Apple’s NFC Rumors May Be True, But Irrelevant. Mobile Payment Is Visa’s Call
Written by Evan SchumanReports resurfaced this week suggesting that Apple will include native NFC (near field communication) in its next iPhone. Those reports—which are true in the sense that the iPhone will include such technology, but flawed in the timing—are being coupled with the on-the-record comments from Google about Android’s imminent NFC support. The conclusion: In-store mobile payments are imminent. The reality: Hardly. Those who see the native-NFC shipments as fueling mobile payments don’t understand what the key mobile payment roadblocks are.
If we set aside mobile payments for the moment, native NFC will enable some wonderfully powerful capabilities, particularly in the marketing world of digital-signage. It can allow the phones to exchange extensive information with barcodes, price tags and CRM cards. Native NFC also could allow one-way information from mannequins and other store displays, and to do so in a more forgiving manner than 2D barcodes.
Let’s not overlook the tons of wonderful capabilities native NFC on popular handsets could offer retail by getting fixated on one—mobile payment—that has quite a few other challenges.
What challenges? The enthusiasm assumes that the only hurdle for mobile payment has been getting a large enough group with the ability to do it. This is similar to the contactless payment argument, and we all know how well that did. (In its last chance, advocates are hoping that mass transit might save contactless.)
There are two problems with that thinking: First, it assumes that there are millions of consumers just dying to make payments with their phones, if only those devices had the capability built in. (Reality: Not quite. There are about 49—and three-quarters of them are not old enough to vote.)
That said, I think there are millions of consumers who could be easily persuaded to do mobile payment. But it will be up to the retailers to make it worth their while with discounts and other incentives, plus lots of aggressive marketing.
Concession point: Having NFC functionality embedded into phones before they ship to consumers is a critical prerequisite for such a retail move. So this is a crucial step. But it will take many changes before retailers will make that leap.
What this is truly all about is the complex payment world. All of the players—handset manufacturers and carriers for the phones; banks, Visa/MasterCard and assorted processors for the existing payment environment; and retailers, squarely in the middle—have to work things out. Yes, we’re talking interchange concessions, some way to bring zero-liability-like programs to debit and agreements all around on revenue splits. That’s the killer.
-Marc
January 28th, 2011 at 4:57 am
Not true this side of the pond – apparently there are 42000 tills in mainly food outlets that will accept NFC payments. Not sure whther the max is £10 or £15 – the latter I believe.
2 of the main networks are going in for it (http://www.theregister.co.uk/2011/01/27/nfc_ee/)
January 28th, 2011 at 11:23 am
Editor’s Note: Mark is, of course, absolutely correct. Our piece was intended to describe the challenges of payment, NFC and contactless in the U.S.. We should have made that more clear.
February 2nd, 2011 at 10:30 am
To your point about the huge investments that have been made in the existing infrastructure – I think that consumers and merchants assume that the new payment platforms will have equivalent security, and I am not sure that is a safe assumption to make. I think it remains to be seen if new models (like Square)that shift some of the risk in order to facilitate payment can be validated without significant fraud losses. Most payment processors (rightly so in my opinion) view mobile devices as untrusted devices with many new threat vectors. Will convenience outweigh the risks?