Nobody knows the future of mobile payments. At a couple of recent conferences, we've noticed that straw polls of delegates revealed they were roughly split between those who thought that phone payments using NFC will take off, and those who thought they
really will not. If even the industry experts are not convinced, there's definitely no certainty as to what is going to happen.
We can be sure of one thing. The existing payment card players will continue to push NFC. It's a technology they understand; it's a very small step forward from the EMV "chip and pin" technology that's been around since the seventies and that underpins
all their existing systems. And it provides no serious threat to their existing business models. So behind NFC on phones we have MasterCard, Visa, American Express, and all the other major card players.
We can be sure of another thing. These existing players will be under considerable threat from new entrants. So far all the new initiatives in payment acceptance (Square, iZettle, even PayPal) have been based around the existing card payments infrastructure.
But that's not guaranteed for the future. PayPal's core business, of providing person-to-person payments for Internet-based transactions, tries to avoid payment cards as far as possible by encouraging users to work through bank accounts or even to use PayPal
as their bank. For PayPal, the card payment cost of 1 – 2% of a transaction is money lost. So PayPal has enormous interest in circumventing the existing credit card system. They are exploring approaches like location-based payments, and barcodes for PayPal
customers to make point-of-sale payments without going through the credit card network. They might succeed in making one of them mainstream. Or another disruptive approach might do that instead.
Lastly, there're the new entrants: the mobile operators and phone manufacturers. They own a "secure element": the SIM or a component on the phone. That provides the security so a phone can make payments even when neither phone nor merchant is connected
to the Internet. Businesswise though, there's a problem. The operators see themselves as part of the payment process, and typically are looking for a tiny percentage of all payments; the card owners see the secure element as replacing existing cards, and
so are offering only a fixed fee per user. It's not clear how this will pan out. The banks are fighting back effectively: Bank Inter in Spain has recently deployed an NFC phone payments solution that replaces the secure element with an Internet connection
- cutting out the involvement of the operator.
So NFC or Internet-based payments; secure elements or cloud connections; currently it's all to play for. These are exciting times ...!