Does NFC really stand for “Not For Commerce?”
It’s an acronym made in effigy that we see often in the payments industry. Those who don’t believe NFC is a viable payments technology often use it as a catchy way to support their claims, while NFC’s vocal supporters often decry the slogan as so much clever nonsense.
During the North American portion of MasterCard’s Mobile World Symposium at Mobile World Congress last week, the acronym was presented to three expert panelists: Paul Galant of Citi, Ryan Hughes of Isis and Jeppe Dorff of Rogers Communications.
While the conversation touched on all aspects of NFC as a payments tools: technological, philosophical, practical and otherwise, one of the most interesting talking points centered on this false acronym, and the business model behind NFC as a payments feature.
Hughes began by talking about how NFC plays into Isis’ business model, which is essentially to serve as a middleman between merchants, banks and consumers.
“We think of ourselves fundamentally as a platform that connects issuing banks to merchants, with consumers behind the junction point. We’re not trying to be a Financial Institution ourselves. We’re not a bank and we’re not a payment network, but what we’re building is a connection point that enables for the simple provisioning of payments cards to load into the Isis wallet,” Hughes explained.
“What we really try to do is sit with our issuing banks and try to understand what it is, in terms of engagement and marketing channels, that lets them talk to customers.”
Galant acknowledged that mobile shopping provides potentially advantages for issuers, but questioned whether those advantages were unique to NFC or applied equally to any tech encouraging mPayments.
“The business bank that needs to be made by a bank is going to be predicated on ROI. If I take my card base and I pay Isis or anyone for that matter, then I need to figure out where I’m getting return. So the first question is, am I going to get more interchange or lending opportunity by virtue of getting my card in an Isis infrastructure or any other infrastructure, “ Galant asked. “To date it’s been a very tough analysis: no one has 100 percent clarity on how much net incremental new revenue they’re going to make by putting a piece of plastic inside a mobile wallet.”
According to Galant, it’s that lack of clear derivable value that has stalled NFC payments in the U.S.: not a lack of NFC technology.
“We need to create this commerce opportunity and take either cash out of the system or take a portion of the wasted marketing and advertising spend, and simplify it and create a more direct connection, a more measurable connection. If you’re able to do that, then these infrastructures become absolutely fine,” he said. “The problem right now is, if I were to say on a scalable basis that I’m going to give it a go, I can’t tell a board or a capital comity that I’m going to get a return.”
Dorff responded from a telcos point of view, acknowledging that there is some risk involved in investing in NFC, but pointing out that there are big potential advantages to being on the leading front of the technology as well.
“We hear this argument all the time, that it’s expensive and there’s no ROI. I think the real question is: do you believe in [NFC] long-term? I agree there’s no clarity in the business model right now, there are just lines in the sand that will change in three-to-five years and in fact could turn upside down,” Dorff said.
“While I understand why a very large issuer like Citi would [hesitate], I think what you’re seeing is someone has to make the first pitch, right? Isis and Rogers have said, ‘listen, we’re going to do this. We’re going to do all the up front investments, we’re going to do all this stuff because we believe there’s a shift,’” he said. “It’s difficult to tackle ROI, but I think if you wait too long you play too much catch-up and find yourself in a position where you don’t respond fast enough.”
What do you think? Does Galant present a fair argument for why issuers should hold off on NFC? Do Hughes and Dorff make a compelling case in favor of the technology? Let us know in the comments below.
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