The always-dependable NFC hype machine is working overtime today (check my curated links for proof), but I wanted to direct your attention to two particularly silly stories this morning. Samsung and Visa will deploy a mobile payment system at the London Olympics next year that will require users to buy special phones — a laughable proposition that ensures very few will participate. Even more ridiculous, though, is this piece from Business Insider claiming that Google’s support of NFC means “QR code technology is on its way out.” That ignores the fact that NFC-enabled handsets are almost nonexistent in the U.S., and will slowly come to market over the next year or more. QR codes may never gain mass-market traction, but they will have a huge head start over the NFC stuff that many are so obsessed with.
It’s been a slow news day in mobile, but the Wall Street Journal is getting attention for this piece documenting Google’s efforts in mobile payments. Google has lined up some solid partners including MasterCard and Citigroup, and and the initiative also includes VeriFone — the company that makes credit card readers. But more important is the fact that Google and its partners are focusing on apps that can bring real value to mobile payments. There’s little value in the actual act of waving your phone rather than reaching for your (real) wallet, but apps that consumers like to use would go a long way in moving the needle for mobile payments.
Some of the groundwork is finally being laid for mobile payments, but the industry still has to find ways to convince users to pay for stuff with their phones. Which is why apps will have to do much more than just execute transactions.
The overhyped (in my opinion) world of mobile payments suffered another setback today with the news that Apple won’t include NFC in its upcoming iPhone. Apple appears to be concerned about a lack of a clear standard for NFC, which is an understandable concern given all the different initiatives trying to bring mobile payments to market. There are plenty of other hurdles too: business models need to emerge, an expensive infrastructure must be built and — most importantly — somebody needs to build apps that can bring value to the consumer. So while the hype remains, you shouldn’t get too excited about the coming mobile wallet just yet.
My colleague Ryan Kim at GigaOM.com posted a good piece this morning examining Verifone’s announcement that it will begin including NFC readers in all of its point-of-sale terminals. That’s a huge boost for NFC, of course, because retailers have understandably been hesitant to invest in costly readers without some evidence of consumer demand. But major hurdles remain before the mobile wallet gains any kind of traction, including the emergence of viable business models; the creation of incentives for users to pull out their phones rather than a credit card; and the unification of an already fragmented market. Those challenges will take considerable time to overcome, which is why it was refreshing this morning to read this skeptical piece from the Wall Street Journal about the prospects for NFC payments.
NFC will arrive in handsets in a big way in the coming months, but other components of a viable “mobile wallet” scenario aren’t in place yet. Here are some possibilities for the technology beyond using it to pay for goods at the retail counter.
The concept of a mobile wallet has become hot in recent months, and Starbucks threw some fuel on the fire today with news that it allow users to pay with their smartphones at nearly 8,000 locations around the country. But while most of these kinds of efforts are based on NFC technology, Starbucks customers will use a downloaded app that will tap credit card or PayPal accounts to complete transactions. That’s important because A) it doesn’t require an NFC chip on the phone and B) vendors don’t have to install expensive NFC readers. But Starbucks’ system still doesn’t provide much value to consumers who already are carrying credit cards and/or cash. So I don’t expect many people will rush to embrace the program.
Fierce Wireless’s Phil Goldstein posted this thought-provoking piece this morning examining some of the challenges facing NFC-based mobile payments, which is a space that has made plenty of headlines in the last few weeks. There’s no shortage of players looking to push the concept of a mobile wallet, from Google to Apple to mobile network operators. But as I’ve written before, consumer demand for mobile payments is far from certain, and viable business models have yet to emerge. So while plenty of companies are trying to position themselves to grab a piece of the mobile payment pie, I don’t expect any real traction in 2011.
AT&T, T-Mobile USA and Verizon Wireless today took the wraps off ISIS, a long-rumored mobile payment service that will use NFC (Near Field Communication) to support transactions at the point of sale. The initiative is notable for its sense of collaboration among carriers — a rarity in a space where an inability to play nice contributed to the death of Simpay several years ago. ISIS faces some serious hurdles, though, including the steep costs of building a mobile payment infrastructure; the cost of adding NFC chips to phones; and the sheer lack of demand by consumers for an alternative payment system at retail counters. So don’t expect to see much uptake of this stuff for quite a while.
Network operators are once again pushing the idea of a “mobile wallet” in an effort to grab a slice of purchases for both virtual and physical goods. But they’d be wise to view themselves as an extension of existing payment systems — not as a replacement.