Banks should prepare for NFC says Celent
Celent: NFC offers banks a tool to avoid disintermediation by telcos
NFC is gradually beginning to overcome the obstacles that have held back development. Banks should prepare for the coming upswing in usage, according to a new report by financial research firm Celent.
Near-field communications technology has had a lacklustre profile in recent months, as the relative lack of progress towards NFC adoption on the high street gave the impression that the technology was struggling to gain mainstream acceptance.
However, Celent has now concluded that the arguments in favour of NFC outweigh the negatives. NFC offers payments guarantee to the merchants; it uses hardware-based security tough enough to keep the majority of criminals at bay, and tapping has the potential to shorten queues at retail outlets, thereby boosting business by reducing the number of customers who turn away.
Celent recommends that banks should invest in marketing campaigns to educate consumers about the benefits of NFC and address concerns about security. They should provide monetary incentives to consumers to use the new solutions, and aggressively target specific towns and cities and merchants with mostly low-value transactions, ideally with multiple retail locations. They should also develop geo-reference apps that make it easy for consumers to find retailers that accept contactless, and not forget to “leverage the astonishment” when it all works.
“NFC is showing more promise than many have thought and is an emerging payments competitor,” says the Celent report. “Despite well-known challenges, it is an attractive payments technology. Furthermore, it offers banks an opportunity to maintain leadership in mobile payments by ensuring bank-issued credentials continue to be used for core payment transactions.”
The Celent document argues that banks should promote the ‘mobile lifestyle’ through QR codes and other related technologies, while firms reluctant or unable to commit the necessary investment to support NFC. Given the uncertainty over the future of mobile payments, banks that are unsure whether they should invest in NFC payments technology should develop “trigger points” that would prompt them to action. Banks should expect to pay for provisioning their payment credentials on mobile phones, but should try to keep these costs consistent with the cost of card issuing; they should also think about the role various partners play in delivering the service and who has the right to charge for the payment service.
NFC has been the subject of significant debate in recent years, as advocates of the technology have enthusiastically trumpeted it as the future of payments while detractors have argued that it is expensive to implement and offers little real benefit to the consumer. Merchant and retailer reluctance to make the large investment in the kit necessary to support NFC has been one of the most serious obstacles; for example, Tesco has been trialling NFC in 30 stores since at least Q4 2013, but still has not committed to a network-wide rollout.
