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It could take four to six years for widespread deployment of NFC at the retail point of sale, but the technology needs to become more than just a “form-factor change” from cards, said Dan Schulman, group president, Enterprise Growth, at American Express.

Schulman, who is charged with expanding American Express’ traditional credit card business into mobile and other channels, added that the jury is still out as to whether NFC will become ubiquitous at the retail point of sale. NFC has an inside track but has fallen a bit behind cloud-based technologies in the latest industry buzz over which technologies will lead the industry into the new era of commerce.

Schulman, made the comments about NFC during a keynote at the Open Mobile Summit in London this week, in which he sounded themes he's discussed before–about the fundamental changes the smartphone and data analytics will bring to the retail-shopping experience. Offline and online transactions, m-commerce and e-commerce, will all merge into what Schulman calls “digital commerce.”

“I know there is a lot of conversation around tapping your phone at the point of sale,” he said. “My view is, that is a form-factor change and not a value-proposition change and form factor changes actually take a long time to come about.”

American Express plans to make its consumer and small business cards available for download to the Isis NFC wallet trials planned for this summer in Salt Lake City, Utah, and Austin, Texas. The company earlier launched its Serve platform, which is designed to enable consumers use their mobile phones and computers to send and receive money and shop online with a prepaid account they fund with their U.S. bank accounts or credit or debit cards. Serve cards and accounts also could be used for offline purchases, including from NFC phones, though Serve won’t be available for the Isis trials.

There is little advantage for merchants to support NFC if all the payments industry wants to do is replace swiping cards with tapping phones, Schulman contends.

“My view of the world is fundamentally different from that,” he said. “Imagine if, instead of tapping your phone at the point of sale you, metaphorically speaking, tapped your phone as you entered into a retailer. And you don’t even need to tap. You could do it through geofencing; you could do it through any number of techniques.”

Consumers would put onto their smartphones or into the cloud all of their commerce wants and needs, which would become their “commerce identification,” he said.

'Commerce Identification'
“The way to define your commerce identification is not just your financial information to complete the transaction, but basically the brand that you want to shop for, the shopping list, coupons that you may have, the budget that you may have, and you basically tap that on the doorway and when you tap that on the doorway, you let that retailer know exactly who you are and what you want. So that merchant then can come back with a customized set of offers specifically for you.”

Schulman, a former executive at AT&T, who later ran Priceline.com and founded and headed mobile virtual network operator Virgin Mobile USA, noted in his keynote that as many as 70% of consumers use their smartphones when they shop in a retail store.

That has hurt bricks-and-mortar merchants, which are getting hit hard by the “showrooming” trend. Schulman observed that the share prices of big box retailer Best Buy and Amazon.com were at parity five years ago, but today Amazon’s stock is trading 10 times higher.

“Best Buy is becoming a showroom for Amazon,” he said. “That’s happening at retailer after retailer after retailer, and offline commerce right now basically sees a threat coming from digital commerce but also a tremendous opportunity.”

He said U.S. marketers spend an estimated $400 billion a year on “commerce-enabling activity,” such as advertising, couponing and other promotions, along with market research, to try to get customers into their stores. “Of that $400 billion, I would say that half of it is extremely inefficient,” said Schulman.

'Data is the Holy Grail'
“The whole idea around digital commerce, which is the future of commerce, is all around data,” he said. “Data is the holy grail of digital commerce. Data allows us to know as marketers when we advertise something online, and (consumers) drag that into our wallet and then somebody actually taps their phone against the point of sale, we know, did you actually respond to that offer. Did you buy it? And what else did you buy when you responded to that offer? Think of how powerful that data is to marketers.”

Data is what Google is after with its Google Wallet, Schulman noted. Marketers could be willing to pay 10 times more per click for targeted promotions that get consumers into their physical stores than what they pay Google now for clicks.

“So think of how valuable that data is to somebody like Google, where they do their Google Wallet not to move into payments itself, but to capture data and to close a market and return-on-investment loop.”

Google Wallet now mainly uses NFC technology, but observers expect it to become more cloud-based under restructuring Google is now undertaking, sources told NFC Times.

In response to a question from NFC Times, Schulman said it remains to be seen whether NFC prevails for retail payment, offers and other promotions or whether a “cloud-based solution” will prevail.

There could be a combination of technologies underpinning the new era of digital commerce, but NFC would arrive later because of the added infrastructure that is needed, he said.

“My view on NFC is, it’s still four to six years out only because you don’t have enough phones with the NFC chip in them yet,” Schulman said. “But people turn over their phones every 18 to 36 months and with natural upgrade cycles at the point of sale, every, call it, four years or so.”

If all POS terminals were equipped with NFC and all smartphones came with NFC chips, it would solve the chicken-and-egg problem and provide more security for transactions if secure elements were involved, Schulman said. But he added: “The other thing you need with NFC is not just the EMV payment facility. (You need) the two-way communication part of NFC to be able to transmit the coupons and loyalty.”