Anyone who has traveled to Japan (or South Korea) lately may have noticed that the Japanese use their phones to pay many types of bills. With Near Field Communications chips embedded in Japanese cell phones, one can swipe their cell phone near a POS terminal and either have their cell phone bill charged for the price of the item or perhaps have it deducted directly from a bank account.
Mobile payments such as this are appearing in various locations: One can now use their Japanese mobile phones as ATM cards at Japanese ATM machines to withdraw cash from their bank accounts; Japanese Taxis will soon accept mobile phone payments; at some gasoline stations in Japan, one can now buy gas via a swipe of a mobile phone; and Japanese can pay a restaurant tab using a mobile phone at some restaurants. These are just a few of the examples of use.
This capability is enabled by NFC (“Near Field Communications”). NFC operates at 13.56MHz and has data throughput up to 424kbit/sec over distances no longer than 4cm. NFC is capable of both read and write and works between NFC chips embedded in some cell phones and contactless POS (“Point Of Sale”) terminals.
NFC in Japan is so popular that even Soft Bank in Japan, the exclusive Japanese carrier for the Apple iPhone, has started offering NFC stickers to attach to the back of the iPhone 4 to enable NFC capability on the iPhone, which has yet to include NFC capability internal to the handset.
Will NFC Adoption Occur in the U.S.?
The issue with the US or any other country adopting Mobile Payments is that it involves a fairly complex ecosystem. Putting NFC chips into handsets is the “easy” part. But in addition to this, mobile payments needs to be supported by mobile operators, the banking industry, retailers and consumers. In the past, there has not been much motivation in the US to make this happen.
Times, however, may be changing.
Mobile Operators: US operators AT&T, Verizon and T-Mobile USA have formed a joint venture called ISIS that is working with Barclay’s Barclaycard US entity to grow the adoption of NFC in the US. These are supposed to go commercially live in mid-2012.
Handset Vendors: NFC handsets are currently not available in most markets, but Nokia and Samsung have been among the first to announce NFC-capable handsets, and other handset vendors will likely follow.
Banking: Mobile carriers need to sign credit issuers to support their mobile payment services. These relationships are being built with Barclays and they are working with mobile operators to enable mobile payments.
Retailers: Retailers will likely need to make a significant investment in installing the NFC POS equipment in their stores. Will they be willing to make such an investment when credit and debit cards are already widely used? This will largely depend on the benefit to them. If there is consumer pull for use of Mobile payments, retailers will make the investment. Without the consumer pull, it is unlikely.
Consumers: The key to the future of NFC in the US is whether there is any perceived benefit of NFC/Mobile Payments by consumers versus the current system of credit/debit cards. In order for banks and operators to make this system work, the industry should focus on new capabilities of NFC that credit/debit cards cannot address, while stressing ease of use. With such new capabilities, features and incremental ease of use, consumers will start to desire Mobile Payments, creating the pull needed for NFC and mobile payments to take off globally.
What is your opinion? Feel free to post a comment.
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