The State of NFC – Mobile Payments, Marketing and More

The following is a guest post from Dan Trigub, VP Business Development at Blue Bite.

Next week on March 6th I will be giving a short discussion regarding Near Field Communication (NFC) during the NFC Ecosystem track at the Cartes Expo and Conference being held in Las Vegas.  My session will dive into the state of NFC (specifically in America) and focus on how even though the hype is well underway for NFC as a game changer in mobile payments – NFC is much more than just that.  As I prepare my thoughts for next week I thought this was an opportune time to give my views and take on how NFC will revolutionize content delivery and consumer engagement, potentially even more so than it will mobile payments if at all.

A picture is worth a thousand words and I hope my graphic accompanying this post helps get across my view on NFC for mobile payments as we sit here today in the U.S. (click the image to view full size).  It seems to me that the most overused imagery the industry is using today for NFC payment solutions is the infamous episode from Seinfeld where George Costanza blows out his back from his hefty, over stuffed, over utilized wallet that is making him sit crooked when it is in his back pocket (watch here).   Arguably, one of the funniest and recognizable Seinfeld episodes, this is being used in the U.S. to sell the dream and vision of one day never having to blow out your back from an overstuffed wallet.  As it does a great job to get across the point and sell consumers on the power of NFC I am not at all that convinced that NFC is going to be the solution to our back pains.  I must disclose that I am personally a huge advocate and believer in NFC and see it drastically changing our lives over the course of the next few years – though, I am not convinced mobile payments are the right conduit for NFC.

Just like with any new technology platform and especially when it comes to getting private consumer data and information (i.e. your credit card number) there are immediate security concerns and panics by the general public and society as a whole.  I would be the first to argue that NFC mobile payment solutions are even MORE secure than a traditional wallet, however, that is beside the point.  Society as a whole is much more irrational than the individual and will immediately rush to conclusions which will continue to impede NFC adoption for payments.  This was recently seen via the Google Wallet security scare that flooded all media outlets over the past few weeks.   In addition to security concerns, the awareness for NFC enabled phones and what the technology is capable of is still some time away from the general public in the U.S.  I can’t tell you how many of my friends or twitter followers get excited about NFC when I first mention it to them as they then proceed to tell me that the Giants win over the 49ers was phenomenal.  I then have to tell them we are not talking about the National Football Conference.  I am obviously exaggerating a bit, but what many industry people tend to forget is that not everyone lives in NYC, San Francisco, LA or Chicago.  There are many consumers and mobile phone users elsewhere that know very little about the technology, let alone what it can do for payments.

Another key problem of NFC for mobile payments in the U.S. is that not many handsets support the technology and for the ones that do, not all carriers support the payment platforms.  Keep in mind that the most recent research from ComScore shows that the smartphone share of the total mobile audience is still at only just over 40% in U.S. of which Apple has nearly a 30% share and probably at least double that in mindshare.  That said, the fact that the iPhone still does not have NFC (with no signs indicating it will have NFC in the near future) will continue to hurt the adoption of NFC for mobile payments.  I will be the last to pretend to know what Apple is going to do or claim I know anything more than the next person but I will refuse to believe any rumor about NFC and the iPhone until it comes straight from the mouth of Tim Cook.  However, I do know that Apple is all about their closed ecosystem and wanting each of their users to download and receive content from the iTunes store.  With that context I can’t see Apple allowing their iPhones to simply interact and touch NFC touch points at the POS or wherever they may be without having to go through the Apple “ecosystem.” In addition, just look how Apple will not let an iPhone receive content via Bluetooth from another non-iPhone (but I can do this with any other handset out there today).  As we all know Bluetooth is an open standard (just like NFC) but Apple will refuse to let content be shared via this technology with other handset types.  I cannot imagine this being any different with NFC as this all leads me to believe the iPhone will not have NFC anytime soon or that when it does it will be open and free to use as anyone would wish.

Finally, if you ask my mom and a lot of other people about what they feel about waving their phone at the POS instead of swiping their credit card I think an overwhelming majority will not really care or see the value proposition.  There was recently a great post in Business Insider speaking to this very point entitled NFC Is Fighting The Right Battle With The Wrong Weapon that goes into this very reasoning.  This is certainly not the case in other markets and countries where the value proposition for NFC as a mobile payments solution is much, much superior.  In emerging markets in Africa and APAC regions where more people have cellphones than credit cards and bank accounts – the value proposition of instantly going in and developing an NFC payments ecosystem is much larger and frankly makes more sense.

