Rise of Mobile Payment

Kevin Bailey's picture
Kevin Bailey : Director of Point of Sale

The payment world is at the precipice of adopting a groundbreaking technology which, will permanently alter the way people use mobile devices to interact with their daily environment. NFC (Near Field Communication) is a short range read and write wireless communication protocol.

First conceived in 2004 by Philips and Sony, NFC allows devices to communicate with each other and exchange data at close range (approximately four centimeters) by coming into proximity contact with one another. A NFC enabled mobile phone can be used to emulate a configurable, contactless smart card to establish a connection with compatible devices or interfaces. A simple tap allows users to pay at contactless terminals, or turn ads into interactive multimedia experiences.

NFC has faced a tough road to widespread commercialization. Adding new wireless technology into mobile devices is not easy—requiring designers to address both physical design as well as software compatibility. Further, there are ecosystem development dependencies across a complex and dynamic value chain ranging from hardware components, standards bodies and IP stakeholders, to network operators to work out.

Even wireless technologies that are nearly ubiquitous today faced a long and uncertain uphill battle to gain traction in the US.

Wi-Fi, a wireless feature common in nearly all smartphones, was first conceived of in 1985 when the Federal Communications Commission (FCC) opened several bands of wireless spectrum for use without a government license. Used initially to connect cash registers, it wasn’t until 1997 that participating vendors finally agreed on a set of basic specifications for Wi-Fi. It took until around 2006 for wireless carriers to be assured that the breadth of mobile content available to consumption both in and out of the home was sufficient enough for them to take the handcuffs off Wi-Fi enabled devices. Once devices with Wi-Fi were allowed to be on the network adoption became widespread.

Bluetooth, commonly used today in mobile phones also faced hurdles in being widely adopted. Though Bluetooth was initially conceived in 1998, concerns over interoperability and identifying a killer application for mobile phones hampered its adoption. It wasn’t until 2004, that handset manufacturers began to incorporate Bluetooth into high end phone designs. Adoption continued to grow over the next four years bolstered by a complimentary multi-billion dollar mobile device companion products business.

Although facing many of the same early adoption issues as other wireless technologies NFC is disruptive to existing business ecosystems making its move to the consumer mainstream even more complex than either Wi-Fi or Bluetooth. Mobile device handset makers, software companies, banks, traditional credit card brands, and wireless carriers are all vying to control digital payments made with the wave of a phone. After years of technology and industry trials, the pieces required to make NFC a reality for the US masses are beginning to fall into place. (Gilbarco’s Passport® Point of Sale System currently supports NFC payments.)

Significant hurdles such as device interoperability, contactless terminal deployment driven by EMVCo (Europay, Mastercard, Visa or EMV) rollout, and overall business model complications have been overcome paving the way for the NFC to take off. Industry analyst IHS predicts that by EOY 2015 there will be over 750 million NFC enabled devices in the market.

The market will see an attempt of various stakeholders to grab consumers’ attention and get their applications and payment instruments into mobile devices. The rate of consumer adoption and ability to secure consumer market share on a particular application will ultimately determine the winners in the NFC marathon.

The options are growing with more introductions every day – Apple Pay™, Android Pay™, the soon-to-be-released Samsung Pay, and more. Understanding your consumers’ desired payment needs is critical, so take the time to run research whether it’s an informal poll or a 3rd party customer study. Find out your customers’ preferences and make sure that your POS system has an easy, cost-effective path to upgrading your stores. The good news for Passport® users, it already accepts NFC today!

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