Analyst Sees Too Much Emphasis on Payment for NFC Rollouts

While NFC holds great promise, and 2011 is shaping up as a turning point for the technology, the industry is focusing too much on payment as the major application for expected NFC rollouts.

That was the message from Nick Holland, senior analyst of U.S.-based Yankee Group during a webinar he held this week titled, “NFC: Not (Just) for Cards.”

In it, he threw cold water on the notion that the technology will supplant payment cards anytime soon.

"I don’t think payment is what NFC is about," Holland said. "For us to focus on payment, that’s the tail wagging the dog. It’s much bigger than just this card-emulation mode. It’s a component, but the cases we’re seeing are all about tag reading. That’s where we’re going to get the broad innovations–where the physical world around you is hyperlinked."

While NFC can work for retail payment, the barriers to its deployment on a large scale are formidable, Holland said­. They include an entrenched payments industry that’s developed a physical card-based model accepted by consumers and merchants alike despite its flaws, and a multitude of competing interests vying to get their NFC payments models established. These don’t bode well for the emergence of NFC as a widely used alternative to cards anytime soon.

"NFC will have to be safer, more convenient, ubiquitous and faster than anything else out there, otherwise it won’t displace existing protocols," he said. "I think you’ll ditch your wallet around the same time you ditch your car keys."

Holland noted some high-profile commercial initiatives, many centered on NFC-based payment, but he sees only pockets of promise.

For instance, he takes issue with some who point to Google’s support of NFC in its smartphone operating system, Android, and in its new Nexus S phone as signs that the company will be laying the groundwork for a payments initiative developed around NFC. That would be significant, but Holland doesn’t see how the scenario plays out.

"There’s a lot of noise about them becoming a competitor to MasterCard and Visa, but I think that’s nonsense, frankly," he said. "If 97% of your revenue is about advertising, is it in your best interests to go head-to-head with MasterCard and Visa, or to try to become the next PayPal? I think they are going to stick with what they do best."

But Holland isn’t as dismissive of Apple’s interest in or ability to extend its reach into the payments sector. While uncertain as to whether Apple will incorporate NFC into its iPhone, he does see a scenario in which the company could mold its iTunes model into something resembling a payment platform that might have appeal for certain types of specialty retailers.

"I think, unlike Google, Apple may have a play as a payment brand," he said.

Both companies, as well as other commercial interests looking to tap into NFC’s unique capabilities, might want to look in a direction other than payment, Holland said. NFC’s real promise, at least in the near-term, lies in allowing people to interact with their physical environment. The ability to equip people with NFC-enabled devices that pull information off of tags on physical objects opens up a wealth of opportunities for bridging the gap between the physical and digital worlds and delivering information of all types and for a multitude of purposes, he says.

"In reader mode you have a way of grabbing information from the world around you, and this I see as really where the majority of activity outside the payments field is going to be for NFC," he said. "Where you see something that’s NFC-enabled you have this way of interacting. It can be a call to action in the physical world, like a hyperlink in the HTML world, enabling you to get to other information."

Google, notably, recognizes NFC’s promise in this area, Holland said. The first applications available on its new Nexus S handset revolve around pulling information off of NFC tags. And Google is running a test of its Hotpot location-based mobile app incorporating an NFC feature, enabling retailers to display stickers embedded with tags, which consumers can tap to pull down recommendations and reviews about the merchants. Both are examples of how NFC’s ability to “hyperlink the physical world” offers some potential commercial uses.

NFC also is being used for information on demand in education, healthcare and transit, Holland noted.

"As economies of scale kick in, there’s a potential for NFC to be in whole variety of objects, and to deliver the capabilities that allow people to interact with their environments," he said.

HEADLINE NEWS

UPDATED: U.S. Federal Government Awards Grants to Help Transit Agencies Roll Out Contactless Payments and Mobile Ticketing

Feb 18 2021

NFC TIMES Exclusive Insight – U.S. public transit agencies have been keen to remove cash and paper tickets from their buses and trains and to keep more distance between customers and agency staffers because of the Covid-19 pandemic. Now they are getting a new boost from the U.S. federal government in the form of grant funds to enable them to enhance contactless and mobile payments systems, among other measures.

