Smartphone payments via NFC? Don't ditch your wallet just yet

Smartphone payments via NFC? Don't ditch your wallet just yet

Summary: Samsung and Visa are promoting NFC as a mobile payment technology, but there are still a lot of obstacles to tackle before it becomes a mass-market proposition.

Mobile payment
Why haven't mobile payments taken off yet?

Samsung and Visa are working together to promote mobile payments using NFC technology, but with many elements of the mobile payment ecosystem still not in place, and the significant absence of Apple from the market, it could be an uphill struggle.

Using your smartphone to pay for things seems like an obvious and easy win. Most people are as likely to carry a phone as a wallet, so combining the two makes a lot of sense.

Under the deal announced by Samsung and Visa at Mobile World Congress on Monday, Samsung NFC-enabled handsets will be preloaded with Visa's payWave app; banks can then load payment account information remotely using Visa's mobile provisioning service to those Samsung handsets for a mass NFC mobile payments rollout.

Mariano Dima, executive vice president of Visa Europe, is certainly bullish: "A Samsung device equipped with the Visa contactless payment service is a powerful proposition and will allow us to make mobile payments a reality for people around the world."

The companies said the deal could pave the way for the implementation of large-scale mobile payment programmes, pointing to numbers from ABI Research forecasting that a total of 1.95 billion NFC-enabled devices will ship in 2017 — although in 2013 the number will be nearer to 200 million.

According to ABI Research, nine out of the top 10 manufacturers now have NFC-enabled handsets commercially available, with most housing an embedded secure element solution. NFC will therefore come out of its 'trial phase' in 2013. ABI expects NFC-enabled handset shipments to more than double this year, with NFC inclusion "likely to become a default technology integrated into flagship handsets".

Samsung's existing flagship smartphone, the Galaxy S3, already has NFC inside (indeed, Visa and Samsung tested out mobile payments with athletes at the 2012 London Olympics).

Nokia's Lumia 920 handset also includes NFC, as does BlackBerry's new Q10 and Z10. And following the Samsung–Visa alliance announcement, it would be a pretty big surprise if the forthcoming Galaxy S4 didn't also have NFC.

Samsung and Visa aren't the only companies talking about NFC payments: MasterCard also used Mobile World Congress to show off an update to its MasterPass digital wallet, which supports NFC.

Raising the profile of NFC

Visa is an internationally trusted payment brand, and Samsung is the top smartphone manufacturer in terms of shipments. Both companies are likely to put effort and marketing muscle into making consumers aware of the potential benefits that NFC payments can bring, said Eden Zoller at consumer analyst at research firm Ovum.

"For most consumers, mobile payments — let alone NFC — is simply not on their radar" — Eden Zoller, Ovum

But that marketing muscle is desperately needed, as Zoller points out: "For most consumers, mobile payments — let alone NFC — is simply not on their radar."

Zoller said this was backed up by Ovum's research, which found that when consumers were asked to rank their most frequently used applications, mobile commerce-related applications were very low down on their list compared to mobile games, email and social networking. Meanwhile, Visa says contactless payments have quadrupled over last year and now generate around 13 million transactions per month.

That sounds impressive until you realise that's about the same number of transactions that Visa Europe processes in about 12 hours. 

NFC is about a lot more than payments of course — there are some interesting applications around transferring documents and access to buildings, for example. But a whole set of factors still hold back widespread usage of NFC for payments.

Drawbacks to NFC

The benefits to the credit card company, the retailer and the handset maker are all clear: more transactions, quicker transactions and more loyal customers among them.

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However, consumers can't see the benefit to them — especially as they remain happy enough with credit cards and cash.

NFC in itself won't make your physical wallet disappear, even if it makes it a bit thinner — which isn't a compelling reason unless you're obsessed with the fit of your jeans or suit.

Another big problem is the fact that the infrastructure isn't there. Even if you wanted to use your phone to pay for a sandwich today, there are very few places you can because the deals between banks, credit card companies and handset manufacturers still haven't been done.

Each of these issues can — and will — be overcome in time, but until there's a compelling customer need smartphone payments will struggle. It's worth noting that although contactless credit cards are widely available, they're still rarely used (although I'm personally a fan). So to get consumers to make the even bigger leap to using their phone for payments will take even longer.

