Wednesday, May 22, 2013
In his May 15, 2013, opening address, Smart Card Alliance Executive Director Randy Vanderhoof alluded to "considerable headwinds in getting the ecosystem aligned" for NFC payments. But he said a great deal of the foundation necessary to realize that alignment, both for payment and non-payment related uses, was laid in the last year.
Panelists discussed the hurdles that lay ahead. Issues concerning data security on mobile phones, merchant adoption of NFC technology at the POS, and bank buy-in on the mobile account provisioning process suggest that NFC payments as a ubiquitous alternative to traditional bankcard payments is still years away.
Koichi Tagawa, General Manager, Global Standards and Industry Relations Department at Sony Corp. and Chairman of the NFC Forum, followed Vanderhoof with a talk focused on the fundamental need for global interoperability of NFC in order for contactless mobile payments to succeed.
Tagawa said consumers often carry many different payment cards to use in different payment situations, but that is not the case for smart phones, where individuals usually carry only one. He said that "if contactless is going to be in your phone, or any device, it has to be globally interoperable" so that any mobile device can be used to make payments in any situation.
One area of focus to achieve that goal of global adoption is for NFC providers to create demand for the technology. "Payment is not the only application," Tagawa said. He listed other uses of NFC, such as business-to-business applications like wine tracking and speeding up the boarding of passengers onto airplanes.
Brad Greene, Senior Business Leader – Strategic Partnerships and Business, Mobile at Visa Inc., said the payments industry has waited years for NFC to make its way to consumer mobile devices. He noted that the wait is largely over and it "shouldn't be very long until a majority of consumers have an NFC phone in their pockets."
However, for mobile NFC payments to be realized, merchants must buy into NFC as well and upgrade POS terminals to accept NFC payments. While merchant acceptance is "very strong" in countries around the world, in the United States "it's getting there," Greene said. He added that more U.S. merchants will be upgrading POS terminals in the next two to three years to accept Europay/MasterCard/Visa chip and PIN cards, with NFC technology also built into those terminals.
Greene cited Berg Insight research that said 86 percent of terminals in the United States will accept NFC by 2017, but he later admitted in the question-and-answer session that that percentage is a "very ambitious number."
Another hurdle to overcome is the provisioning of accounts, as banks must be able to securely load individual account details into the mobile phones of individual accountholders – a "pretty daunting task," Greene said. He explained that the costly and time-consuming task of banks having to match account holders to their mobile devices makes for a "frightening deterrent to banks."
Visa has instituted the Visa Mobile Provisioning Service, which allows banks to "plug in" to Visa to facilitate that provisioning process, Greene noted.
Dr. Siva Narendra, co-founder and Chief Executive Officer of mobile security firm Tyfone Inc., believes NFC payments will happen, but on a time frame that is not conducive to "what's next" headlines. In his presentation, Narendra said, "The media expects NFC to take off like Facebook and Twitter, where a billion people opt in, in three days. We don't need that. Payments is very deliberate. And we look at this as a 15-year horizon. … It takes that long."
Narendra spoke to the security challenges inherent in NFC applications. According to Narendra, a chief problem with mobile security today is that passwords stored centrally in the cloud are unsecure. He cited data culled from several sources that said 90 percent of centrally stored passwords are vulnerable to attack; 280 million such passwords have been compromised in the last 18 months; and 94 percent of those compromises go unreported.
The problem with passwords is that consumers devise ones that are easy to remember and thus are easy for fraudsters to hack. The solution is to do away with passwords altogether, Narendra said, and the way to accomplish that is with biometrics.
Sebastien Taveau, Chief Technology Officer at "Natural ID" provider Validity Sensors Inc., followed up on that topic. "Fingerprint is the key to unlock many personalized services," he said. When consumers' unique fingerprints take the place of passwords, "you become your own password," he added.
Both Narendra and Taveau favor solutions where biometric data is stored locally by consumers, such as on their mobile devices or on key fobs that communicate with those devices via NFC to unlock payment applications.
In an afternoon panel discussion, Isis Account Director Geoffrey Dunkle characterized the NFC-based, mobile telecommunication operator-backed mobile wallet enterprise as being "a very exciting technology that's coming along." The Isis mobile wallet has been in pilot mode in Salt Lake City and Austin, Texas, since October 2012.
During the discussion, Lynne Bartron, Vice President of Marketing at Jamba Juice, said the smoothie retailer, which is taking part in the Isis pilot, has developed a strategy that includes all types of mobile users, not just the early adopters who are more likely to be drawn to NFC payments. So Jamba Juice's mobile payment mix includes text messaging and quick response codes as well.
"[W]e see a future with NFC as far as what that can provide in a deeper brand experience, more simplicity for a consumer, but it's going to take consumers a little bit of time to get there where it's available to everybody to interact with in our stores," Bartron said.
Lydia S. Martinez, Store Marketing Specialist at Whole Foods Market, focused on how NFC payments can drive brand loyalty while also providing a faster method of payment, "really giving the opportunity for people to not just tap their phone and pay, but to tap their phone and get a message across."
She pointed out that NFC payments can be improved at the POS by using the technology's communication capabilities to reach consumers with special offers when they enter brick-and-mortar locations, not at checkout. "A lot of time people right now are seeing deals when they get to the point of purchase," she said. "At that point it's too late."
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