Today in the U.S., what the reality is when it comes to NFC for mobile payments is that it is a complete mess and cluster jam.  Today there are: too many players trying to fight for the same piece of the pie (handset makers, POS manufacturers, credit card companies and banks to just name a few); lack of NFC standards; concerns with how to enable the secure component on the various cellular networks; too many NFC payment platforms (ISIS, Google Wallet, ISIS to just name a few); and simply too much confusion for the average American consumer.  In my view there is definitely a need to avoid the chiropractor for all the George Costanza’s out there but there are many more impressive non-NFC payment solutions that will steal the thunder of NFC.  Starbucks, Square, Dwolla, Boku, mopay and SCVNGR (via LevelUp) are just a few examples of those already infiltrating and gaining rapid market share in the mobile payments space today.  The beauty of these platforms is that they can work anytime, anywhere and in many cases anyhow (via SMS, QR Codes a traditional barcode or even an App via the cloud) and do not rely on a single technology platform that is still in its infancy.

Other than mobile payments there are many other more compelling use cases for NFC.  A lot of hype has been around its ability to transform transportation as this is certainly happening today in the U.S.  Just the other day in San Francisco I noticed parking meters with NFC tags that would allow someone to instantly get an app on their phone that could be used to pay the fare on their mobile device via a cloud based payment system.  Also, many transportation systems across the country are using NFC based systems in their metro cards.  In San Francisco, the Clipper Card which can be used for all public transportation actually has an NFC chip embedded in the plastic.  This allows for the public to simply tap their card when boarding the various metro systems.  You can also download the FareBot App and touch your card with your NFC enabled phone and read all types of information off of your Clipper Card including balance data, prior trip history and recent balance refills.  Second, simple file sharing applications for NFC are extremely compelling as well.  Shazam, Rovio and Evernote (click to read more specific examples) are just a few who have entered into the realm of NFC for this purpose and have shown great opportunity.

Transportation and file sharing will certainly help advance the proliferation of NFC (more so than payment systems) but in my view, the Holy Grail is content delivery and connecting real world objects with the much more rich and robust online world.  Unfortunately, where we sit today in the U.S. there are simply just too many technologies and platforms to get content from one object to a consumers handset each with varying difficulty and consumer user-flow experiences.  SMS, Bluetooth, WiFi, QR Codes and Apps are the most widely used platforms today but this just leads to confusion.  Certainly, there is no one good “silver bullet” for brands and marketers.  However, NFC has the opportunity to change all of that.  What is even more exciting is that NFC can transform the way media is bought in the physical world.  What the internet did for marketers by bringing a Cost-Per-Click (CPC) model NFC can do the same thing with a Cost-Per-Engagement (CPE) model in the physical world.  Nevermore will an advertiser have to pay on a grey and at times fuzzy impression based metric (i.e. how many eyeballs are looking at something) which cannot ever be verified and proven.

NFC will certainly take a bit of time to gain traction and saturation within handsets (just as it took time for a CPC model to carry any heft on the internet) but when it does it will be a game changer.  Unlike all the technology platforms that exist today which I rattled off earlier, NFC is by far the easiest from a consumer experience perspective and requires fewer clicks and fewer steps which ultimately translate to more engagements.  Literally any object in the real world can be outfitted with an NFC engagement – store shelf products, clothing, posters, business cards, out-of-home advertising and so much more.  Conversely, once these objects are engaged with via an NFC handset the content delivered can be just as endless – video, games, pictures, social media integration, coupons and whatever else the mind can imagine.  This possibility of taking real world objects and connecting them to the web is by far a much more compelling and significant opportunity for NFC than being the go-to solution for the mobile wallet.

About the Author

Dan joined Blue Bite as VP of Business Development in March 2009. Dan is responsible for business development, marketing, operations, finance, and corporate strategy.  Dan joins Blue Bite with over 6 years of early stage startup, finance and marketing experience. Most recently Dan held the title of investment banking Associate at GCA Savvian, a firm principally focused on providing M&A advisory and capital markets services globally in the digital media space among others. Previously he worked at Analysis Group, a leading financial, economic and strategy consulting firm in Washington, D.C.  Dan has a B.S. in Economics from Vassar College.

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