On the surface, at Money 2020 last week, all was going well with NFC (Near Field Communiations). The mobile carrier-supported Isis wallet initiative showed off its progress, deals with C-Sam and Gemalto, and partnerships with Chase and Barclaycard US. Isis now supports 40 devices, with 30 million Isis-capable devices loaded with issuer and merchant offers scheduled to ship in Q4 2013-Q1 2014.
But all the glamour and forward movement could not deflect the fact that in just the previous month, Capital One had pulled out of the Isis trial and the iPhone 5s shipped notably without support for NFC technology (the NFC frequency can’t penetrate the metal of the iPhone case). User opposition to missing Google Wallet support on the Isis system also flooded the chat boards.
In the Exhibit Hall and at the event’s lavish cocktail parties, attendees were quietly expressing doubt for any significant NFC penetration. The key complaint: The high cost involved in implementing NFC — $15 to make the phone NFC-ready, $100 for the merchant terminal, and the prospect of the mobile carrier intermediaries being placed in a position to extract a fee from the transaction. In the trenches of implementation at the merchant site, channel POS service providers expressed concern about the costs of implementation and operation, even as they built the functionality into their system just in case.
MasterCard, a long-time supporter of NFC, has also hedged its bets with the adoption of QR codes, while PayPay’s integration of cheaper-to-implement QR codes into its Beacon point of sale system further signaled NFC’s loss of industry support. PayPal’s VP of retail and prepaid products, Don Kingsborough described the adoption of the QR codes as part of the natural consumer progression towards the omni-channel experience in which the transitions between in-store, online and mobile shopping become seamless.
Eastern Europe and beyond
Moreover, Cellum, a European developer of mobile payment applications and a MasterCard partner, unveiled a new “motion dynamic QR code” technology that the company expects to accelerate the use of mobile devices for transport and event ticketing, personalized coupons and eventually electronic ID cards. The company claims that the new technology is more secure than static QR codes, and has an advanced storage capability, allowing the secure storage of photos, fingerprints, and other information.
A leading provider of NFC technology in Hungary, the company announced earlier this year in July the integration of QR codes as a payment path, alongside NFC, into a new infrastructure. Since the integration of QR codes, the company reports that it has achieved a tremendous 84% purchase conversion rate, significantly higher than with NFC alone, or as demonstrated by competing payment platforms. Cellum’s payment app works across iOS, Android and Windows phones. In addition to MasterCard, Cellum counts among its customers and partners IBM, Microsoft, Magyar Telekom, Telenor, FHB Bank, OTP Bank and Vivacom.
Moving beyond Eastern Europe, Cellum is aggressively expanding to other global markets including Austria, Russia, Vietnam, Indonesia and Thailand. With an estimated mobile penetration of 80% by 2017 in Indonesia alone, the opportunity looks bright for Cellum and the QR code – dynamic or not.
Still alive, but no universal standard
And going back to NFC – don’t count it out yet. There’s still Verifone and the Google Wallet, though the previously much touted loyalty and gift card functionality (which is understood to be one of the core benefits of NFC) was dropped this past August….
Moreover, NFC penetration in certain countries such as Japan is high, and as the iPhone loses market share and more NFC-ready Droids and other devices proliferate, we could see NFC take hold in certain markets. Not a bad deal if you consider the U.S. smartphone commerce market alone could reach $13.4 billion in 2013, according to eMarketer. It is pretty safe to say though, that the promise of NFC as a universal global standard is no more.