03 September 2014

Brett King

Brett King - Moven

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Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.
A post relating to this item from Finextra:

Apple to hold fire on NFC - The Independent

14 March 2011  |  10056 views  |  0
Apple has rejected plans to include NFC chips in the next generation of iPhones, preferring to wait until a clear industry standard has emerged, according to anonymous sources quoted by UK broadsheet,...

Apple puts NFC on hold? Let's relax...not

14 March 2011  |  6383 views  |  3

There's rumours flying around about Apple possibly pulling out of their previous NFC (Near-Field Communications) launch commitment for the iPhone 5. Of course, Apple has neither substantiated or denied these rumours. However, I can already hear a collective sigh of relief from many of the card product teams globally who now think they have another year before having to worry about NFC. If, and that's a big if...if Apple does decide to delay NFC does it really change anything?

Firstly, a delay is not cancelling their intention to deploy a strong mobile payment platform. Secondly, a delay in Apple launching NFC doesn't change the fact that Google, Nokia, Samsung and a bunch of others have already deployed NFC capable phones and that increasingly NFC capable POS are fast becoming ubiquitous. Thirdly, it's not like the outcome is going to be any different in 3 years time.

Apple is still massively committed to NFC as a strategy. They've created a world-class team led by Benjamin Vigier, they have a ton of patents around mobile payments with NFC integrated into the experience, their iPhone platform has been designed with this capability in mind, and they've been busy buying up NFC chipsets. If you think they are walking away from NFC, then whatever you're smoking is some pretty potent stuff.

The fact is, if your business is based on plastic credit or debit cards - it is just a matter of time before you are going to have your Encyclopedia Brittanica, Blockbuster, Borders, Newspaper, Video Casette, CD-Rom moment. That is, payments modality will change not because of an Apple iPhone, but because the mobile phone as a device is just too ubiquitous and too easy to use as a payments device. Whether it is NFC, P2P, Square or other emerging mobile-based payments technology, the mobile phone is still going to be the future of payment interactions.

The need for standards
In Japan and South Korea, they've been running NFC payments networks and technology since 2001. So right now today, you could argue the US and the EU are 10 years behind in respect to this capability. Now admittedly in Japan SUICA and FeLiCa are two separate standards, but this hasn't held up adoption. In South Korea they didn't bother with a competitive approach, they just got all the parties together and demanded a standard. The thing is in both South Korea and Japan, the carriers, the banks, the regulators all worked together for the greater good.

I just don't see this happening in a location like the US. Admittedly in the EU there is probably more of a framework for having a standard, but the worst thing for NFC is the likelihood of a whole cabal of different players who want to 'own' the standard. You can't incentivize people to cooperate unless they understand how they're going to make money, and with interchange under threat in multiple markets, then the most obvious revenue stream around NFC mobile payments is no longer considered the potential cash cow it once could have been.

But none of that really matters. It still won't stop NFC, P2P, smartphone or mobile adoption rates in any appreciable way.

When?
One of the most intelligent things I heard in respect to the Apple NFC rumour (which incidentally I think is probably an Apple Black Ops false flag operation) was from David Birch from Consult Hyperion. When we were discussing whether the rumor was true he said:

"Not sure. If it is true, this gives Google a real opportunity..."

Right now Google has the phone and the Android OS platform capability to deploy NFC payments, they just need the App(s), the wallet and the integrated payment network. I would hedge my bets that they're pretty close to doing that.

So at the end of the day - whether the iPhone 5 does or doesn't have NFC - it doesn't mean NFC is no longer viable, and doesn't mean the phone won't be the most disruptive device in payments and banking ever!

 

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Comments: (3)

A Finextra member | 16 March, 2011, 09:14

Still more likely for the NFC chip to be in a keyfob/dongle on your keyring than on a disposable device like a mobile phone. (iPhone 5 - the clue is in the name - it's the 5th iteration. I'm not onto my 5th keyring in that timescale, but I've had lots of different mobile phones, which sometimes get left behind when I leave the house, or their batteries run out, unlike my keys).

And who says that you can't just put your NFC dongle in your phone's case if you really want to use your phone to swipe for payments, rather than your keyring, or bank plastic card, or your wristwatch, or whatever.

Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 16 March, 2011, 12:16

@Brett:

Good that you brought up Encyclopedia Brittanica, Blockbuster, Borders, Newspaper, Video Casette, and CD-ROM to paint the doomsday scenario for plastic credit cards and debit cards, since that provides a good context with which to analyze the impact of mass adoption of mobile payments - regardless of if and when it happens.

Wikipedia could go all out to herald the decline of Encyclopedia Brittanica; likewise, Amazon, of Borders and NetFlix, of Blockbuster; and so on. Whereas, most mobile payments as of now rely on the underlying credit / debit card account, and merely seek to supplant the plastic form factor. Even Zong, which originally launched as a pure play mobile payment method operating solely via a TELCO-billing model decided to add credit card as an alternative funding mechanism in order to boost adoption and scale up ticket sizes.  

To me, this means in short, no credit card / debit card, no mobile payments.  So, at least in their present avatar, mobile payments can only lead to en-masse replacement of of magstripe and chip-and-PIN POS terminals by NFC terminals at merchant premises, which doesn't mean doom for credit and debit cards. This is unlike an alternative payment method like PayPal - if everyone had PayPal and bank accounts, they could fund their PayPal accounts via their bank accounts and transfer money to one another via PayPal, and there would be no need for credit or debit cards, in plastic, mobile or any other form factor.

 

Matt Scott - Wincor Nixdorf International GmbH - Bracknell | 17 March, 2011, 11:20

I think this is may be a strong indicator that Apple do not perceive there to be an agreed standard method of managing Payment, Travel and Loyalty Tokens in a Virtual Wallet on a Mobile Device. 

 

What I did observe was the big emphasis at the latest Keynote (iPad 2 launch) on the number of Apple Accounts associated to a Payment Card for one click purchasing – around 200 Million Accounts.  If Apple were to somehow tap into this for an NFC based approach whereby they almost become an Acquirer of sorts – that could shake things up in a rather interesting manner.  I can see some Cardschemes/Banks taking protective measures to deter this strategy.

 

However, I think Apple should put pressure on the Major Cardschemes and Banks to form a Standards organisation akin to EMVco for Mobile based NFC Device to iron out an interoperable global standard – not only for the Payment side of NFC Devices but the Distribution, Management and Consumer use of these Tokens in a Standard Virtual Wallet.

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