July 19, 2011

Written by Kyla Robinson and Kelly Stickel

The buzz surrounding mobile payment solutions including Google Wallet, Isis, and PayPal mobile, leads you to question if you have missed swarms of customers in store waving smart phones like magic wands. You haven’t. However, with the support of VeriFone, by the holiday season retailers will be reminiscent of students at Hogwarts. 

What is this magic NFC that is positioned to take over the payment landscape and how will consumers financial information be protected in this cardless world? Erik Vlugt, Vice President, Product Marketing, Integrated Systems at VeriFone shared the benefits and challenges of Near Field Communication (NFC) and how your consumers will be protected in this mystical space.

Erik shared, mobile payment is not just about the transaction, the entire wallet experience is going to be the motivator to bring mass adoption to the market.  “With NFC we will be able to tap our phone for payment, update our loyalty card, and include our total to include coupons.”  

At the root of this holistic payment experience is the value for the consumer. The issue with contactless payment acceptance in the past was consumers were indifferent to swiping verses tapping.

The mobile wallet will allow consumers to see great benefit of using their phone to store receipts, use coupons, redeem and build on loyalty programs, house boarding passes, cash in gift cards, and store your credit cards digitally.

A mobile wallet is much deeper than a wave of the wrist to pay. Because of the value to the consumer, simplifying and optimizing the experience, it will be the utopian mobile experience that creates a true value proposition for the consumer.  She is very busy, but will soon be motivated to change her behavior. 

One of the challenges of implementing NFC is enabling the consumer while engaging the retailer.  We are now seeing contactless payment companies launching in pilot cities, such as, Austin, Salt Lake City, San Francisco and New York where they are enabling the retailer and the consumer for payment.

That said, if you have an NFC enabled phone, you can start this tap-and-go payment experience today where the opportunity is available. Nationwide, from taxis to retailers, tap your phone at a MasterCard Paypass terminal and voila, you have kick started the way you will be paying for years to come.

The world of NFC does not remove the challenges facing security with our card form of payment. However, there are benefits to it that solve a few of the plastic problems facing us today.

Firstly, Card Cloning NFC fixes this issue because it is challenging to duplicate an NFC chip. Secondly, authentication of the consumer –this challenge is not addressed with NFC. There is a level of risk and price of purchase balance at play. 

When you tap the reader and exchange payment for a $3 latte - it is low risk. In contrast, when you spend $3,000 on a flat screen television, there is less comfort in paying without authentication. 

There is a method to ensure security with cards, by entering your unique pin on the terminal.  Your unique identity is confirmed and the payment is secured. A similar safeguard will be constructed on the payment terminal for phone purchases above a certain price point.  The customer will be prompted to enter her unique user identification code (pin).  Once a phone is tapped, a unique code is entered, and the transmit will be secured through data encryption. 

The ultimate challenge is the historic chicken and egg conundrum. Do you funnel money at first - enabling NFC on phones or drive retailer acceptance? Luckily, following thoughtful conversations with retailers nationwide, and deals with device manufacturers, both parties are on board, and mobile payment is moving forward at light speed.


There are different value propositions from the emerging leaders. For example, Isis has a strong mobile phone network, PayPal has a captive database of people, and VeriFone has a strong relationship with the hardware. As Erik insightfully noted, “There are many other players coming to the market and healthy competition will be good.  It helps keep everyone honest.  Of course there will me many more in the beginning, than in the end, but that is the nature of the beast.”

With the exploding press pieces of the major players in the space, we are on the edge of our seats awaiting this payment transformation. Whether NFC rumbles into the holiday season like an avalanche or trickles into stores across the next two years, the value to the consumer will make mobile payment a powerful alternative to plastic for the foreseeable future.

Interviewed:

Erik Vlugt, VP Product Marketing, Integrated Systems, VeriFone

Mr. Vlugt joined VeriFone in 2004, serving as Sr. Product Manager for Customer Facing Devices. In this capacity he helped define and drive the development of the MX line of products. In 2006, Mr. Vlugt was promoted to Director of Product Management for Integrated Solutions to help drive and execute the global product strategy for integrated products. In 2009, Mr. Vlugt accepted his current Vice-President of Product Marketing position. He is currently responsible for product marketing for VeriFone’s Integrated Systems group, and acts as spokesperson on topics including mobile payments and NFC.

Prior to joining VeriFone, Mr. Vlugt managed TDK’s Product Management group and worked on a variety of consumer electronics, mobile computing, and wireless products.

Mr. Vlugt obtained his degree in Computer Science and Business in The Netherlands, and he is fluent in English and Dutch.

Follow his mobile payments twitter feed: @verifone_erik

Co-Authors:

Kyla Robinson – Distillery Manager and Analyst

Kyla Robinson is a Marketing Associate at the Advisory Board Company—a health care research and analytics company based in Washington, DC. Beyond interests in the health care arena, she enjoys researching consumer mobile trends and mobile technology solutions.

Kyla graduated from Northwestern University with a B.A. in Communication Studies and actively supported the execution of Mobile University in 2010 and the first Bricks + Mobile event in 2011.

Kelly Stickel – Founder of Remodista and Executive Director of Bricks + Mobile

Kelly has 12 years of experience building teams that execute digital agency and consulting projects. For the past 5 years, she has managed Acquity Group’s service vendors while researching new and emerging technology.  She has also successfully organized mobile-related educational events including the first Start Up Showcase for Mobile Monday – Chicago in 2009, the first Mobile University event for the Heartland Mobile Council in 2010, and the first Bricks + Mobile event for Remodista March of 2011.

For the past 15 years, Kelly has taught mosaic art classes to students of all ages. Kelly has a B.A in Political Science from the University of Missouri.