Citibank Says RFID Pilot Proves Strong Consumer Interest in Mobile-Phone Payments

"At some point, customers will have quick and inexpensive options to add NFC to their existing handsets, or buy a top-of-the-line NFC-enabled handset," says Samee Zafar, Edgar Dunn's director. "Even plain stickers with limited functionality can serve as a steppingstone for unlocking the hidden demand for contactless payments. Many bankers regard this as not strictly mobile-phone payment, as one can put the sticker on anything. However, from a customer's perspective, it would serve as a mobile-phone transaction—and influencing customer perception is always the most important factor when thinking of new product ideas."

For the pilot, customers either were directly solicited in phone calls, or signed themselves up after viewing promotional materials regarding the service. Participation was available to Citibank credit card holders who were also Vodafone mobile subscribers and Bangalore residents. Participants first purchased Nokia 6212 mobile handsets, and employees at the Nokia store assisted them in downloading the ViVOtech software application they would need to enable the NFC payment system, by linking data at the point of sale over the air on the handset to the user's account. Merchants also utilized ViVOtech contactless terminals at their stores. MasterCard supported the pilot with advice and expertise gained from other NFC pilots from across the globe, and provided the PayPass certification for the payment process.

Samee Zafar, director of Edgar, Dunn & Co.

A user could take the phone to a store and, at the point of sale, tap it against a payment terminal. He or she then entered a four-digit password, and the payment was complete. During the pilot, there was a waiting list of customers requesting to participate in the program. In fact, 3,141 phones were sold, while nearly 4,000 were requested. The total value of all purchases made on the phones was 26 million rupees ($571,000).

Promotion was an important element in the pilot, and was intended to gain consumers' attention before the pilot even started. A teasing phase was launched first, in which marketing material (such as the simple word "tap") was posted in stores, as well as on billboards. This was followed by an education phase, providing live demonstrations to customers in order to explain how the system worked. Well-known grocery outlets participated, as did fast-food chains, accessory stores and bookshops. What's more, smart posters were placed at locations in which pilot participants could use the Nokia phones to pick up mobile coupons that could then be spent elsewhere.

Customers indicated they signed on for the enhanced convenience, security and the "cool factor," and reported that the transactions were quick, painless and faster than non-NFC-enabled payments. Bangalore residents who received offers by phone to participate in the pilot, but who subsequently chose not to do so, said they opted out due to the timing of marketing calls, in addition to local language barriers between the telemarketer and the residents. After joining, some customers complained that the handset did not meet their expectations, while some felt merchant coverage should have been greater, and that the store's staff should have been better trained to assist customers.

"The valuable insights and learning provided by the pilot should be utilized to roll out the pilot in other cities in India or indeed in other global markets as well," the study found. The report's authors also found that combining NFC technology use with loyalty campaigns could contribute to the program's success.