The road to the widespread rollout and adoption of Near Field Communication mobile payments may be littered with potholes and speed bumps, but payments-industry executives still hope the technology can make a significant splash in the United States.
Those executives, however, hold varying opinions on whether consumers believe a need exists to carry NFC-enabled phones, according to comments made this week during the 2010 Payments Conference sponsored by the Federal Reserve Bank in Chicago.
Wences Cesares, CEO of Bling Nation Ltd., a Palo Alto. Calif.-based mobile-payments company, believes pent up demand does exist for NFC from consumers and merchants. Others, however, are not so sure consumers are ready for the technology upgrade.
“Consumers in the U.S. don’t see a burning need for it,” Jeff Semenchuk, head of growth ventures at Citigroup Inc., told conference attendees. “They want it but are not clamoring for it.”
Consumers outside the U.S., however, appear to be welcoming the change.
Citi experienced success with an NFC trial last year in India, Semenchuk said. The test involved some 5,000 consumers with Nokia 6212 phones that could make contactless purchases at approximately 400 merchants (see story).
Two months into the trial, some 800 participants made six or more purchases using the phone, according to Citi. Nearly all consumers made at least one purchase. The trial ended in December.
“It was also a business-model trial,” Semenchuk said.
NFC’s primary setback has been how the card brands, issuers, mobile operators and handset manufacturers divvy up transaction revenues. “For all the partners that were involved in this trial, we all made more money,” Semenchuk said.
Besides the lack of a fluid business model, handset manufacturers need to make more NFC-enabled phones, Semenchuk said. Until then, U.S. payment companies will continue to find ways around the technology.
Cesares’ Bling Nation has accomplished that by using contactless-payment stickers consumers may affix to mobile phones as a way to bridge the gap to NFC. Banks associated with Bling issue the sticker, which consumers may use to initiate debit purchases drawn from their checking accounts.
Despite Bling’s moderate success with several community banks nationwide, Cesares still realizes the advantage NFC chips bring to phones. “Nothing increases the functionality of a phone like having a chip in the phone to pay,” he said. Unlike basic contactless, NFC supports two-way communications with other NFC chips to support coupon downloads and other functions using smartphones.
NFC should reduce fraud, and that may help increase adoption in the U.S., Paul Tomasofsky, president and executive director of the Secure Remote Payment Council, tells PaymentsSource.
Indeed, NFC transactions would be much safer than magnetic stripe cards, Semenchuk said. “We need to do a better job of promoting the security” of NFC payments, he added.
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