NFC, or near field technology, should be a raging success outside of Korea and Japan, but it simply is not. This is despite efforts by the GSMA to get the ball rolling with CSPs worldwide and the finance and transport industries agreeing and the profound benefits of having multiple payment methods ensconced in mobile devices.
It’s a matter of worlds colliding. The traditional payment handlers such as banks and credit card issuers have the credit and distribution channels sewn up as well as the all important merchants, and it has taken them years to get to that position. The transport authorities were quick to jump on the benefits of NFC and high throughput of passenger numbers, particularly for city transport systems, but they have their own NFC cards and top-up methods, usually via ATM-like machines.
The idea of putting NFC functionality in a mobile handset adds many benefits such as convenience, especially if multiple cards can be stored on one device, and the security of the card issuer having the ability to disable a stolen or lost device simply by sending it a direct message via the mobile network.
The take-up issue is not one of technology or customer acceptance; it’s all about trust and who gets a cut of the action or a share of the spoils. The credit card companies and issuing banks have a cozy revenue arrangement, which they simply do not want to share, and an established merchant network. The CSPs want to get some of this action or charge ‘rent’ on their SIM and provide the necessary security. The transport companies have already made the investment on their own closed systems and don’t like the idea of sharing their meager margins with anyone.
Add to this the fact that banks have become very wary of CSPs worldwide, first because of the success of their pre-paid offerings, and second, because of their move into traditional banking areas by offering mobile banking and mobile payments, particularly in markets that banks have not been able to address. The final nail in the joint NFC coffin was the realization that if all the parties were to work together successfully they would need another party, a ‘Trusted Service Manager,’ to act as the arbitrator for all the others. Yet another cost the players simply could not afford.
The result is that all the parties appear to have parted ways and are doing their own thing. We are seeing the card giants like Visa and MasterCard running trials with handset makers, and we are seeing CSPs offering card and payment services via their own handset and SIM combinations. The latest technology even removes the need for a special NFC handset by adding stickers, SIM overlays, microSDs and other brilliant technologies to the handset.
The recent news that Verizon and AT&T are planning a joint venture to break Americans’ love affair with plastic and sideline Visa and MasterCard is a clear sign that the gloves are off. According to insiders, T-Mobile USA will also join the crowd, working with Discover Financial Services and Barclays. The first test are planned for later this year. Customers will be able to pay by waving their smartphones at special terminals, and the payments will come from their bank accounts or carrier bills. The phones will incorporate NFC contactless payments technology.
MasterCard and Visa have also been investing in their own mobile solutions, Visa is working with DeviceFidelity on a technology to turn current handsets into payment devices handling multiple accounts. Visa says it is in talks with numerous CSPs round the world. MasterCard has worked with Citigroup to launch MasterCard PayPass stickers that can be stuck to the backs of cellphones to make contactless payments at about 230,000 U.S. stores.
At present, it appears the strategy of Visa and MasterCard is to play down the potential threat from the telcos. The threat from the mobile carriers aside, Visa and MasterCard have enough problems on their hands, especially dealing with the potential impact of the U.S. financial reform law’s so-calledÂ Durbin Amendment. Among other things, the law will likely lower debit interchange.
And their major bank issuers are not commenting at all. Juniper Research predicts the worldwide mobile payments market–including purchases of digital and physical goods, money transfers and NFC transactions, will grow from $170 billion in 2010 to almost $630 billion in 2014.
There’s plenty of reasonsÂ why replacing your wallet with a mobile phone is still a ways off, but now there’s an all-new one: regulation. According to Consumers Union, mobile payments may not be safe, and it is working with regulators to implement protective standards,Â reports theÂ Los Angeles Times.
Perhaps the biggest disruptor to the mobile industry in the last five years may also have a say in the NFC revolution. Over a year ago, Apple applied for patents around NFC technologies built into the iPhone and has just announced the appointment of NFC expert Benjamin Vigier to its ranks.
Is this just a case of dÃ©jÃ vu, or could Apple really do it again? While all the traditional players bicker, could it sneak up from behind, again, and show them how it’s done?