Feature Articles

Consumers continue to rely on their mobile device for routine tasks and banking is a logical extension of this.

Consumers have been relying on their mobile device now more than ever to move and manage their money. Studies have indicated that consumers continue to find the marrying of their banking and payment information with a mobile device has potential for increased convenience and ease of use.

Mobile payment services are proving to be a beneficial offering for various stakeholders targeting the unbanked population. Mobile payments and transfers tend to focus on the unbanked sections of the population with access to mobile phones. Even in the developed markets, it complements existing banking and payment methods, giving an already sophisticated customer base even easier access to financial services. Mobile banking consists of the provision of banking services to those who already have access to the financial system.

“Affordable smartphones have been the biggest driver of mobile banking. Contactless payments continue to exist as an extension of traditional plastics, and it will take some time to shift that behavior to a mobile device. Eventually, smartphone users will adopt mobile payments. It is unlikely that the desire for mobile payment technology will drive consumers to a mobile device,” says David Pinski, Group Leader, Discovery Services,ING Direct.

According to Pinski, consumers are just beginning to understand the technology and what benefits it offers.

“Financial Institutions have invested in marketing the benefits of contactless payments, but not the mobile versions of these technologies. The pilots in the marketplace today are not only testing technologies, but business models. The industry remains focused on the most effective methods to market this technology to consumers. Due to the immaturity of the marketplace, the participation is quite low, and will likely remain so for another 1-2 years,” said Pinski, who is scheduled to speak at the forthcoming NFC Payments USA conference, to be held in Miami (November 2-3) this year.

Retail banks that provide and evangelize competitive mobile banking offerings are best positioned to take advantage of the increasingly mobilized consumer base and to avoid disintermediation as NFC/Virtual wallets gain ubiquity, says Peter L Petersen, Vice President and Director Bank Card Business Integration, Fifth Third Bank.

“Banks that are contactless enabled will drive early adoption of consumers and the business case will be derived from increased usage due to wallet maturation, “new fee based services” and consumer confidence. Current Market participation is very early in its cycle. 2012-2013 will be the real test for measurable market participation in the US,” pointed out Petersen.

Personalization

To date, there have been few commercially available mobile devices that support NFC and payment personalization. As a result, much of the mobile payments growth and innovation has occurred outside the contactless payment space and has been mostly within applications that enable payment (in app or via mobile optimized solutions).

The traditional mobile players are risking stifling the entire mobile payments market on existing payment rails, said Pinski.

“As a bank, we need to know that when we launch a service, a customer can utilize our payment scheme regardless of their mobile technology,” shared Pinski.

He added, “Right now, no one can predict who will win the race to be the authority in provisioning secure elements in mobile devices. Is it the device manufacturer, the mobile network operator, the OS developer, the consumer? For that matter, what will we be charged for this access? How can any institution plan a long-term business or technical strategy with these critical issues still to be determined? This leaves the market open for start-ups to build novel solutions outside of the current payments infrastructure that do not rely on these technologies and compliance schemes.”

The market is still fairly immature, but that should change rapidly as mobile device manufacturers provide devices with the capability and carriers begin to support the technology and provide a viable means to personalize and manage the devices.

Sustainable partnerships between mobile providers and retail banks/financial institutions are among the critical issues when it comes to making mobile payment a mass offering, said Petersen.

“The mobile providers and retail banks need to work together to leverage each other’s core competencies in order to deliver the ultimate consumer experience with mobile payments,” said Petersen. He added that the thought of mobile providers becoming financial institutions or banks becoming mobile providers will deteriorate consumer confidence and challenge the ability for the industry to gain momentum in user acceptance.

Progress

Most new technologies are complicated, and when one adds in the high security requirements of banking and payments, it is increasingly complicated.

At the same time, it should be noted that there were almost no commercially viable options to pursue for NFC payments a couple years ago and a lot of progressed has been made.

It is being acknowledged that merchants must have a compelling value proposition to change their point of sale systems to support contactless or mobile payments. Payments alone are rarely the answer, with the exception being retailers with fast transaction speed requirements (such as quick service restaurants). The industry needs to see more innovation in the ecosystem in terms of offers, loyalty, and other value added services that leverage NFC in order to have a basket of opportunities that in total would make it compelling for retailers to adopt the technology in a ubiquitous way.

Pinski says the merchant side of the equation is being addressed and will be resolved.

“All of the major merchant device companies are offering NFC options in some or all of their devices. The ecosystem on the consumer device side is and will more slowly emerge. There needs to be some way for any FI to provision any device,” he said.

Elaborating further, Pinski cited: Imagine a conversation with a customer without this ability. “What model phone do you have and what carrier do you use? I’m sorry your XYZ phone has NFC, but you are on a carrier that will not give us access to the secure element. May I suggest that you break your contract and get a new carrier?”

“Without a solution to this problem, the market will remain fragmented and adoption will suffer. There is also the issue of provisioning cost. In the near future, customers will still want a physical card for those locations that don’t accept contactless, so those costs don’t go away. What will we be charged to provision a mobile device? Some mobile industry players are drooling over the possibility of a new revenue stream for providing this access. Given the declining margins in the debit and charge card industry, there is not much room for new incremental costs. As long as these costs remain unknown, all but the largest banks will sit on the sidelines while they wait for the metrics to support a business case,” explained Pinski.

Future

In June this year, Europe’s first Mobile Network Operator Trusted Service Manager mobile solution for NFC Payments (approved by MasterCard) was unveiled. The development is expected to help in accelerating interest and deployment of NFC payment systems in Europe and the Americas.

Assessing such developments, Petersen said, “My perspective is the evolution for NFC is picking up significant pace and new solutions are only going to accelerate the progress. 2012 will be a year of tremendous change and momentum for NFC and Financial Institutions are posed to “jump in” to provide consumers with solutions to Mobile Payments/NFC.”

Referring to NFC and payment personalization, Pinski said that it remains an immature space at the moment, but by mid-2012 this will change. The devices are coming with or without payments. There are only a few limited payments pilots currently in operation throughout the industry. This industry will only mature when there is a business model that all players understand, agree with, and a framework around which they can begin to build products and services.

“The critical need at present is for a functional marketplace for obtaining access to the secure element on any device with any carrier. If the industry can solve this challenge, it will resolve much of the uncertainty to deploy payments. At that point it will become an adoption story, not a story of ongoing pilots,” said Pinski.

Petersen concluded by mentioning that with the evolution of mobile banking and the growing adoption of smartphone users, consumers will continue to ask “what’s next” and he believes the industry is on the cusp of introducing solutions that are simple and secure from a payment’s perspective.

