They certainly appear to have prompted interest, primarily with those that are unsure of what you do when encountering this unique barcode design. But as far as changing the way we interact with retailers, I have yet to meet someone who feels they’ve received any tangible value. So is NFC another one of those sounds great in theory, but not reality let-downs. It’s probably an opportune time to do a health check on where we’re up to and what the industry is saying about it.
For those unaware of the technology, NFC is a proximity data transfer platform based on Radio-Frequency Identification (RFID) which allows an NFC enabled mobile phone, credit card or electronic device to securely transmit and receive information over a short range (maximum of a few centimetres). The technology can be used for a number of applications including payments, social networking, file sharing and e-commerce. For those interested in the underlying technology there are plenty of resources that outline the infrastructure and potential. NFC World for example provide a regular update on the subject.
It’s in the area of digital payments that has generated the most buzz around NFC. Often referred to as the ‘Mobile Wallet’ the theory is that customers can tap their phones on a receiving device at the sales counter or mobile POS to conclude their payment. Saving time, minimising overheads and providing convenience have been the attributes used to describe mobile payments. To utilise the feature there needs to be a transmitter (NFC chip) in the phone and a receiver (Contactless Payment Device) at the point of payment or POS. Here lies the first disconnect between capability and current reality.
Speaking to a number of payment vendors providing the hardware gateway between the retailer and the banking institutions there is still plenty of work ahead prior to NFC payments being a fait accompli. The initial challenge is getting the contactless payment infrastructure in place on the retailers end. This is slowly becoming a reality with one vendor quoting 25% rollout with a projected twofold increase this year. This is driven by a number of factors but the most compelling one being that certain Merchant Category Codes (MCC) have been mandated by the banks to have contactless readers in place by 2014. Another vendor has stated that it could be up to two years before we get a proper mainstream NFC deployment in Australia. That said all are committed and have projects to support it. Overall this is a positive sign for the technology side.
Then there’s the other side of the equation being the retail and consumer. Vendors say that most people wouldn’t know they have a contactless card let alone dormant NFC capabilities in their mobile. So unless they are prompted to use it by the retailer, they probably wouldn’t. Speaking to a number of retailers including the Co-op bookshop and NIKE (RPG Group) they say that the contactless card option has been popular for small amounts, but they have yet to hear from their merchants on the usage of NFC payments or the protocols around it. They say it sounds exciting but is it effecting the way they do business, probably not. One retailer said they would like to see payments concluded away from the counter, more akin to the Apple retail model where you launch and app and scan a barcode. PayPal and Tyro see this as a future trend and believe that any consumer with a smartphone shouldn’t need to always go to a specific place to check out. This has opened up the discussion beyond simply the future of NFC payments.
At this point what appears to be gaining ground are the apps that provide the payment processing functionality. This is the touch point around the ‘Mobile Wallet’. The latest news is that Coles has launched a trial of a Coles MasterCard Mobile Wallet that will allow customers to pay with their credit card using their smartphones. The user downloads the smartphone app and links their credit cards to their digital wallet and via the PayPass option the customer pays via the smartphone instead of the physical card. The other player to date is Google and its ‘Google Wallet’. At this stage it has only partnered with one card vendor being Citi Mastercard, again uses the tap and go methodology. Although this sounds like a proprietary solution using the NFC technology it still strengthen that desire by the retailer and customer that digital payments are on the horizon. If the movement in the US and Japan are any indication, there are a number of retailers actually using the technology including Macy’s (Australian equivalent being Myer), Foot Locker and Toys ‘R’ Us (both in Australia). Neither Foot locker nor Toys ‘R’ Us in Australia have capabilities to transact utilising NFC, although they are both keen to proceed.
It appears that in Australia we are very much in a building phase. There appear to be a number of workarounds assuming that the planets align, but as far as NFC being mainstream it looks like we’ll be waiting a bit longer. If there’s one component that is holding back NFC back in Australia it’s the ‘Digital Wallet’. The crystal ball appears to be pointing towards either the card merchants such as Visa and Mastercard or independent vendors like TYRO, Google or PayPal providing the software link for the customer which will then facilitate the technology development gap back to the NFC chip and device. Customers will embrace the technology but it needs to be undemanding of their participation. Like with the PayPass cards there needs to be very little customer configuration and a simplistic payment methodology. The retailer equally should only need to request the payment and await a response, not unlike they do with EFTPOS. The positive to all this is that the building blocks are a reality but are awaiting the commercials so the players can finish building the bridge across the technology gorge.
NFC like many technological advancements are often adopted at the clock speed of who has most to benefit. At this stage it looks like the card and payment merchants are pushing the hardest. Once they close the payment loop than adoption by the industry should fall into place systematically. Overall this is a good sign and indicates that mainstreaming will be sooner than later or until the next health check.