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AmEx Exec: NFC at Point of Sale Not Ready for at Least Three Years

Substantial rollouts of NFC at the point of sale are still three to five years off, said David Messenger, executive vice president for online and mobile in American Express’ Enterprise Growth unit, though he predicted NFC would eventually become a “big force” in payments and other mobile commerce.

Messenger, speaking at the recent NFC Payments USA conference in Miami, also pointed to the importance of mining customer data in the coming era of mobile commerce. And he questioned how open Google–a potential m-commerce competitor to AmEx–will be with its Google Wallet platform.

NFC POS Penetration Remains Low
Messenger noted that only about 1.7% of POS terminals in the United States now support contactless payment or NFC and said other technologies would have to bridge the gap until merchants roll out NFC-enabled terminals more widely.

“My view, it is a three- to five-year process,” he said. “Whether it’s three or five, no one can be precise at this point. But it is relatively a long-term play at the point of sale.”

He said American Express could use other technologies, including 2D bar codes and purely network-based communication to “bridge from the world as it is today to the world as it will be once we get to this next generation of point of sale.” American Express would not only use NFC technology to interact with customers, even after the infrastructure of terminals gets rolled out widely.

American Express, which launched its Enterprise Growth unit to spearhead development of mobile and online business about 13 months ago, is promoting a digital-payments platform, Serve. The platform lets 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. Users also can get a reloadable Serve prepaid card they can use to pay at shops, restaurants and other physical merchant locations that accept American Express. Serve also could be used to deliver offers, said the company.

AmEx has partnerships with two of the top three U.S. mobile carriers, Verizon Wireless and Sprint, which are supporting Serve. Messenger noted that Verizon is part of the Isis joint venture with AT&T and T-Mobile USA, which plans to launch an NFC-based mobile wallet next year.

“We’re working with Verizon really in the interim to create the ability for Verizon to get their customers to use their phone to make payments before the arrival of NFC.”

Data: ‘Crown Jewel’ of M-Commerce Platforms
NFC will complement the network-based technologies for mobile payment, couponing, and other commerce, and customer data will play an increasingly important role in the success of m-commerce, Messenger said.

“Digital payments and commerce is about that data, and for data to be valuable, you need more of it, and there is an exponential effect: The more data you have, the more valuable it becomes” for targeted offers and other promotions, he said. “Data has become the crown jewel in any emerging commerce platform.”

American Express, which both issues cards to consumers and acquires transactions from merchants, can “close the loop” on collecting data.

“We see every transaction on our network in its entirety–who is spending, where they are spending, when they are spending,” Messenger said. “And importantly, that is very different from traditional market research in that it’s real behavior, not stated behavior.”

Gathering meaningful data is also what Google has in mind with its Google Wallet, that is, capturing purchase transaction data and other information on consumers, then using it to send targeted offers and promotions to the same consumers.

“If they (Google) can close the loop and capture the transaction data, they will be able to generate far higher returns from clicks,” Messenger told NFC Times. “This is the holy grail, to get that payment data. The economics are so strong for closing the loop on advertising, my sense is that they are not concerned around the economics of payments so much. They could look at payment as a loss leader.”

Competing with Google
Google has already said it won’t charge banks or other payment service providers to put their payment applications in its wallet.

While American Express has said it would work with Google on putting its ExpressPay contactless application in the Google Wallet, AmEx could find itself competing with Google’s mobile-commerce platform. “This (Google Wallet) could particularly disintermediate us,” said Messenger.

Google, like other prospective wallet providers, will need to convince merchants and consumers that it “can be trusted” with consumer data, said Messenger, who contends AmEx already enjoys trust among these parties.

“American Express does not sell or otherwise ever share any personally identifiable information from our customers,” he said. “We do work in partnership with merchants to offer our customers special deals and offers based on their interests.”

Google Wallet: How Open?
Messenger also questioned how open Google’s wallet will be since the Google has ultimate control over the Android mobile operating system. Other potential rivals to Google have pointed out the search giant has not published application-programming interfaces, or APIs, to the wallet or to access secure elements in the Android phones.

These unpublished APIs would technically enable Google to block access to secure elements for other wallet providers in its own Android phones and potentially others, though it would be difficult for Google to deny Android device makers access to secure elements in the Android phones they manufacture.

The APIs to access secure elements are not generally published by other platform providers, such as Research in Motion for its BlackBerry OS. A Google spokesman told NFC Times that “for security reasons, we do not plan to publish APIs to control the secure element in the Nexus S.” It's unclear whether that restriction will extend to other Google Android phones. The spokesman added: “Google Wallet is an open commerce ecosystem and we will work with any bank, carrier, network to include them in Google Wallet.”

Still, the fact the APIs are not published is enough to raise suspicions among organizations that could compete with Google on mobile-commerce platforms, including mobile operators that plan their own NFC wallets and such companies as American Express. There might be other restrictions, as well, they suggest.

“What does the architecture allow them (Google) to do in the future? There are a lot of questions to be answered about how open Google will be,” Messenger said. “They may start to be open, but choose to be more closed over time. The question is, what is their ambition over time in this space?”

He noted the Isis wallet started out as closed, but the Isis telcos “decided that wasn’t the right approach.”

On the other hand, some observers point out that U.S. mobile carriers control the phone distribution channels and could refuse to sell NFC-enabled Android models if they don’t gain access to the secure elements. Verizon Wireless, part of the Isis joint venture, might try to block the Google Wallet from Google’s own Galaxy Nexus smartphone when it puts the model on sale, probably later this month, say sources.

Messenger added that it was “too early to call winners and losers, and too early to draw bright lines between potential partners versus potential competitors.”

Google has contended that it can be trusted to protect the data of its partners and only collects data on consumers on an opt-in basis and won't use customer data from one merchant to promote others.

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