To NFC or Not to NFC
A Special Report Sponsored by
After years of talk about enabling customers to pay for goods with their mobile phones, technology companies are planning a number of pilots to make this possible – both in stores and online.
Some programs utilize near field communication (NFC), a process whereby a special chip in a smartphone retains bank account or credit card information. Customers wave their phones near point of sale equipment and payment data is sent via radio waves from the card to the POS receiver, which then transmits the data via existing payment networks.
Other programs will utilize barcodes containing payment information, which can be downloaded onto smartphones. When these phones are presented at POS, retailers use new or existing scanners to read the barcodes and capture payment information.
Most payment experts believe NFC will be the best and most popular method for mobile payments; NFC supporters claim the technology is the most secure and the most accurate. There are significant limitations with NFC in the United States, however — few phones are equipped with the right technology to transmit payment data over the airwaves, and few retailers have the necessary receivers hooked up to their POS systems.
Therefore, in order to allow a significant number of consumers to start using their phones for payment now, many retailers are going the non-NFC route — or at least utilizing a hybrid system where barcodes can be used when NFC is not available.
Solutions for today
Payments experts are watching a non-NFC program with CorFire and Dunkin’ Donuts. CorFire has worked on mobile payment programs throughout Europe and Asia for 10 years, but is just beginning to bring the technology to the United States. It supports both NFC and non-NFC solutions and is a partner in the NFC-enabled Google Wallet.
CorFire CMO Jon Squire believes most of the domestic attention for now will be on the non-NFC side of mobile payments. “Right now, NFC is difficult because you need the carriers, handset manufacturers and retailers all to be in line,” he says. “That may change over the next 24 months, but right now there are not enough players on all sides that are working together. We think a lot of retailers will evolve to the NFC path, but they need solutions to support mobile payments today.”
Dunkin’ Donuts is in a full-blown rollout of the CorFire offering as it makes mobile payments available in 7,000 stores nationally. To use the program, customers need a Dunkin’ Donuts gift card, which can be downloaded from the chain’s website and Facebook page or received via e-mail. Once in the store, the customer touches a Dunkin’ Donuts logo on her phone and a card appears on the screen that, when touched, prompts a barcode to appear on the screen. A store clerk scans the barcode to get the payment information. The customer can tap the card again to view the transaction and get an updated balance on the account.
Squire says most of the Dunkin’ Donuts corporate-owned outlets already had the necessary barcode readers in place, so only software upgrades needed to be made on existing store POS systems. Some franchisee-owned outlets, however, needed new barcode readers installed to support the program.
While the program currently is focused on payments, it is set up to support a loyalty program or online couponing should Dunkin’ Donuts choose to add those features in the future, Squire says.
Catering to the cutting edge
Isis, a coalition formed by AT&T Mobile, T-Mobile and Verizon Wireless, plans to launch an NFC-focused program soon in Salt Lake City and San Antonio. Hundreds of retail locations are expected to participate across the two cities; the program will begin with an advertising campaign offering $10 in preloaded funds to customers who get their phones upgraded for the pilot.
Jim Stapleton, ISIS chief sales officer, is confident that NFC is the way to go. “NFC has had a much higher success rate in the consumer world than barcode readers,” he says. “It is much faster than barcode readers, and you don’t have to worry about the optical readers not being able to read the barcodes.”
Austin-based University Co-op, which has four stores serving students and alumni of the University of Texas, will participate in the Isis pilot. “Our customers like to be on the edge of technology,” including when it comes to payments, says Co-op vice president of marketing Brian Jewell.
Jewell expects the Co-op will do some on-site promotions as well as advertise at special university functions like Tailgate Days. Over time, the stores want to be able to use the program to send mobile promotion messages about in-store specials. “We like the speed and accessibility of NFC and we think this will help us meet our customers’ expectations of offering them the greatest opportunities to use their mobile devices,” he says.
Salt Lake City-based RC Willey, an eight-store chain that sells furniture, electronics and appliances, will also participate in the Isis pilot.
“Our business is not as much on the cutting edge, but we serve a loyal customer base that we want to keep in touch with,” says Curtis Child, CFO of RC Willey. The chain hopes Isis will help it appeal to a younger demographic base that is engaged in advanced uses of mobile phones and actively involved in social media.
“We want to make our store the center of the relationship with our customers,” Child says. Although it is beginning with payments, the chain plans to merge some type of rewards program into the mobile offering.
Making online payments easier
Beyond enabling in-store mobile payments, there are also efforts to simplify the process of making online purchases via mobile. While nearly 10 percent of online purchases today are made via a mobile device, the process has high rates of abandonment due to the difficulty of entering customer information on a mobile device’s small keyboard.
“Trying to check out on a mobile device can be a painful experience,” says Prakash Hariramani, vice president of products for mobile commerce company Payfone. “We’ve come up with a one-touch checkout that enhances the shopping experience.”
With Payfone, customers register their shipping and payment information just once. Then, when they want to buy something using their mobile phone, they click on the Payfone icon and participating retailers automatically receive the necessary information.
Payfone will begin to pilot the program at the end of this year, with a full rollout expected in 2013. Hariramani expects hundreds of retailers will be online by the middle of next year.
One payments processor that will be working with Payfone is CardinalCommerce, which already works with 30,000 retailers on electronic payments. It plans to pilot the program late this year with 20 merchants, many of whom use CardinalCommerce to host their e-commerce operations. “We will host the entire checkout for them,” says Tim Sherwin, CardinalCommerce co-founder and executive vice president, “so that we control their checkout process and they will have zero integration issues.”
Retailers that want to control their own checkout process can do so by integrating into CardinalCommmerce’s Payfone applications.
“We have a number of our customers that are seeing up to 20 percent of their online sales coming from mobile devices, but payment is still a problem for them,” Sherwin says. “Clearing checkout is a miserable experience for a lot of consumers and we wanted to make it simpler for them and help drive transactions to our retailers’ site.”