The chances for NFC to power the mobile payments revolution are quickly running out. Google has been the biggest vendor backer of the short-range technology, which allows handsets or smartphones to make payments when swiped over a reader. But it has released a new version of its virtual wallet, which does not require NFC and can be used on any Android phone in the US. That follows hard on the heels of two serious blows to mass adoption of NFC ‘ Apple’s failure, once again, to include the technology in its latest iPhones; and a rival offering from PayPal, based on Bluetooth LE (Low Energy).
Google Wallet, which has seen lower uptake than once expected because of limited device support (mainly its own Nexus products); and carrier suspicion (Verizon blocked it, perhaps because of its own involvement in carrier NFC initiative Isis). The latest version should gain far wider usage, as it can run on any device with Android 2.3 or higher, and can send money to any US resident with an email address, no NFC necessary (although that approach is still an option).
Money can be sent from a bank account or Google Wallet balance, or (for a small additional fee) from a linked credit or debit card. As with Apple’s Passbook, loyalty cards and vouchers can be imported into the phone-based wallet too, and location-based offers can be sent to the handset.
Google clearly wants this to be a solution which spans physical and online purchases, an ambition it has held for some years, but where it has released several lackluster solutions. But the simplicity of Wallet may change all that ‘ as well as the mobile app, there is the facility for registered users to send money directly via Gmail on a PC, throwing down an obvious gauntlet to PayPal.
Of course, PayPal ‘ with its vast influence over the payments ecosystem ‘ has been the biggest negative for NFC, as it has persistently sidelined the solution in its own attempts to expand from online purchases to the physical store.
PayPal has been cautious about NFC, and now the online giant, which also wants to dominate physical payments, has unveiled PayPal Beacon, a triangular device which plugs into any power source and acts as an in-store GPS system, using Bluetooth LE (Low Energy). It then enables payments without the user having to swipe a handset or smartcard, as they would with NFC.
A Beacon-enabled merchant is able to ‘check in’ any customer who enters the store provided they have downloaded the app and given permission to be tracked in this way. The merchant will then deliver various special promotions geared to the buyer’s preferences, as well as other applications such as automatic refilling of prescriptions. Finally, they will be able to pay via the app, without any physical process. ‘It turns out, swiping a handset wasn’t much better than tapping digits into a terminal,’ commented a PayPal executive.
This shows PayPal’s stated preference for using technology that consumers already have ‘ Bluetooth is in almost every handset ‘ rather than NFC, which has to be supported by a large number of device makers and stores to gain critical mass. And Beacon aims to be a full platform, and is offering APIs to developers, tempting them with the 132m consumers who already use PayPal and regard it as a trusted brand.
Apple has taken a related approach with one of the new features of iOS 7, similarly named iBeacon. This is also powered by BLE and can be used for all kinds of close proximity data exchanges, creating a huge network of millions of devices that are connected to one another in a peer-to-peer fashion. Like PayPal, it harnesses the ability of Bluetooth to create a beacon around a small area so an app can be alerted when a user enters that area (the beacon is a wireless sensor that transmits data to a phone over BLE).
Combined with Apple’s Passbook, the potential to turn it into a payments technology is clear. Already, the iPhone maker is talking about similar apps to PayPal’s and Google’s ‘ transmitting coupons to a customer entering a store, providing directions within a museum and so on. But the real power comes when BLE is also used to support payments and that could see Apple opening up yet another front in its fight with Google.
The search giant itself has been grudging in its attitude to Bluetooth LE and only added Android platform support for the standard with release 4.3, in response to developer demand. That means the BLE ecosystem is less developed in Android than iOS, while Google’s own beacon-like product, Android Beam, is based on NFC. We suspect there is a large team in Mountain View scrabbling to catch up in BLE, and that could see NFC’s dreams fading quickly. It is the basis of many carrier payments initiatives, but since when did operators ever win the day with a technology that has fallen outside the mainstream?
Carriers support NFC, of course, because it is integrated with the SIM card and gives them control over a vital element of the mobile commerce chain. Cellcos round the world continue to form partnerships to invest in the marketing, infrastructure and ecosystem development required to get a new platform off the ground ‘ Austria is the latest, with T-Mobile gathering a group of financial institutions and retailers around itself for an NFC trial starting this month. But even those initiatives are starting to lose momentum, and they will certainly be handicapped if flagship devices do not come on board with NFC support soon.
In another bad sign for NFC, credit card operator Capital One said this week that it was withdrawing from Isis, the world’s most prominent NFC-based carrier alliance, Isis in the US (led by Verizon, AT&T, T-Mobile and a group of financial institutions). Isis reflects the narrowing of NFC’s potential in its own history. Initially its founding cellcos were set to bypass the major card processors and establish themselves as a full payments platform, but soon realized they could not succeed without Visa and Mastercard on board. After various delays, and some tensions with Google (also running NFC trials around the US and hoping to push its wallet on the Isis carriers’ networks), the group has gone rather quiet.
Capital One’s departure will be a further blow to confidence. The company told NFC World that it had got the data it wanted from the trials in Austin, Texas and Salt Lake City, Utah but would not share further details. American Express, Chase and Barclaycard remain involved in Isis and the group still insists it will expand to national coverage from the end of this year. Its prospects are not destroyed by one partner quitting, but the timing is telling, just when so many major influencers are going cold on NFC. Mobile payments remains a significant growth area, and operators still have the potential to make money from them, especially in emerging markets, where the ‘unbanked’ is a genuine, and rare, untapped user base. The success of services like Vodafone’s M-Pesa in east Africa should be the template for the payments world, but as so often before, too many operators are focusing on the technology and not on the user experience. Apple, for all its faults, always knows better than that.