There is no question about it, the way people pay for things is fundamentally changing. When it comes to mobile payments, 2011 was the year that the major players began marshalling their forces. Partnerships were forged, baselines of technology were established. In 2012, the ecosystem will deploy its innovations, testing the market to see how it will react.
That brings us to the most important question regarding mobile payments in 2012: does Near Field Communications (NFC) have a legitimate future? Shaking the Magic 8 Ball, the answer remains, "answer cloudy, ask again later."
More People Have NFC Capabilities In 2012
This year, NFC technology will finally make its way into the hands of millions of users. This will be spurred along by new smartphones, notably from Android, that have NFC capabilities baked into them. The technology industry is waiting to see if and when Apple decides to put NFC into the iPhone. Many pundits think that when Apple goes NFC, that will be the true harbinger of the heyday for mobile payments. As it stands, Apple's newest iPhone 4S is three months old and a new one will not be released till the third or fourth quarters of 2012, if at all.
That does not mean that NFC cannot start changing user behavior. With or without Apple, the technology and financial sectors are going to move forward to create the infrastructure that consumers will need to make mobile payments realistic for physical goods at brick and mortar stores. It is still a cash world, with about 85% of transactions still being made with paper currency. It behooves the financial system and their technology partners to shift those scales. Even a 1% increase in digital payments means billions dollars flowing through the ecosystem.
The NFC camps have circled their wagons. Google has its Wallet and Offers program and is set to create new partnerships this year now that the original group has lost its "exclusive" rights to the project. Allying against Google are the mobile carriers with AT&T, Verizon and T-Mobile all heavily invested in the NFC Isis project. While Verizon may claim that the Google Wallet posed technological challenges for its network, the motivation has to be the notion that Wallet on Verizon Android phones would cut the carrier out of the loop.
Sequent Predictions & Training Wheels
One NFC software and solutions company has taken no sides. Sequent, based in Redwood City, Calif., aims to make an open standard software for NFC. Sequent makes software that any carrier, financial services provider or app developer can take advantage of to institute NFC. Sequent's stance is that it could as easily partner with Google or Isis as well as compete along side them.
Sequent's CEO, Drew Weinstein, has four predictions for NFC in 2012 that are worth considering:
- Mobility will reshape the credit card and payment industry. With recently introduced technology such as Google Wallet, more consumers can pay with their smartphones, while retailers and public transportation agencies are beginning to adopt this technology. The integration of location-based services and coupons will also motivate users to begin adopting NFC. At the mall and hungry? Tap a button on your smartphone and get offers from restaurants near you, apply the coupon and pay with a tap of your smartphone.
- NFC smartphones will outnumber deployment targets. NFC enabled phones will become available and find their way into consumers' hands. Whether or not consumers use NFC and it becomes mainstream remains to be seen. However, peer-to-peer NFC use cases will become more frequent as consumers become more familiar with the technology.
- 2012 will be the year of "NFC training wheels." There will be a big marketing and advertising push to consumers as tags, posters and other advertisements emerge at retail stories and businesses. These tags will connect consumers to targeted marketing and discount offers, allowing them to be more comfortable with the technology.
- Carriers will deploy NFC faster than consortiums. Carriers can act more nimbly on their own versus a consortium with multiple parties, which can result in friction and longer timeframes to make a decision. Consortiums like Isis are trying to solve for payment, the most difficult NFC use case, while other use cases are more easily achieved.
The fourth point is interesting. Isis is a consortium ... of carriers. It almost seems to be a contradictory statement. The carriers can be more nimble on their own but that does not mean they do not need Isis to help set up the infrastructure and standards that are going to be needed to bring widespread adoption to NFC.
The third point is spot on. Mainstream consumers are going to have to figure the if/what/when/where that NFC will be used. This does not just mean payments but also physical access to buildings, library checkouts, posters and retail marketing and so on. The first step towards getting users ready to pay with their smartphones is the prepping them for the notion that a "tap" is an acceptable input method.
What will it take for you to adopt NFC in 2012? Let us know in the comments.