NFC (Contactless)

The Problem with Mobile NFC

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An NFC bus shelter in a deserted London street. Do they seriously think that anyone will tap on this?
An NFC bus shelter in a deserted London street. Do they seriously think that anyone will tap on this?

Don’t get me wrong, I really like mobile NFC. Or at least, I like the idea of it. NFC can act as a fast, simple mobile wallet. It also has plenty of potential as a brand interaction channel. Touch in for ticketing, touch in to receive further brand information, touch in to join the in-store WiFi, touch in to leave your contact details. The possibilities are almost endless (there’s a good paper from the GSMA on the opportunities here). However, there’s a big problem with mobile NFC. Consumers, (and for that matter some retailers) just aren’t that bothered about it.

What Do We Know About the Success of NFC So Far?

- There are 200 million NFC enabled handsets*

- 300 million NFC enabled mobile and tablet devices predicted to be sold in 2013*

- 4 million NFC enabled retailers (100,000 in the UK) in 2013*

- The global value of mobile NFC predicted to be $50bn by 2016* (or $74bn by 2015**)

*http://www.gsmamobileeconomy.com/GSMA%20Mobile%20Economy%202013.pdf

** http://juniperresearch.com/viewpressrelease.php?pr=291

200 million handsets sounds good. But to put that in perspective, it’s less than 4% of all handsets (and the audio tagging app, Shazam has 300 million regular users). NFC has a long way to go before it is as ubiquitous as Bluetooth, which is in 80% of all handsets. And the stats don’t tell us how many people actually use NFC. Unfortunately there is no published information that states the number of people regularly using mobile NFC (I would guess at about 10% of those who have it on their phone, but if anyone has got better data, then please tell me). If the uptake of NFC was high,  I would expect that the providers would be shouting about it. Square, another mobile payment system did $4bn in 2012. How does that compare to NFC? My estimate is that mobile NFC payments are much less than that (feel free to correct me if you have accurate figures).

Will NFC Ever Happen?

Whilst there are plenty of predictions of exponential growth in NFC, there’s little evidence that it is actually happening. At best, we will see an incremental growth in users, rather than the exponential growth that some have predicted.

So why is NFC failing to take off? For starters there’s the retailers. Only a minority of them take contactless, and when they do, it’s not made obvious to the customer. The other day I was in a certain sandwich shop, and wanted to pay by contactless. First, I had to find the machine. It was buried under some packets of crisps. Then I had to ask the till assistant to turn it on. Except that they’d already got the chip and pin machine ready to hand to me. It is exactly this kind of experience that make’s consumer wonder, ‘what’s the point’? NFC ought to be a highly usable and frictionless experience, yet in practice, it rarely is. It now seems that some retail giants are far from convinced of the benefits of NFC (see below).

The other issue for consumers is one of trust. Banks will go to great lengths to tell you how secure contactless payments are. However, the problem is one of perception. Consumers feel it is not secure and they don’t trust the banks when they tell them otherwise. So it would seem that the payment providers are much keener on NFC than consumers. Or as someone once said: ‘NFC is a solution looking for a problem.’

Some people blame the lack of NFC in the iPhone as the reason it has yet to go anywhere in mobile. It’s certainly true that Apple users have driven a lot of mobile usage in the past. However, not only are there now considerably more Android phones than Apple’s offering, but usage of apps and web is similar to those of the iPhone. Arguably, Android is just as likely to drive usage as iOS. It now seems unlikely that Apple will ever implement NFC, with their focus on developing their own wallet rather than a retail payment mechanism.

What about mobile NFC outside of payments? In the UK a number of the outdoor ad companies are sticking NFC points all over the place, especially at bus stops. That’s quite a strange thing to do. Ask any OOH warrior and they’ll tell you that most bus stop advertising is aimed at the people going past in their cars, not the people waiting at the stop. The point is that brands are failing to show examples of useful, engaging NFC experiences that will demonstrate the benefits to consumers.

Failing to Solve Problems

NFC doesn’t really solve any pain for consumers. Arguably if it was going to be adopted widely, then it would have happened by now. A representative from the supermarket, Tescos recently stated that NFC is too complex and offers too few benefits for it to go anywhere. A key point was that consumers are now looking for a payment experience entirely within their mobile device. Think of the Starbucks loyalty app or Pizza Express’ mobile payment system. And from a brand perspective that also makes a lot of sense. Building payment into an app is a good bit of behavioural economics, which takes away the ‘pain of payment’. Think how Amazon One Click or iTunes do it. Some supermarkets, such as Sainsbury’s are already experimenting with apps which allow consumers to scan and purchase in-store all through their mobile.

