The Long Road To NFC Payments
Maybe some mobile technologies have to be invisible to be fully effective.
At a forum earlier this week, several of the major NFC (Near Field Communication) players gathered in Cambridge at the MIT Enterprise Forum to discuss the future of NFC and mobile wallets.
For some reason, NFC discussions tend to draw crowds. A year ago at SXSW, a mobile wallet panel attracted a standing-room-only crowd and this week’s MIT Forum, officially named NFC Cluster Circle Boston, sold out. This all for a technology that is not yet widely available or deployed.
To show one example of NFC in action, MIT staff handed out a thick piece of paper with an embedded tag for use with an NFC-enabled phone. Placing the phone on the paper transferred the slide show of the main presenter to the viewers’ phones. While it did work effectively, only about a dozen attendees acknowledged having NFC-enabled phones.
That highlights one of the short-term issues with NFC: not enough consumers yet have it. The other issue is what people will do with it once they do have it in their phones.
The discussion at MIT centered on NFC being used for payments and how the mobile wallet will evolve, which led to the actual value proposition and what NFC would have to accomplish in order to be considered successful.
At the payment level, the credit card companies are not only closely monitoring NFC, but in many cases deeply involved in multiple experiments. Some are simply waiting for more NFC phones to hit the market.
For example, MasterCard has deployed to merchants more than 400,000 PayPass-supported terminals that can accept payments by a tap from an NFC-enabled phone. This does not mean the credit card necessarily goes away, but that consumer payments become a different experience.
“It’s a better way of using your plastic,” said Mung Ki Woo, head of mobile at MasterCard. “You don’t necessarily need a proposition that something has to be 10 times better.”
For example, Woo noted that 10 years ago, there was not a problem with books, but eBook readers ultimately still caught on and the same will be true with mobile payments. “It’s just incremental convenience,” he said. “A richer shopping experience with value added services.”
Another active mobile payment participant viewed mobile payments from a different perspective. “You’re enabling someone to trade with someone else,” said David Chang, COO of PayPal Media Network. “NFC is a way to connect at the last inch.”
Chang defines the issue as enabling omni-channel commerce and discounted security as a factor. “Security as barrier is sort of a red herring,” he said. “It is not one of the barriers for consumers.”
From a retailer’s perspective, the issue is less about the specific mobile payment technology being used and more about the consumer experience and benefit.
“Mobile commerce means conveniences in the store,” said Prat Vemana, director, Velocity Lab and Mobile at Staples. “The value proposition for loyalty is where we can add value in the store and where can we make it fun and interactive? The devices are in the store, not just at the point of sale.”
The panel clarified that NFC is coming but it is not yet here. Only mentioned in passing was that Apple has not adopted NFC.
The panelists agreed that wallets or payments ultimately will be via mobile. “The word 'wallet' is a misnomer,” said Woo. “Inside a leather wallet you have primary and secondary tickets or cards inside. The replacement for the leather wallet is the phone itself. Contactless terminals are becoming ubiquitous. There will be payments by chip, magnetic stripe and contactless.”
As if to highlight the point of technology not always being easily accessible, one of the panel participants was to participate via a live video feed over Skype. After several attempts by several of the conference leaders, the audience had to settle for a video of the person standing in the front of the room, also on the Skype screen, since they could not get the video of the panelist to come through. And this was MIT.
When NFC technology becomes totally invisible and payments become extremely frictionless, mobile payments will have truly arrived.