The big holdout

Oh, and that one manufacturer who isn't using NFC?


The iPhone 5 doesn't include NFC, which means few retailers or banks will be willing to invest in anything more than trials — which is what we've seen for the last few years.

Of course, the iPhone isn't the only smartphone around by a long chalk, but it's still extremely influential and many organisations will remain wary of mobile payments until Apple's plans are clearer.

And Apple can afford to wait, because until the infrastructure and the consumer need is there, it can't be late to market.

Smartphone payments will be commonplace one day — but don't ditch your wallet just yet.

Topics: Banking, Apps, Mobility, MWC, Smartphones

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  • Computer exterior accessories

    This is great ! I don't wanna ditch my wallet. HAHAHA.
  • NFC Adoption Cycle

    9 out of 10 phone manufacturers have NFC-enabled phones, but upgrade cycles for consumers will be a determinant factor in the adoption of this technology. Another important factor is the trust concerns that consumers have regarding this form of payments. Google and Visa are both big companies that inspire ease of mind for consumers when it comes to letting them handle some of their transactions, but I think there needs to be an incentive layer built into the experience so that consumers can justify using this form of payment instead of just taking out a plastic credit card as they have been doing forever. Maybe this incentive layer should include a deals componet which, when combined with geo-location data, could spot deals nearby only available if trasnsacted via NFC.
  • credit card is still better...

    Until your mobile phone has the same advantages as a credit card, there will be no competition besides the geek factor...
    I.e, wafer thin, waterproof (even if it goes though a wash!) , replaceable instantly by your bank if lost, can be used even if bent out of shape by keeping it in your back pocket (like my mate does!!) :D

    and a lot would want to leave their phone behind on holiday, but not their credit card..
  • Something to bear in mind...

    Between April-September 2012 there were 56,680 mobile phones stolen in Greater London. How many more would be targeted if the thieves thought that they could also use them to raid your bank account as well?
    Ian Sargent
    • how many credit cards were stolen in the same period?

      Besides, it's easier for a thief to use a stolen credit card than a stolen phone with a NFC wallet app on it.
  • Just a matter of regulators

    Technology won't fly unless the ecosystem around it support it.

    Come to Tokyo. We pay the subway, the bread, the coffee in the vending machine, the sandwich in the convenience store ... Even the stuff in MUJI or UNIQLO with Suica ( We charge cash in Suica, then pay with Suica. It's not contactless credit, just contactless CASH.

    Others just have handsets with the NFC chip integrated. This type of transaction is widespread, safe and considered convenient by the society - because it actually IS.

    Why is this such a big problem in the rest of the World? Contactless cash is not credit, probably VISA doesn't like that very much.
  • You realize your phone is lost sooner than you realize your wallet is lost

    One benefit to smartphone wallets is that you'll realize much sooner when your phone is lost. And how many times have disgruntled merchants and restaurant employees stolen credit card numbers from their patrons? There's no handing off w/ a smartphone payment opp. So now you have security concerns. Harlan Hutson developed TraitWareID, a mobile authentication app that links the identity of users with certain personality traits of their devices, then ties the device and user with an Identity Binding Token. The IBT can act as a virtual token, or proxy for the authenticated end user in any transaction. Pretty cool stuff.
    • quite so

      I've had my credit card number stolen by a restaurant employee. They weren't even disgruntled, just making a few bucks on the side selling patrons' numbers (some of us had charges from the other side of the planet). An eWallet may not be perfect, but it would make that scam more difficult.
  • I'll pass

    This stuff is getting too unsecure.
    You lose your phone [and especially if you are dumb enough not tgo have a decent password for it] and they can not only get to your data, contacts, and email but also your credit card.
    While my next phone may be a Samsung Galaxy S IV, that feature will be disabled. My current phone has the GPS disabled.
    Oh as for Apple? Who cares. The iPhone is beginning to be like the Mac - a niche market. Do you do things for 80% of the market or 20%?
  • We can ditch our wallet..

    but not our credit cards, not in a long while as I see it. Cash people can certainly do without. But not their plastics. Before I got my mPowa card reader ( last year I had to turn away customers who only brought their cards with them. My sales rose thrice last year when I brought my dongle with me to a festival. But no one has ever tried paying me with their phones just yet.