NFC offers a range of functionality, from exchange of data between NFC-enabled phones, to picking up information from NFC-tagged media such as advertisements and in-store materials, to cash-free transactions.
Banks have not been slow to spot the opportunities. In September, Bank of Montreal launched its free Mobile PayPass Tag, becoming the first major Canadian bank to adapt mobile phones for contactless credit card payments. PayPass as a contactless payment service already accounts for almost 10% of all MasterCard transactions in Canada.
However, banks face significant challenges if they are to realise the full potential of NFC in payments:
- Collaboration across the value chain: for NFC to work at scale as a payments vehicle, mobile phone companies and financial services providers will need to develop unified platforms. This is gathering momentum, as seen in the recent joint ventures announced between Everything Everywhere, Vodafone and O2 in the UK and Germany, and of course the Google Wallet platform proposition.
- Gaining customer buy-in: a recent YouGov survey suggests 70% of UK consumers have not heard of mobile wallet and only 23% are interested in using mobile payments technology. With NFC chips having relatively basic encryption, consumers will need convincing NFC is secure, as well as beneficial to their lifestyles.
A recent report from Gartner suggests such challenges mean the mass adoption of NFC in payments is at least four years away. But in the meantime banks can still exploit the technology. For example, in the US, Dupaco Community Credit Union is using NFC to increase face-to-face contact with customers by encouraging them to 'check in' with their local branch whenever they are in the vicinity and by sending customers special offers. Whilst it may take time for banks to realise the full functionality of NFC, its ability to open new channels of communication with customers can offer more immediate potential benefits.
By Richard Robinson, Principal Advisor in the UK