Near Field Communication (NFC) technology has taken major strides this year despite being omitted by Apple on the iPhone5. Some forecasted the end of NFC when Apple elected not to include the technology in its newest phone, but other carriers have pushed forward in a major way. It now appears that NFC technology is on the brink of revolutionizing a range of commercial and social activities.
NFC is relatively new technology - it has been in development since 2004 when Sony, Nokia and Philips formed the NFC forum. The forum currently has over 150 members.
NFC involves the establishment of radio
communication between two devices placed in close proximity
(up to four inches) to one another. Smartphones can come
equipped with NFC capability, but communication is also
possible between phones and unpowered chips, called "tags."
These tags can be placed almost anywhere and used in endlessly
creative ways. A great deal of innovation will take place to
enhance NFC's capabilities, much of it inspired by creative
end-users.
Many of the private industry and industry supported University R&D efforts will be eligible for Federal Research and Development tax credits. Enacted in 1981, the federal Research and Development (R&D) Tax Credit allows a credit of up to 13% of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria:
Eligible costs include employee wages, cost
of supplies, cost of testing, contract research expenses, and
costs associated with developing a patent. On January 2, 2013, President Obama signed
the bill extending the R&D Tax Credit for 2012 and 2013
tax years.
The roots of NFC technology are in radio frequency identification (RFID) which transformed the distribution industry by making every piece of inventory capable of being scanned and tracked. Similarly, NFC allows for one's phone to serve as a personal identifier. Many consequently feel that the events industry will be one of the first to be transformed by NFC, with one's phone supplanting the ticket (even the mobile ticket) as a means for entry into an event.
Closely connected is the credit card and billing industry. Starbucks, in partnership with Square, is one of the companies leading the charge to allow customers to pay via their phone. By supplanting cash and potentially also the plastic credit card, Smartphones are now literally eating into the wallet.
As Smartphones play greater and more varied
roles in human life, security becomes a larger and larger
concern. Key issues include the physical security of the
phone, contingency plans if the phone is stolen, and security
of the information being transmitted to and from the phone, as
well as in the phone. A great deal of innovation must take
place to ensure that the phone and its uses, many of them
NFC-driven, are as protected as possible.
In a popular commercial two years ago, two NFC-enabled devices were tapped together, the song playlist on one phone magically bouncing over to the other.
However, NFC-enabled chips, or tags, can be placed anywhere. Imagine a tag on a bird feeder in a popular garden, with a sign underneath that says Am I Low on Food? With one swipe of a Smartphone, an email can be sent to person in charge of the feeder, or perhaps the swipe will activate the "birds" themselves to start chirping on Twitter that their food is low.
These tags are typically passive, meaning they are unpowered and only become active when a Smartphone enters its magnetic field. Consequently, tags can be placed almost anywhere and are not themselves in need of consistent upkeep. Other tags could be used to provide more data to the person swiping, such as a movie trailer that plays on a phone once that phone swipes by the relevant movie poster at a theatre.
Human creativity will find even more
individualized uses - a mountain biker, for example, swipes
the garage door as she leaves, texting her husband "Out
Biking" and activating her GPS so her location is knowable in
case of emergency. It is both exciting and unpredictable to
witness how individuals and small groups will find ways to use
NFC-enabled phones and tags to enhance their lives. One thing
is certain, however: once novel patterns of interest and usage
emerge, industry will find ways to support and further enhance
those uses.
MarketsAndMarkets.com issued a report
entitled "Near Field Communication (NFC) Market: Global
Forecast and Analysis (2011-2016)" which predicted that NFC in
Smartphones will grow from the current single digit level to
40% in 2016. Revenue from NFC is expected to grow at an
estimated annual growth rate of (CAGR) of 35% from $7.68
million in 2011 to $34.52 million in 2016.
Industry will also find ways to harvest the data from those many creative uses of NFC. NFC-enabled tags will provide huge streams of data which, properly analyzed, will help firms better understand their markets and define business strategies . Indeed, whereas sensors can collect reams of data placed in commercially permissible locations, NFC tags, like the phones with which they will be interacting, will be generating data from places like homes and cars among others.
Even at the small and mid-sized level, many
firms now have departments dedicated to Big Data analysis,
often headed by a Director of Analytics. These professionals
apply advanced quantitative concepts to their data, including
multivariate analysis and sophisticated algorithms, and are
frequently highly educated in technical fields like
mathematics and software engineering. The data provided by NFC
will therefore provide these professionals with unique and
often unprecedented windows into consumer habits and
preferences.
Firms developing NFC-enabled applications and products should analyze their applicability to the R&D tax credit. Likewise, firms engaged in advanced data analytics and solutions, as well cyber-security, should consider what the credit may have to offer them.
Charles R Goulding Attorney/CPA, is the President of R&D Tax Savers.
Seann Convey is a Tax Analyst with R&D Tax Savers.
Charles G Goulding is a practicing attorney with experience in R&D tax credit projects for a host of industries.
