NFC mobile payments have played an important role in the evolution of smartphones into tools for everyday commerce. Adding near field communication capabilities to mobile devices can enable consumers to make contactless transactions through digital wallets, but handset support alone does not guarantee widespread adoption. Successful mobile payment ecosystems also require participation from financial institutions, payment networks, merchants, technology providers, and consumers.
The growth of NFC mobile payments has historically been influenced by several technology and infrastructure challenges, including access to the Secure Element, merchant acceptance, and the availability of compatible point-of-sale terminals. Technologies such as Host Card Emulation helped create alternative approaches to storing and transmitting payment credentials, while the transition to EMV encouraged merchants to upgrade their payment terminals. Together, these developments created a stronger foundation for expanding contactless payment acceptance and accelerating the broader adoption of mobile wallets.
As the title of this article from Mobile Payment Insider implies, it argues that Apple can dominate mobile payments if it simply adds NFC to the upcoming iPhone 6 product.
“Rumour has it that Apple’s iPhone 6 will include NFC technology. If so, the company will be in prime position to capture the mobile payments market, according to some business commentators.
“Whilst rivals like Google and Samsung have embraced NFC in their Android devices, it has been ignored by Apple through the release of each successive model of the iPhone. Despite the opportunities that NFC presents when it comes to digital wallet creation, those companies who have adopted have been largely unable to capitalise on the potential, lacking the kind of customer base that would allow them to roll out mobile phone based payments on a large scale.”
The problem with this logic is that the slow adoption of mobile payments with NFC is not controlled by the mobile handset manufacturers; the delays are driven by the fact that mobile carriers have limited access to the NFC component called the Secure Element (SE). This lack of access to the SE, combined with slow merchant adoption of NFC acceptance, has delayed mobile payments for everyone. The iPhone does of course represent a very large part of the smartphone market and as such, NFC enablement in iPhone 6 would greatly expand the market existing NFC solutions could operate on.
This increased availability of NFC in mobile handsets becomes more important because a thaw may be coming in the frozen NFC market. Visa and MasterCard have announced plans to bypass the SE by using Host Card Emulation and merchants will begin to accept NFC as an adjunct to EMV adoption driven by the liability shift. The logic becomes more muddled when the argument is expanded to include Apple’s iTune users as a critical component of the mobile wallet.
“Apple, it is thought, does have that clout, thanks to its 800 million iTunes users. Now, as more and more merchants have begun to adopt NFC technology, Apple is expected to revisit that potential – especially as, in the US, merchants have been given an October 2015 deadline to replace old card readers with EMV-compatible ones, many of which also support NFC.”
Without a banking partner that has expertise in payment issuance, Apple is unable to leverage its iTunes customers into a broader payments relationship. While Apple will be in a position with iBeacon to influence the consumer to make a purchase, once the consumer is ready, they will need to use a bank card either plastic or mobile based – this is why the rumor regarding a potential Apple relationship with Visa was so interesting.
The evolution of NFC mobile payments demonstrates that successful payment innovation depends on more than the capabilities of a single smartphone manufacturer. Broad adoption requires coordination across the payments ecosystem, including card issuers, payment networks, merchants, mobile platforms, and technology providers. Expanding NFC availability can increase the potential user base, but consumers also need widespread acceptance and a secure, convenient way to connect existing payment credentials to their devices.
As contactless payments continue to mature, technologies that simplify credential provisioning and reduce reliance on specialized hardware can help accelerate adoption. At the same time, partnerships between technology companies and established payments organizations remain critical for connecting digital wallets to the financial infrastructure needed to complete transactions. The continued development of NFC mobile payments highlights how collaboration, interoperability, and merchant acceptance ultimately determine whether new payment technologies achieve widespread use.
Overview by Tim Sloane, Vice President, Innovation
To read the full story, go to Mobile Payments Insider.
