The hard focus of US mobile payments has been on nearfield communications-based proximity payments as the comingrevolution. And it will certainly achieve a lot provided thebusiness model gets figured out. In its primary role as acontactless payment vehicle with a really nice interface (forsmartphones at any rate), an NFC-backed option-whether it comesfrom a single card issuer, aggregates multiple card issuers into amobile wallet, or is a merchant-issued application-will bring a farricher consumer experience while offering both the merchant and itsprocessing partners a richer data set for marketing analytics andfraud management.
But thinking that NFC proximity payments is theevolutionary end stage for mobile payment is a huge mistake. It isjust a beginning.
We are looking at a pair of transitions that leverage themobile smartphone and that channel.
Trend 1: Security. From asecurity point of view, we are shifting from static payment data toa dynamic amalgam of both a dynamic payment data stream(contactless EMV for example) and an analytics-powered streamcontaining behavioral and reputational data. This combinationprovides a rich set of data “signals” to use during the paymentauthorization process. Because many of these signals are dynamic innature, they can’t be replayed for use in anothertransaction.
With reliable provisioning of payment credentials to thehandset and standard, controlled application interfaces to thosecredentials, the mobile device will take on more authenticationtasks. A user could enter a PIN on the handset, for example. Or, aplethora of biometric options could be used, including voicerecognition, a built-in fingerprint reader or a facial recognitionstep using the onboard camera. And more.
Trend 2: The App!Betweenpayment credential presentment and authentication, that covers alot of the traditional POS terminal functionality. That’s thesecond trend, a gradual shifting of POS terminal interface andinteraction functions to the smartphone itself. Yes, there aregoing to be a bazillion challenges, but high volume devices likethese will allow certification costs to be spread across millionsinstead of tens or even hundreds of thousands of POS terminaldevices. It’s not impossible and the millions of smartphone usersout there will expect, even demand, this kind ofintegration.
And then there’s the customer experience managementpotential the smartphone can present. Rewards points, coupons,shopping lists, upsell offers, reminders, manufacturer incentives,and more.
We’re Already Doing Some ofThis
Some of this is achievable today using stored card numbers(see below) and 2D barcodes (check out the Starbucks iPhone app atyour local Target store).
Take it a step further – with the NFC chipset andespecially the secure element (SE) on it that manages paymentaccount credentials, hardware is now present. The payment app couldinspect the credentials and pass them over the wireless network andback to the merchant’s electronic cash register. No need to use theNFC radio. Take the “long way around” to the merchant.
Of course, we are already doing card not presenttransactions over this “long way around” mobile channel. Just not(much) at the POS. That’s the next frontier.
From both a security and an experience point of view, thebest card not present approach is based on stored paymentcredentials, a la Amazon’s mobile app. Amazon has a longrelationship with me, knows what I might buy, and is able to manageits risk based on analytics against that relationship as well as mypayment credentials that it holds. Using those tools, Amazon isable to manage its card not present channel’s fraud rates to cardpresent levels.
Take the POS Shift Further
As anyone watching Apple’s payment patent stream knows,the possibilities are endless. One vision suggests that thesmartphone will be connected (wirelessly of course) to the contentthat’s being displayed on your home TV. Watching a football game?Rooting for the home team? Look at your iPhone’s screen andthere’ll be an offer to buy your team jersey directly from the NFL.Or see a discount offer to switch to FIOS displayed on your handsetduring and for the five minutes after a Verizon ad run on yourHDTV. Press the purchase button on the phone and the goods willshow up a LOT faster than the “four to six weeks” delivery times ofbygone TV mail order advert days. (If you miss those days, here’s a hilarious musicalreminder!)
Having a payment terminal in your pocket could raise heckwith the family budget, but raising transaction volume is what thepayment business is all about anyway. Hey, maybe there should be an”app for that” too.