Justifying Mobile Payments

Observers of using Near Field Communications (NFC) in mobile phones are still confused about why it anybody would want to use the technology to make in-person payments at stores.

I'm Confused About Why Mobile Payments are a Good Idea. Many Other People Are, too.
When you look at the market, it makes little sense. Some of the arguments are:

• Using a phone is slower, not faster, than using a traditional credit/debit card.
• The costs associated with using a phone are higher.
• There is insufficient infrastructure available at merchants.
• Adding infrastructure (NFC-equipped point of sale terminals) would be expensive and adds too much cost for the merchant.
• There is an existing card presentation and clearance mechanism that's extremely well developed, entrenched and profitable. Barriers to entry are very high.
• Players are squabbling about who "owns" the customer and the secure element in the phone.

In short, the idea of adding an NFC payment mechanism to mobile phones makes little sense. And there's a lot of head-scratching going on among people in the industry as to why (and how) it could possibly happen.

A New Way to Think About It

I've said it before and I'm sure it'll be said again. NFC-based mobile payments are NOT a great idea at this point, at least not for the U.S. There isn't sufficient business case to drive key players to adopt it.

But there are a number of NFC applications that DO make a great deal of sense. And they're gradually finding their way into smartphones and stores and movie theaters and other places.

Mobile Coupons. Illustration from ViVOTech

People are justifiably now asking "How do NFC payments make business sense?" But when the market is ready, and there are enough NFC phones and infrastructure and interest -- driven by non-payment applications -- and people will be asking, "Why not NFC payments?"

 It's significant that we're still asking, "Why?" Instead, we need to make sure everything's ready when when people start saying, "Why not?"