One of the world’s largest trials of Near Field Communication payments, which Citigroup Inc. and MasterCard Worldwide launched last year in India, provided a glimpse into the challenges of incorporating merchant-sponsored product discounts and coupons within mobile payments.

Though the six-month NFC trial in Bengaluru (formerly Bangalore) primarily was designed to test NFC payments, the couponing effort fell flat, with only two of 250 merchant locations participating and only 150 coupons downloaded during the entire trial.

Participants say that despite those paltry results, the trial in general was successful and it helped to demonstrate what it might take for mobile coupons to be successful within NFC payments programs.
One lesson participants learned from the trial is that merchants must promote NFC coupon offers prominently through various channels, including at the point of sale, to spark consumer interest, and merchant participation in NFC coupon programs requires advance planning.

Consumers apparently were satisfied with the NFC coupons offered and the way they were delivered, notes Satish Menon, executive vice president with Citigroup’s Citi Growth Ventures group, which conducted the trial with Citibank India and a variety of other partners. “However, for the full development of the NFC ecosystem, besides NFC payment applications driven by us, other partners, too, will need to actively participate in communication and create awareness of nonpayment NFC features to increase ... coupon redemptions,” he says.

During the pilot, launched June 30, Citi helped distribute NFC phones to 3,141 customers with MasterCard credit card accounts. Customers could use the phones to make purchases at all participating merchants’ outlets. Partners included wireless carrier Vodafone Group PLC, handset manufacturer Nokia Corp. and NFC technology firm Vivotech Inc., which supplied contactless terminals and over-the-air transaction software.

During the trial, consumers could download coupons by tapping their phones on codes printed on posters and other marketing materials. They could redeem them at the point of sale by tapping the phone at participating merchants’ contactless terminals.

Fast-food chain Subway System offered customers a free soft drink with NFC purchases of more than 150 rupees (US$3.29 or 2.42 euros), and supermarket chain Nilgiri’s, operated by Nilgiri’s Dairy Farm Pvt. Ltd., offered customers a free drink and two cream buns for NFC purchases of more than 300 rupees.

Edgar, Dunn & Co., which this month published a report describing the Bengaluru trial, concluded that “NFC technology allows banks, mobile operators and merchants to develop targeted and effective marketing and loyalty campaigns.” However, this trial lacked a solid framework to measure broad consumer appeal and merchant results from NFC coupons, the report noted.

Grocery stores accounted for 60% of the NFC payments initiated during the pilot, followed by telecommunication stores (17%), apparel retailers (8%), bookstores (7%), department stores (4%), restaurants (2%), and petrol stations and drug stores (1% each), London-based Edgar, Dunn said in its report.

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