For the amount of industry discussion there has been about Near Field Communication-enabled mobile phones, little has been said about the critical role point-of-sale terminals will play in the acceptance of mobile payments and other contactless services.
But just as terminal makers are set to roll out devices that support NFC payments, perhaps more important will be the software applications that eventually will reside inside those terminals. The software will help to enhance the relationships merchants have with consumers, especially through their in-store loyalty programs, observers say.
“The big change for terminals is that they will need software that requires more than just the ability to pay,” Todd Ablowitz, president of Centennial, Colo.-based Double Diamond Group LLC, tells ISO&Agent.
Ablowitz expects terminals to feature software that will improve such areas as discounts, coupons and loyalty-point systems. “All of those things are going to be part of the consumer experience, and that is what is going to be the sizzle in any NFC rollout,” he adds.
Indeed, instant discounts via coupons or loyalty points are high on the list of must-have terminal software as it relates to the NFC ecosystem, observers say.
William Rossiter, vice president of marketing at terminal maker Hypercom Corp., describes a scenario where a consumer would go online with a smartphone, find a coupon and digitally “clip it,” and proceed to the merchant to redeem the value at the point of sale.
NFC changes the coupon experience, but it also brings consumers into the brick-and-mortar environment and opens them to additional impulse buys, Rossiter says. “To me, NFC solves the problem of bringing more customers into stores,” he adds.
Some applications already available address this problem. Shopkick Inc., for example, has a smartphone application that also functions as a mobile wallet (
Rossiter contends such initiatives could reach a new level because NFC would enable the phone to communicate with a similar application residing inside a terminal. “Payment is probably the least sexy capability of a mobile phone,” he says. “It’s these exciting applications the mobile phone delivers. Nobody wakes up in the morning thinking about paying for something.”
Harnessing The Apps
Mobile apps should become more appealing and robust once developers are able to create programs that harness the NFC chip, and Google Inc. could emerge as a lead initiator to such endeavors, Rossiter says.
Nexus S, a smartphone made by Samsung Electronics Ltd. that runs on Google’s Android operating system, has NFC embedded in it, but the chip is not active (
In March, Bloomberg News reported that Google is preparing to launch an NFC trial in San Francisco and New York this summer (
VeriFone has declined to comment on the rumored Google pilot, but the San Jose, Calif.-based terminal manufacturer is considering the effects NFC payments will have on its devices.
“What we’re attempting to do is put together an ecosystem for all merchants that allows them to harness this new technology in such a manner that it’s easy deploy and manage, but gives them tremendous benefit above and beyond what they have today,” Scott Henry, VeriFone director of product marketing for North America, tells ISO&Agent.
Henry cites the difficulty in achieving such a goal because the manufacturers will have to account for different NFC schemes developing in the marketplace. Besides Google’s potential plans, Apple Inc. is believed to be working with NFC and has filed multiple iPhone patents around the technology.
VeriFone is viewing the Isis initiative involving wireless providers AT&T Inc., Verizon Wireless and T-Mobile USA and payments players Discover Financial Services and Barclaycard as a serious and legitimate NFC movement. Isis has announced its plans for a 2012 pilot involving the Utah Transit Authority’s system in Salt Lake City (
“You now have individual players who have their own flavor for NFC, so managing and supporting those [initiatives] on payment terminals is extremely critical,” Henry says.
Until NFC becomes more widespread, terminal manufacturers are working to balance card-based transactions with potential mobile programs.
“The company that finds the right bridging [capability] that brings the new world forward without forsaking the new old world has a great opportunity” to lead the terminal space, Ablowitz contends.
VeriFone believes it can achieve that balance from a technological standpoint. “We’re trying to make this as evolutionary as possible,” Henry says.
That will be achieved if the terminal manufacturers develop an ecosystem that does little to disrupt business for merchants, especially smaller businesses, he adds.
“We want them to continue doing business as usual today, and we want them to be able to step into the future without having to completely learn a new system and completely change the dynamics of what they are doing,” Henry says.
Phoenix-based Hypercom soon will roll out its next generation of terminals with NFC capability, mostly at multilane, big-box retailers. The company recognizes the attention small merchants will need to pay to NFC and believes third-party companies will serve as ambassadors for the technology.
Rossiter cites Groupon Inc. as an example. The Groupon discount website, which caters to both large and small merchants, offers daily deals to consumers who sign up for the service. Eventually, a small retailer might want to promote Groupon acceptance via a mobile application, he says.
“You can download a software update, and all of a sudden you have an NFC terminal that also accepts some kind of Groupon application,” Rossiter adds.
In the end, Ablowitz believes NFC will change the way the terminal manufacturers approach their business models.
“The hardware manufacturers have over the years looked to prove that they can build a recurring revenue business,” Ablowitz says. “They are used to selling a device, and if the device doesn’t break, they’re done” with the merchant interaction, he says
That changes with NFC because many of terminal makers already are moving toward a different business model by trying to incorporate software applications into the terminals that leverage NFC-enabled phones.
Such add-ons historically have been the responsibility of independent sales organizations and merchant acquirers, and the uncertainty is whether the terminal makers can pull that off themselves, Ablowitz says.
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