“The ecosystem will grow with consumer demand and continued partnerships with significant players in the mobile industry, in fact, industry data suggest that POS terminalization needs to quickly change to meet the demands that the mobile universe is beginning to put on the infrastructure,” said Petersen.

NFC Payments USA conference

David Pinski, Group Leader, Discovery Services, ING Direct and Peter L Petersen, Vice President and Director Bank Card Business Integration, Fifth Third Bank are scheduled to speak at the forthcoming NFC Payments USA conference, to be held in Miami (November 2-3) this year.

For more info, click here

By Ritesh Gupta

Various critical stakeholders including banks, merchants and electronic payments specialists have been signing agreements and working on plans to set up the requisite infrastructure for mobile payments.

In one of the major developments this year, Isis, the national mobile commerce joint venture between AT&T Mobility, T-Mobile USA and Verizon Wireless, became the first mobile commerce platform to gain support of all four national payment networks - Visa, MasterCard, Discover and American Express.

Such collaborations are a must to take mobile commerce to the next level.

American Express acknowledges that the industry has witnessed a lot of developments that suggest NFC is quickly gaining traction, specifically as it relates to partnerships between key industry players.

“It’s clear that no one can go it alone and succeed in such a complex ecosystem, so I see the partnerships as promising. However, NFC payments haven’t reached critical mass in terms of merchant or consumer adoption, and there is still debate about what will really push contactless payments forward,” David Messenger, Executive Vice President, American Express Company told NFC Insight’s Correspondent Ritesh Gupta.

Douglas Kilgour, Senior Business Development Executive, Isis Mobile Commerce Solutions, too, says mobile commerce is a complex intersection of multiple industries, so developing the necessary infrastructure is imperative to its success. Isis is working with banks and operators in order to ensure the appropriate hardware, software and security aspects are present on the consumer’s mobile handset.

Challenges

According to Kilgour, the widespread adoption of NFC-enabled mobile commerce requires two key principles: Convening the ecosystem and developing the infrastructure. Isis provides the scale and resources necessary to align all key stakeholders – payment networks, banks, carriers, merchants and consumers – and successfully drive the widespread adoption of an open platform.

Messenger believes there are two major hurdles for the NFC industry on the whole before one is able to offer end to end payments to a critical mass of consumers:

1) Widespread merchant and consumer technology upgrades, and
2) Changing consumer behavior and providing value in the wave vs. swipe.

“I would argue that consumer behavior will prove the biggest challenge of the two. Waving a phone over a reader is not a huge improvement in ease or convenience to simply swiping. This is why incentives, such as discounts or special offers, will play a major part in the widespread adoption of mobile wallets and NFC payments,” says Messenger.

He added, “It’s also why American Express has an advantage because of our control over the entire redemption loop (i.e. seeing all the payment information from consumer purchase to merchant redemption). If you know who is actually redeeming offers and how much they are spending, you can be much smarter about tweaking and targeting offers that are attractive to consumers.”

Also, according to Messenger, the full business case for NFC in the banking sector is still evolving, but the potential is huge.

Readiness

On a positive note, going by some of the recent initiatives, consumers have shown a strong appetite for contactless mobile phone payments.

For instance, as per the results of a four-week trial ANZ and Visa released in late July, more than 90 percent of participants in the trial said they liked the ability to make purchases using their mobile phone because of the convenience of not having to carry a wallet, and all participants said they felt safe when making contactless transactions using their handsets. Participants in the trial were able to make payments by simply waving their phone in front of a contactless reader. Cafes and fast food outlets were the stores where participants most commonly made mobile payment purchases.

“Consumers are ready for more than simply a new way to pay. Consumers are interested in the complete mobile commerce experience and anything short of that will not prompt widespread adoption. The Isis mobile commerce experience will go beyond payments, enabling an active conversation between consumers and merchants through opt-in offers, loyalty programs and coupons,” says Kilgour.

In the US, U.S. Bank has been testing an NFC-enabled mobile payments service in 20 different markets, spanning several U.S. states. The company’s pilot was with contactless payments technology (PayWave) embedded in a MicroSD card in conjunction with a fully functional mobile banking application.

“This pilot showed us that consumers continue to find the marrying of their banking and payment information with a mobile device has potential for increased convenience and ease of use. However, contactless payment acceptance in the United States remains fairly low and that becomes a barrier. If a consumer can only use their mobile device for payments some of the time, it lowers the convenience factor significantly because they have to assess, each time they shop, how to pay,” said Dominic Venturo, Chief Innovation Officer, U.S. Bank Payment Systems. He added, “That said, consumers continue to rely on their mobile device for everyday tasks and banking is a logical extension of this as consumers look to stay on top of the finances and improve how they do their banking and make payments.”

Smartphone and NFC chips

Evolving from a combination of contactless identification and networking technologies, NFC is a wireless connectivity technology that enables convenient short-range communication between electronic devices. The industry is counting on NFC to further enhance mobile experiences. Using NFC technology, people can make numerous contactless transactions including those for mobile payment, transit and ticket purchase etc.

Isis believes NFC is the best, most secure technology to modernize payments and commerce. And NFC technology is gaining traction.

In its report released in June this year, Juniper Research indicated that global NFC mobile contactless payment transactions will reach nearly $50 billion worldwide by 2014. It is being projected that there would be almost 300 million NFC capable smartphones by 2014. Significantly, at least one in five smartphones worldwide are expected to feature NFC contactless functionality. It is being projected that with the growing rate of NFC services in the next three years, more smartphones will have the contactless functionality.

Mobile handset manufacturers have been in the news this year for integrating NFC chips into mobile devices. For instance, Sony Ericsson has already chosen NXP Semiconductors’ NFC technology for inclusion in its Android-based smartphones.

Sony Ericsson is planning to create a portfolio of smartphones that enable mobile transactions. Using simple touch gestures, consumers will be able to make purchases or connect to a point of sale (POS) terminal, ticketing terminal or location-based promotional tag simply and securely with their NFC-enabled smartphones. For its part, NXP has stated that its NFC software is open source on the Android platform and enables the Google Wallet application.

With more and more handset vendors integrating NFC chipsets, NFC payments and retail marketing capability via coupons and smart posters are being tipped to become common amongst smartphone users in Western Europe, North America and other developed regions.

“We’re seeing more and more manufacturers add NFC to their new mobile devices, but this alone won’t drive widespread adoption. To get there, we’ll need millions of merchants to upgrade their POS systems to include NFC readers and we’ll need consumers to change their behaviour and see clear value in waving vs. swiping,” said Messenger.

Technology

There are a number of ways to implement mobile payments including with handsets that have NFC technology built-in.

Electronic payments specialists are working on mobile payment applications that are technology agnostic and enable financial institutions to commercialize mobile payments using a variety of mobile chip technologies.

