Behind The Value Propositions: NFC And Cloud Proximity Payments

By Pete Rizzo, Editor (@pete_rizzo_)

If you were lucky enough to attend PYMNTS Summer School 2013, you’re among a select group who learned a valuable mobile payments lesson: devices offer tactics, not strategies.

This mantra can be essential in helping merchants understand how to craft a mobile payments initiative, manage their goals and pivot strategies when necessary. But, it falls short of helping merchants with another mobile strategy essential – selecting the right technology, and technology providers, to support their objectives.

Complicating matters is that the ecosystem remains crowded with players offering varied technologies. Each mobile payments provider is attempting to convince merchants that they can provide real value in the form of increased efficiency, loyalty and security, and the result of the fragmented field is that merchants are left with burning questions: Are consumers ready to change their payment habits? Which mobile wallet technology will prevail, and which emerging players are worthy of further investigation?

These questions were the focal point of a new white paper from Netherlands-based digital security provider Gemalto, entitled “The Future of Mobile Payments.”

To guide us through this new resource, spoke to Amol Deshmukh, Gemalto’s vice president of mobile financial solutions, for his take on how merchants can navigate mobile payments technologies.

Cloud-Based Proximity Mobile Payments

Gemalto defines cloud-based mobile payments as a type of proximity payment that stores payment information on a remote server, rather than a mobile device. However, cloud-based mobile wallets aren’t just for mobile devices.

“Consumers can access their mobile wallets by using their mobile application,” Deshmukh told “But because it’s [in the] cloud, they can access the payment application on their tablet as well. So, it’s not limited to mobile in this case.”

Deshmukh cited Merchant Customer Exchange (MCX), a mobile wallet collaboration between retail companies that uses Gemalto for its platform, as a key example of an up-and-coming cloud-based mobile payments provider. MCX executives have been outspoken about their reasons for choosing to offer a cloud-based mobile wallet, and have remained cautious of NFC payments.

MCX CEO Dekkers Davidson told PYMNTS Summer School attendees on August 12 that “initially our solution is primarily barcode and cloud-based,” and that the reason was so MCX could “get to market and begin to learn, not engage in conversation about which standard or technology will eventually win.”

Davidson said that he believes the market will eventually declare a winning technology, and that financial institutions (FIs) and merchants won’t be the deciding factor.

NFC Proximity Mobile Payments

For NFC proximity mobile payments, a personalized, contactless payment card is placed inside an NFC-enabled phone. Consumers then pay for purchases by holding their contactless card two-to-four inches away from a point of sale (POS) terminal.

This method stores data on a special chip inside a mobile device that protects consumers’ confidential data. Though early security issues may have shaped consumer sentiment, past Gemalto research has found that NFC is as secure as a traditional plastic card.

“[A key advantage] that we see with NFC payment applications that are offered by AmEx, MasterCard and Visa is that NFC gives a wide range of acceptance, and builds up credit card companies,” Deshmukh said in an interview.

He downplayed what merchants and industry observers consider the slow consumer adoption of NFC, saying that new technologies can “have a slow ramp-up.”

Gemalto’s white paper further discusses examples of NFC mobile payment options such as Google Wallet and Isis Mobile Wallet, and it details the histories of these platforms to date.

Mobile Wallet Adoption And EMV

Even with this information, some merchants are still hesitant to invest in POS terminals for mobile payments. Deshmukh believes this is largely due to the misinformation merchants have received about both NFC and cloud-based payments.

“Both NFC and cloud-based payments have secure elements,” Deshmukh said. “It’s up to us to make [consumers] really aware… they’re going to have a much more convenient, easy-to-use, rewarding, and at the end of the day more secure experience.”

To review the merchant and consumer advantages, and learn more about key operators in the mobile payments industry, read Gemalto’s new white paper in full here.

For Deshmukh’s take on how EMV and consumer smartphone habits will play a role in this transition, listen to our full podcast below.


*If you have trouble with the audio player above, click here.

And for a transcript of the podcast, click here.

Amol Deshmukh

Vice President of Mobile Financial Solutions, Gemalto

Amol U. Deshmukh received his Bachelor’s degree in Electronics and Communications Engineering from the University of Poona and a Masters in Computer Science and Engineering from Penn State University. He joined Schlumberger in 1996 and has since worked in the smart cards, PKI, financial services and security solutions field in various positions from Product development, Program Management, Strategic Relations and Marketing. His experience includes working with leading Fortune 500 companies for Corporate Security, Financial Institutions and Payment Associations covering payment technologies and secure transactions. He is currently the Vice President of Mobile Financial Solutions within Gemalto and has been instrumental in setting the direction of the Solutions for Mobile Financial Transactions for Gemalto.

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