Thursday, July 5, 2012

It’s not about new connectivity technology; consumers don’t care

With the resurfacing of NFC based solutions driven by mobile providers and banks in various territories (and as if this weird late adoption isn’t a good enough indication to its irrelevance), I feel compelled to repeat my message about connectivity technology.

NFC was dead on arrival for payments, and the ongoing discussion about it is misleading and irrelevant. That’s for two reasons – first and foremost NFC doesn’t solve a problem, something I’ve been repeating for a while but has been discussed again lately. Handing your card over, waving your phone, who cares? There’s no consumer incentive to adopt this technology. On the other hand there’s (lack of) merchant adoption: NFC usually requires replacing or adapting your POS terminal, and the merchant has no value in doing so. A card network that really believes in NFC can push it by promising lower fees or other types of coverage to give merchants an incentive – that was tried and failed with 3D secure. Merchants hate conversion killing or just non-contributing features.

The same is relevant to other connectivity technology. I hear Jumio is growing, but most of its volume isn’t coming from its based technology, that allows you to show your card to the camera to have it recognized. The reason? In the time it takes you to set up flash, take your card out, position it in front of the camera and add needed info you can type it in since you remember it by heart. Of course you do. So as I said here, there is not incremental benefit to anyone other than some marginal fraud prevention for merchants (which is not to be discounted, but is marginal, since it’s a conversion killer).

Disagree? Consider other solutions that area vying for market share: Google Wallet, Serve, and other sign-up-and-add-your-credit-card solutions that popped up lately. Consumers don’t have a problem with directly using card to pay for purchases – not offline, and increasingly not online (at least in the US). They don’t care how secure your solution is, they have plastic. They don’t care about coupons; they have rewards on their cards. They are not interested in a new financial relationship that’s based on their credit card. If you’re not solving a problem, you’re going to have to buy yourself some market share, which is exactly what’s happening, even with the larger providers.

1 comment:

Rafael Molano said...

Your comments are generally valid if you are thinking about one individual card, but most people carry multiple cards. NFC is the bridge between the physical world required by the merchant POS and the virtual cards stored in your smart phone. The benefit to the end user is the efficiency and convenience of not having to carry multiple plastic cards. With NFC the user carries only a smart phone no plastic cards. That is a great benefit!