My view is a UK/Euro-centric one. NFC has the opportunity to bring simple payment systems in emerging countries. A number of commentators have pointed to the success of contactless systems in Asia (still no data to demonstrate it, though). However, it’s dangerous to assume that what happens in some Asian countries can be applied elsewhere. In Europe, at least, there doesn’t seem to be much good news for mobile contactless. Much as I like NFC, it seems as if consumers really don’t care about it, and the opportunity for the channel may now have passed.

Barclaycard PayTag: it’s mobile NFC, but not as we know it

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The UK credit card company, Barclaycard are rolling out their PayTag NFC stickers to millions of customers in the hope they will attach them to their phones. The company has already been sending them to a selected few, but the recent announcement will see that scaled up to significantly more customers.

But is this a good thing for mobile NFC? This could certainly be a good way to introduce users to tapping their phone in to an NFC terminal to make a payment. However, unlike mobile embedded NFC the PayTags are essentially dumb chips that do not link to the the phone and have limited capabilities. Currently that capability is a £15 payment (rising to £20 in June). Native NFC is capable of doing so much more. It can link to a website, launch a video, add loyalty points, be used for event or transport ticketing.

In the UK the major supermarkets are rolling out NFC terminals as well as commitments from Transport for London to include mobile ticketing in their contactless system. The danger with PayTags is that it does not benefit the user significantly enough to encourage mass adoption of NFC.

Lexus Use NFC in Wired Ad

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Always ones to be pushing the tech boundaries, the US version of Wired Magazine has included an ad from Lexus with NFC embedded in it. With around 3 million NFC handsets in the US, they are hoping that some of their 500k readership will be willing to ‘touch in’ to the advert. The activation takes users to a link with videos which introduce the Lexus app suite which includes Bing, OpenTable, iHeartRadio, Pandora, MovieTickets.com and Yelp. For Wired, it’s as much about being experimental as it is about gaining a response. But who knows, maybe all magazine ads will be like this one day.

Creating the Future of NFC

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Unsurprisingly, one of the big themes at WMC last week was NFC or contactless. Sure, there were payment devices, but there were lots of other whizzy applications showing how NFC in phones is much more than a mobile wallet. Here are just a few:

NFC Vending Machine – touch in to buy your drink

NFC flowers – touch in to find out what the flower is and how best to look after it

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NFC Car – OK, this was a car mock-up, but showed how contactless could be used to unlock a car and as an ignition key. This is very useful for car hire or car sharing where the NFC could be restricted to a set time period.

Of course, there’s so much more that could be done with the technology. To try to find out, Isobar London Create are running a hack day on 24/25th March, in London and partnership with O2. Any would-be developer can turn up, demonstrate their skills in an NFC environment and be in with a chance to win a number of mobile devices and other goodies. And anyone who comes up with a great application could be eligable for Kickstart funding from Bluevia. There’ll be lots of NFC tech and expert support to help developers through the Hackathon. There’s more information at http://www.isobar.com/createlondon

BlackBerry NFC to allows sharing between phone

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BlackBerry has announced that its new OS7 will include the facility to share files, contacts, docs and more between handsets, which are NFC enabled. RIM has been adding NFC chips to it’s higher end Curve and Bold models since the spring this year. They are not the only company to show an interest in Contactless technologies in mobile. Orange, in conjunction with Barclay card launched a Samsung NFC phone in 2011. Google has also firmly shown their commitment to NFC with their wallet.

However, BlackBerry is the first to promote the file sharing aspect of the technology. Outside of the business market, their key demographic are younger users (it’s all about BBM), and the presence of P2P-based file sharing will set well with that audience. It was this demographic that made use of Bluetooth for file sharing in the days when Nokia were still making phones. BlackBerry Tag looks set to replace that for their users. VFC has been slow to roll out, but could BlackBerry tag do for contactless what BBM did for IM on mobile?

Although not primarily aimed at mobile marketing, this initiative could help open things up for that market. The company will include a developer API to allow third party integration with the ‘tap to share’ function. Look out for a ‘tap’ to do download poster in the near future.

NFC? 91% of People Don’t Know What it Is

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What does this tell us about contactless payments? Not much, according to the study!

A new study by YouGov has found that just 23% of consumers want to make payments with their phone, instead of cash and 20% said they preferred chip and pin. 91% of those asked didn’t know what NFC (Near Field Communications) and 70% had no idea what a mobile wallet was. So, whilst many people in the mobile industry are excited about NFC (or contactless, or mobile wallets or TapTap if you’re Orange or whatever we’re calling it this week …) it would seem that consumer adoption will be a major barrier. Contactless technologies are widely in use: door entry is cards; travel cards, such as London’s Oyster; and it is in many credit/debit cards. In spite of that, 61% of those who have the technology already never use it.

