Discusses the need to convince companies taking lots of cash payments – among other topics – in the run-up to the NFC Payments Europe 2012 in June.
Most market watchers accept that NFC will take two to five years to become an accepted mobile payments channel – and it will take real coordination among key stakeholders if it is to do so.
There are so many diverse players in the ecosystem, and they all have a role to play.
Indeed, a study released by m-commerce specialist Sybase 365 showed that 26 per cent of the survey respondents cited mobile operators as the most important catalysts, while 24 per cent said banks, and 19 per cent pointed to companies like Amazon, PayPal or Groupon to encourage great adoption.
It's also true that NFC is just one type of technology supporting mobile payments. A company like PayPal is seeing explosive growth already, with barely any support from the tech.
Still one can't ignore the fact that NFC promises to turn mobile phones into contactless payment, couponing and redemption devices. And the truth is that the tech has made tremendous progress in the last 18 months.
According to Alberto Jimenez, director of global mobile solutions at Citigroup, there are two key factors here: First, both mobile and POS manufacturers have a healthy pipeline of devices that support the technology. Second, several providers that leverage NFC technology for payments have either announced plans or have already launched services.
He says: “There are key ecosystem dependencies necessary to drive broad adoption – such as merchant and mobile device readiness. But we recognise the momentum across the different stakeholders to bring relevant services to end-users. Once that value proposition is clear from an end-user perspective, they will naturally try and adopt the services.”
In this sense, mobile commerce is mimicking online commerce more than a decade ago. Consumers started using mobile to research products and prices. They’re now starting to shop and pay on their handsets.
Financial institutions are waking up to these changes in consumer mindset too.And Citi accepts it has a role in educating them about the potential of the market.
Jimenez says: “We are certainly investing to communicate these benefits to our clients. Our mobile payments offerings, like the rest of the products we bring to our clients, are secure and we spend a significant amount of time and effort making sure they stay that way.
“It is also important to understand mobile payments security in the context of the transactions it is replacing. For example, if we replace a cash transaction with a mobile transaction, we are significantly improving the security for both consumer and the merchant, before, during, and after the transaction.”
Of course, the space also need buy-in from retailers and merchants who need a compelling value proposition to change their point of sale systems to support contactless or mobile payments. Payments alone are rarely the answer, with the exception being retailers with fast transaction speed requirements.
Jimenez reckons merchants actually have the most to gain for NFC as it can give them access to a rich set of data not visible to them today (regulation permitting) – which can improve loyalty and customer service.
From a consumer perspective, Jimenez highlights two areas that can trigger that behavioural change. "The first one is discounts, and examples include promotions and price comparison tools, and the second one is improved experiences: the ones that make transactions safer, faster and more relevant to the end-user."
The key, he says, is to focus on the “flow influencers” that control vast numbers of cash transactions.
“For example, in an emerging economy, tens of millions of individuals make physical cash payments on a daily basis. However, just a few entities control these collections and disbursements. We call them ‘flow influencers’, and we believe a structured set of incentives can persuade them to migrate to the mobile channel.”
For the future Jimenez believes there will be a merging of the kind of mobile wallets we see today in developed markets (a container of multiple payments instruments), and those that have worked in developing markets (a store value instrument that can be managed through a feature phone).
"This convergence will be driven by the smartphone and 3G penetration in emerging markets,” he says.
* NFC Payments Europe 2012 takes place at The Royal Garden Hotel, London on June 13th and 14th. More details here.