NFC beyond mobile payments

There has been talk for a long time that mobile payment is the next big thing and that it’s going to take over the other three channels of payment (cash, credit and check) very soon. However, the adoption hasn’t been as rapid or revolutionary as many thought. Some of the reasons include lack of consumer education, reluctance for change and high cost of infrastructure. But the big factor to me is how it failed to address a key consumer issue – better consumer experience.

There are four major models in the mobile payments sector. They include SMS based payments, direct billing, mobile web payments, and contactless NFC. The current market expectations and trends are revolving a lot around contactless NFC. However, I feel a player in this sector should look beyond NFC to gain a step ahead of others and prepare for rapid changes in this sector since technology is changing at a rapid rate. Some of the alternatives to NFC include digital wallets such as Google wallet, PayPal Here, Passbook by Apple and Square Register. There seems to be no consensus in the market on which technology to adopt or which technology consumers would prefer. If a big player like Apple doesn’t show interest in NFC based payments, then there has to be a strong reason against the NFC trend. It could be just that Apple was interested in building a better experience (Passbook – digital wallet) or that it wanted to minimize the number of players sharing the mobile payment pie (retailers, merchants, banks, NFC chip manufacturers, carriers, and smartphone manufacturers) or that it wanted to build its own platform like it did with iTunes. Irrespective of the trends, there seems to be a lot of choice and no clear leader in the market.

The major problem with NFC or other mobile payment solutions that put the wallet in the phone or in the cloud is that they don’t make the consumer experience any better. If the process involves tapping on to something and selecting a card from many, then it doesn’t make the process any better. It’s just a replacement. Something that would make things better is smarter management of the wallet and the experience. Imagine if you are walking by a Starbucks and your phone containing the digital wallet vibrates with a coupon for a Cappuccino, which is something you really like. Smart wallets are the next big thing and not digital wallets. I strongly believe that Google is going in this direction with its Google Now service, which delivers notifications (cards) based on your interests and search history.

As an example, let’s see how a carrier can capture value in this sector in the near future. Mobile payments depend a lot on smart devices like tablets and smartphones. These devices are getting smarter with each day and one common thing that they all need is data connection. And this data comes largely from carriers like Rogers. If Rogers can build a cloud platform/solution that can house all the players under one roof or partner with specific players like banks or retailers and deliver smart solutions like location-based coupons or context-based suggestions, then it can substantially improve consumer’s shopping experience while capturing value because it can increase the data consumption which I believe is a key revenue generator for carriers. Moreover, it can subsidize the consumers further and charge the other side since they have access to a huge consumer pool. NFC would be useful for everyone if it goes beyond mobile payments, however, mobile payment solutions have to get smarter if they are to be adopted at a higher rate than they are now.

Table 1: Survey results from a group of approximately 100 people

Category

Answers

Yes

No

Somewhat

% of people who look for offers

54.93%

21.23%

26.76%

% who like customized offers

77.46%

12.68%

12.68%

% who like location-based offers

73.24%

16.9%

12.68%

% who like context based offers

58.57%

24.29%

20%

Table 2: Willingness to pay

Price

Free

At least $0.99

% interested

52.11%

47.89%

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