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Why Google’s New Wallet Application Does Not Spell the End of NFC or Mobile Payments

by Nitesh Patel | 9月 19, 2013

A few articles I’ve read conclude that Google’s decision to extend its Google Wallet application to non-NFC devices represents another nail in the coffin for NFC. In my opinion this is not a rational conclusion for the following reasons:

Contactless at the point of sale (POS) in the US remains limited, but is growing (albeit slowly): Over 200,000 national and local retail locations accept contactless payments, either via contactless card, NFC phones or other NFC enabled devices – such as smart watches. With the major POS vendors Verifone and Ingenico integrating NFC as standard into their product lines, and global payment networks putting their weight behind contactless, there is a strong industry push that will see NFC availability at the POS continue to grow. As I pointed out in my 2010 report on NFC payments, it will take at least 5 years for the foundations for NFC to be laid, and another 5 years for consumer demand to kick in.

Google stated that its efforts around NFC will continue:  "If you have one of 29 different NFC-enabled devices, you can continue to tap and pay at hundreds of thousands of U.S. locations, while also enjoying the new Wallet features," Hazlehurst said. "We also have more NFC-enabled devices on the horizon as we continue to invest in NFC with our partners." These are not statements I would expect to hear from a company ready to sunset its investment in NFC or NFC payments.

Google aims to close the gap on Passbook and Samsung Mobile Wallet: Both Apple and Samsung have focused on barcode and QR code based methods for their mobile wallet, largely acknowledging that NFC is not widely enough deployed by service providers (e.g. retailers, airlines, live event venues) to stimulate end-user NFC use today. A small but not so insignificant number of companies, mainly airlines leveraging digital boarding passes, have developed applications that integrate with Passbook already. By supporting non-NFC based transactions in this latest Google Wallet iteration Google addresses this gap, making Google Wallet more relevant today to a broader number of users.

With ISIS set to launch in the US before the end of the year, momentum around contactless payments in the US is set to intensify.  Demand for NFC enabled handsets from AT&T, T-Mobile and Verizon will grow, and device vendor partners such as Samsung, Motorola, Nokia (through Lumia) will be under pressure to deliver. The availability of NFC enabled phones is soon unlikely to be a barrier to handset based NFC payments.

While Apple may not support NFC on the iPhone currently, I expect the case for it to do so will build as ISIS goes live before the end of the year. Second guessing Apple’s plans for in-store payments would be speculative, but I wouldn’t write off Apple's chances of scoring some wins if it came in with a non-NFC based solution. As we have seen, companies like Square and PayPal have opened up POS to small and medium sized retailers (via dongles attached to phones) while LevelUp and Square (Square Wallet) have gained some traction with cloud-based mobile payment solutions. Apple, with its larger resources could take some market share. However, suggesting that NFC payments will fail because of absence of support from Apple may be going a little too far.

For now, the real challenges for mobile NFC payments remain, and must be addressed if NFC is to come of age:

Driving retailer acceptance more rapidly – retailers are in no rush to replace existing payment systems in order to accept contactless payments. Cash and cards are doing very well already and retailers need a reason beyond queue busting to introduce contactless payments.

Gaining support of banks – handset based NFC services adds extra mouths to feed in the payment value-chain, which is partly deterring the participation of existing issuers, such as banks. We have seen earlier this week, Capital One withdrew from the ISIS trial in the US, suggesting that some banks will adopt a wait and see approach before joining third-party mobile wallet schemes.

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