Indian Landscape
Although 88% percent of India
India is a unique country, having all kind of
phones, ranging from low cost basic mobile phones to high end smart phones,
like I-phones, Samsung Galaxy, Nokia Windows, HTC smart to name a few. The
penetration of smart phones in India
The young, upwardly mobile, high income male is the
segment, who seems to be more inclined towards m-payments, m-banking and P2P
payments. From a consumer readiness perspective though, I am positive that the
Digital and Mobile
The Big Question
In this context, I would like to examine if there
is a need for contactless payment technologies, specifically NFC, if there is,
- why be part of
it,
- who will pay for
it and why,
- And finally,
“would stakeholders bite the bait?”.
Payment Options
Today’s customer is spoilt for choice when it comes
to choosing a transaction channel- be it ATMs, PoS, Internet, Mobile or IVR and
now contactless payments are getting added to it. The payment methods, be it
insert, swipe, login, call, or SMS and now even, “touch and pay”, are plenty.
So is the customer getting confused, as more or
less, the channels and associated payment methods, meet the same need - Payments,
Transfers, Purchases, Cash-in and Cash-outs? There is also a need to remember
multiple user-name and passwords, if one chooses to opt for multiple channels
and payment methods.
The question to be asked is - Are convenience and
security, the only driving factor for choice of payment channel/method or does
the ability to do everything safely, easily and conveniently, through a single
channel/method reign supreme? The answer, in my mind, is “yes” and the right
channel/payment method, possibly, is Contactless Payments/NFC.
What is NFC?
NFC is a near field communication technology which
can affect data or information exchange in proximity, securely. NFC devices can
function as credit cards, debit cards, badges or as tickers and in the card
emulation mode, can enable the "mobile wallet." In reader mode it can
read NFC tags, containing data or information and in P2P mode, NFC devices can
exchange information with each other. It can act as a key for a car, a secure
key for access to ant premise, enable low ticket payments through just ‘tap and
pay”, and these are just a few examples.
To sum it up, there are 3 primary ways NFC can be
used on mobile devices: Card Emulation Mode, Reader Mode and P2P Mode
(peer-to-peer mode) and this gives NFC enabled devices the ability to do almost
everything that a user may desire.
Opportunities in NFC
Having established the need for such a versatile
technology/device let’s look at why one should be part of it.
From a user perspective, the most personal device
for transactions of any kind (sharing, payments, purchases and transfers,
cash-in and cash-outs), for anyone, will most likely be a mobile
phone, for very simple, yet, very powerful reasons. One may forget one’s wallet,
driving license, ID cards at home but not the mobile. It keeps one connected
always, wherever one is, whatever time it is, with whomsoever one needs to be
in touch with. And finally, like I mentioned above, it can almost do anything
for anyone.
Once the communication method/transaction
channel/device (proximity/wireless/mobile phone) is chosen, the choice of a
payment method/technology will be determined by Ease, Convenience, Versatility,
Safety and Security and that is where NFC scores above all.
The choice of mobile, as the device to do all
financial transactions, and the technology, NFC, taking care of all points
mentioned above, will dramatically alter the transaction mode from
“insert/swipe/login/call/text” to “touch and there you go”.
The ease, convenience, versatility, safety and
security of NFC effected payments will also drive the payment mode from cash to
non-cash (electronic) and if the shift from cash takes place everyone will
benefit – Merchants, Advertisers (brands), Technology and
Infrastructure provider, Mobile companies, Banks, Government (financial
inclusion) and finally, the “customer himself”.
Globally, 40% of payments are through cards and
m-payments are expected to corner 15% of this share by 2013. The m-payments
transactions are expected to grow from 4.6 billion transactions to 13.6 billion
transactions in 2013 with the value growing from €62 billion to €223 billion.
This growth is likely to be led by workers’ remittances, retail purchases,
payments and transfers.
There is also an emergence of two specialist roles
for Payment Service Providers namely; Wholesale Payments Provider (WPP) and the
Retail Payment Services Provider (RPSP). The payment services providers, who
will be able to fulfill both these roles in a cost and value effective manner,
will eventually be the winners.
Players like NPCI are chipping in and so are mChek,
Paymate, Airtel money and Movida to name a few but as of now they can only
service a few needs and a few segments. But if NFC becomes the choice, with
m-banking, m-wallet, m-Payments, Advertising, loyalty coupons, deals, checking
in, P2P payments being the application universe, NFC enablers, are expected to
rule the roost in the time to come.
Stakeholders
Now the next question is, who is going to fund the
infrastructure needed to make NFC a success. In my mind, all stakeholders
- the mobile companies, the brands (advertisers), the switchers/acquirers, the
merchants, the banks, the Telco’s and the government too, will contribute, to
the idea- NFC, whose time has come.
The Mobile
companies will fund, driven by the need to innovate, to make mobiles more
useful and to sell their NFC enabled handsets. The Switcher/acquires will pay
for NFC terminals (technology and infra), for marketing expense for Merchant
& customer acceptance, due to higher transaction coming through NFC
applications (read NFC payments) leading to higher switching fee income. The
Merchants will pay for the transaction cost plus acquirer/issuer margin,
provided NFC infra cost contribution is reasonable, customers adopt NFC quickly
& increase spends too and also due to the resultant higher sales, which may
come through NFC applications like m-advertising, couponing, deals push,
customer purchase behavior knowledge (NFC taxation history), in addition to
deep customer engagement, emerging from convenience, safety and security of
transactions (oh yes, NFC payments are much secure).
The banks who adopt NFC will establish leadership
presence in payments space and fund back-end integration cost with them,
marketing expense for driving customer education, awareness and acceptance,
given shift to electronic transactions and NFC payments take place, customer
acquisition and retention grows and interchange earnings go up too.
The Telco’s, themselves, can take the lead in
setting up the ecosystem, be the driver for the same and make others a part of
the ecosystem, rather than themselves being the part of ecosystems, as they
have the huge captive customer base, have deep customer engagement, command
customer loyalty (at least in India), are merchants themselves and finally,
possibly are the ones, who connect customer thru a common thread – the
omnipresent, omniscient and omnipotent, mobile.
The government and regulator both are looking to
push for safe, secure and convenient non-cash transactions (electronic payments)
along with financial inclusion. Any technology, which can address both, would
tilt them positively towards it and they can, by propagating smart cards and
contactless payments, be big enablers for NFC.
Finally, the customer himself, by making the right
choice, by choosing mobile as the preferred channel, making mobile the most
personal and universal device and by quickly adopting the best technology,
possibly to emerge in mobile space, NFC, will fund all.
The
author can be contacted over email, rajnishkhare@gmail.com, for feedback and
comments.
No comments:
Post a Comment