NFC the future for mobile payments? There are some alternatives
I am sure you have all noticed the big buzz surrounding mobile payments. Mobile payments are hot again! While the first mobile payment initiatives date from 10 years ago, now it finally seems to really happen. And it all makes sense: nowadays everyone has a mobile phone and people always carry them with them. Smartphones are extended with more capabilities and people use them for more things.
People are shifting away from PC’s to smartphones to access the internet. Many are already using their phones for mobile banking, so why don’t have people to pay with their smartphones? It would be ‘just’ a small extension of current capabilities to mobile payments (although I acknowledge it is already an established industry). In addition, this opens up the way to other functionality, such as having multiple accounts on your phone that replace the large number of cards in your (physical) wallet, or to profitable new businesses, such as couponing.
As many see great opportunities in mobile payments, many companies step up to enter the arena. Google has been the most notable; in cooperation with MasterCard and Citi, Google recently launched the Google Wallet, based on NFC supported with couponing. (NFC stands for Near Field Communication, a contactless communication method using radio frequency). On the other side, Citi also just announced to have invested in Billing Revolution, an internet based mobile payments solution. In Europe there are also countless initiatives: in the UK Visa is betting heavily on NFC for the Olympics in 2012; in France there is the Cityzi initiative that launched NFC in Nice; in the Netherlands banks and telecom operators (MNOs) work together on the Sixpack initiative to develop NFC. And there are numerous others.
The majority of the current initiatives are based on NFC. Mobile payments ‘equals’ NFC, and vice versa. There almost seems to be no other way of mobile payments. Debates on mobile payments are mostly all on whether NFC will happen or not. Many industry experts agree NFC is THE future and will make the mobile payments industry to hit record-high volumes. And it is THE solution for all your proximity payments.
Nevertheless, there are some notable hurdles. Most importantly, there is no existing infrastructure to accept NFC payments (besides some local initiatives): there is no Point-of-Sale (POS) network accepting NFC – Google for example, invests heavily in the infrastructure to make it work – neither are there many phones that are ready for NFC (although add-ons, stickers, etc. can turn your phone into an NFC-device). Building this infrastructure is costly and difficult as it requires multi-stakeholder cooperation between banks, MNOs, phone manufacturers (OEMs) and others. A lack of standards makes companies reluctant to enter the market.
However, there are some interesting alternatives to NFC, offering similar user experience – simple and quick payments with stored payments details, simple authorization, multiple accounts, additional services etc. – but with different technique, different hardware and therefore also different hurdles to overcome.
One commonly known example is Starbucks that is touted for its success and is even said to now be the largest player in the US mobile payments market. Starbucks already had their Starbucks Card: a personal, reloadable prepaid card to pay without PIN. Starbucks simply made an app to load your card details on – they still call it Starbucks Card Mobile – and you can pay in a similar way; instead of having the code on your prepaid card scanned, now you have the code scanned from your phone screen. Transactional services are all about the context and finding the service that best suits its context. And in this context, a place that you often visit and are strongly engaged too, it works very well.
Another nice example is Narrate, a Sillicon Valley start-up. Although to my knowledge it is not yet operating, the company advertises that with its Zoosh technology it offers the benefits of NFC with ultrasonic technology using the speaker and microphone that phones already have. To enable the Zoosh technology only one software update to mobile phone apps and to POS is needed. Hence with the existing mobile devices and (seemingly) limited investments in POS a compelling user experience is created.
I can imagine more ways of offering a similar experience for proximity payments. I foresee some location based capabilities communicated over 3G be applied to payments. Apple for example could link its iTunes infrastructure to the GPS on the iPhones and with some adjustments to POS software allowing payment acceptance. And like me, I am sure many others will think of other creative ways to perform proximity payments. Though most ideas will appear unrealistic, some will have potential.
If you are a bank or a telecom company reading all the news it seems that you must have some NFC capabilities pretty soon not to miss the boat. However, if you don’t want to wait untill NFC has gained large adoption and are looking for a solution for today, or if you are reluctant to invest in NFC, then there are still options for you. Think creatively, think outside the box. Most importantly, think of the context of your payments and try to find the solution that best fits your context. Then you may be the one who develops the next success story of mobile payments.
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