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Battle lines being drawn in NFC arena

March 30, 2011

Google, MasterCard and Citi are marking out territory in the NFC ecosystem

With Google, MasterCard and Citi reportedly teaming up to go head-to-head with the United States carriers’ Isis joint venture with Discover Card and Barclaycard, a war in the near field communication space is on the horizon.

The stakes are high. NFC is about much more than contactless mobile payments—it can enable closed-loop location-based mobile marketing and loyalty initiatives, as well as provide marketers with invaluable consumer data to increase the relevancy of ads and offers.

“Google sees mobile, especially NFC, as something to bridge the online and offline worlds so that they can extend the advertising platform to the physical world,” said Sandy Shen, Beijing, China-based research director at Gartner.

“That’s a reflection of what we said that the immediate opportunity is, not with payment, but with loyalty and proximity marketing,” she said.

Google and Citi declined comment.

A MasterCard spokesperson issued the following statement in response to an inquiry:

MasterCard has a 45-year history of innovation in payments, and we are confident that we will be at the center of delivering the next generation of mobile payments to our customers and consumers around the world.

We have partnered with mobile carriers, handset manufacturers and financial institutions globally to launch numerous NFC-payment trials, PayPass mobile payment tags, person-to-person money transfer services and iPhone/smartphone apps that are paving a path to help revolutionize the mobile commerce experience for consumers.

However, we cannot comment on rumors or speculation. Of course, we will certainly share information, when and if there are developments that warrant sharing.

Competitive ecosystem
The wild card in all of this may be Visa and American Express, both of which have been very active in the mobile payments and financial services space. Neither has announced any major partnerships related to commercial rollouts of NFC, although Visa has been running trials for quite some time.

Also in the mix are handset manufacturers such as BlackBerry-maker Research In Motion, whose battle with the wireless carriers over mobile-payment data is a precursor to the larger war over who owns consumers making transactions using mobile devices (see story).

A mass-market rollout of NFC is not expected until early next year in the U.S., and all of the various stakeholders are already jockeying for market-share position.

“It’s going to be a bit of a bloodbath—in the U.S. it is just a turf war,” said Nick Holland, senior analyst at Yankee Group, Boston. “The Isis initiative made the assumption that they would own the mobile device and therefore own the NFC transaction.

“However, the way things are going with Google and RIM, they have the ability to bypass the SIM card, so third parties such as MasterCard and Visa can be players too,” he said. “It’s kind of messy right now—it’s a free-for-all.”

One factor that differentiates Google from other players is that its primary concern in not securing a cut of the NFC transaction fees—what Google craves is consumer data to boost its advertising business, which has always been its bread-and-butter.

“In the U.S., the carriers want to share the transaction revenue, whereas elsewhere they are satisfied with a rental fee for storing information in a mobile wallet,” Mr. Holland said. “Isis is challenging the status quo by trying to get a cut of the transaction fees, and MasterCard and Visa are doing whatever is necessary to get theirs—they will try to circumvent whatever the carriers are doing.

“Google, on the other hand, is quite happy to facilitate the NFC transactions—it is gravy for them,” he said. “They are really after the advertising revenues—what they get is information about what you as a mobile subscriber do in the physical world, what shops you go to and what you buy.

“That’s how they make their money.”

Looking at Google’s acquisitions and platform launches such as Latitude and Goggles, it is clear that location-based services and mobile advertising are high on the priority list, and NFC could take those to another level.

Mr. Holland said that in 2009 Google reported that 97 percent of its revenues came from advertising.

“Why would they mess around with whatever sliver of transaction revenue MasterCard wants?” Mr. Holland said. “But they interesting in facilitating NFC transactions—it is a rapidly evolving space.”

In any case, Isis now has serious competition on its hands, and will undoubtedly soon have more. It will be interested to see if the carriers are willing to make any concessions to the various ecosystem players to help ensure that their joint venture is retailer-friendly.

“Mobile payments can be completed with or without mobile network operators [carriers],” said David Schropfer, author of “The Smartphone Wallet,” Red Bank, NJ. “While Isis clearly wants to include MNOs, the Google/MasterCard pilot is likely going to exclude MNOs. 

“Neither Isis nor Google/MasterCard have released specific details about the features or functionality of their respective products, but these seem to be two of the heavyweight opponents in the U.S.,” he said.

“Visa is also a heavyweight, and they are also moving aggressively in the mobile payments space, but they are more likely to reserve their punches for Isis than MasterCard.”

While NFC opens up a world of possibilities for marketers and merchants, there are skeptics that believe mass-market adoption of contactless mobile payments and loyalty is still a ways off.

“There is a land-grab going on in mobile commerce and this is a key initiative, but since it is hardware- rather than software-driven and relies on smartphones and point-of-sale retail terminals, it will take a long time for this initiative to reach any type of scale,” said Simon Buckingham, CEO of Appitalism, New York. “Another challenge is that this is limited to certain Android handsets and doesn’t include the likes of American Express, which announced a separate Serve initiative today.

“This initiative is good for mobile commerce generally but these initiatives need to be industry wide,” he said. “Appitalism believes that you need to cooperate to create the market and then compete to divide the market.

“There is too much competition too soon in mobile commerce, which will accelerate the short-term development of mobile commerce and might end up inhibiting the medium-term growth of mobile commerce.”

VeriFone issued the following statement in response to inquiries regarding reports that it is partnering with Google, MasterCard and Citi for their NFC initiatives:

VeriFone cannot comment as it relates to Google.

VeriFone systems are already installed in 60-65 percent of all U.S. retail locations and its modular systems have been designed for easy migration without major retrofit.

Retailers big and small have been consistent in their conversations with us about their expressed need for a system that leverages their existing investments yet opens up options for the future.

VeriFone is extremely confident of its market position and role in enabling the overwhelming majority of merchants in their move towards NFC in the future, across a wide range of potential services and service providers.

Final Take
Simon Wilson, Android engineer at Google, Mountain View, CA


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Dan Butcher is associate editor on Mobile Commerce Daily and Mobile Marketer. Reach him at

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