For its part, Isis is working to significantly advance the vision of an open and secure platform that provides banks and merchants with a highly relevant way to connect with consumers.

“All new mobile technologies are a strong indication of the realization that consumers should be able to pay for purchases using their mobile, whether that’s turning the mobile phone itself into the POS or using your mobile to checkout at traditional POS. In addition, the whole definition of “merchant” is changing –as you note, we have the technology now for anyone to become a merchant and accept payments, and that’s a huge opportunity for the industry,” said Messenger.

Widespread launch

To date, there have been few commercially available mobile devices that support NFC and payment personalization. As a result, much of the mobile payments growth and innovation has occurred outside the contactless payment space and has been mostly within applications that enable payment i.e. in app or via mobile optimized solutions.

The widespread adoption of mobile commerce will take more than a year, said Kilgour.

He mentioned that it takes time to build the ecosystem and get all the players aligned to ensure a comprehensive, secure mobile commerce experience.

For its part, Isis has confirmed Salt Lake City, Utah and Austin, Texas as initial launch markets. It is slated to roll out in the first half of 2012 with support from all four payment networks.

NFC Payments USA conference

David Messenger, Executive Vice President, American Express Company, and Douglas Kilgour, Senior Business Development Executive, Isis Mobile Commerce Solutions, are scheduled to speak at the forthcoming NFC Payments USA conference, to be held in Miami (November 2-3) this year.

For more info, click here

By Ritesh Gupta

The industry continues to witness initiatives pertaining to setting up of mobile commerce platforms that align and advance the interests of consumers, merchants and banks.

One such initiative emerged a couple of months ago when Isis, the national mobile commerce joint venture between AT&T Mobility, T-Mobile USA and Verizon Wireless, chose to tie up with Visa, MasterCard, Discover and American Express. This platform, which is to be supported by four national payment networks, is expected to result in an open and secure platform that provides banks and merchants with a new way to connect with consumers. Earlier this year, Isis announced Salt Lake City, Utah and Austin, Texas as initial launch markets, slated to roll out in the first half of 2012 with support from all four payment networks. Isis will bring mobile commerce to consumers and merchants by using mobile phones to make point-of-sale purchases through the use of near-field communication technology.

It is being pointed out that merchants must have a compelling value proposition to change their point of sale systems to support contactless or mobile payments. Payments alone are rarely the answer, with the exception being retailers with fast transaction speed requirements. There is a need to see more innovation in the ecosystem in terms of offers, loyalty, and other value added services that leverage NFC in order to have a basket of opportunities that in total would make it compelling for retailers to adopt the technology in a ubiquitous way.

For its part, Discover Network, which has been working closely with Isis to facilitate mobile commerce, too, agrees with the same.

“If NFC only provides consumers with a “cool” way to pay and nothing more, and if it doesn't help merchants sell more merchandise or reduce costs, it will meet the same fate as contactless cards,” according to Troy Bernard, Director of Chip Payment Technology at Discover.

Overall, Discover believes that the ground-breaking event in mobile payments is yet to happen.

“We have seen significant momentum in this space, but there has yet to be a mobile payments product that has captured the consumer's imagination,” Bernard told NFC Insight’s Correspondent Ritesh Gupta.

Bernard spoke in detail about the current status of the mobile payments arena. Excerpts:

(Discover Network’s General Manager, Prepaid &Director of Emerging Payments, Farhan Ahmad is scheduled to speak at the forthcoming NFC Payments USA conference, to be held in Miami (November 2-3) this year).

Consumers have been increasingly relying on their mobile device now more than ever to move and manage their money. Consumers are increasingly adopting wireless data services, including contactless payments. Which do you think has been the path-breaking development in the mobile payments arena?
Troy Bernard:

The path-breaking event in mobile has been the invention of the smart phone. The smart phone, with its richer experience as compared to feature phones, opens the door to a wide array of mobile commerce products.

By richer experience, I am referring to a large touch screens with crystal-clear images, the ability to download millions of apps from a central marketplace, and faster 3G/4G download speeds. Having a GPS-enabled personal computer in hand is the true product revolution on which mobile commerce solution providers can capitalize.

However, I believe the ground-breaking event in mobile payments is yet to happen. We have seen significant momentum in this space, but there has yet to be a mobile payments product that has captured the consumer's imagination. Industry insiders know of these developments, but consumers may not yet know beyond managing banking accounts by mobile, or purchasing a ringtone, song, game, or movie ticket. I believe this statistic will change dramatically over the next 1-2 years as people start using their phones to pay for purchases in-store.

Discover has been an early pioneer of mobile payments. In 2007, Discover, along with our partners Motorola and C-SAM, was one of the first to test over-the-air provisioning of a multi-card NFC wallet. We were the first to commercially launch a credit-based mobile payments sticker, and the first to partner with Isis (the national mobile commerce joint venture between AT&T Mobility, T-Mobile USA and Verizon Wireless). Mobile commerce will take many forms and will be provided by a wide number of providers. Discover is forming relationships and developing products with key partners as this stage.

Discover Zip contactless credit cards and stickers, targeted at early adopters of its mobile technology, was rolled out late last year. How do you think such payment solution has been accepted in the marketplace? What sort of consumer behaviour/ preferences stood out?
Troy Bernard:

While our card issuing side of the business is best suited to answer this question, based on earlier trials that Discover Network has led, what consumers liked about contactless was "simplification" and "convenience".

Sample comments received were:

- I don't have to carry my purse/wallet to pay for lunch. I just need to carry my phone.
- If I attach the Zip sticker to my ID badge, with only one card, I can pay for things and access the building
- I like that I don't have to give my card to the cashier

To date, there have been few commercially available mobile devices that support NFC and payment personalization. How do you assess the maturity level of mobile payments at this stage?
Troy Bernard:

Although NFC mobile payment trials date back to the mid-2000s, it is a nascent product. All one needs to do is ask relatives and neighbours, not in the payments space, what an NFC payment is. I am confident that very few will know what kind of phone can make these payments, where they can buy the phone, and where they can use the phone to shop. However, the recent announcements from Google, Isis, RIM, etc. will quickly change this.

What do you make of the hurdles for the NFC industry on the whole before one is able to offer end to end payments to a critical mass of consumers? As a direct banking and payment services company, what do you think still are the major challenges in this arena?
Troy Bernard:

In short, there is a lot of NFC hardware to deploy. 300+ million U.S. consumers and 8+ million U.S. merchant need NFC phones and terminals respectively. In addition:

- Only one handset sold in the U.S. has NFC today.

- As of today, there are no commercially available NFC mobile wallet products. Google is in the trial phase. Isis to launch in early 2012.

