EMV's No Silver Bullet for NFC

NFC fanatics are anxiously awaiting the EMV liability shift in hopes the card networks’ mandates will drive NFC adoption at the point-of-sale (PoS). While many are already heralding EMV as NFC’s savior in mobile payments, it’s far too early for celebrations to ensue.  

Yankee Group expects the EMV liability shift will have a profound impact on NFC's role in mobile payments. It’s important to recognize, however, it will by no means be the silver bullet that guarantees an extension to the technology’s lease on life. While NFC undoubtedly needs an event like the EMV liability shift to remain relevant in payments, much more than penetration of the technology at the PoS will be necessary for success. For those banking on EMV to solve their NFC woes, it’s important to remember:

• EMV will not be a light switch event. The transition to EMV is far from a mandate and merchants are not legally obligated to upgrade their PoS infrastructure by October 2015. Smaller merchants will likely resist initially and even some larger merchants,like Wendy's, may hold out for some time. As with other countries, the massive cost of a PoS overhaul will ensure the transition to EMV terminals in the U.S. will be a lengthy, drawn-out process.
• Merchant buy-in will be necessary. Relying on merchants soon accepting all NFC payments is a risky strategy at best. While EMV-compliant terminals will have NFC baked in, the merchant will decide which (if any) NFC payments get accepted. To scale, mobile payment players leveraging NFC must communicate a compelling value proposition to merchants that proves how their solution trumps traditional payments. Providing robust benefits for merchants will be crucial for adoption.
• Consumer education must be increased. Yankee Group's consumer survey shows consumers rate the importance of NFC as a mobile device feature second to last (20 out of 21), telegraphing a significant hurdle. We see this troubling reality less related to consumer disinterest and more to a lack of consumer awareness. Increased messaging on NFC’s benefits and use cases, in addition to industries apart from payments embracing the technology, will be necessary to favorably position NFC in the eyes of consumers.

NFC has tremendous potential in mobile payments but EMV alone cannot drive the technology mainstream. Players looking to capitalize on the liability shift must continue to sharpen their value propositions and effectively position their offerings in the eyes of merchants and consumers alike. In the meantime, technology-agnostic solutions will continue to reign supreme.