German Transit Agency Plans to Complete Open-Loop Rollout on Buses and Trains This Quarter, Expand to Other Mobility Later

NFC TIMES Exclusive Insight – German transit agency SWB Bus and Bahn plans to fully roll out its contactless EMV fare payments service BONNsmart to its bus and train lines by the end of the first quarter, after launching a pilot last fall, confirmed a spokesman, who added that plans call for eventually expanding the contactless service to payments for parking and such micromobility modes as e-scooters.

Large Private U.S. Bus Company Latest to Adopt Mobile Ticketing in Covid Era

NFC TIMES Exclusive Insight – Academy Bus, a large private commuter and charter bus company serving the U.S. East Coast, has launched its first mobile-ticketing service with the SilverPass app, enabling commuters to purchase digital tickets with credit cards or employer benefit cards.

LA Transit Authority Introduces Virtual TAP Card on Android, Complementing Earlier Launch with Apple

Feb 2 2021

NFC TIMES Exclusive Insight – The Los Angeles County Metropolitan Transportation Authority, or Metro, has followed through with plans to offer Android NFC phone users a way to pay fares with the agency’s TAP closed-loop fare card.

Penetration Rates for Contactless Payments Saw Strong Growth in 2020, including in U.S., Say Networks

NFC TIMES Exclusive Insight – The CEOs of both Visa and Mastercard in their respective earnings calls yesterday confirmed that contactless payments continued to grow as a share of all face-to-face card payments, with consumer fears of handling cash building on already strong growth trends for the technology.

Moscow Metro Sees Continued Growth in Open-Loop Transactions Despite Fall in Ridership from Covid

NFC TIMES Exclusive Insight – The Moscow Metro saw a large increase in contactless open-loop transactions in 2020, despite a sharp fall in ridership because of the Covid-19 pandemic, according to Roman Latypov, a first deputy CEO for the transit agency.

Visa Increases Support for Analog Watches and Other Passive Wearables

NFC TIMES Exclusive Insight – Visa is supporting another provisioning company, Sweden-based Fidesmo, to deliver and manage Visa-generated tokens to passive wearables, such as analog designer watches, keyrings and bracelets. The move, which follows Visa’s support in recent months for at least one other provisioning company serving an analog watchmaker, promises to expand use of payments wearables to more issuers, markets and devices.  

U.S. Transit Agency in Pennsylvania Latest to Launch Mobile and Smart Card Ticketing with SaaS Platform

NFC TIMES Exclusive Insight – A mid-tier U.S. transit agency in Pennsylvania is the latest to introduce mobile ticketing with an option for riders to use smart cards to pay for fares, using a software-as-a-service ticketing platform from a start-up.

New York’s MTA Hits OMNY Milestone as Contactless EMV Transactions Continue to Grow

NFC TIMES Exclusive Insight – New York’s Metropolitan Transportation Authority has recorded more than 35 million contactless transactions since it launched its OMNY open-loop fare payments service in May of 2019, and usage continues to increase.

Milan Transit Operator Plans to Give Contactless EMV Fare Payments Larger Role, Including Use with Planned MaaS Platform

NFC TIMES Exclusive Insight – Milan’s public transit operator, Azienda Trasporti Milanesi, or ATM, which began accepting contactless credit and debit cards on its four-line metro in 2018, has begun to expand the EMV payments service to buses. But the agency has much larger plans for the technology.

Boston Transit Authority Makes Aggressive Move to Eliminate Cash in Planned Fare-Collection System

NFC TIMES EXCLUSIVE Insight – The Massachusetts Bay Transportation Authority, or MBTA, in Boston plans to completely do away with cash fare payments on its various transport modes when it rolls out its massive new fare-collection system, an MBTA official told attendees during a recent virtual conference.

Israel Launches Nationwide Mobile-Ticketing Scheme; Moovit, Others Provide Apps

NFC TIMES Exclusive Insight – Israel this week launched a nationwide mobile-ticketing system, enabling riders to pay for trips on buses and later on railways, with the charges assessed at the end of each month.