Will NFC and mobile payments revolutionise customer brand loyalty?
If you ask anyone in the banking, mobile or retail industry about the next disruptive technology, the answer will be NFC (Near Field Communication).
NFC (Near Field Communication) is the technology that will allow consumers to tap and pay for things using their mobile phone. The technology has been developed over the last five years and is already integrated into Android's latest batch of Nexus S smart phones.
Until now NFC has been relatively unused, but over the course of 2013-2015, we'll see technology leaders such as Google and Apple compete with mobile manufacturers, banks and major credit card providers such as VISA and Mastercard. In addition, retailers have brought their cards to the table, with Walmart and Starbucks both announcing plans to offer mobile payment solutions.
Who’s leading the race in mobile payments technology?
No one really knows how NFC technology is going to play out. Companies are publicly coy on the issue, whilst spectators are sitting on the fence.
Google has integrated Google Wallet and NFC technology into their latest Android devices, Apple is rumoured to incorporate NFC into their next iPhone 5S, and Amazon has just recently applied for a patent in mobile payment technology.
Visa and Samsung have both announced a partnership to include VISA-payment solution technology into their phones, VeriFone announced it was offering its mobile payment tools to China Mobile and the Bank of China, and Mastercard unveiled MasterPass, its own mobile payments solution.
With retail superpowers Walmart and Starbucks looking to offer their own versions (the former is inching ever closer to fully fledged mobile checkout with its Scan and Go app), you can start to appreciate the scale of the scrap for market dominance.The key points to remember are:
- Card providers such as VISA and MasterCard are scared of being replaced as the middleman
- Retail stores could open up mobile payments as a new form of brand loyalty
- Manufacturers such as Apple and Google are in pole position to get a piece of the action
- Financial services and banks will see mobile transactions as a way to cut out the middle-man and reap a higher cut of the fees that are paid to terminate transactions.
How can mobile payments influence the retail industry?
Mobile payments can reinvigorate retail: they offer the biggest opportunity to revolutionise customer brand loyalty, customer tracking and location-based marketing.
In a world where Amazon is undercutting many brick-and-mortar retailers, mobile payments can turn the tide in the retail store’s favour. Imagine, for instance, being able to send promotional offers and discounts to customers in real-time when they are in store. Mobile payments also free up staff resources from the checkout desk, leaving floor assistants on hand to offer personalised customer service.
A recent ABI Research survey found that 45% of smartphone users with a retail-branded app visit the retailer’s store more often. In other words, greater personal connection and information sharing between a retail store and its customers will cement brand affinity and drive more visits.
Once customers have signed up for mobile payments, retailers have access to more engaged customers through a channel that offers more immediacy and intimacy.
According to Dan Schatt, Head of Financial Innovation at Paypal, "80% of consumers buying decisions are influenced by information they see online today."
Mark Beccue, analyst at ABIResearch similar stated: "Clearly consumers are using retailer-branded apps as an engagement tool. Once a retailer can capture a consumer with one, there is a real opportunity to leverage smartphone apps to enhance customer service, deliver richer, more relevant product information in real time, shorten checkout lines, and more."
Mobile payments, in conjunction with information and price comparison on the same device, create a seamless purchasing path, eliminating the need for external consultation.
When can we expect mobile payment solutions to take off?
Although the benefits of mobile payments can be seen from afar, sceptics still point to the lack of adoption, seen in the limited number of NFC units being leveraged in retail stores.
Many critics point to Apple’s decision to omit an NFC chipset from the iPhone 5, which reduced brand confidence in the technology, leading to reduced POS (point of sale) rollouts.
And it's not just about technology for technology's sake as Jamie Henry, senior director of payment systems at Wal-Mart Stores, tells paymentsource.com. The business benefits of reducing merchant fees on credit card transactions and creating a seamless customer experience - all whilst preserving security - have to be present.
However, with Apple’s new iPhone rumored to incorporate NFC in addition to fingerprint identification - which can significantly reduce transaction fraud and chargebacks that account for 5-20% of merchants costs - we’re likely to see NFC sometime soon. Simply put, there are far too many players investing behind the scenes in this technology for it to not take off.
Are you convinced by NFC? What are your thoughts on mobile payments technology? How will it impact on business processes and customer experience? Leave your comments below!
Adam Grunwerg, the founder of a digital media agency, ARG Media. Adam runs popular sites in the education, finance and gaming industry. His portfolio of websites include investing.co.uk