NFC supports encryption, and the fact that the devices must come so close together to communicate further bolsters security because the odds of a hacker intercepting a radio signal over such a short distance is minimal. NFC draws less power than Bluetooth wireless, but early rollouts of NFC are being studied to see how much the constant use of NFC may drain a smartphone.
The NFC Forum defines three modes (PDF) of NFC operation. Peer-to-peer mode enables two NFC devices to communicate with each other to exchange information and share files. Reader/writer mode enables NFC devices to read information stored on NFC tags embedded in smart posters and displays. Card emulation mode enables NFC devices to act like smart cards, allowing users to make retail and transit purchases.
NFC and other options in the U.S.
Google Wallet is an application that uses NFC to make mobile payments. It first appeared in September 2011 in the U.S. on the Nexus S smartphone over the Sprint wireless network. The Samsung Galaxy S III launched in 2012 with NFC and S Beam (built on Android Beam) for data sharing.
Samsung also launched tiny NFC TecTile tags in 2012 that can be programmed and rewritten by NFC devices. For instance, a tag stationed near a bedside could be programmed to turn the phone's music app on each time the phone comes close. An NFC tag can also be used in a billboard or kiosk, much the same way QR codes are used to provide information when read by a smartphone or other enabled device.
When the Apple iPhone 5 launched in September 2012, many expected it would have NFC, but it did not. It instead relies on Apple's Passport app and barcodes on the phone's display that are read by optical scanning terminals in stores and at airport check-in counters. Starbucks and Dunkin' Donuts also rely on optical scanners to read the barcodes on smartphone displays for customers who want to buy coffee and make other purchases.