The question begs, “Are consumers ready to go entirely cashless?”
In the last two months, we have been hearing tons about these three alphabets: N-F-C. And it stands for “Near-field communication,” which gives smartphones and other devices the ability to transmit information via radio communication in close proximity.
I don’t own an NFC-enabled device; I use an iPhone 5. A Guardian article dated 14 September last year saw analysts from various firms questioning if there is real demand and adoption for NFC-enabled devices. After all, are rival smartphones really driving NFC, and just how mainstream is this? The last straw came when eBay’s executive director, John Donahoe repeated the quote of one cynical merchant: “NFC stands for “Not For Commerce”. Albeit witty, that certain merchant might just have to take back his words.
Payments, management and just for fun
From data transfer to payments to checking a friend’s transport card (called ez-link here in Singapore), NFC has definitely evolved from an obscure term to something people compare while checking out new smartphones. In the midst of this tech revolution, Asians have definitely become more savvy with mobile devices, and as a result, are becoming more and more receptive towards the usage of this seemingly new technology.
Visa, the global payment tech company, along with MasterCard and VivoTECH, is one of the bigger NFC mobile payment providers here in Asia. With plans to push a cashless and cardless society, it has rolled out Visa payWave in Singapore. payWave is a solution which works like existing cashless “tap-and-go” cards, such as Nets FlashPay. It has also launched Vodafone SmartPass application in Australia, which essentially allows users to preload their accounts with credits from any credit card and pay for purchases with a simple tap and go. Users will not have to key in any sort of pincode as with most electronic payment cards, but transactions will be capped at S$100 (US$81) to counter credit card fraud.
Visa’s country manager, Ooi Huey Tyng, shared with e27 that consumers in Singapore are seeing the value of this added convenience and speed. “As a result Visa payWave is projected to represent more than 10 percent of face-to-face transactions by the end of 2013.” She added that there has been an exponential increase of 148 percent from 2011 to 2012 with regards to Visa payWave transaction volumes in the city-state. Some 11,000 NFC terminals have been set up island-wide by Visa, and the payments company recently announced issuing a million NFC-enabled cards in Singapore.
Of course, as mentioned earlier, NFC is not all about payments and purchases. Another example would be Zeguestlist, which we covered last month, a mobile guest list and event management solution company. They set up Singapore’s very first NFC-enabled and managed wedding dinner. Guests were able to check in with a NFC card, and they were led to their seats with the help of the new technology. Zeguestlist also offers other features like invitation, online registration, ticketing, survey solutions and mobile event microsites.
With all sorts of technologies, the important question is: what sort of data can you receive and how can you analyse it? Gael Sydness, co-founder at Zeguestlist opined that one’s imagination is the ceiling when it comes to tracking people’s behaviors. “The great thing with an NFC chip is that it can put in anything from stickers, cards, bracelets, [and] now smartphones. And each chip can be programmed with a unique number and is reusable.” Gael added that this means businesses can now analyse members to know more about the places they go, what they buy – all with a single tap.
He then suggested, “I’m sure it will also wonder into healthcare where there would be multiple [ways] to use data collection for patient benefits.” Indeed, healthcare is one sector NFC can easily tap into and use data collection for good. The industry is ripe and ready for such technologies. One example would be a blood pressure monitoring device which is NFC-enabled to pair up with smartphones so Omron, a Japanese company, can map out the blood pressure levels in Japanese throughout the different seasons.
Japan has been fairly receptive to such new technologies, as opposed to the rest of the countries in the region. Like what a certain Quora user, Dion Lisle, said in his answer to “How did NFC payments catch on in Japan and why hasn’t it worked in other markets?” Japan has always been very much cash-oriented. With options like debit and credit cards being less mainstream in Japan, the leap to NFC was to counter a pain point for many consumers. Thus, it worked very well. According to Wireless Watch, there are more than 70 million NFC-enabled devices in Japan. While NFC isn’t new (the NFC Forum has been here for the past nine years), it is a very new – and real – hype in the rest of Asia.
Concerns with NFC payments
Which is it, then? Do you gain control over payment methods, or do you lose control because you don’t have shillings in your pocket anymore?
Visa Singapore’s Ooi Huey Tyng shared that some new adopters may be worried that the use of this technology will result in errors like a double payment or getting charged accidentally when the card is in close proximity to the reader. She then explained just how Visa is tackling that misconception: “As with any new technology, there will be some education required [...] There are a number of Visa safeguards to ensure that the consumer is always in control of amounts charged.”
For example, each transaction must either be completed or voided in order for another to take place. payWave terminals are also designed to only accept one transaction per card at any given time. Retailers must also first enter the purchase amount for approval and cards have to be placed in “close proximity” to the card reader – within four centimeters to be exact. Security (or the lack thereof) could also deter new users from adopting this technology. She added that payWave-enabled cards comply with the Monetary Authority of Singapore’s (MAS) standard of data security, and are as secure as any other Visa chip card. Transactions are processed by Visa’s global processing network, VisaNet, which analyses and scores in real-time for fraud potential.
Zeguestlist co-founder Gael Sydness said that he sees two main concerns rising from this new technology. Firstly, consumers may not trust a new technology with something “as valuable as [their] personal money.” Secondly, consumers don’t like losing control of their spending.
He opines that in theory, it might even seem mainstream. “We have been using NFC for payments in Singapore using our ez-link card for a long time now. People are used to it and trust it, and by being a top-up-then-spend service, they can control their spending to a certain level.” Now, you can even check your transport card balance on your NFC-enabled phones with just a tap.
But besides Visa’s mobile initiative, which is not yet in Singapore, consumers can get a NFC-SIM card to make purchases with their phones. This is known as an “Ez-link NFC” solution, which even allows consumers to top up their card with their phones via credit or debit card. The Ez-link NFC website reveals that with the app, Activate!, members get to block and recover monies when they lose their ez-link card or purse. They can also get a S$10 (US$8.10) coverage if there is unauthorized usage on their card after getting reported as lost.
He concludes that it will be difficult to make NFC mainstream quickly except for low value purchases because it is precisely due to the lack of trust and control that people might not jump on the bandwagon. But he does not think it is an impossible task. “And I don’t think it’s impossible to make it as secure as our traditional payment methods today, using some additional control mechanisms, but I think it will be a learning process and that it mainly depends on how many big cases where NFC payments has created an unfortunate situation will happen along the way.” Gael also shared that with the financial crisis, trust is not exactly in excess. “Some people are back at putting their money in their mattress. And don’t forget Apple has still not launched an NFC-enabled iPhone.”
Businesses and becoming mainstream
Visa’s Ooi Huey Tyng also shared that businesses and merchants with payWave see more access to a faster way to accept payments, enhanced payment experience and the ability to clear more customers within a period of time. While it is accepted at many of Singapore’s retailers like Starbucks, Coffee Bean, Cold Storage, Giant, Market Place, Burger King and Guardian Pharmacy, it is merely promoting a cashless and not entirely cardless society. This being said, there are plans to implement the mobile solution here in Singapore. It definitely won’t be long before you see people slamming their phones onto the NFC terminals.
Visa also shared that one trend that is moving and propelling this move forward is small or micro-payments that already offer consumers the convenience of not having to carry cash around.
For a long time now, both consumers and merchants are bored stiff with the QR code phenomena. With recent new NFC-enabled startups rising in the industry like ZAP, consumers will definitely find that NFC is about more than just convenience.
Image Credit: Near Field Communication / Shutterstock