Near Field Communications World: Wells Fargo to Run NFC Field Trial

by George Peabody 0

By George Peabody, Director, Mercator’s EmergingTechnologies

Visa is getting some traction with itsDeviceFidelity-based NFC pilots, at least in terms of the bankswilling to pilot the project with them. Wells Fargo joins US Bankand Bank of America in the US and Turkey’s Akbank in the trialprogram. Of course, a pilot is just that and we have seeninnumerable NFC pilots over the last five years.

It’s easy to understand why, this time, these issuers areinterested. Personalization and fulfillment is straightforward,working very much along the lines of existing card fulfillment.Today’s microSD cards are tiny, featherweight chips that can beeasily inserted by most customers, or their 11-year-old children.Inserting a personalized version into a mailer issimple.

But there are shortcomings, big ones, to this approach.Here are just a few:

  1. The NFC capability is not built into the handset. ThemicroSD card is an after-market, consumer installed device. Thatadds a lot of process friction.

  2. This version of NFC has to appeal to the banks, but thereis a card-like, one-to-one relationship between the accountholderand the personalized microSD card. Unlike cards, however, there isroom for only one microSD card per mobile handset. For the FI, theyare always top of wallet and that’s good. From the consumer’s pointof view, that may not be ideal.

  3. Many smartphone users have microSD cards with massivestorage capacity for their music and video collections, 16GB istypical. That adds cost. And no one is going to be willing toreplace their large capacity card with a low capacity card (leavingtheir video clips behind) just to get a contactless paymentcapability.

  4. Finally, this approach is a long way from the originalvision for NFC payments where multiple accounts share the samephysical hardware.

  5. Continuing the payment industry’s hard focus on payments,this approach simply replicates the contactless card experience.Consumer and merchant expectations of integration magic (coupons,discounts, customer experience management) delivered by smartphonego WAY beyond a simple contactless payment.

As I said, the approach is congruent with existing issuingmodels. And it sidesteps the thorny issue of building a businessrelationship with the mobile operators around payments. Itbasically skips the Apple market entirely (although there is aniPhone sleeve that no one will buy). There is an API thatthird-party developers can use. If financial institutions the sizeof Wells Fargo, US Bank, and Bank of America really encouragethird-party developers to program to their microSD payment “cards,”then the possibility of cool apps that embed the payment into thepurchasing process will emerge.

This approach is a safe step for card issuers. But givenall of those barriers, it’s hardly a leap into delivering morevalue to consumers and merchants who are the ones pushing the moneyinto the system in the first place. This risk averse approach iswhat will let the PayPals of the world, as well as all of themerchant-focused start-ups, establish alternatives that go aroundthe card networks.

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