NFC (the technology behind contactless payments) has yet to really take off, and with two of the biggest names in retail dismissing the technology for payments, it looks like that NFC for payments is a dead technology…
In a recent article published on “thegrocer.co.uk”, Tesco dismissed NFC payments as passed their sell by date. Tesco’s enterprise consultant architect, Lyndon Lee, told the Mobile Payments and Value Added Services conference that NFC offered no proprietary value for retailers and that it wasn’t “cool” enough for the next generation of shoppers. This echoes statements made by Walmart not too long ago.
When you look at the experience of using contactless payments, you would have to agree with Lyndon Lee’s statements. What does NFC payments give a retailer like Tesco over standard Chip and Pin transactions? The answer, the time it takes for the user to tap in their 4 digit PIN. That’s it. Nothing else is gained. So there is no real benefit to the retailer, not even the benefit of offering something your competitors don’t offer. Consumers in a store that have NFC, still need their cards, still need to use those cards and essentially have the same experience as in a store that doesn’t have NFC. With that in mind, why would you invest in NFC contactless payments across your thousands of checkouts when there is no benefit?
Is the technology cool enough for the next generation of shoppers? Well that’s a little harder to judge, as when used in-side a mobile phone it may well be seen to be “cool” to shoppers. But inside a mobile phone offers other challenges and barriers to entry for the consumer (those for sure aren’t cool). An additional issue is also one of perception, what feels “safe” to tech savy shoppers. Simply waving a phone over a reader doesn’t inspire security confidence, knowing your card details are being transmitted by their phone.
Cards are the issue
The problem though for NFC payments, is that it is essentially a technology that was never designed for payments, rather sharing small chunks of data / communications very quickly. I can think of many examples of where NFC is definitely not past it’s sell by date, and is a very “cool”. Take for example wireless charging on a stand, that using NFC then triggers your phone to launch a particular app, like your calendar, mail, tasks, or music. That’s pretty cool, and works great with a Nokia Lumia 900 for example. That’s what the technology was designed for, it was never designed to initiate payments, and because of that along with the nature of the “Card” infrastructure, it’s never going to offer merchants anything proprietary or that different in terms of experience (or security). Not even when you tie it to Mobile Smartphones.
When thinking of NFC in payments, if you are familiar with Sony’s Minidisc, you might start drawing comparisons. Initially, the Minidisc was a great idea, it provided all the flexibility of a cassette with the sound quality of a CD but in a tiny format that was mobile. The problem was that window where this was a great technology was so small, just on the horizon was the MP3 player, which at first was not that flexible or intuitive to use, but very soon would provide us with the first iPod, delivering thousands of tracks to a small mobile device that was made really flexible in terms of adding music, thanks to iTunes. Essentially, the iPod killed the minidisc. The same could be said for NFC in payments, with the rapid development in mobile technology, Wi-Fi and the Cloud, NFC is a technology that had a small window of opportunity within the Payments arena, but is surely to be replaced by cloud based payment gateways in conjunction with mobile smartphones.
Added value to merchants is essential, and basically NFC offers only a slightly different experience when making a payment, so there is no added value. Merchants are looking for ways to engage with customers via mobile devices, and payments provides a cornerstone to be able to do that effectively across a wider net of customers. So whatever a merchant looks at for their payments, it needs to tie in with their vision of adding value to the customers shopping experience with them. Again, technologies like smartphones, Wi-Fi and the Cloud provide the platform in order to be able to deliver added value. With this in mind, do we really need a “card”? Something that was created pre the digital revolution, pre smart phones and pre the cloud? Probably not…
So could the mobile phone, digital wallets effectively kill off all cards? We think so…