Optimistic, but why?

[Dave Birch] In a good article in the June 2010 “Digital Transactions“, John Stewart says that “optimism about NFC is starting to spread “despite the “deadlock” between banks and mobile operators. This deadlock, which Mohammed Khan of Vivotech says has “wasted three years”, means that mobile operators never specified NFC in their device profiles and handset manufacturers never added it to their device roadmaps. The result: no handsets in the shops at all and, at the time of writing, not a single NFC device in the Nokia product catalogue. What’s more, Javelin Strategy & Research say that fewer consumers are interested in mobile proximity payments than they were a year ago! (Although, as regular readers will know, I am sceptical of consumer research about this kind of thing.)

What has changed in the US to trigger optimism? One thing is the positive response to the “bridging technology” of stickers. First Data shipped half-a-million “Go-Tag” pre-paid stickers last year and the statistics are mildly encouraging. The average user is paying with the sticker 2.5 times per month and the average reload is $93. In addition, Bling as been shipping stickers to community banks for local payment schemes and Citi has just announced a large scale launch of stickers as well. Customers clearly like waving and paying with their phones. And stickers are also being used by merchants, an indication of their acceptibilty.

At the Rochester, Ind., Dairy Queen, more than 350 customers can wave special stickers fixed to the backs of their cell phones at a scanner in the store, thereby banking loyalty points and qualifying for free cones and Blizzard sundaes. Customers have come back to the store more frequently as a result, helping sale rise more than 3 percent in the past year, says co-owner Dave Reasner. “It’s something that’s working,” he says.

[From Shoppers Check Out of Stores Via Cell Phone – BusinessWeek]

As far as they, and many others, are concerned, stickers are the future. If one day they come built in to the phones then great, but in the meantime they’ll do just fine as they are.

French children’s clothing retailer Tape à l’oeil has rolled out a contactless sticker-based loyalty programme across all its stores and its website.

[From French children’s fashion retailer issues 300,000 NFC loyalty stickers • Near Field Communications World]

Another factor is the shift to smartphones (55m shipped worldwide in 1Q10), seen as more effective carriers for mobile wallets. Nokia’s recent announcement that it would NFC to all of its smartphones announced in 2011 will further fuel this renewed optimism, because surveys show that smartphone users are much more likely to use mobile financial services than non-smartphone users—which may or may not be a guide to mobile payment proclivity—and expect more and more of their services to be delivered on this platform. As I said at the time

Nokia’s no.2 showed up to announce that all Nokia smartphones introduced starting in 2011 will have NFC as standard. Up in our little Digital Money treehouse, this is what is officially known as a big deal

[From Digital Money: Big deal]

Is this enough though? Just because Nokia will make these handsets available doesn’t mean that operators will order and certainly doesn’t mean that operators will order non-SWP version to please other stakeholders who don’t want the operators to be gatekeepers. In a recent report on the market, the analysts Ovum say that

If operators are to realize the aforementioned potential and become players in the value chain, this is wholly dependent on the availability of appropriate devices for consumers to actually make mobile payments with. This is a major problem for operators. There is a paucity of NFC-enabled handsets on the market, and those which are capable of using SWP are almost non-existent

[From Telecoms and Software News]

Well, yes. But the availability of NFC handsets isn’t something like the weather, which the operators just have to put up with. They are part of this ecosystem: they could have gone to the handset manufacturers and added NFC to their purchasing roadmap. Had they committed to the extra $1 per handset, then the manufacturers would have a gone ahead. As it is now, it’s not at all clear whether the operators have given away their position in the NFC permanently or whether avoiding the SIM and SWP in favour of stickers or SD cards is just a temporary fad. I firmly believe that other handsets manufacturers will produce SWP handsets in 2011: but will the operators order them?

What about the business model? Now that mobile operators’ fantasies about collecting a transaction tax have been laid to rest, I think the real business models are becoming clearer. As we have always said, the value-added services are the key to the business model and as spot-on Steve Mott is quoted as saying in that article, if the mobile wallet allows the retailers to get the right offer to the right customer at the right time, then this is what the retailers will pay handsomely for and you may as well give them the payments for nothing.

Which leads me to the main point: it will be the people who control the data who make the money, and right now it looks as if the US market will go not to banks or operators but to Apple and Amazon, Paypal and Blippy. These are the kinds of real business issues that I’m looking forward to discussing at NFC World Asia in Singapore on 14th-16th September 2010. It will be a great opportunity to learn from key stakeholders — including financial services organisations, retailers and mobile operators — so it’s going to be an excellent opportunity to compare the perspectives.

Our good friends at Terrapinn have made an extraordinarily generous donation to this blog and have given me a two-day delegate pass for the event — worth approximately THREE THOUSAND SINGAPORE DOLLARS — to give away on this blog as a competition prize. So if you are going to be in Singapore on those dates and you’d like to come along to meet some of the leaders in the NFC field, all you have to do is be the first person to respond to this post with the names of the two different kinds of data coding that are used by NFC standard, one at 106Kbd and the other at all other speeds.

In the traditional fashion, this competition is open to all except for employees of Consult Hyperion and members of my immediate family, is void where prohibited and has no unfunded pension liabilities. The prize must be claimed within three months. Oh, and no-one can win more than one of the Digital Money Blog prizes per calendar year.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]