As you wait for Santa to come and fill your stocking this holiday season, you may be thinking of what might be the best toys and gadgets for that most demanding of technologists in your household, namely…yourself. Perhaps you have bought every new gadget that comes out in the marketplace, including tech toys that were way ahead of their time? You know the type – ingenious devices that perhaps made a promise on which the actual product, software, or marketplace could not deliver? But you bought them anyway, because you had to have them? And you know who you are – you’re the one who bought the first run Apple Newton back in the early ‘90’s.
So perhaps, like many of this writer’s neighbors in the San Francisco Bay Area, you admit to being a certified technophile and early-adopter. And if this is you, you have been shaking out the bottom of that furry boot hanging from the mantelpiece every single Festivus morning for what seems like ages looking for that holy grail of convergent tech devices – namely, the mobile phone that you can also use to pay for things.
That promise of convergence certainly beckons, doesn’t it? As summarized in a PYMNTS University course earlier this year, the convergent opportunity of mobile and payments certainly sounds seductive from the outside in: “Consumers walk out the door every day with just a few things in their pockets: keys, wallet, and mobile phone. Ubiquitous. High-utility. Highly-necessary. These adjectives are every consumer product marketer’s dream. So you’re in a planning session with your colleagues, pull out your wallet and mobile, place them on the conference table, and say “why can’t we just put these two things together and make the world’s most amazing consumer product?” Why not indeed? Sounds simple. It worked for chocolate and peanut butter, right? Why not here?”
And perhaps the answer to that question lies in the approach the industry has taken to making this happen? Namely, taking a mobile phone – which is a remote communication device, or perhaps in its best form a web-enabled smartphone with a graphic interface, touch screen, and robust memory—and trying to turn it into a chip payment fob? Certainly, it would seem that using NFC (near-field communications chips, making payments like contactless cards) makes logical sense – standards have been tested and implemented for chip deployment within mobile phones, for chip acceptance at the point of sale (PoS), and for managing payments applications on NFC chips both on mobile phones and at the PoS. (Related Briefing Room: NFC and Contactless)
But, as any follower of PYMNTS.com and platform businesses will observe, building participants on both side of a two-sided market –as payments requires—at the same rate and quickly enough to ignite a business is no mean feat. The list of organizations that have tried to propagate new payments technologies, and failed, is legion. And make no mistake, building an NFC payments ecosystem for mobile requires laddering a new network effect on top of the current one. Yes – the basic payment connections are all there, but now you need to add a chip (and software to drive it) to the mobile phone along with a value proposition for making that chip drive a private label payment capability? And perhaps you have plans for doing something extraordinary to close the gap between the 100K or so merchants accepting contactless today and the nearly 8M who accept mag-stripe cards?
Perhaps the combination of the top 3 mobile operators in the US, riding the backbone of the Discover acceptance network, and providing private label credit to consumers on the Barclay’s issuing platform will make the difference? Only time will tell if the ISIS joint venture (nee Mercury, then Thor –would someone please pick a culture/mythology and stick with it?) will make the promise of NFC-enabled handsets, making contactless payments at millions of points of sale, a reality. New devices shipping on the Apple and Android platforms will have NFC-driving capabilities standard, which will help. But still, there’s that little challenge of a new mobile device, new consumer behavior, new acceptance terminal, new product, new value proposition, and a new business case. (Related Article: AT&T, T-Mobile and Verizon Wireless Announce Joint Venture to Build National Mobile Commerce Network)
Perhaps NFC mobile payments will finally take off. Or perhaps another technology, like the IP-enabled remote payments enabled by companies like Cimbal will steal the value-prop thunder of NFC? Innovators who enable payments at the point of sale by playing to the growing deployment of IP-enabled points of sale and smartphones, playing to consumer familiarity with snapping photos and using iTunes-like payments registration? Who can say? All we know for certain on this eighth day of Christmas is that the traditional payments players have set their 8 maids to a-milking high returns from the established card business. Someone out there is certain to bring an epiphany of a new way to pay that will ignite adoption by consumers and merchants alike. Who it will be, and how, only time will tell.
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