The Democratic National Convention did more than confirm Barack Obama's seal on the party's presidential nomination in August. Denver was also a coming-out party of sorts for First Data's near-term answer to the drive toward near-field communications technology.
First Data used the national setting to issue thousands of DNC lapel pins using its new GO-Tag contactless payments features-an NFC "sticker"-which included $10 in preloaded value allowing the delegates to buy concession-stand fare between the convention speeches at the Pepsi Center and Invesco Field.
Applied externally to a phone or other object, the NFC sticker contains a passive-mode chip that serves as a contactless form factor. These versions of the technology are what many proponents see as the necessary precursor to the mobile device digital wallet, and the industry centerpiece of a mobile banking and payments channel. NFC stickers-even the ones dumbed down to the level of one-way, RFID-capable fobs-are doing what many see as the important work of encouraging consumer use and merchant adoption of contactless. "It's a fairly low tech way of testing the market, and testing the propensity of users to use their phones for contactless transactions," says Aite Group senior analyst Nick Holland.
Other NFC trials over the past two or three years by the card associations and major banks have been more involved, using specially embedded cell phones to test customer usage or application provisioning. Many see the First Data NFC sticker experiment as an interim step in the NFC evolution, but a key part of its strategy for a closed-loop, prepaid issuance market, especially into the merchant/retailer arena for gift-card, loyalty and other programs.
Barry McCarthy, president of First Data's mobile commerce solutions business unit, was mum on whether First Data had any plans beyond prepaid issuance of GO-Tags, but says "it would be a fair assumption that First Data has an interest in the mobile commerce ecosystem-that would be merchants, banks, and issuers-and moving this ecosystem forward."
Another NFC sticker program garnering some attention is the Blaze Mobile wallet, a mobile banking and payments service powered by Yodlee aggregation that allows users to access their bank accounts at more than 8,000 institutions for options including money transfers and billpay. Users have to use a preloaded debit card to use the swipe-payments feature of contactless readers. A Gartner outlook on mobile commerce noted the Blaze tool (from parent company Mobile Candy Dish) as one of the key players to watch, despite its $4.99 monthly fee and the research firm's own minimal outlook on mobile payment adoption (just three percent of mobile users worldwide will be utilizing m-payments by 2012). "The [Blaze] service offers ease-of-use and easy access to information from a single application on the phone," the report states. "Early adopters may be willing to pay the fee initially when contactless payment on the phone is a novel experience. However, when NFC payment is deployed by major carriers and banks, this charge is likely to go away, as mobiles are just another channel that makes it more convenient for people to make payments."
Supported by card association initiatives, many issuers are eager to jump into NFC. The problem is, they don't yet have the level of cross-industry partnerships to make it work, say analysts. Some U.S. carriers and handset manufacturers have made investments and have joined in trials, but still face daunting economic hurdles; according to Javelin Strategy & Research, wireless carriers would have to expend between $400 million and $800 million each for hardware and infrastructure upgrades to include specialized two-way RFID chips on handsets. That puts the onus of ROI on transaction and data revenue through a yet-to-arrive business model with banks and the card companies. The most critical component-merchant uptake-is even less mature.
The NFC sticker is an option allowing issuers to, essentially, go it alone. Last fall, a semiconductor manufacturer responsible for over 50 million chip sales in North America began attracting interest from financial institutions looking to jumpstart NFC while these cross-industry interests get worked out. "Our partners and issuers in the U.S. expressed concern that NFC, while a hot, sexy way to reach consumers, was going to take a bit more time to roll out between banking and the carrier community," says Charles Walton, an evp with Inside Contactless. Walton says Inside Contactless expects to have several issuers lined up by year's end to conduct further trial and use of the NFC sticker format, most likely in the same preloadable format as First Data's GO-Tag products.
It's important to note that many proponents of NFC stickers don't see the format as usurping carriers. To bridge to the mobile-wallet stage, there's little debate about the need for moving the system to NFC-embedded phones. Digital wallets will require multi-account capabilities, merchant loyalty and couponing programs, payments security and other features that will need power and processing capabilities inside the phone. "They can erode some of the leverage the carriers have," says Javelin senior analyst Bruce Cundiff, "but long-term, they still need the carriers, on one level or another."
Agreed, says Mohammed Khan, president and founder of OTA provisioning software firm ViVOtech, which is developing platforms to marry the competing interests between banks, carriers, handset companies and merchants. "[NFC wallets have] very broad interest in terms of enabling merchants ...and takes the baby steps toward mobile payment," says Khan. (c) 2008 Bank Technology News and SourceMedia, Inc. All Rights Reserved. http://www.americanbanker.com/btn.html/ http://www.sourcemedia.com/