- Consumers don't know what a mobile payment is or why it's of value. Plastic cards are very convenient. Most consumers would say that paying for goods using a card is fairly easy and not a cause of stress, so they don’t necessarily see a need for mobile payments.

- While Google and Isis have announced product launches, what is yet to be seen is the business case for merchants and banks to offer these products to their customers.

Discover’s payments business, Discover Network, has worked with merchants to certify contactless readers for many years, and also the company was the first to test credit-based contactless stickers. What do you think still are the critical issues when it comes to making mobile payment a mass offering? For instance, in the US, it is being highlighted that consumers must get full protection against fraud, processing errors and merchant disputes in case they are charging their purchase to their mobile phone bill?
Troy Bernard:

As a payments network, a large amount of our work in mobile payments revolves around security. Our issuers and merchants rely on us to provide secure payment solutions. For example, in mobile we needed to create new security standards for Trusted Services Managers, the entities that transport encrypted card data from the card issuer to the NFC handset's secure element. TSMs are new to the payments ecosystem, and therefore, new certification policies needed to be drafted.

Discover has created a qualification process so that any TSM can be approved to support our issuers. Any interested TSM can seek this approval from Discover. Similar to a PCI compliance audit, Discover will send approved auditors to assess physical and data security as well as perform a functional assessment.

NFC Payments USA conference

NFC Payments USA conference is scheduled to take place in Miami (November 2-3) this year.

For more info, click here

By Ritesh Gupta

Innovation is a mindset and a risk profile - and mobile payments is exactly that - a mindset and a risk profile.

This is what Jeppe Dorff, Head of Transaction Services, Rogers Communications terms as the key when it comes to making NFC payment systems a success.

Dorff, whosays he has been in the mobile banking/payments since there was no space - at least in the US, points out that as it relates to innovation, there has to be recognition that doing this is not at all easy – all ecosystem parties have to collaborate and that requires a business profile, which allows ‘out of the box’ thinking.

“I am lucky to work for a company that encourages that,” says Dorff, who in his current role at Rogers Communications is responsible for the development and execution of the transactional product and business strategy. Dorff added, “As it relates to operational success, banks, merchants and wireless operators have very material challenges to address, both on the infrastructure and business process side – those hurdles have to be successfully climbed before a scalable and repeatable business can emerge.”

Dorff, who is scheduled to speak at the forthcoming NFC Payments USA conference, to be held in Miami (November 2-3) this year, spoke to NFC Insight’s Correspondent Ritesh Gupta about the status of mobile payments. Excerpts from the conversation:

How do you assess the current sentiments when it comes to mobile banking and mobile payments making it really big in banking services? What is the level of market participation?

I agree, the model of services engagement is changing. I do however think the market is still largely viewing this segment in 2D rather than understanding that consumer behaviors and relationships are changing rapidly which requires all parties to dare to ‘think bigger & faster’. Is mobile the end state? Or is this just the beginning of an even bigger democratization or convergence in payments.

In June this year, Europe’s first MNO TSM mobile solution for NFC Payments was unveiled (approved by MasterCard). How do you think such developments are going to accelerate interest in and deployment of NFC payment systems?

I think it is great to follow the developments around the world in mobile payments, whether it is proximity or remote payments based. I think that as operators and banks around the world are getting their ‘feet wet’ and successfully launching services, it helps drive collegial enthusiasm and courage globally. I for one am very happy to see the focus on SIM based NFC services focusing on this will allow for greater standardization and in return, quicker and more seamless deployments.

How according to you has the industry collectively made progress when it comes to rolling out such offering for consumers?

Unfortunately as a combined industry we have not seen many great success stories around wide collaboration, yet. I think that Canada is a great example of a homogeneous market where the stakeholders understand that we all have to co-exist and continue to do what we, as individual companies, do well.

The Canadian operators have had a clear position around openness and standards driven NFC and we have recently published this widely accepted perspective on how to help drive the industry forward and create collaborative conditions.

What do you make of the hurdles for the NFC industry on the whole before one is able to offer end to end payments to a critical mass of consumers? What do you think still are the major challenges in this arena? 

I think that there is still too much meddling with last minute standards changes and cross industry alliances that cause market wide uncertainty. Standards are such a tough area that can have direct impact on your company’s sustainability in this vertical.

For that reason you see a lot of posturing in the debate and unfortunately it’s rarely with the consumer in mind.

What do you think still are the critical issues when it comes to making mobile payment a mass offering? For instance, in the US, it is being highlighted that consumers must get full protection against fraud, processing errors and merchant disputes in case they are charging their purchase to their mobile phone bill?

I am very comfortable that carrier billing is a large but niche payments vertical that has a valuable role to play going forward. However carrier billing was not built to support retail purchases, and while I sympathize with the innovative thinking behind extending carrier billing to the point of sale, I am reluctant to accept that carriers can comfortably roll out these services commercially without entering into the regulatory fray of banking and payments. As mobile payments relates to using your mobile phone as a new form factor for credit cards, the services will rely on existing payment, issuer and acquiring networks where these issues have already been addressed with services such as zero liability policies, fraud indicators etc.

On the implementation side, outside of the existing policies and processes that are already in place, the acceptance and merchant adoption in the US is not nearly high enough, and it will take a while to see widespread consumer adoption if there are no places to use the NFC services.

What do you think are the major considerations for any mobile operator to successfully launch and commercialize an approved TSM solution?

NFC is almost from the get go a counter intuitive initiative for wireless operators. There are decisions that have to be which have not historically been ‘front and center’ for wireless operators. Understanding the general roles in the ecosystem are also challenging, the questions that the stakeholders have are many. Hiring for success in this vertical is something that all ecosystem players needs to look at – these decisions will not come easy and you will need talent and sponsorship that can provide the answers and always remember that when you bake cake, you break eggs.

With the rapid deployment of contactless payment technologies, what are your expectations going forward?

That it will continue. I have a big affinity towards the consumers and merchants in all of this political madness.

So I think in general that one of the largest opportunities for in payments is to provide services that are compelling to these two categories. As the stakeholders begin to accept that changes are coming and it’s better to be on the bus than not, we will begin to create new solutions that can service and satisfy customers in a whole new way. The ability to provide secure Over-The-Air provisioning of credentials to any phone anywhere in the world will empower billions of new cardholders, increase the pie and help drive commerce. I think we are turning a corner in 2011-12 and going forward the rate of relative change in the payments landscape will be tremendous from what I can tell.

NFC Payments USA conference

NFC Payments USA conference is scheduled to take place in Miami (November 2-3) this year.

