Near Field Communications promises to be a technology as disruptive as the application ecosystems built around iOS, Android and, possibly, Windows 8.
NFC is a short-range wireless technology that enables contactless payments. While contactless credit and payment cards are an early form of NFC adoption, the real promise is the mobile wallet. When your smartphone will not only enable you to pay for goods, it will include your loyalty cards, transport costs, gym membership.
Google has embraced NFC, releasing the Google Wallet app in September last year, but Apple is more reticent, failing to include NFC capability in the iPhone 5 which was launched in September.
Locally, there has been lots of activity around NFC in the past year involving all three telcos. Vodafone and BNZ conducted an NFC trial late last year, Snapper has partnered with 2degrees for its Touch2Pay service and Telecom is working with Westpac and Auckland Transport to trial NFC-enabled phones to pay fares on trains and ferries.
There is also the development of a Trusted Service Manager (TSM) for NFC payments, a joint venture between Vodafone, Telecom, 2degrees and Paymark which is expected to launch next year.
So when the invitation to moderate the NFC panel discussion at the ITEX conference in Auckland earlier this month came up, I quickly accepted, seeing it as an opportunity to catch up on developments.
In the email exchange prior to the event it became apparent that there exist two distinct views. That of the telecommunications and banking industry, which was represented by Chris Bowman from Telecom, Albert Naffah from Mastercard and Philip Deason from Paymark.
And the challenger view voiced by Snapper’s Miki Szikszai. (By the way, Snapper is currently embroiled in a legal dispute after it was turfed out of the Auckland Integrated Fares System. There are allegations of political interference and, according to the Auckland Transport blog, the auditor general is involved. While the matter didn’t come up in the panel discussion, it does demonstrate that the payments business involves high stakes.)
The telco/banking view is that New Zealand has come late to the NFC, but it will stride ahead with the development of the TSM.
The Snapper view is that it is the only company that offers contactless products, and that New Zealanders will rapidly tire of NFC pilots and trials.
The telco/banking view of security was that consumers can be assured the right measures are being taken. Naffah went so far as to say that security in the NFC environment is better then the non-NFC environment.
The Snapper view is that security is a legitimate concern and there have been documented attacks on credit card-based services.
Szikszai says that some prototype services have created a PIN number for transactions but that this can impair the customer experience. An audience member pointed out that the customer couldn’t set the dollar limit themselves and the way that NFC was deployed was often controlled by the banks, rather then by the customers.
Szikszai is pushing for common standards throughout the Asia Pacific region for mobile wallets.
Finally, panellists were asked what role the Google Wallet might play in the adoption of NFC here.
The telco/banking view is that Google is interested in other markets and that it doesn’t have the ability to create an inclusive ecosystem to enable mobile wallets here. Naffah maintains that New Zealand should determine its own NFC destiny.
The Snapper view is that as we live in an interconnected world, we can’t ignore Google and that strategies designed to exclude it won’t work.
It was also pointed out that the biggest problem that the banks and telcos have with Google Wallet is that its service is free.
And that, for me, was the most telling statement in the discussion. New technologies are disruptive. The banks and telcos must be worried.
While talk of standards and ecosystems are important – how much of this is designed to keep challengers out?
As Frost and Sullivan analyst Andrew Milroy told a telco conference I attended earlier this year – banks and telcos no longer see each other as competition, it’s Google, Apple and Amazon that make them nervous. As we see the mobile wallet being marketed in New Zealand in the next two years, it might pay to keep Milroy’s view in mind.