That’s a somewhat disappointing set of figures given the vast spend on rolling out these technologies, not to mention the considerable sums that Barclays have thrown at their TV advertising and iPhone games. Clearly, there is a lot of work to be done to get consumers to both understand and be reassured by contactless. People whizzing down giant roller coasters clearly isn’t doing the trick. Perhaps something more direct, such as shop assistants suggesting that customers use contactless (it’s faster) or even rewards or money off for doing so. It’s in the banks, shops and operators interests to shift to mobile-based NFC, so why not make it worth the consumer’s while?

More on the YouGov study here

Google Wallet: what’s right and what’s wrong with it

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Last week, Google launched their contactless payment system, Google Wallet. They are initially trialling it in two US cities, New York and San Francisco. Besides a simple touch to pay wallet, it will also include the facility to hold and redeem vouchers on the phone. There has been a mixed reaction to Google’s Wallet though. Here is a run-down of the good and bad points about their NFC offering:

What’s right with it

  1. Google has the traction to make NFC payments happen. Whilst there are many companies in the mCommerce space, it takes a Google (well, Google) to get it into the mainstream. Given the number of providers getting into the sector, Google will help consolidate the market.
  2. Low cost of transaction. From a merchant perspective this could be the killer app. Google are not interested in making money from this but rather, using it to develop their search marketing base. They are therefore only charging the standard card-holder present fee. Compare that to the transaction costs of Premium SMS (35% or more), and Google Wallet become a bit of a no brainer. What’s more, for launch they are giving away the terminals and $100 worth of free transactions.
  3. Vouchering and discounts. Wallet ties in very neatly to Google Offers. In fact there are some that believe that Offers isn’t about beating Groupon, but rather connecting it to NFC. The idea is that Google Wallet users will receive offers that can be redeemed by touching in to a contactless terminal. As one commentator put it, it will ‘close the loop’ in the offers/payment system for merchants, and reduces the effort of having to print out or show vouchers for customers (http://searchenginewatch.com/article/2075862/Google-Offers-and-Payments-Its-all-about-Search).
  4. It goes well beyond payments and vouchers. Google wallet isn’t just a payment card, or an offers network. It will also be a ticketing mechanism, travel card and could even replace your house keys and let you into your home. Worried about losing your phone (and ergo your wallet and your house keys)? Google point out that people take more care of their phone than their keys or wallet. We know where our phone is most of the time, but do we know where the other items are? And the advantage of it being held electronically is that you can both quicky ‘cancel’ your keys and get a replacement. Much cheaper than a locksmith.

What’s wrong with it

  1. Getting sued by PayPal. OK, tech companies are always getting litigious with each other (just look at Apple and Samsung), but the legal threat from such a major payment competitor will make roll-out more complicated (http://www.webpronews.com/paypal-sues-google-2011-05).
  2. Lack of terminals. Obviously for NFC to work, there needs to be enough terminals in retail outlets. Google are intending to use Mastercard’s  PayPass as the reader. There are already 120,000 of the devices in the US – that sounds good, but in terms of retail coverage that’s a pretty tiny percentage of outlets. Some commentators believe that terminals will need to become ubiquitous to achieve mass adoption.
  3. Fragmentation. The market is already becoming divided. First off there is the operating vs operating system wars. RIM have already launched an NFC handset in the states, Orange and Barclaycard in the UK. And everyone knows that Apple is developing their offering in that space. Outside NFC, Square is making great gains and recently launched their CardCase which allows users to easily make payments through their phones. It is far from a given that Google will own the contactless space .
  4. Issues with Privacy. As one commentator said, it will be the end of anonymous shopping. That isn’t simply about being able to hide embarrassing purchases. It will be about freedom from being followed round by advertising. Google’s revenue model is all about advertising, so the primary reason for getting into NFC is to use the data to further ad revenue, particularly behavioural targeting. Google will know everything about your purchasing habits both on and off line.
  5. Concerns over security. It’s the question almost everyone asks when first told about NFC. What about security? Google have certainly addressed the issue by keeping the credentials separate to the OS along with a robust encryption.
    That’s still doesn’t detract from user concerns. Most people wonder if it’s possible to snatch a payment just by walking past someone. The answer is of course ‘no’. Both the proximity (4cm) and the encryption makes that hard (Google would say impossible). However there are some industry experts who also think that many hackers will try to compromise the system (http://www.eweek.com/c/a/Security/Google-Wallet-Security-Solid-Until-its-Hacked-566798/). After all, Android was hacked just a few months ago.
  6. Developer unfriendly. Fair enough, it’s a mobile wallet so you can’t exactly open up the data to everyone and their dog. However, that also means that Google is looking to succeed without the support of a developer community (http://www.i-programmer.info/news/81-web-general/2519-google-wallet-developer-unfriendly.html). That will make the whole thing much harder to realise. Surely there must be some kind of API that allows developers to interact with the wallet but raise security problems?

