Apple snubs emerging mobile payment standard

SAN FRANCISCO/NEW YORK — EBay Inc Chief Executive John Donahoe often quotes a merchant saying NFC stands for “Not For Commerce” – and dismisses the prospects of Near Field Communication technology used to turn cellphones into mobile wallets.

He got some support this week from Apple Inc, which did not embed NFC chips into the iPhone 5.

NFC proponents had hoped Apple would endorse the technology, which passes encrypted data between devices at close range without contact. So instead of swiping a credit card, shoppers can simply wave their phones at a checkout terminal to pay for their goods.

The technology is backed by the largest U.S. carriers and credit card companies, but has failed to take off in America because merchants have been reluctant to spend money to upgrade their checkout terminals until NFC is more widely adopted.

“Anyone hoping NFC would be a reality soon is disappointed,” said Sanjay Sakhrani, an analyst at Keefe, Bruyette & Woods. “Many in the industry were hoping inclusion in the iPhone would be a springboard for more adoption. This takes the impetus away.”

NFC technology, which has uses beyond mobile payments, is backed by Isis, a mobile wallet joint venture between Verizon Wireless, AT&T Inc and T-Mobile USA. Isis’ financial services partners include American Express, JPMorgan Chase and Capital One Financial.

Like many new technologies, NFC is hampered by a chicken-and-egg problem. Mobile phone makers like Apple are reluctant to take on the extra cost and engineering effort of embedding NFC chips because many merchants can’t accept payments this way yet. Meanwhile, merchants won’t install NFC until more consumers have the technology on their phones.

Isis said on Thursday that it was delaying the launch of its NFC mobile payments service for the second time this year.

“Isis has placed a massive bet on NFC,” said David Evans, founder of Market Platform Dynamics and an adviser to companies in the payments business. Apple’s decision “is another reason to believe that Isis doesn’t have much promise of getting off the ground.”

Apple did not include NFC because it is not clear the technology solves any current problem, marketing chief Phil Schiller told AllThingsD on Wednesday.

Apple: We’ll pass

Instead of embracing NFC, Apple is developing Passbook, a mobile app that pulls together loyalty cards, tickets and coupons on the new iPhone. Many analysts consider this an early version of a digital wallet, except Passbook does not let users link their credit and debit cards yet.

Other digital wallets have already been developed by companies including eBay’s PayPal, Google Inc and Visa Inc. These wallets aim to bring together credit and debit cards, bank accounts, loyalty cards, rewards and coupons in one place, letting shoppers pay for purchases mostly online, but increasingly in physical stores too.

NFC’s advocates argue it eliminates plastic and cash and can be more secure than magnetic strips. But that alone will not persuade consumers to stop using credit cards in stores because plastic is already so convenient, experts say.

“It is a new technology and one that is unfamiliar to users. So that opens up new possibilities for abuse and naiveté,” said Charlie Miller, principal research consultant with Accuvant. But he said NFC allows for interesting security options that traditional credit cards don’t, such as account numbers that change dynamically.

PayPal is betting that other services that make digital wallets more useful will encourage consumers to switch – it is designing a digital wallet that helps consumers do as many things as possible from one place, including buying flight or movie tickets, sending money to other people and tapping coupons, rewards and loyalty cards.

“Technology is not what’s going to win this digital wallet war. It’s going to be about the consumer value proposition,” said Carey Kolaja, senior director for PayPal’s product team.

Others argue NFC still has potential, partly because merchant incentives from Visa and MasterCard are expected to spark a wave of payment terminal upgrades in coming years. These upgrades will include NFC capability.

“It is difficult to buy a new terminal that doesn’t already have NFC technology, and soon it will be impossible,” said Rick Oglesby of consulting firm Aite Group.

But the software and service providers behind the terminals will also have to be ready to accept and process payments that come with coupons, loyalty cards and rewards programs.

At the moment, most terminals can handle the amount of the transaction and the card number and not much else, Oglesby said.

Until this is all sorted out, Apple will likely wait to enter the payments business aggressively, Oglesby and others said. Apple took a similar approach to 4G LTE wireless technology, waiting until coverage was wide enough this year to unveil an iPhone that uses it, Oglesby noted.

“They won’t do something until they know a lot of their customers will use the service,” he said.

source: interaksyon.com

PayPal could heat up mobile payments race if McDonald’s test pays off

SAN FRANCISCO — PayPal is in the early stages of what may be a blockbuster mobile payments deal with McDonald’s Corp, the world’s biggest hamburger chain.

