Top Executives Debate Future of Mobile Payments

Outstanding in the Field: MPD and PYMNTS.com at the 3rd Annual Mobile Contactless Payments Innovations Summit
 
Chicago, IL — October 17-18, 2011

Early last week, more than 400 representatives from the mobile and financial services industries converged on the W City Center in Chicago for two days of discussion and debate about the future of mobile commerce in general and NFC mobile payments in particular. If you were a diplomat, tasked with hosting a round of negotiations among the major powers of two powerful industries headed on a commerce collision course, you’d be hard pressed to find a better gathering of the key players than Strategic Solutions Network’s 3rd annual mobile NFC gathering. Top executives from the biggest names in payments, banking, processing, mobile networks, mobile services, and mobile marketing — among many others — were on hand to debate the future of mobile payments.

We’ll note here that the debate has continued to center on the future of mobile payments and the often misunderstood — and certainly much-maligned in some payments circles — chip technology protocol called Near Field Communication. As PYMNTS.com readers know, this mobile technology consists of a complex implementation of chip technology, software, and physical controls within mobile handsets that can load, host, and store secure data including payment credentials. Those credentials may then be transmitted to an NFC-enabled physical point of sale device to facilitate a payment transaction. And, as the conference attendees all agreed, we have proved over the past few years that the technology to enable this is fundamentally sound and scalable. Most of the attendees also conceded that the collaboration to build that ecosystem has been quite complex and difficult — both in the number pf parties required and the level of cross-industry collaboration required. But the parties have collaborated often and deeply enough to prove that it can be done.

But, will it, and at scale? Therein lies the rub. Almost to a person, the conference attendees agreed that NFC faces at least two challenges, both of which to the fundamental platform ignition issues that all new marketplace face: 1) the technology needs broad distribution in consumer handsets and merchant points of sale to drive penetration and prepare the marketplace for NFC payments, and 2) there must be a compelling value proposition for the retailer and the consumer to ignite NFC platform payments. To the first point, many of the NFC proponents (handset manufacturers, operators, chip services providers) pointed to two fundamental technology shifts in the industry. First is the forecast that most major handset manufacturers will include NFC capabilities in their new handsets beginning later this year, and that we will see near-ubiquity of NFC-enabled handsets in North America within the next 5 years. OK, that’s one side of the platform penetration challenge. The other major shift to which the majority of these same proponents pointed was the recent announcement by Visa to incent EMV adoption (in both contact and contactless chip forms among North America retailers through a combination of economic and compliance incentives.

So, perhaps the technology will be widespread on both the consumer and retailer side of payments within the next 5-10 years. But what about enablement, adoption, and use? What will incent consumers and retailers to adopt NFC as the primary way to pay? What will be the “insanely great” value that NFC will unlock to ignite the technology as a payments platform? To this question, one of the most insightful comments of the session came from a representative of a major wireless operator, who observed that “consumers don’t buy technologies, they buy capabilities. Nobody buys “Wi-Fi” when they acquire a connected device, instead they are buying the experiences that Wi-Fi can enable.” And so it must be with NFC that the unique value that NFC can unlock for consumers — value that they can’t get elsewhere — will be the key to widespread adoption.   

In this context the conversation at the conference began to turn on changing the debate from one focused on payments enablement (transactions) via a specific technology (NFC) into a debate focused on the creation of commerce through the deployment of a broad range of services. As the industries in attendance turned their discussion to focus on the continuum of consumer needs, the discussion turned to deploying the full range of mobility services (location, connectivity, interactive messaging, enrollment, profiling, engagement) to help consumers manage the commerce journey of “see-want-find-get-enjoy,” knowing full well that payments are but a small part of the larger consumer commerce experience. Consumers don’t “buy” card-based payments any more than they will “buy” NFC — they just want to acquire things as simply, seamlessly, and reliably as possible.

And so the discussions at the 3rd Mobile NFC Payments Innovations Conference began to shift from NFC enablement to mobile commerce creation. As participants looked to drive deeper retailer and marketer engagement with consumers through pre- and post-purchase activities such as offers, promotions, locators, check-in, alerts, notifications, and transaction summaries. All of these capabilities are being wrapped around the payment process that is ubiquitous today and that works for consumers — namely, card-based mag-stripe transactions. But the information assets being laid down by the leaders in the marketplace today — the assets that create and sustain commerce — can be wrapped around unique functions with NFC tomorrow. Whenever that tomorrow may come.

If you’re a business that manages consumer engagement with brands, retailers, payments, financial services, and mobility, the conversation about how to manage the coming convergence of commerce creation onto mobile platforms is a critically important one. That conversation has started at the 3rd Mobile Contactless Payments Innovation Summit last week. It continues at the first Commerce Creation event in January 2012 in Las Vegas. If you’re interested in shaping the future of mobile commerce, we’ll see you there.