For more info, click here

By Ritesh Gupta

A growing ecosystem around mobile commerce and mobile payments has rapidly become part of business plans for telecom operators, financial institutions and merchants.

According to Pyramid Research, with mobile technology playing a vital role in consumers’ lives, operators feel they must act quickly to capture this trend of Internet users going mobile and see this ecosystem as a potential inflection point in their respective business models.

For long, it has been pointed out that the mobile payment ecosystem remains fragmented.

Various competing technologies, interests and standards have resulted in numerous challenges. As pointed out by Deloitte earlier this year, many of the key players — financial institutions, mobile carriers and merchants — do not share the same interests. For example, mobile payments are attractive for mobile carriers as they face declining revenues .On the other hand, mobile payments threaten financial institutions’ revenues from merchant fees and existing payment instruments without providing any incremental revenues. At the same time, merchants view mobile payments as a potentially cheaper alternative to credit card transaction fees and a valuable channel to reach consumers.

The absence of revenue-sharing agreements between critical players in the value chain is termed as a major hurdle. For instance, the lack of agreement between telecoms and financial institutions, in terms of split of mobile payment revenues, has slowed the development of mobile payments in the past.

Despite such hurdles a combination of factors have permitted this new ecosystem to arise with its various players along the value chain, says Cristiano Laux, Director - Global Research & Consulting, Pyramid Research.

“First, we noticed that access to financial services until recently was limited to the upper level segments of the socio-economic pyramid that comprised lesser than 20% of the population. There was a suppressed demand for banking, financing, and non-cash means for payments and transactions, and mobility surpassing 100% of the population in many market around the word allows a path for mobile payments,” highlighted Laux.

Elaborating further, Laux added that on the telecom side, as penetration approaches 100% of population and with subscriber revenues falling, there is constant pressure on mobile operators to maximize their network reach and monetize with high-margin value-added services.

In addition, the recent success of mobile computing devices such as smartphones, and interest from payment vendors to protect their business from competition also contributed to set off the path breaking development for mobile payments worldwide.

Laux, who is scheduled to speak at the forthcoming NFC Payments USA conference, to be held in Miami (November 2-3) this year, spoke to NFC Insight’s Correspondent Ritesh Gupta about the current status of mobile payments. Excerpts:

To date, there have been few commercially available mobile devices that support NFC and payment personalization. How do you assess the maturity level of mobile payments at this stage?

Cristiano Laux:

Still at early stages, however we are seeing more people pursuing shopping comparison with their mobile devices and a lot more interest for newer shopping and non-cash transaction enabling applications.

At this point, NFC, like any other payment method, faces the chicken-egg problem as merchants are not actively investing in deployment since the addressable market still lacks the required scale to justify ROI on POS solutions. At the same token, consumers are not fully embracing since supply of NFC devices is limited yet, and not many merchants accept NFC payments.

But most important, there is a lot of footprint to be gained in terms of educating mass consumers of NFC and its seamless possibilities. This indeed is a game changer.

It is highlighted that implementing proximity mobile payment is complicated by the number of stakeholders that are involved in establishing the eco-system, including merchants, payment brands, issuing banks and mobile operators among others. How according to you the industry has collectively made progress when it comes to rolling out such offering for consumers?

Cristiano Laux:

The industry has made progress acknowledging that not a single value chain player can play all the roles at the same time.

We’ve seen the launch of Google Payments with Sprint which was a clear example on players taking a wider role.

Others areas where we foresee challenges relate to the chicken-egg problem of technology: merchants don’t want to invest on devices or POS solutions before there is a large base that justifies the investment cost and without merchants, there is little value for consumers to adopt the technology.

To date, there have been few commercially available mobile devices that support NFC and payment personalization. As a result, much of the mobile payments growth and innovation has occurred outside the contactless payment space and has been mostly within applications that enable payment - in app or via mobile optimized solutions. What do you make of the situation?

Cristiano Laux:

I thinks it’s really great, it’s an industry driven by very smart and entrepreneurial people. There are some really cool applications around mobile commerce and payments, and innovative companies and start-ups gaining a lot of ground with consumers and merchants. The traditional payments companies have moved fast to position themselves and avoid disruption of their business models.

It has to do with what we mentioned before about the lack of widespread adoption among technology and device vendors and still relatively small base of users. In addition, the cost of adding NFC chips to handsets and who should pay for it adds some thoughts to the business model for NFC.

Experts believe that merchants must have a compelling value proposition to change their point of sale systems to support contactless or mobile payments. It is being said that the industry needs to see more innovation in the ecosystem in terms of offers, loyalty, and other value added services that leverage NFC in order to have a basket of opportunities that in total would make it compelling for retailers to adopt the technology in a ubiquitous way. How do you assess this sentiment?

Cristiano Laux:

For merchants, a contactless system should have a positive NPV meaning the cost of implementing must be lower that the future benefits in terms of more sales or more efficiency.

As people become increasingly mobile, they are looking for more relevant content and deals at their fingertips. How do you assess the viability of various value-added services at this stage be it for couponing, loyalty or LBS when it comes to making the most of mobile payments potential?

Cristiano Laux:

Those services are crucial to engage the full mobile shopping and mobile payment experiences both for consumers and merchants. The technology itself most will unquestionably agree that it offers a superior experience and greater possibilities than what is currently in place with plastic credit cards, newspaper coupons, and loyalty programs.

I anticipate that winners in this mobile ecosystem will be the ones personalizing and facilitating consumer decisions, not complicating them. People don’t want to be simply flooded with information on deals, or ways of overspending, especially during recession times.

NFC Payments USA conference

Cristiano Laux, Director - Global Research & Consulting, Pyramid Research is scheduled to speak at the forthcoming NFC Payments USA conference, to be held in Miami (November 2-3) this year.

For more info, click here

IN-DEPTH: Studies have indicated that in order to feel comfortable when it comes to making a mobile payment consumers need confirmation that their personal information was safe. And a company of MasterCard’s stature believes its ready to counter such concerns. In fact, the firm says: “if we were not confident that the system is secure we would not be associating the MasterCard brand to it”.

By Ritesh Gupta

The industry continues to witness lots of excitement and interest around mobile payments.

Only two years ago, there were almost no commercially viable options to pursue for NFC payments. The landscape is very different today and the industry sees the status to be remarkably different in 12 months.

For long, it has been pointed out that the acceptance of mobile payments at this juncture is dependent on how various stakeholders including banks, merchants and electronic payments specialists shape up their respective collaborations. Various players, including banks, are focused on the entire value chain and are trying to make sure that they are in a position to help customers move to this technology. And now the results are showing too. For instance, the availability of the Google Wallet to Sprint Nexus S 4G owners is already being considered to be a major development.

