Most merchants shouldn’t run to NFC just yet

I’ve read countless obituaries for NFC-based mobile payments schemes over the last year or two, but the technology is once again generating a lot of hype as a platform for transactions at the retail counter. Most of the new buzz stems from reports that Apple will embed NFC in both the iPhone 6 and the iWatch (or whatever the gadget will be called) as part of an integrated mobile wallet offering that also leverages iBeacon for both payments and marketing. And McDonald’s threw a little gasoline on the fire this week with reports that it will roll out an NFC-based payments system later this month.

While details are still scarce regarding both companies’ plans in mobile payments, both systems should be pretty compelling. McDonald’s is said to include a payment and coupon app dubbed McD that will include music and video downloads and will enable users to access time-sensitive discounts at the point of sale. Apple’s system looks to be even more comprehensive, leveraging the new smartwatch as well as Bluetooth low energy for proximity-based mobile marketing. Both brands also have tremendous clout and the big-budget marketing savvy to educate consumers about their payments systems and — more importantly — explain the value proposition to users. And I’ve explained at length why I believe Apple is well positioned to finally move the needle in a market that continues to spin its wheels.

It’s worth noting, however, that no mobile payments offering in the U.S. has gained any real momentum other than Starbucks’, and neither of the new offerings will be a slam dunk. NFC was embedded in only 18.2 percent of the handsets shipped worldwide last year, according to IHS, and no iPhone currently on the market supports the technology. In addition to low penetration of NFC-enabled devices, the vast majority of merchants have yet to install NFC readers at the point of sale, according to data from Research & Markets. Those two factors will forestall booming growth of the market for NFC-based payments in the short term; meanwhile, competing systems using other technologies will continue vie for the attention of consumers and retailers. Small to medium-sized businesses who have yet to invest in a mobile payments system would be wise to monitor the market carefully as these two NFC-based offerings come out of the gate.