Doubt has been swirling around the potential widespread use ofnear field communication, or NFC, a technology that links consumers' mobile phones tomerchants' point-of-sale terminals, enabling instant mobilepayments. Apple released the iPhone 5 without an NFC chip, leavingmillions of consumers out of the NFC equation. Google locked itselfinto NFC with the launch of the Google Wallet app, but other possible major players in the NFCarena, including PayPal, Bank of America and Walmart, sidesteppedthe technology during their recent mobile payment initiatives.

Isis, a mobile commerce venture spearheaded by AT&T,T-Mobile and Verizon, allows consumers to pay participatingmerchants using NFC-enabled mobile devices and eligible paymentcards, and launched a trial of their service in Austin, Texas, andSalt Lake City last October. No official results have beenreleased. Some reports indicate Isis transaction activity has beenlimited so far, while a spokesperson for Isis said it is pleasedwith the results of the launch and will continue to incorporatemarket learning as it grows. Currently, only 3% to 4% of allsmartphones have NFC chips, and just 140,000 out of 7 millionmerchants have NFC readers, according to a CO-OP Financial Serviceswhite paper. 

NFC is clearly in its early stages, but several experts say thatif and when the pieces of the puzzle are put together–by financialinstitutions, merchants, payment card providers and smartphonemanufacturers–it could become real. In the meantime, they say,credit unions should keep a close eye on it and consider thepotential roles they could play in NFC. 

Brian Day, Dwolla product leader for The Members Group in DesMoines, Iowa, said he believes  that once the requiredinfrastructure is in place, use of NFC will eventually become thenorm. With Mastercard and Visa pushing an initiative that requiresmerchants to upgrade their point-of-sale terminals to accept EMVcards by 2015, the shift could take place within the next couple ofyears. 

This year “will be more of an infrastructure building year forNFC,” Day said. “I think that as long as the infrastructure existsand merchants have the ability to accept NFC payments, it willstart to grow naturally.”

A big unanswered question around NFC is how all theparticipating parties will be expected to interact with one anotherfrom business relationship and proceeds distribution standpoints,he said. That aside, Day emphasizes that many smartphones,including the newest Android models, have been built with the NFCchip, and he thinks Apple will put a chip in the iPhone at somepoint. The cool factor could also be a selling point for everyoneinvolved. Day described a potential scenario in which a consumercould walk by a movie poster in a mall and tap his NFC-enableddevice to purchase early-bird tickets.

“Credit unions should be keeping tabs on NFC. and the wayconsumers are interacting with it,” Day said. “From what we'veseen, NFC offers the most seamless way to interact.”

As of now, credit unions have barely dipped their toes in theNFC pool. In 2011, Pentagon Federal Credit Union made plans to roll out an NFCservice for their members, at least in pilots. But this year, aPenFed spokesperson said the pilots didn't last long enough toresult in any meaningful data, considering how much the market hadchanged from the time the credit union ran the earlytesting. 

CO-OP Financial Services is actively helping credit unions bringmobile payments to their members. It just released Sprig, an account aggregation tool that allows P2P paymentsbetween accounts within the CO-OP network and is in the process ofenabling out-of-network P2P payments, said Kathy Herziger-Snider,vice president of product development for CO-OP. 

But when it comes to NFC, it's too soon to make concrete plans,as the market remains too fragmented and the technology lackssupport from too many big players, she said. 

“There are some niche products in the market, but nothing isglobally applicable yet,” Herziger-Snider said. “Everything ismoving, but nothing has jelled yet. For credit unions, the digitalwallet would initially include P2P payments, and within time, NFC.But right now, there's inconsistency in theinfrastructure.” 

If the NFC stars align, CO-OP said it would certainly supportuse of the technology among credit union members. 

“We've in favor of anything that supports fast, securetransactions,” she said. “It will be interesting to see how it allcomes together. It just needs more time.”

As the NFC waiting game continues, experts say there are otherways credit unions can participate in the growing world of mobilepayments. P2P payments, mobile payments that occur between twoconsumers or a consumer and a merchant, are becoming more common.For example, the ClearXchange program links customers of Bank ofAmerica, Chase and Wells Fargo. TMG currently has around 20 creditunions live with a mobile P2P payments app from TMG partner Dwolla,Day said.

“We're now seeing the early adopters of P2P technology, andcredit unions will soon follow as their members begin understandingthe convenience it offers and start requesting it,” Day said.

Another term that's dominating the mobile payments space isdigital wallet, which refers to a mobile app that aggregatesfinancial institution accounts plus merchant receipts, coupons,rewards and loyalty cards. Aside from Google, big current playersin the digital wallet space are PayPal and Walmart, which partneredwith American Express to launch the Bluebird card. 

In its white paper on mobile payments, CO-OP says the fact thereis no mature, dominate wallet product is a good thing for creditunions because they can participate in a variety of walletprograms, even without specific promotion on their part. Untilcredit union member-exclusive wallets become common, credit unionsneed to find ways to compete within existing digital wallets fortop of wallet status, CO-OP said. 

“I think a credit union-branded digital wallet is probablyreally good for credit unions,” Herziger-Snider said. “Consumersare still going to put their money in different wallets and ondifferent cards, but our goal is to convince them to turn to theircredit union for their preferred method of payment.”