As shared earlier this year, at commercial launch, Google Wallet will support payments with two payment solutions: a PayPass eligible Citi MasterCard and a virtual Google Prepaid card. Most people who already have a PayPass eligible Citi MasterCard can simply add it to Google Wallet over the air, using First Data’s trusted service manager service. Or, they can fund the Google Prepaid card with any payment card.

Despite the readiness, the industry needs to ensure that it cracks the consumer behavior in order to make mobile wallets and NFC payments a mass offering. This becomes significant considering the fact that studies have indicated the preparedness of consumers towards such services.

For instance, a research from MasterCard Worldwide conducted a few months ago indicated that consumers are now poised for the next step – using their smartphones as mobile wallets. As per the findings, 62% of Americans who use a mobile phone would be open to using their device to make purchases wherever their errands may take them. Defined as a mobile generation with its pulse on digital trends, 18-34 year-olds are particularly ready to take their transactions to the next level. According to the study, 63 percent of 18-34 year olds would be at ease using mobile phones to make purchases versus those age 35 or older (37 percent).

The same study from MasterCard also mentioned that growing willingness to use a mobile phone for payments supports the role mobile phones play as a reflection of personality, and consumers’ desire not to carry a traditional wallet.

Security is definitely a major concern among consumers as the whole thing involves their money.
For its part, MasterCard categorically says “if we were not confident that the system is secure we would not be associating the MasterCard brand to it”.

The company has been supporting an open commerce ecosystem for taking mobile payments to the next level. 

“It is critical for the industry to commit to building a global, open mobile payments ecosystem that encompasses the various stakeholders – e.g. mobile carriers, handset manufacturers, financial institutions,” says James Anderson, MasterCard’s Senior Vice President of Mobile and Vice Chairman of the NFC Forum.

Anderson spoke to NFC Insight’s Correspondent Ritesh Gupta about the company’s initiatives and the latest trends. Excerpts:

Can you elaborate how MasterCard has contributed to the establishment of global standards that is helping in pushing the mobile payment market to the critical mass level?

Through our own efforts, and bodies such as the NFC Forum and others, we’re committed to fostering a mobile payments ecosystem built upon open and global standards. To this end, we’re partnering with banks, telcos, technology companies and merchants worldwide.

Most recently, we announced a partnership with Isis to help foster the growth of NFC-based mobile payments solutions in the U.S. and continue to work with others around the world including Orange and Barclaycard and Smart Hub, Inc. in the Philippines.

Considering that PayPass, MasterCard’s globally interoperable contactless payment system, has been at the center of industry trials and commercial deployments, what for your company has been the major learning? What do you think are the major challenges when it comes to making mobile payment a mass offering?

It’s difficult to pinpoint just one learning. However, a couple of key themes we have noticed include:

• We’ve found that the learning curve is much faster than we originally anticipated when it comes to mobile payments, with consumers grasping the technology within weeks, instead of months.
• Security is top-of-mind for consumers, and something we take very seriously. A recent survey commissioned by MasterCard found that nearly 62% of respondents said that in order to feel comfortable making a mobile payment, they would need confirmation that their personal information was safe. At MasterCard, we’ve been working on making mobile payments secure for more than 10 years in order to afford consumers the same protections (e.g., zero liability guarantee) as card-based transactions.

Various stakeholders in the industry are attempting to make payments by mobile phone available to the mass market over the next couple of years. How do you assess the current maturity level of this offering in the marketplace today? Can you elaborate on the areas which your organization is currently focusing on?

Mobile payments are in their infancy, but we expect adoption will take off quickly over the next few years. A recent study by Juniper Research forecasted that NFC payments will reach $50 billion by 2014. To this end, MasterCard is strongly focused on driving global implementations forward, moving beyond trials and pilots to full commercial deployments. We are working with partners like Google, ISIS, Orange Barclaycard and others who are as serious about getting these services into consumers’ hands as we are. MasterCard has been the leader in deploying PayPass cards to consumers, with more than 100 million cards and devices in the market. We know our consumers want this, and we want to deliver on that need as quickly as possible.

It is highlighted that implementing proximity mobile payment is complicated by the number of stakeholders. How according to you the industry has collectively made progress? What according to you are the critical factors that can make or break the whole effort?

It is critical for the industry to commit to building a global, open mobile payments ecosystem that encompasses the various stakeholders – e.g. mobile carriers, handset manufacturers, financial institutions. 

Consumers are increasingly adopting wireless data services, including contactless payments. Can you provide an insight into the latest trends when it comes to mobile contactless payments?

Retailers are hoping to improve the customer experience by accepting mobile payments which provide added convenience, security and ease of use. However, that also includes leveraging the innovations and technology in a smart phone, like location-based services, mobile apps and beyond to offer promotions and offers or even information on an account balance before a customer makes a purchase. That is something we consistently hear from our clients and partners – marrying the convenience of mobile payments with today’s mobile innovations.

Do you think still a lot of education is needed to convince the retail industry about the benefits of contactless payments. How do you assess the scenario today?

Yes and no. While there still is room for education amongst the entire ecosystem, we are already working with innovators like American Eagle, Walgreens and Subway who are stepping up to the plate and recognize the importance of and demand for mobile payments. As mentioned above, our recent survey confirmed that amongst US consumers, the appetite for mobile payments is already there. Specifically, 63% of respondents between 18 and 34 years old said they would be interested in making purchases with their mobile phones. Demand is there – but mobile payments must be easy, convenient and secure for consumers to use it every day.

Considering some of the key developments pertaining to mobile contactless payments in a market like the UK, how has the penetration of contactless payment technology changed the face of the industry? How do you assess the current sentiments in the US market?
It’s less a matter of whether the US will be receptive to mobile contactless payments but rather when it will take off. According to Gartner, the mobile payment market is expected to generate $86.1 billion worldwide in 2011. US consumers are already making purchases via the Internet on their mobile phones, and contactless will be an extension of that action.  The UK has also been an exciting and innovative market – we helped Barclaycard and Orange launch Mobile PayPass there this summer and we are excited to see more programs coming along in the near future.

By Ritesh Gupta

U.S. Bank has been diligently expanding its mobile capabilities over the past few years and now it has equipped itself with a broad suite of mobile banking and payment features. The company acknowledges that consumers have been increasingly relying on their mobile device now more than ever to move and manage their money.

Quite often, it is emphasised that mobile innovation is a priority for U.S. Bank. And its efforts have been path-breaking, too. To its credit, the company launched a full-suite mobile banking solution with bill pay capabilities for prepaid cardholders - the first of its kind in the prepaid marketplace. It was also the first large American bank to test the Visa Money Transfer person-to-person mobile payment service, and has partnered with Visa to give cardholders on-the go access to account alerts, offers and a locator service with the Visa Mobile application. In addition, U.S. Bank was one of the first banks to test the Visa Micro Tag, an early contactless mobile payment device.

