Sep 25, 2008This article was originally published by RFID Update.
September 25, 2008—Representatives from banks, merchants, credit card companies and payment processing firms formed the Smart Card Alliance (SCA) Contactless and Mobile Payments Council to create resources to support adoption of near field communication (NFC) cashless, contactless payment systems. The council has 120 inaugural members from 48 organizations and evolved from previous SCA efforts that helped set the foundation for contactless credit and debit card systems that are widely used today.
NFC payment systems use near-contact short range RF communication to exchange payment information from the consumer's cell phone or other mobile device with a payment terminal.
"The preliminary education and work to enable [card-based] contactless payments is primarily done now. There are millions of cards in circulation and merchants are starting to accept them. NFC is related to contactless payments and is part of the same movement. Today a lot of education still needs to be done among stakeholders for NFC systems," Randy Vanderhoof, the Smart Card Alliance's executive director, told RFID Update.
The number of contactless payment cards in circulation nearly doubled in the U.S. between 2006 and 2007, and nine percent of consumers use them, a recent SCA survey found. The survey also found more awareness of contactless card and NFC payment systems is needed to spur adoption, and that 47 percent of contactless payment card users would switch cell phone carriers to gain (NFC) mobile payment capability.
One of the major areas of focus for the new Smart Card Alliance council is to inform merchants, banks, cell phone carriers and other stakeholders about different commerce models available for NFC payment systems. Uncertainty over how payments should best be handled -- and who will get a cut of transactions -- are among the leading barriers to adoption.
"The technology for NFC payments is really in place. Some of the biggest obstacles center around the model for how mobile payments and applications will reside on the mobile handset," Vanderhoof said. "Card-based cashless payment systems rolled out of the traditional payments industry, where the participants had experience with payment terminals, processing, etc. NFC moves payments off a card and onto another device. It introduces a whole other supply chain, which includes network providers and handset makers."
Vanderhoof's assessment of technology readiness and other obstacles is consistent with an independent report Juniper Research released in July, which stated technology issues should not inhibit NFC adoption (see NFC RFID to Power $75+ Billion in Transactions in 2013).
Approximately 86 percent of industry stakeholders believe NFC payment systems will be adopted, but there is no consensus on when. "The technology issues are pretty much in place. Now it's a matter of business model and consumer acceptance that will dictate the rate of adoption," Vanderhoof said. "I believe it will be two to three years before NFC reaches the level of penetration we have today for contactless payments. Others think it will be longer."
Juniper Research argues that NFC transaction volumes won't grow dramatically until 2011. See VDC: NFC Adoption Will Be Slower Than Expected and NFC Projections Revised Down (Again) for perspectives from other market research firms.
See the Smart Card Alliance announcement