Linking the Wallet to their search and offers is a shrewd move by Google. Search is what they know. In the end, the success of Google Wallet comes down to one thing – consumer adoption. If the public believe that it makes life easier, is genuinely secure and that they won’t get endless offers they don’t want, then it may well be a success.

Contactless Payments Launches in the UK (finally)

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Orange and Barclaycard have been promising contactless payments in phones for over a year. They finally launched the UK’s first NFC phone last week. It will first be available on a Samsung Tocco Lite on both pay as you go and monthly and the payment facility (called Quick Tap) can be set up by Barclaycard or Barclays Debit Card customers. NFC works much like an Oyster Card (for those of you who’ve travelled in London), whereby you top-up your account with up to £100, and can make single transactions up to £15. In essence it’s like cash, but without the pocket full of coins.  The contactless payments can be used at 50,000 stores, including Pret a Manger, EAT, Little Chef, Wembley Arena, Subway, Wilkinson and McDonalds.

Consumers often raise the issue of security with NFC. Could someone just brush past and deduct a payment? No, because the data is encrypted and can only be read at terminals. In fact, the NFC chips have been available on Barclaycards for some time, and there are no examples of that security being compromised. What if someone looses their phone, could someone just spend the money? Not really. If you lost it will all £100, once you tell Barclays the payment facility is cancelled and the money refunded. If you went out with £100 cash and lost it, you’ve lost £100. That doesn’t happen with contactless.

In spite of that, there are understandable consumer concerns about security, which is why users can add a pin number, making the contactless facility more like a traditional chip and pin. Will contactless catch on? Certainly Orange and Barclaycard have massive confidence in the scheme, and will be rolling out other handsets shortly (lets hope one of them is a decent smartphone). The potential of contactless as both a payment and marketing channel is there, however there is one big but. Consumer adoption. In spite of large investments in mobile NFC by banks, operators and handset manufacturers, there is little evidence that consumers are demanding contactless payments. Pushing technology to consumers does not a promise of success. The world of mobile is littered with failed technology (mobile TV, video calling, any Nokia phone in the last three years …). What is disappointing with the Orange/Barclaycard offer is that neither the handset nor many of the brands involved are exactly cutting edge (contactless in a Little Chef???). True, you have to start somewhere, but this isn’t going to reach the kind of social opinion formers who will evangelise about the technology. Maybe it will all happen with a contactless iPhone 5!

Proximity Marketing: Bluetooth vs NFC (Contactless)

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The Problem with Bluetooth

Bluetooth: named after the scandinavian king who united the country, it hasn't managed to do the same for mobile

Just a few years ago, Bluetooth was predicted as being the next big thing in mobile marketing. The DMA even produced a set of Best Practice Guidelines. Bluetooth offered a number of advantages:

  • It was network independent – you didn’t need a mobile data connection
  • You could send large files, quickly to mobile handsets
  • It worked on even the most basic mobile phones
  • The units were relatively cheap to install

However, it has never reached its promised potential. There have been few examples of major brands successfully using Bluetooth, and none recently. The failure of Bluetooth seems to be down to a number of problems:

  • Users don’t understand how it works – most people have no idea how to turn on or off their Bluetooth. Those that do tend to keep it off as it uses a lot of battery power
  • It doesn’t work on a number of handsets including iPhone and BlackBerry. Given that these two models represent half of smartphone users that is discounting a lot of people
  • It isn’t very reliable – the units often fail to pick up handsets or cannot deliver content

When it comes down to it, Bluetooth was never intended as a marketing medium. It was intended to connect to other devices or for peer to peer file sharing. As such there has been little investment in the channel or the technology.

NFC, The Future of Mobile?

With rumours of contactless payments in iPhone5, 2011 may be the year of NFC

Near Field Communications, or Contactless is a contender for the next big thing in mobile. Unlike Bluetooth there has been a considerable investment in the technology by banks, mobile handset manufacturers and the mobile operators. Visa, for example has committed 400 million Euros to rolling out NFC this year. Payments and ticketing are the main driver, however the potential of NFC marketing is also a factor in its development. So far, only BlackBerry have announced a handset, but other manufacturers will follow. Rumour is that Apple will include it in the iPhone 5, assuming they can get the technology ready.

The key benefits of NFC are:

Simple to use – you just ‘touch in’ to make a payment, get your voucher or call back
The infrastructure already exists in the form of payment terminals in numerous retail outlets
Clear user permission – the action of touching in means that mobile handset users have specifically given their permission

So, it looks like NFC has a future (unlike Bluetooth). It is estimated that it will  be available in all handsets within the next 12 months. That just leaves one major hurdle, consumer adoption. Will mobile users trust it enough to actually use it?