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

The company, which has completed a Near Field Communication project in India, finds that NFC-based retail applications can be successful—with the proper mix of marketing, incentives and execution.
By Claire Swedberg
Mar 08, 2010Having concluded what it deems the world's largest Near Field Communication (NFC) contactless payment pilot, Citibank indicates it believes there is strong consumer demand for mobile payment solutions. But with a scarcity of available NFC-enabled phones, alternatives such as NFC stickers or microSD cards may be necessary in order to get NFC deployments off the ground, the company reports.

The pilot included 3,141 Citibank credit card holders who, at the company's initiation, purchased Nokia NFC-enabled 6212 mobile phones from participating Nokia shops, to pay for goods at 250 merchant locations in Bangalore (Bengaluru), India. Nearly 50,000 payments were completed throughout the 26-week span, which began in July 2009, and participants made purchases more frequently, spending a greater amount with each transaction while using the mobile phones than they did using ordinary credit cards (see Citibank Says High Volume NFC Pilot Shows Strong Usage).


Satish Menon, executive VP of Citi Growth Ventures
According to a report written to evaluate the pilot results, many consumers were willing to utilize the technology (in fact, there were more volunteers than there were available phones). The report, entitled "Citi Tap and Pay mobile NFC proximity payments pilot—Bengaluru, Results & Findings," was authored by representatives of Edgar Dunn and Co., a strategy consulting firm specializing in financial services and payments.

"We're delighted by the results," says Satish Menon, the executive VP of Citi Growth Ventures (the Citibank team that led this pilot with Citibank India). "The usage and spending story is very significant." The study compared the purchase behaviors of a control group of non-adopters (those without the NFC-enabled phones), self-adopters (customers who had joined the pilot without having been solicited to do so) and solicited adopters. Among non-adopters, there was a 7.1 percent increase in quantity compared with purchases previously made using a credit card. Self-adopters had a 329 percent purchase increase, while solicited adopters had a 96 percent increase. The purchase value also grew, with self-adopters increasing their purchases' value by 232 percent and solicited adopters raising it by 55 percent. Each group's spending habits were compared against their credit card spending habits prior to using the NFC system.

On the other hand, the report finds that while there is a clear demand for mobile contactless payments, the lack of available NFC-enabled phones must be addressed. The Nokia 6212 phone, utilized in the Bangalore pilot, was largely perceived as outdated, compared with non-NFC mobile phones available on the market. "Most people in markets where NFC can realistically be deployed [that is, the markets where merchants are equipped with NFC-enabled sales terminals] have gone beyond basic mobile phones," the study indicates, "and are unlikely to carry a second handset just for making payments, which defeats the primary objective of offering convenience to customers... Instead of enabling only a few handset types with NFC, there needs to be a concerted commitment from device providers to include NFC as a regular feature on all types of mobile phones."

Until that happens, the authors suggest, NFC pilots should continue, as well as permanent deployments—but those wishing to offer contactless payment systems must seek alternative solutions, such as NFC-enabled stickers to attach to cell phones, or microSD cards that can be inserted into the phones to provide them with NFC functionality (see Customers Tap and Pay in Sao Paulo and MicroSD Card Brings NFC to Phones for Credit Card Companies, Banks).

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