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Why Banks Should Be Watching Nintendo's Moves

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While banks struggle to get consumers to use Near Field Communication-enabled phones for mobile payments, the video game industry is having blockbuster success with NFC technology.

Nintendo built an NFC reader into its Wii U video game console, which launched in late 2012, and the company announced this week that it will finally put its NFC capabilities to use through a series of NFC figurines that interact with its most popular games.

The figures, called "amiibo," resemble hit toys like Disney Infinity and Activision's Skylanders, which are sold as physical embodiments of game characters. To play as a character such as Disney's Buzz Lightyear, players take a figurine and place it on a special reader. The character then comes alive in a game, and the figurine stores any progress the player makes.

Skylanders, the original implementation of this concept, is a runaway success. The franchise has exceeded $2 billion in worldwide sales by early 2014.

So what, if anything, does this mean for payments?

It may mean that banks and mobile wallet providers are focused on the wrong audience. Getting adults to change their lifelong payment habits may not be as easy or as fruitful as focusing on a younger audience that, for the past few years, has grown up with NFC.

Obviously, this doesn't mean banks should start building payment capabilities into Super Mario and Mickey Mouse toys. But it does mean that the concept of an NFC transaction will come a bit more naturally to a younger person, so perhaps the focus of mobile payment initiatives should be student accounts or Internet-only banking relationships, which would reach a more tech-savvy customer.

American Express has probed this market over the years, with products and marketing tied very closely to popular games like League of Legends and Halo 4. In mobile payments, Amex has had success signing up customers for its Serve prepaid card through the Isis mobile wallet, which relies on NFC technology.

AT&T, Verizon Wireless and T-Mobile, the carriers behind Isis, sign up new users for their mobile wallet whenever they sell new Isis-compatible phones. As part of this process, the carriers' sales staff also offer to sign up consumers for Serve, helping Amex reach a new market of young, tech-savvy mobile phone users. Over half of Serve's customers are under the age of 35, and a third of Isis customers have an income of less than $50,000, according to American Express.

There are likely more opportunities like these for card issuers and other companies to pursue. Perhaps branch staff can do what Isis is doing, and enroll younger customers for a mobile wallet when they sign up for their first student account.

But if banks instead ignore this opportunity with younger consumers, it might be game over for mobile payments.

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Comments (1)
I get frustrated at the classification banks struggling to get customers to use NFC enabled phones. The reality is that NFC enabled phone use in countries like Japan and South Korea is well over 75% of the population, in countries like Canada, Turkey, Poland, Australia and the UK NFC/Contactless use exceeds 50% and over 1.5 Billion contactless EMV cards were distributed last year alone.

There is not a problem with NFC/EMV adoption outside of the United States and there never has been and adoption rates are progressing exactly as predicted 5 or even 10 years ago. The fact that the US is 10 years behind the rest of the interoperable world when it comes to the EMV standard can be attributed to very straight forward issues between merchants, issuers and networks.

At the end of the day, the target breach, the very clear requirement to move to EMV in 2015, and the national POS replacement that has already started, will finally enable mobile use at the POS to ramp up. It is not about the desire of consumers en masse to use a mobile to pay, otherwise Starbuck's mobile App would not be processing 5 million transactions a week. It is simply that the infrastructure to make such payments has been hindered by the slow adoption of EMV in the US - the slowest single adoption of EMV of any developed nation on the planet (evidenced by the fact that the US was the very last country in the world to adopt the EMV standard, just a few months after North Korea).
Posted by Brett King | Friday, June 13 2014 at 11:38PM ET
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