Industry analysts have called 2012 a possible “breakthrough year” in the payments industry for Near Field Communication technology.
Such a view of the contactless-chip technology is understandable, considering speculation persists that new initiatives this year from payment networks, especially in the United Kingdom, will feature NFC technology.
In addition, Google Inc. included NFC technology in the Google Nexus S mobile phone, and rumors carry over year to year about what Apple Inc. intends to do with NFC, possibly earmarking it for the iPhone 5 (see story).
And then there is PayPal Inc., the most prominent player in the online-payments world and a company industry analysts consistently view as leaving NFC behind in its pursuit to secure a place in cloud-based mobile payments.
PayPal, a unit of San Jose, Calif.-based eBay Inc., recently extended its reach into plastic prepaid cards (see story). And Home Depot and Office Depot locations are testing PayPal acceptance at the point of sale (see story).
Yet most industry interest in PayPal’s plans center on whether NFC is to be part of its future. PayPal conducted what it termed a “small NFC test” in Sweden late last year (see story). It also has included NFC in its latest version of the PayPal mobile application for Google Inc. Android devices.
All of which suggests PayPal is not anti-NFC but instead views the technology as a potential part of its cloud-based digital wallet, PayPal spokesperson Anuj Nayar tells PaymentsSource.
Confusion about where PayPal stands on NFC development continues because of industry interpretations of comments a PayPal executive recently made, Nayar says.
When David Marcus, PayPal vice president of mobile, noted during an interview with a technology website reporter that NFC could take too long to develop in a world likely moving away from traditional point-of-sale terminal use, some interpreted it to mean PayPal has no interest in NFC, Nayar says.
“To be clear on this, we have never said we are against NFC,” Nayar adds. “We view it as a technology, not necessarily a strategy.”
That stance puts PayPal in a position to incorporate whichever technology in its payments system it deems favorable in the eyes of consumers, Nayar contends.
“We find NFC very interesting as a communications protocol, but when you look at the key companies looking to adopt it, that adoption has not been as swift as any of us thought,” he adds.
Meantime, PayPal continues to stir retailer interest in its in-store mobile-payment setup. Compared with the card networks, PayPal offers access to more complete customer data with retailers who incorporate its system in which the consumer pays through a PayPal account linked to his mobile phone and PIN.
“Retailers don’t get much benefit from paying interchange fees, and PayPal was thinking in terms of what it could give back to the retailer for using its payment system,” Nayar says.
In following company privacy provisions, PayPal offers the data only if the consumer agrees it can be shared, Nayar adds. The data allow the retailer to learn what a particular consumer tends to purchase, and where, and to target relevant offers to that consumer, he notes.
The incentives help the retailer and consumer, and they allow PayPal to create more interest in its mobile-payment offering while other technologies look for a foothold, Nayar says.
Most mobile-payment technologies “face a long road to get to where you change consumer behavior,” Nayar suggests. “Tapping a phone to make a payment may not be significantly better than swiping a card in the eyes of the consumer.”
Industry analyst Todd Ablowitz, president of Centennial, Colo.-based Double Diamond Group, LLC, has a blunt assessment of where PayPal sits on the NFC fence.
“PayPal has always been steering away from NFC,” Ablowitz tells PaymentsSource. “Their strategy is to leverage cloud-based systems for mobile payments.”
And that means PayPal wins if NFC loses any ground in the payments industry, Ablowitz contends.
Nayar suggests PayPal doesn’t view the technology race as a game to be won or lost on one or two new developments. “With our cloud-based service, our digital wallet doesn’t live on any single device,” he says. “From that standpoint, we would be happy if NFC succeeds and can be added as another way to pay in our digital wallet.”
Ablowitz agrees PayPal easily could decide to attach NFC in some form to its cloud-based digital wallet, but it likely will prefer to watch NFC development from the sidelines.
“Clearly, they are looking to come up with something that sticks with consumers while waiting for the others to fight it out over NFC,” Ablowitz contends. “In the meantime, they are trying to make the cloud the way to do mobile payments.”
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