McDonald’s is testing a mobile payments service featuring PayPal at 30 of its restaurants in France. Earlier this year, McDonald’s ran demonstrations of a broader PayPal mobile payments service at its franchisee conference in Orlando, Florida.

A McDonald’s spokeswoman confirmed the France tests and said the PayPal demonstration at its conference was part of a booth that features “technology coming within the next 24 months or so.”

PayPal is racing against start-up Square Inc and other technology companies to become the mobile payments service of choice as consumers increasingly use smart phones to make purchases in shops, restaurants and other retail locations.

Square struck what could be its most important partnership to date last week when it teamed up with Starbucks Corp, the world’s largest coffee chain.

PayPal, owned by eBay Inc, has signed up more than 15 retailers, including Home Depot and Office Depot, to accept PayPal payments in their stores.

But landing a partner the size of McDonald’s, with over 30,000 restaurants, would be a big win, according to analysts.

“McDonald’s would certainly be a whale,” said Gil Luria, an analyst at Wedbush Securities. “If McDonald’s customers can stand in line and order on a mobile app and pay with PayPal that is a huge extension of PayPal’s reach.”

Square’s deal with Starbucks “creates a sense of urgency for PayPal,” he added. “This is a race.”

The test in France lets McDonald’s customers order food on smart phones through a McDonald’s mobile application, or online, and pay with PayPal. There is a separate line in the test locations to pick up the meals, according to a PayPal spokesman.

Demonstrations at the McDonald’s franchisee conference in Orlando featured a more “in-depth” service that would allow customers to order and pay using PayPal’s digital wallet and mobile application, the spokesman said.

Rolling out a service like this may help McDonald’s cut lines at restaurants, which is a key factor in maintaining and growing same-store sales, Luria said.

“If they can shave 10 seconds off wait times, same-store sales could go up a lot,” he added. “It’s substantial.”

source: interaksyon.com

NFC Is Great, But Mobile Payments Solve A Problem That Doesn’t Exist

For the past few years, we’ve been told over and over again that NFC will eventually replace the common wallet. And yes, NFC is a great technology. Parts of Europe and China are using it for public transport transactions, and the sharing of content between devices is incredibly cool (just check out this commercial). And moreover, the ability to ditch all of your loyalty cards and combine them in one place (potentially) PassBook-style would be highly convenient. But where mobile payments are concerned, there is no problem to be solved.

Let’s just start with the small stuff. For one, the motion itself should be no different. It’s not like contactless payments via mobile is a more physically efficient form of living and transacting. You grab your credit card out of your wallet in your pocket, and swipe it through the reader (or in some cases tap it, just like the phone). In the case of NFC, you grab your phone out of your pocket, open Google Wallet (or whatever), and tap it to the reader. It’s the same exact motion.

But that doesn’t even matter when we start to consider the real obstacles for NFC mobile payments. There are two issues: the smaller is that, along with not being any faster or easier physically, no one is actually getting rid of their wallet. For one, everyone needs an ID and an ID isn’t safe in a pocket or loose in a bag. So, until I can use my phone as a form of identification at the airport, with the police, or to go to a Dr.’s appointment, my wallet will still remain. And it’s fair to assume that at least some people prefer to have a little cash on them, just in case.

I took a quick Twitter poll using PopTip (a newly launched TechStars company), and it turns out that the few respondents I had mostly feel comfortable without any cash. But, I also assume that the majority of my Twitter followers are generally tech-savvy early adopters, so I still stand behind the fact that you’ll continue carrying a wallet, or some other carrier of small, valuable pieces of paper like insurance cards, IDs, etc.

Moreover, all merchants would need to be set up for NFC transactions to allow the consumer to ditch their wallet, not just forward thinking giants like American Eagle, Macy’s and OfficeMax. It’s not like consumers will stop shopping at non-NFC merchants just because they aren’t set up — paying with a credit card is just as easy, so why even go through the trouble of setting up Google Wallet? Google Offers is a nice incentive, but it isn’t enough to sway all consumers, and it certainly isn’t attractive enough to woo merchants.

In essence, the only true value given to the consumer is the fact that it’s “cool.”

And then the problems intensify when we visit the merchant side of things. There is no benefit to merchants to implement these systems. Sure, Google and Isis can try to convince these SMBs that NFC is the future, but in reality it’s only an added cost to overhaul the system. Even at a minimal cost, the only value is a slight increase in efficiency pushing customers through POS. Companies could potentially market through their POS using NFC, as is the case with Google Offers, though I’m not sure this is welcome on either side. As Mirth so gracefully stated at Disrupt, merchants aren’t quite as enthusiastic about deals services as consumers are.

source: techcrunch.com