Mobile payments: Uneasy situation on a global market


During the last couple of months I have attended payment conferences all over the world and they all had one hot topic in common: NFC and mobile payments. It is clear that after years of speculation, NFC technology is finally gaining momentum.

Several impressive projects using NFC technology have been launched in the last few years -- the Octopus card in Hong Kong and Transport for London's NFC concept being among the most notable. It is becoming common for customers to use their contactless cards in taxis, buses, trains and subways all across the world -- riders pay their fares by simply tapping an NFC device against a reader. However, even after seeing these projects come to fruition, I don't think that the real NFC revolution has begun yet.

Although growing numbers of people are gaining the confidence to make a payment by tapping their phones and credit cards at points of sale, my impression is that regular contact card payments are still the most prevalent. Customers are used to and already trust this technology; getting them to change their habits may be a long-term proposition. On the other hand, I can foresee that in 10-15 years the new generation (known as “Gen Y”), will use only NFC for their payments, completely displacing today's debit/credit/loyalty cards, checks, coupons, fare tickets, perhaps even medical records etc.

The question to be answered is if NFC's complexity, fragmentation across all major payment networks and implementation difficulties are not creating an opportunity for some other technology to take over the market sooner. Current payment options are simply too broad, adding yet another challenge to the mobile payments industry today. Each NFC device provider and payment network offers multiple digital wallets, each with “unique” features - increasing confusion in the market. It is not surprising that when faced with this confusion, consumers choose the option that from their perspective, is easier and safer: regular credit cards.

I can see that for banks and large retailers in particular, NFC is the next "big thing". There is a huge expectation that it will be a new source of revenue growth. By making it easier and safer for customers to shop, they will spend more. But the price for this technology is becoming too high for all. How will small retailers be able to operate in this space? The NFC infrastructure burden is becoming more and more challenging for them as the cost of supporting all these technologies increases and the transaction costs eat into their slender margins.

For example, even ordering a drink at my local pub has become a problem these days. I was astonished when the bartender asked me to pay cash for a single drink and bag of chips; if I paid by credit card, he would have to charge me an additional fee for the card payment. If this is our current payments reality, it really wasn't meant end up this way.

Issues with NFC technology adoption obviously add another layer of cost on top of the current bill for payments network fragmentation. Implementation of EMV required some serious investment in resources for all payment devices and before this investment could be paid off, NFC appeared on the scene. The inability of big players such as Visa, MasterCard and American Express to agree on single standard specification has made this burden exponentially higher. The implementation process is longer and more expensive and the certification process is complicated. Their 6-month technology mandates are becoming a nightmare for all participants. A good article about practical issues from such implementation can be found here.


Is it possible that the difficulties and fragmentation associated with EMV/NFC technology will create an opportunity for some completely new and different payment approach, leaving the majority of today's players in the dust? PayPal is very ambitious these days, also iMoney comes to mind, or it could be even a completely different emerging payment philosophy such as BitCoin.

Please don't get me wrong. I'm fully convinced that EMV/NFC technology is the right choice, but perhaps it is suffering from a form of “US Space Shuttle” syndrome. What was meant to be used as a common low-orbit space bus has become so expensive that there is no money left in the pile to implement it.

So what can be done about this? Some suggestions:

  1. Let EMVco serve its original purpose first! Unify all EMV/NFC specifications across all payments networks and let EMVco become a single-point for this technology source. Also, lets have EMVco publish yearly mandates which would cover changes approved for all payment networks.
  2. Build-up EMV/NFC technology knowledge! Having too few people who understand what is this all about makes them too expensive and some implementation projects simply become impossible.
    We need an army of people able to help with EMV/NFC roll-out as well as daily processing issues. Yesterday is already too late, so let's start building it now!
  3. NFC was designed to be a low-cost shopping solution. So let it be one! Lets drop all the network fees on low value transactions (the drink & chips equivalent). Let these transactions be affordable for everyone, while boosting market penetration and providing strong security.
  4. Bring EMV/NFC technology to the masses! Let's support EMV/NFC integration into our daily life. 
    I want to use a single payment device for my weekly shopping, local market shopping and at the pharmacy; for public transportation, coffee point collection, loyalty point redemption and a donation to my local charity. But this requires making this technology accessible and its usage worthwhile for all to integrate.
  5. No more wallets! I'm not interested in having 10 wallets loaded in my mobile phone. I'm really not. I just want to have one card/payment device for everything. Can we put all wallets into one wallet please? Let's just create one which will support all cards, but that top down, will always look and behave the same.

Obviously we need a serious re-think of what the market really wants. I really don't want the EMV/NFC project to end-up in a museum like the Space-Shuttle. I am totally convinced that if we could manage to implement at least 3 of my suggestions above in the near future, we wouldn't have to worry about any other payments technology taking over for the next 15 years. Let's start the revolution in payments today!


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