NFC adoption requires 'behavioral change'

24 Mar 2014

Last month at MWC I wrote about how with each passing month the digital payments ecosystem becomes only more cloudy.

So you can imagine my new level of confusion after sitting through a half dozen sessions on proximity payments, NFC and digital/biometric IDs at Cartes Secure Connexions Asia in Hong Kong last week.

While the infrastructure and handsets are finally available (150 NFC projects are now live or under implementation worldwide and a third of smartphones shipped last year were NFC-enabled), consumer adoption has been slow.

In the US (the most “mature” market outside of Japan and Korea) uptake has been disappointing, and last week Best Buy and 7-Eleven said they are backing away from NFC and looking a barcode alternative.

The speakers in Hong Kong did shed some light on the key obstacles to service adoption:

1. Fragmentation

Solving the technical issues is only half the story, says Neal Michie from Hexlixion.

To drive mass market adoption, Michie says users have to be able to access the services whomever is their network operator. This means that a service provider needs a commercial relationship with each wallet provider. “There are a lot of MNOs, but there are even more wallet services providers, so the integration gets quite messy quickly.”

SIMalliance general secretary Herve Pierre called on telcos to help defragment the market by being more cooperative and open -- with each other and with NFC service providers.

2. Convenience is not enough

MasterCard’s Wilianto Wu said that from a consumer’s perspective convenience is a given, noting there needs be a monetary benefit to moving to any new payment system.

Sebastien Taveau, chief evangelist for Synaptics’ biometric product division,
argued that the “reward” doesn’t necessarily have to be monetary – discounts, free offers, etc. -- it can be a positive experience or recognition.

3. Easy/cheap/simple for merchants

Andre Delaforge from the Natural Security Alliance Mobile said mobile wallets won’t roll out until they can meet merchants’ expectations regarding “fast and convenient transactions by seamlessly combining payments, loyalty programs and coupon redemption, by harmonizing user interfaces and finding a unique user experience.”

While MasterCard’s Wu agrees that reducing transaction time is important, he says merchants need “minimum or zero integration at PoS” – the means being able to reused the existing infrastructure. “They also want better consumer analytics and to be able to easily issue e-coupons and engage nearby customers.”

Bottom line

When the players continue to talk about the need to “drive behavioral change”, it’s a clear signal that they’re pushing a technology in search of a true consumer need. We heard the same think 10 years ago with 3G and mobile video calls.

There is indeed demand in certain markets, particularly developing ones, where credit card penetration is low. But in many (like Hong Kong), where reloadable cards and credit cards are increasingly replacing cash, payment by any type of mobile phone solution will be an uphill battle. Fragmentation among MNOs (as well as around solution options) and merchant reluctance will ensure that for the next decade.

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