Late last year the entity partnered with Visa, DeviceFidelity, FIS and Monitise to pilot mobile contactless payment technology that allowed customers to pay for purchases by waving their phone in front of a Visa payWave contactless payment terminal.

U.S. Bank was one of the first major card issuers in the US to pilot this technology, which its employees tested in multiple states.

The ability to link an existing payment account to a mobile phone is transforming how consumers pay and how merchants get paid. The industry has been looking at ways to bring the speed, interactivity and security of mobile contactless payments to a user’s preferred device.

U.S. Bank clearly states that its customers want to make payments with their mobile device.

Assessing the current status of the mobile payments segment, Dominic Venturo, Chief Innovation Officer, U.S. Bank Payment Systems, says, “To date, there have been few commercially available mobile devices that support NFC and payment personalization. As a result, much of the mobile payments growth and innovation has occurred outside the contactless payment space and has been mostly within applications that enable payment (in app or via mobile optimized solutions).”

“This growth has been very strong and the announcements from many mobile carriers and manufacturers that they will support NFC and payment personalization have opened the door to significant potential in the next 12 to 24 months,” shared Venturo, who is scheduled to speak at the forthcoming NFC Payments USA conference, to be held in Miami (November 2-3) this year.

Venturo, who was promoted to his current role in February this year, spoke to NFC Insight’s Correspondent Ritesh Gupta about the company’s initiatives and the latest trends. Excerpts:

Dominic Venturo:
To clarify, our pilot was with contactless payments technology (PayWave) embedded in a MicroSD card in conjunction with a fully functional mobile banking application. This pilot showed us that consumers continue to find the marrying of their banking and payment information with a mobile device has potential for increased convenience and ease of use. However, contactless payment acceptance in the United States remains fairly low and that becomes a barrier. If a consumer can only use their mobile device for payments some of the time, it lowers the convenience factor significantly because they have to assess, each time they shop, how to pay. That said, consumers continue to rely on their mobile device for everyday tasks and banking is a logical extension of this as consumers look to stay on top of the finances and improve how they do their banking and make payments.

Can you elaborate on the trials done across a number of technologies, including NFC, contactless stickers, and micro SD enabled devices?

Dominic Venturo:
At U.S. Bank, we tested NFC with over the air personalization in Spokane, Washington with consumers. This pilot was a joint effort with MasterCard, Nokia, and other partners and was with a Nokia 6131 NFC mobile phone.
In addition to piloting over the air personalization, we demonstrated other NFC capabilities to show the future potential of the technology. These included -- pairing a mobile with speakers to play music, reading an NFC tag to link to a website, pairing a device with a picture frame to upload a picture from the phone, and more. The consumers that saw the future potential were very impressed and they did enjoy the convenience and wow factor of being able to make payments with their mobile phone. We also learned that contactless acceptance was pretty immature at this point and perhaps more importantly, we learned consumers had very specific preferences about their mobile device and carrier. As a result, we quickly decided that a solution that was dependant on one type of phone, or carrier was going to have limited potential.

We later tested contactless stickers with Visa and other partners. This solved the issue with consumers have a preference for their mobile device, but created a new concern. Because the stickers were branded with the bank and payment brand, consumers felt that was broadcasting that they had something special that might present a security or privacy concern.

Lastly, we recently completed a test with Visa, Device Fidelity, Monitise Americas, and others to trial a MicroSD card with payment information and a full service banking application. This solved a number of the challenges we learned earlier because it could be inserted into the phone the consumer already owned, or a special case for the iPhone.

Various stakeholders in the industry are attempting to make payments by mobile phone available to the mass market over the next couple of years. How do you assess the current maturity level of this offering in the marketplace today? Can you elaborate on the areas which your organization is currently focusing on?

Dominic Venturo:
The market is still fairly immature, but that should change rapidly as mobile device manufacturers provide devices with the capability and carriers begin to support the technology and provide a viable means to personalize and manage the devices. We are focused on the entire value chain and making sure that we are in a position to help our customers move to this technology when it makes the most sense to do so. That will require broader acceptance and support across multiple carriers and devices.

It is highlighted that implementing proximity mobile payment is complicated by the number of stakeholders. How according to you the industry has collectively made progress? What according to you are the critical factors that can make or break the whole effort?

Dominic Venturo:
It is complicated, to be sure. Most new technologies are complicated, and when you add in the high security requirements of banking and payments, it is increasingly complicated. That said, only two years ago, there were almost no commercially viable options to pursue for NFC payments. The landscape is very different today and I expect that will be remarkably different in 12 months.

The carriers in the U.S. have been working towards various solutions that appear to have potential and the handset manufacturers are as well. However, a few important elements remain to fall into place:

First, acceptance. Merchants must have a compelling value proposition to change their point of sale systems to support contactless or mobile payments. Payments alone are rarely the answer, with the exception being retailers with fast transaction speed requirements (such as quick service restaurants). We need to see more innovation in the ecosystem in terms of offers, loyalty, and other value added services that leverage NFC in order to have a basket of opportunities that in total would make it compelling for retailers to adopt the technology in a ubiquitous way. Security is also a factor and there are some very good reasons why contactless could be a part of that as well. Without broad acceptance, mobile payments will grow more slowly, though I expect they will continue to grow and be an important part of the intermediate future.

What would you suggest as do’s and don’ts when it comes to mobile contactless payments?

As the excitement around NFC payments mounts, the whole of the NFC payments industry will unite in London on the 13-14 June for NFC Payments Europe 2011. The biggest brands from Banks, MNO’s, Mobile device OEM’s, system integrators, payment and solution providers, regulators, semiconductor manufacturers, technology and infrastructure providers will be in London for two days of discussion and debate.

With Google’s CEO calling NFC a “mega-scale opportunity” and the Head of Handset Software for RIM stating that 2011 is a “pivotal year for NFC”, the event seems to have come at exactly the right time for those companies involved in NFC payments.

The agenda covers some of the key issues that the industry currently faces. Panel debates on SIM Vs Handset Integration, how to reach critical mass and the business case for both banks and MNO’s are some of the highlights of the conference. Presentations on how to structure deals between banks and MNO’s alongside NFC from a merchant’s perspective, will cover some of the key challenges facing the ecosystem.

Scattered throughout the two days will be case studies given by some of Europe’s thought leaders. On top of this delegates will benefit from market predictions from IMS Research and a global overview courtesy of Visa Europe.

