Of course, we’ll need a few million more contactless-enabled merchants before the wallet-free world is realistic for most, but widespread use of stickers could move that along[From Could Mobile Payments Get a Boost from Lowly Stickers? (NetBanker)]
Will it really need large numbers of contactless POS to make this work? I’m not so sure, because there may be good business cases to built around using a Tesco sticker or a Manchester City sticker or a Disneyland sticker that only works in two “places”: one is the physical terminal estate of the issuer (in a store chain or a stadium) and the other is the Internet, where inexpensive USB contactless interfaces — Sony have already sold more than five million of these in japan — could transform online payments. That having been said, there are some pretty major players who are betting that there will be enough contactless POS terminals rolling out anyway and that stickers are a way to take advantage of this estate — to grab some market share, to drive a stake in the ground around innovation or simply to build brand — and they are investing already.
With GO-Tag, First Data is placing a major bet on the fast-emerging world of mobile e-commerce. These pea-sized chips, each with a radio transmitter inside, can be stuck on a cell phone or ID badge to make paying for purchases fast and easy. The transactions are handled on the networks that First Data uses for traditional debit and credit cards. In recent weeks it has landed several major customers, including Blockbuster (BBI). GO-Tag takes about a second to complete a sale—much faster than using a traditional credit card or cash. “The ultimate goal is to eliminate the need for cash in our stores,” says Blockbuster Chief Executive James W. Keys.[From GO-Tags May Replace Cash and Credit Cards]
The economics of this are interesting. Since the stickers cost more than twice as much as cards, they must be delivering some significant additional value somewhere along the line.
The price of a sticker will come down as quantity builds, Guez says, but currently they are anywhere from 2.5 to three times more expensive than a contactless card. That puts the price to the issuer at around $3 each, he estimates. Contactless cards, he says, run from $1.10 to $1.20 each. Conventional mag-stripe cards cost around 50 cents.[From News]
I’m not a psychologist or a marketer, so I can’t say why it is that people are prepared to pay so much for stickers, but they clearly are. Maybe it’s just cool.
The new products and services being rolled out are not only in the payments field, although that is a focus. There’s quite a bit of activity outside the traditional providers, and not only in the campus and transit environments that have featured contactless technology in the past. Just last week, another US startup, Bling Nation, came into the space:
The proprietary system, which relies on so-called contactless stickers that consumers can affix to their cell phones, will charge a 1.5% fee to merchants for each transaction. Of that amount, Bling Nation says it will collect 30 basis points as its network fee, with the bank pocketing the remainder as both issuer and acquirer, less an estimated 25 basis points for issuing costs, primarily for the contactless inlays. On a $40 Bling Nation transaction, for example, the merchant will pay 60 cents. Bling Nation will take 12 cents, while the bank will get 38 cents, including 18 cents as an acquiring fee and 20 cents as the issuer. The bank incurs about 10 cents in issuing costs.[From News]
It isn’t just payments where service providers are pushing ahead with stickers — specifically targeted at the backs of customers’ mobile phones — rather than wait for the mobile operators to get something into the marketplace.
Air New Zealand has distributed approximately 100,000 customised OTI Smart Stickers to its most frequent domestic travellers to be attached to the back of their mobile phones. These will serve as a permanent and reusable boarding pass.[From Security Document World – Biometrics, Passports, ID Cards and Visas]
The strategic question is not whether mobile and contactless will come together to deliver interesting and convenient new payment services to consumers, but whether the providers of those services will include current stakeholders. After all, if the co-ordination costs around NFC infrstructure are simply to great when they involve (for example) banks and (for example) mobile operators, then alternatives are financially rational and reflect a new value network rather than impatience.
These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]