NFC stands for Near Field Communications. SmartPhones with special wireless chips in them can establish short-range contact with wireless readers, for instance at checkouts.
This means that in future you may be able to dispense with small change in your pocket and use your phone instead. You simply wave the phone above the reader and wait for the payment to be accepted.
NFC technology is already being used in credit cards and in the USA there are already more than 150,ooo stores with NFC readers installed.
NFC requires software and hardware to work on the phone. Google has already launched an NFC phone running their Android OS and there are rumours that Windows Phone and iOS will be including it with their next updates/releases.
Hardware manufacturers are also including it on their new release SmartPhones. As more and more merchants adopt the readers this technology will grow and become ubiquitous.
The mobile payment market is anticipated to grow ten-fold by 2014. The main drawback with consumer adoption could be security issues but NFC has been around for a while now and both hardware and software manufacturers are working hard to counter any security worries.
In fact NFC is considered MORE secure than swiping using a magnetic strip because the technology is more sophisticated.
NFC works within a distance of 20cm using short-range wireless technologies. The reader is the powered device generating an RF field which means that the target (eg. tags, stickers, key fobs, or cards) does not have to be powered.
Because mobile phones are powered they can act as reader or target, being able to scan codes (on advertising for instance) or allowing data to be read for contactless payments at shops or on public transport.
One example of a phone that is already equipped for NFC mobile payments is the Google Nexus S. This phone is available free of charge on a variety of tariffs via UK Mobile Phone Deals.