Confirmed speakers giving their two cents currently include the likes of Visa Europe, Orange, MasterCard Worldwide, Barclaycard, Bouygues Telecom, ClickandBuy, Everything Everywhere, KPN Group, La Caixa, IBM, Samsung, Citigroup, RIM and Bankinter amongst others.

James Davlouros, Business Leader, Vice President – Innovative Platforms at MasterCard Worldwide commented “I'm looking forward to the conference, as it provides a great opportunity for MasterCard and a number of key players to discuss various aspects of mobile payments, as we seek to grow our business in this exciting segment."

Whilst Dickson Chu, Global Head of New Product Development & Alliances  at  Citigroup commented: “For us, NFC represents huge potential for changing the nature of our relationship with consumers and the nature of our relationship partners in the mobile ecosystem which should lead to new revenue opportunities. The conference agenda is top class and NFC Insight have certainly done their homework. I'm really excited to be participating and I am looking forward to meeting other senior execs from across the industry”

Organised by NFC Insight, NFC Payments Europe is aimed at helping facilitate the commercial rollout of NFC payments and will unite the industry’s elite for 2 days of in-depth discuss and exciting debate. After months of research, the agenda looks packed full of all the key issues that the industry currently faces. With all the key players set to appear the conference is certainly shaping up to be a great spectacle for the whole industry.

About NFC Insight:

Near Field Communication, or NFC, will soon dramatically expand the use of smartphones in e-commerce and a host of everyday activities. Christopher Backeberg reports...

NFC operates at very short range, usually limited to 10cm (less than 3 inches). It will be the technology for what might be called ultra-close location-based services (LBS). It certainly has the potential to change the way we conduct financial transactions, taking the place of cash and credit cards.

It could also potentially replace electronic ID, access and travel cards, transfer data between phones merely by tapping them together, render coupons obsolete and influence multiplayer computer game design. Beyond that, it could become the multi-device controller for the electronic home of the future.

Financial institutions and phone makers have been experimenting with NFC for a few years now. Google, some banks and at least one transit authority have conducted field trials or already launched pilot NFC services. Perhaps most significantly for the emerging technology, a number of the big phone-makers have announced they will release phones with built-in NFC chips this year. Keep an eye on Google's Android releases, the Samsung-manufactured Nexus S, Nokia‘s 2011, the Symbian^3 range and Apple's mid-year iPhone 5.

The NFC transaction scenario

Tom Cardoso, writing in The Varsity, nicely encapsulated the anticipated primary use of NFC in phones, which is to turn a smartphone into a wallet.

"Imagine this: you're about to walk into a subway station, but realise you have no money on you. And they don't take credit or debit! No problem. Just wave your phone at a sensor and you are electronically billed for the fare.

"Surprisingly, this technology has been around for quite a while, and is actually very popular in countries like Japan, where one can buy anything from McDonald's burgers to train passes with the simple wave of a cell phone. In Europe and the Americas, adoption of NFC technology has been slow."

Cardoso doesn't foresee NFC taking hold immediately, however great its promise may be. He says: "Don't expect to be buying a latte with your cell phone by the end of the year. Adoption will be slow, and it will likely be several years before NFC becomes as standard as credit card chip technology is today."

John Dvorak gave Marketwatch his take on the recent Consumer Electronics Show (CES) in Las Vegas. He picturesquely discussed NFC: "Just floating under the radar is the next oddball chip initiative that at some point should equal sales of any sort of GPS chip in mobile phones."

The NFC Forum, naturally enough, has great faith in the technology. It has stated: "NFC in mobile phones is a technology that holds much more potential than previous advancements, with greater ability than the likes of barcode scanning and more chances for integration with existing infrastructure than Bluetooth-based connectivity due to better security and existing NFC payment and entry key technology."

NFC for business

According to the NFC Forum, NFC will start to replace the contactless ID cards that control access to facilities and networks. It will also simplify login to enterprise networks. The resulting benefit to the enterprise will be reduced costs for card issuance and management.

In addition to such cost savings, the forum has identified other likely main commercial drivers for NFC technology. These include increased revenue from interactive services, consumption of rich media content on NFC-enabled devices, and consumer preference for NFC-enabled services - NFC is easy and convenient to use.

Jupiter Research has forecast that as many as 700 million NFC-enabled mobile phones will be sold by 2013, representing up to 25% of the market. Jupiter also projected that NFC mobile payments will top $30 billion by 2012. These predictions spell big money for NFC.

Visa and MasterCard have both run adverts illustrating the concept of NFC.

Testing the market for NFC

Google has launched its first NFC marketing service in Portland, Oregon. The pilot program allows users to swipe their Gingerbread-equipped handsets over NFC-enabled decals, business cards and even coffee stirrers to learn additional information about the business and to be tagged in that exact location.

O2 and Nokia completed their "O2 Wallet" trial in the UK in 2008 with the co-operation of Visa and Barclaycard. About 500 smartphone users made in-store purchases using Nokia 6131 NFC handsets. Afterwards, 87% of testers said that the availability of such a service would be likely to influence their purchase of a new mobile phone.

Bank and card companies are spearheading similar NFC projects in Turkey and the US, using MasterCard PayPass technology. Visa has already developed its PayWave solution in the UK, allowing for contactless transactions of up to £15.

In travel, the Deutsche Bahn rail operator ran a successful trial of NFC ticketing. Passengers touched their phones to an NFC tag when they boarded the train and then to another when they got off. The fares were calculated and added to their monthly bills.

The conservative view

John Dvorak was less than enthusiastic in his Marketwatch article. He commented: "Exactly why the public gets so enamoured with this sort of technology simply baffled me. Is everyone 12 years old and fascinated by gizmos and shiny objects?

On the possibility of NFC replacing credit and cash transactions, he said: "While I can see the usefulness at the parking meter, especially in cities like San Francisco that gouge its citizenry with meters that require 25 cents for three minutes, I would personally resist this change in day-to-day behaviour.

"I've always had a fear that the banks and credit cards would somehow link up with phone companies in such a way that users risk losing credit and phone service and Internet access all in one fell swoop over a billing dispute, which is bound to happen a lot."

The eager anticipation

DialToSave has a completely different view of NFC and the future: "Imagine this. You get home after a long day at work, you wave your phone over a small reader in your living room, the lights come on, and your favourite programme starts up on the television.

"It doesn't have to stop there, as this tech could to extend to all areas of your daily routine. Fancy buying that Kings of Leon CD advertised on the TV? Simply wave your phone in front of it. An app on your phone or computer would control all the preset rules and the phone would act like a remote, but without every affected device in your home needing to be connected back to your computer or the Internet."

DialToSave sees NFC as more than just a game-changer for business: "Given enough integration into our daily routine, this little mobile chip could change the way we live."