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Will U.S. consumers and retailers ever be ready for NFC?

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November 22, 2013

The Google Wallet app

Last year, experts thought that NFC was going to really take off in 2013, but recent moves from Google Wallet and Isis point to a significant question: Will NFC ever really take off?

On Wednesday, Google Wallet launched a physical card, suggesting that its NFC application is not doing the job. Isis recently created an Alliance Program for merchants, implying that retailers are struggling to adopt NFC on their own and require the help and comfort of a network system.

“I think NFC is not the correct technology for it,” said Paula Rosenblum, managing partner at Retail Systems Research, Miami. “Personally, I prefer the PayPal model of entering my phone number and pin number on a key pad and using nothing physical at all, but it seems Bluetooth is garnering more interest.”

Google Wallet
Google Wallet has launched a physical card that works anywhere MasterCard is accepted. Consumers can use their wallet balance to pay in-store or withdraw from an ATM.

The card is linked to the app, so consumers will be notified on their phone when they make a payment. It also means if someone pays a friend through Google Wallet, he or she can use that money anywhere, not just at places that accept NFC payments.

By creating a physical card, Google Wallet is sending a message that NFC is not working so well. They are reverting the traditional card in an effort to salvage the app, but NFC alone just was not cutting it.

“While I wouldn’t say that Google has given up on NFC, they certainly are acknowledging a willingness to work outside of that system as an interim solution,” said Brian Stein, managing director at Pervasive Path, Cleveland, OH. “This allows them to build awareness and adoption of their wallet and its other capabilities without waiting for NFC acceptance.”

Pay with Isis
A recent move from Isis suggests that Google is not the only one facing problems with NFC.

Isis has launched an Alliance Program to create an ecosystem for its participating merchants.

According to Jim Stapleton, chief sales officer of Isis, 25 of the top 100 United States retailers have already or are in the process of deploying contactless terminals.

“The Aite Group projects hundreds of thousands of merchants in the U.S. will have contactless-ready payment terminals by year end,” Mr. Stapleton said.

“The Isis Alliance Program was created to help merchant technology providers take advantage of the opportunities created by mobile commerce,” he said. “We developed resources and tools to help meet the needs of the merchants they support.”

While Isis is still relatively new, the fact that it is creating the program suggests that support is needed for merchants to adopt the technology. It does not seem like merchants are running to adopt NFC anytime soon, so Isis must work harder to attract them.


Isis’ app

Mobile payments
According to RSR Research’s 2013 Payments Benchmark Study, 18 percent of merchants are piloting mobile payments, 17 percent have budgeted for it and 30 percent have plans.

According to Ms. Rosenblum, this points to a better chance at upcoming adoption of mobile payments in the near future.

However, she does not think that NFC will power this trend.

“Not everyone has an NFC-enabled phone, and Apple isn’t planning to release one anytime soon in any case,” Ms. Rosenblum said. “Why limit yourself to your specific brands of phone?”

Despite the fact that many phones are not NFC-enabled, Deloitte’s 2013 Global Mobile Consumer Survey found that NFC may actually be slowly rising. Ten percent of respondents said their phone had NFC technology, a 103 percent increase from 2012.

Of that 10 percent, 34 percent said they had used NFC in the past month.

However, these numbers are still not necessarily significant enough to matter to merchants.

“Google, Isis and others have faced resistance in their NFC wallet efforts at almost every turn,” Pervasive Path’s Mr. Stein said. “From carriers blocking access to the NFC chips, low penetration of NFC readers and merchant acceptance, to poor consumer education and adoption.

“Unless something can break that cycle, NFC will become just another great technology that could have been,” he said.

“Will future generations of consumers be carrying around pieces of paper and plastic to make payments? Of course not, but we’re too early in the game to predict what that future will look like. For this reason, merchants shouldn’t rush to be early adopters of any one technology and should rather focus on creating flexible technology solutions/interfaces and leveraging intermediaries who can shield them from some of the change.”

Final Take
Rebecca Borison is editorial assistant on Mobile Commerce Daily, New York

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Rebecca Borison is editorial assistant on Mobile Commerce Daily and Mobile Marketer. Reach her at rebecca@mobilemarketer.com.

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