NFC smartphone payments are slowly making their way into the mainstream, but there is still a long way to go before we see widespread consumer adoption.
Visa plans to use the London Olympics as a showcase for mobile NFC, although the trial will only involve a limited number of athletes.
And the infrastructure for consumer adoption appears to be in place with more than 140,000 contactless terminals around the UK.
So what is holding smartphone payments back?
To find out more about NFC payments and the opportunity for retailers, I spoke to The Logic Group's marketing director Mark Kusionowicz.
How can retailers be making better use of mobile in-store?
You need to look at how mobile can be included in the entire customer journey, as there’s more to making a purchase than just handing over the cash.
If you look at the whole decision process from the initial research, through to browsing products and finally making the purchase, mobile is the perfect medium for retailers to engage with their customers through the whole journey.
They can also have more of an influence on the customer's experience and behaviour.
For example, prior to buying something retailers can target consumers with specific offers to encourage the purchase. So rather than just sending out blanket offers through a deals site, you can reach the people you want to target because you know they are in-store at the time.
NFC comes into this, as consumers could tap their phone on a reader to access more product information or find out what’s in stock. But then the store also finds out that you are there and can offer 10% off if you buy it today.
So do you see NFC as more than just a payment tool?
If you offer a one-tap system at the point of purchase you can offer users much more than just payment options. That one chip can manage the shop’s loyalty scheme, include any vouchers the customer has downloaded, or even notify the shopper of any other offers or products they might be interested in.
It can also be used to help understand consumer behaviour between offline and online channels.
Most consumers will go online and also visit a store at some point during the purchase journey, and mobile can help to marry up those contact points.
It’s still a difficult process, but mobile makes it slightly easier if we get to the point where people are searching for product information and making payments using the same device.
A recent survey found that 60% of British consumers would avoid making a payment using a mobile. How can retailers overcome consumer opposition to the technology?
It’s really all about education. Once you know the facts, you realise that a mobile is safer than a plastic card but consumers aren’t generally aware of that.
I still read about concerns around contactless cards in press articles, which underlines the point that we need more education around the subject.
People need to realise that they are not liable if they fall victim to fraud, it’s down to the banks, but we also need to demonstrate how safe it is.
Credit card providers, such as Visa, have been pushing for the adoption of NFC recently. What are the motivations behind this drive to get rid of bankcards?
Data is one of the key benefits. The more you know about your customers, the better they can be targeted with adverts and offers, so the merchants and advertisers get a better ROI.
Take vouchers sites for example. All these sites that offer coupons and money back, it’s difficult to tie that back to the customer who redeems it, but something done through a mobile is unique to that handset, so you know who is using the voucher, their location and the time of day.
By accessing this sort of data it gives the retailer much better control over the marketing budget. But it’s not simply the data they collect on consumers – it’s also the data they can provide to their customers.
NFC has the potential to benefit customers as much as merchants.
Mobile clearly has benefits to retailers, so why don’t more offer free Wi-Fi in-stores?
I think there was an initial knee-jerk reaction early on where retailers were worried that consumers would go into their stores to try the clothes on then buy the online.
So for a while there was a certain fear around providing Wi-Fi, but now they realise that Wi-Fi and 3G are a fact of life. Retailers will do better to offer their customers a more enjoyable experience, which has a knock on effect on their brand and on sales.
It’s interesting to note that consumer demand is driving the change, so retailers like John Lewis have reacted to that to offer free Wi-Fi.
There are a number of different mobile payment options on the market currently. Who do you think will be the eventual winner?
I think the industry will mature with a number of providers, but then we will see some standardisation occur. There will always be space for multiple payment models - cash isn’t going away anytime soon.
And most of them realise that they will have to be fairly open and able to work with other providers. MasterCard’s new e-wallet works with other cards – you can’t silo the product, as people will always have more than one card in their wallet
Who does responsibility for moving the industry forward sit with? Is it handset manufacturers or payment suppliers?
It’s an interesting debate, but there’s probably no one area within the eco-system where overall responsibility sits.
Innovation is needed from all parties, whether it be the handset technology itself or the financial products behind them.
It’s going to take a collective effort, and we will probably see innovation from areas we don’t even know about at the moment.
After all, who saw Square coming a few years ago?