If it's anything related to technology and marketing, it is highly likely that Google will lead the pack, or at least be close to the front of it. And it's the case this time, too.
Google (Nasdaq: GOOG) signed an agreement with Citigroup (NYSE: C) and MasterCard in late March to embed near field communication technology in the upcoming versions of Android-based phones, to make mobile phone payments easier. In late May, the company formally took the wraps off a new e-wallet service, featuring not only Citigroup and MasterCard, but partners including Sprint.
Google already has Android mobile-device software that comes with this technology. In fact, it has already launched the latest "wave and pay" technology as part of its Nexus phone series. What I think we're looking at is the first large-scale launch of a long-awaited trend in payment processing. However, with all the action in the field, investors might still be wondering, what exactly is NFC?
Let me tell me about NFC
NFC is a contact-less data transfer technology where you use your smartphone to connect to another device over a distance of about four inches. You don't need to swipe your card. You don't need to carry cash. Just wave your phone near the reader and you are done. Isn't that easy? You bet it is.
That's why Google is so intent on being the early bird before other technology kings enter the arena. Google's deep push into NFC is part of a boarder strategy to offer better advertising to local store retailers by tracking the performance of their ads and customizing them for better conversion rates. Being a payment facilitator off location-aware devices is a powerful tool for a company like Google that feeds off more and better targeted data.
Google won't be charging anything for that as of now. But this is just the start. The mobile payment market is estimated to be at $618 billion by 2016, according to an Edgar, Dunn & Co. report.
What about others?
While Apple (Nasdaq: AAPL) may be a key backer of the technology, other Android partners and even competitors are looking for an edge with NFC as well. Andy McBain of Motorola Mobility (NYSE: MMI) told eWeek Europe that many of their upcoming products will have embedded NFC technology. Verizon (NYSE: VZ), AT&T (NYSE: T), and T-Mobile are contemplating teaming up for a project to enable their users to pay via their mobile phones. On the competitor side, the huge unknown is Apple. The company has been quiet on its plans for NFC, though it's widely anticipated that the longer the wait before the next iPhone release, the better chance Apple will incorporate NFC technology in the next-generation iPhone.
In short, we are talking about a huge segment in the IT industry that is on the verge of opening up, and most of the IT giants are already in the process of making their move to get a big piece of the cake. Google is already moving ahead full steam.
Moral of the story
NFC technology is not just any other news in the world of information technology. It has the potential to be a benchmark in the world of e-commerce, and this can change the face of many related industries as well. If you're looking for a way to directly profit from the trend, look no further than NXP Semiconductors (Nasdaq: NXPI). While Google might be a key first mover in the technology, NFC is only one of the many cogs driving its ad business forward. In NXP's case, the company was an early leader in NFC technology, and manufactures the chips that are integral to the technology.
Of course, like any emerging area of technology, there's a rush of companies looking to catch up with NXP's NFC expertise. So if you're looking to stay updated on the company, make sure to add it to our free watchlist service to get up-to-date news as the NFC market moves away from being a budding technology, and onto mainstream investors' radar. Click here to add NXP to your watchlist.
