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Will Wal-Mart Be the Death of Near-Field Communications?

By Rich Duprey - Apr 8, 2013 at 8:30PM

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Retailer is rolling out use of an iPhone app that sidesteps the need for costly NFC upgrades.

According to a recent Harris Interactive survey, most consumers feel smartphone payments will eventually replace credit and debit cards and cash for most purchases but it's likely not going to happen within the next five years.

That bodes well for the long-term outlook for chip makers like NXP Semiconductors (NXPI 0.32%) and Skyworks Solutions (SWKS -0.71%), which are leaders in the field of near-field communications, or NFC. That's the technology that allows mobile devices to securely communicate with a payment terminal. Wave your NFC-enabled smartphone in front of an NFC-enabled terminal and you can easily make a payment.

Objects are closer than they appear
The interest expressed in the survey is part of the reason behind why NXP feels 2013 is the year that NFC technology takes off. Google (GOOGL 2.37%) has been in the forefront of the issue through its Wallet mobile payment system and Android smartphones like Samsung's Galaxy have been equipped with NFC chips to take advantage of it wherever it's available. Indeed, Samsung recently partnered with Visa to provide an NFC platform that financial institutions can trust.

Banks will be able to load payment account information to a secure chip embedded in Samsung devices using Visa's mobile provisioning service linked to Samsung's service that creates secure data storage domains for card issuers.

Notably, however, Apple (AAPL 4.01%) has yet to jump into the fray. Although many watchers had anticipated the iPhone 5 to include an NFC chip, it was not to be, even though it had acquired such capabilities through its AuthenTec acquisition last year. And with Skyworks already a chip supplier for the iPhone, should Apple decide it needs to be a part of the NFC revolution, it has ready access to a key player in the field.

Scanning the horizon
Yet retail king Wal-Mart (WMT 2.85%) may be leading the way in killing off the chances of NFC gaining a real foothold. Rather than investing in the expensive new terminal upgrades that would be required to make NFC in its stores a reality, it's rolling out an iPhone app called Scan & Go that allows consumers to scan and bag their purchases while shopping and simply scan a quick-response pixilated QR code square at the checkout terminal to complete the purchase.

While that may be a means for it to ultimately save money on cashier salaries, it could provide the pathway for other retailers to follow. Wal-Mart is expanding the test program to 200 stores in 14 markets, and though the app is only available for the iPhone, it's easy to see that (depending upon its success) it could eventually roll out to all 14,000 stores and be available across all smartphone platforms.

Stop & Shop supermarkets have offered a similar app for both iPhones and Android devices for several years, but Wal-Mart's entry could be the thing that brings it mainstream. Because near-field communications has taken longer than expected to get up and running, just as widespread adoption looks to be within its grasp, Wal-Mart's adoption of competing technology could be what kills it off. 

Let me know in the comments box below if you think NFC will die on the vine or will be able to surmount what appears to be a very high obstacle thrown in its path.


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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$143.11 (4.01%) $5.52
Skyworks Solutions, Inc. Stock Quote
Skyworks Solutions, Inc.
$102.27 (-0.71%) $0.73
Alphabet Inc. Stock Quote
Alphabet Inc.
$2,229.76 (2.37%) $51.60
Wal-Mart Stores, Inc. Stock Quote
Wal-Mart Stores, Inc.
$122.60 (2.85%) $3.40
NXP Semiconductors N.V. Stock Quote
NXP Semiconductors N.V.
$180.69 (0.32%) $0.58
Visa Inc. Stock Quote
Visa Inc.
$207.56 (4.29%) $8.53

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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