If there are barriers to NFC payments, who is building them?
[Dave Birch] I think we all understand that there is more innovation going on in the payment space than NFC and it's not the only way forward at the intersection of mobile and payments. Nevertheless, at lot of people have spent a lot of money on it, so there is certainly impetus. But why isn't it mass market yet? There's plenty of talk but, to be frank, things are still a little slow. But why? So far as I can tell, when consumers are given the opportunity to "tap and go" using a mobile phone, they rather like it. So they don't seem to be the barrier, there must be some other problem.
The report also found that embracing NFC technology will be slow due to a combination of privacy fears, a desire for anonymous payments, a lack of infrastructure to support widespread adoption and resistance from those companies with a financial stake in the existing payment structure.[From Mobile Payments May Replace Cash, Credit Cards by 2020 [STUDY]]
Well, I don't buy the stuff about privacy and anonymity. I'm very sceptical about what the public say about anything in these sorts of stories. If anything, NFC is far more privacy friendly than longer range alternatives and despite what anyone might say in a survey, the public don't care about anonymity in payments. Let's look at some other possibilities.
Payments incumbents are embracing NFC because it simply represents an update of their delivery format rather than a threat to their business model. Innovators are instead focusing on solutions that can be launched into the market right away and we think there is nothing more ubiquitous and ready-to-use available today than the cloud.[From Apple's iWallet will use Bluetooth rather than NFC, says analyst - ComputerworldUK.com]
Could that be it? That NFC is going too slowly because it isn't radical enough? Because it panders to the incumbents rather than enabling alternatives? I'm not sure about that either (although it certainly is possible to construct a plausible narrative around this, suggesting that NFC should be used to trigger cloud-based payments rather than to exchange local data). But lets go further back in time to see if there are any other candidates.
NFC prototype – 2003. This was the year that Nordea and Luottokunta created a prototype device that was capable of making payments using NFC technology.[From Nokia’s NFC phone history – Nokia Conversations : the official Nokia blog]
Those early NFC devices (like the Nokia 3220) had a particular characteristic that made playing with them fun and exciting: you could load applications into the "secure element" (the Global Platform chip driving the NFC interface). You can't do that anymore. Tom Noyes (sorry, I can't find the link right now) said that one of the problems was that NFC was conceived and directed as an operator conspiracy (my phraseology) in order to keep control over emerging value networks that bridge the mundane and virtual worlds. Well, maybe. (Although "conspiracy" suggests some kind of shared strategic vision and a modicum of organisation.) It is certainly true that
The lack of collaboration among stakeholders in the NFC payments market is well documented[From EMV in Limbo - Bank Technology News Article]
This lack of collaboration, though, extends beyond the operator-bank nexus. The device manufacturers look to be trying to assert their control too. Here's a case study from Australia. Commonwealth Bank have an NFC sleeve and a contactless payment scheme called "Kaching".
Several Android handsets currently on the market have on-board NFC capability; for example, the flagship Samsung Galaxy Nexus. For organisations like the Commonwealth Bank to get access to the NFC chip, however, device manufacturers need to allow access. Lark said that this access is something that the Commonwealth Bank is currently missing.[From Kaching for Android out in six weeks: CBA - Business - News - ZDNet Australia]
This is what I was moaning about back in the days of Nokia 6131. Having NFC chips in devices isn't going to stimulate a vibrant and exciting secure electronic transaction marketplace if no-one can get access to them because they can't get keys to the secure element. And, from a critical bankers' perspective, it doesn't make a difference whether the secure element is on the SIM (where the operators can hold the banks to ransom) or in the device (where the platform owner can hold the banks to ransom).
All handsets based on chip giant Intel’s current smartphone reference device will carry embedded secure elements in addition to supporting applications on SIM cards.[From Intel: ‘NFC Not a Passing Fancy;’ Chip Giant Prepares to Push NFC in Phones and Other Devices | NFC Times – Near Field Communication and all contactless technology.]
All things considered then, it appears that the stakeholders are currently working together to ensure that NFC never, as David Evans puts it, "ignites". It's the stakeholders, not consumers, that are the block. My personal experience is that when consumers are given a NFC phone with a payment application on it, they rather like it. Phones work better than cards: for one thing, you always have them with you.
To use your phone to pay, you have to wake it up, which likely entails you inputting a security code. Then you have to find and boot the payment app. Then you have to input your passcode in the payment app. Then you wave the phone over the payment terminal.[From Are NFC and smartphones-as-credit-cards dumb ideas? | DVICE]
This isn't a realistic depiction of the consumer experience. I first used my new NFC handset ( an Orange Samsung Wave 578 with Quicktap and a Barclaycards Mastercard in the SIM) when I paid in McDonalds. My experience was this: tap the phone and go. It was unlocked because I was using it and I didn't have to select the payment application. The payment application wakes up itself when you tap and there's no PIN for payments under £15 (soon to be £20). And I just got a colleague to video me paying with the same phone at Starbucks in Australia to prove the point!
So what should we make of the wariness in consumers' responses? I got caught up a discussion about this at the Australian Payment and Clearing Association's symposium back in June. I was (militantly) on the side of the delegates who questioned the wisdom of focus groups and market surveys in this field. As far as I can see, the surveys that say that NFC payments won't work, customer don't want them etc are fascinating results that clearly indicate one key conclusion: it is pointless asking people whether they will use something that doesn't yet exist and they don't really understand.
These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers
The English language version of this work is licensed under Creative Commons Attribution-ShareAlike 3.0 Unported License. If you wish to acquire the rights to make a foreign language translation of the work, please contact Consult Hyperion.
Please note that by replying in this Forum your comments become the property of Consult Hyperion and you assign all rights in your comment to us. Your comments may be edited for length and used online and in print but will always be attributed.
Meet us at:
- May 2013
- April 2013
- March 2013
- February 2013
- January 2013
- December 2012
- November 2012
- October 2012
- September 2012
- August 2012
- July 2012
- June 2012
- May 2012
- April 2012
- March 2012
- February 2012
- January 2012
- December 2011
- November 2011
- October 2011
- September 2011
- August 2011
- July 2011
- June 2011
- May 2011
- April 2011
- March 2011
- February 2011
- January 2011
- December 2010