• by Steve Smith , Staff Writer @popeyesm, February 8, 2012

Most people in the world of NFC have told me that the standards and technology necessary to run contactless payments have been in place for a while. The standards for NFC communications were set more than five years ago. And the payment terminals equipped to handle the basics of phone-based tap-to-pay and other NFC m-payments have been slowly but surely moving into retail outlets for years.

The still-rare EMV (Europay, MasterCard, Visa) chipped credit cards are the front line troops in this reconstruction of the point-of-sale. And VISA says this week that it has passed a milestone in having issued one million VISA-branded EMV chip-enabled cards as of the end of 2011.

“Migrating the U.S. market to chip will help build an infrastructure for accepting NFC payments, enhance international acceptance and reduce fraud,” according to a statement from Stephanie Ericksen, Head of Authentication Product Integration, VISA. The company announced a road map for moving to contactless payment on either cards or phones last year and says that having a million chipped credit cards in market in less than 18 months is a significant step. The security mechanisms in place for the chipped cards, which create unique codes for every transaction to thwart fraud, are the same that will be used in NFC phones.

Apparently, whatever the transmission method used between card or phone and payment terminal, VISA is creating a back-end structure and a new suite of services that will power NFC ultimately as well. The company announced new VISA Chip Services solutions that help chip providers authenticate the account and set up services for clients more quickly.

In August VISA said it was using chipped cards as a way to prepare the credit card market for mobile NFC as it is ramped up. In many ways this is a necessary interim step on the part of companies like VISA, since credit cards are the only hardware piece they can control right now. The rollout of NFC-enabled phones has been slower than some expected. Initial estimates of NFC chip shipments were scaled back in 2011 as Google Wallet issued only one phone into the market and the competing ISIS consortium of carriers, hardware OEMs and credit card companies was still in pre-launch mode.

From a consumer perspective -- even a geeky gadget dweeb like me -- what is the compelling case for m-payments right now? Other than coolness, eliminating one or two credit cards from my wallet is not much of a value add. Ever notice how light and thin those plastic thingies are? Not a lot of heavy lifting there. Still have to reach into a pocket to produce an NFC phone, too.

Maybe I missed it, but I haven’t seen a coherent and broad-based plan for supercharging the credit card with smartphone smarts. And I have to imagine that a coherent go-to-market plan for consumers must also first address the merchants. Is it clear at the POS what the sellers have to gain from this yet? VISA is offering incentives as part of its migration to contactless payments, but I suspect most retailers want to see this ecosystem tie neatly into their own rewards/loyalty/discount programs.

Fold in the general problem of upgrade cycles for hardware, and I think you are looking at a long, drawn-out period of uptake for NFC.