Preparing Retail For the Mobile NFC Transactions Evolution
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Transcript of Preparing Retail For the Mobile NFC Transactions Evolution
Preparing RetailFor the Mobile NFC Transactions Evolution
Prepared for VeriFone
Andy CastonguayDirector
Why Near Field Communications Should BeOn Your Short-term Radar – An NFC Overview
From the telecom salad of acronyms, one that has potential to make a real impact
What is NFC?• A Technology Standard that permits important personal account details to be delivered
quickly to a “contactless” or “touch” reader• Near Field Communication (NFC) is an evolution of contactless and short range RFID
technologies. NFC enables easy and straight forward use of cards and mobile phones with touch-based technology – operating at a distance of only a few centimeters.
• Leverages current payment infrastructure in use through out the world• Currently: A chip and an antenna residing in debit, credit, stored value, and special
purpose cards• In the future, NFC will be embedded in mobile phones
When will NFC reach the U.S. market?• NFC-style implementations have been a small but growing part of the payments
market for years
Why is it important to retail and commerce?• Fast, secure payment – Ideal for high volume establishments• Growing demand and usage among US consumers• Future mobile phone deployments have explosive volume potential and dynamic
interface
NFC Is Growing Independently of Mobile Operators – Providing Retailers w/ Short and Long-term Benefits
US Issuing Banks Estimate Over 15m Have Been Issued Since 2005
NFC cards will outpace mobile wallets,creating behavior that is potentially difficult to alter unless 3-point balance becomes more advantageous.
Credit Card Offerings• MasterCard PayPass
– Embedded cards being issued since 2005. – Bank partners include Citi, HSBC, MBNA, KeyBank
• Visa Blink– Embedded cards being issued since 2005– Chase is key bank partner– Upwards of 5m cards already issued
• American Express ExpressPay– Embedded in Blue cards and key FOBs since 2005– Exclusive to Amex
Merchants Deploying POS
• McDonalds• CVS• 7-Eleven• Subway• AMC Theatres• Fry’s• Walgreens• NYC’s MTA• Eckerd• Ritz Camera• Wawa• Cold Stone Creamery• KFC• Arby’s• Carl’s Jr.• Duane Reade• Regal Cinemas• Sheetz• QuickChek
NFC-based Programs and ProductsQuickly Evolving
Public Transportation
• New York City, MTA
• Boston, MBTA Charlie Cards
• Parisian Metropolitan Subway System
• London Oyster Card for the Underground
Gasoline Stations
• Mobil Speedpass
Mobile Operator Trials (for US)
• AT&T/Cingular
• Verizon Wireless
• Sprint/Nextel
Social Spending Programs
• Health and Food Benefit Programs in US and Western Europe
Primary NFC Activities
1. Purchases at POS
2. Ticketing & Transport Pass
3. Content Discovery & Info Exchange
Mobile Provides Scale, Distribution & Dynamic Interaction
Mobile phones represent the next great focusfor transactions, advertising and marketing
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
2003 2004 2005 2006 2007 2008 2009 2010 2011
Total Mobile Users in US, 2003-2011
Source: Service provider’s reports and Yankee Group, 2Q07
US Mobile Services Market is Maturing & Consolidating
1Q2007 Market Share, by Subscribers*• Provides retailers with a “short
list” of potential marketing partners to drive usage of mobile NFC in stores
• Heavy competition drives Mobile Operators to constantly offer service technology innovations to gain marketing edge – NFC is among key priorities for 2008
• Competition also ensures constant effort to offer newest, most robust handsets. Like Bluetooth and Wi-Fi, NFC will become a necessary standard for future mobile phones
AT&T26%
Verizon25%
Sprint23%
T-Mobile11%
Metro PCS1%
US Cellular3%
Leap1%
Alltel5%
Dobson1%
Other4%
*includes direct, reseller/affiliates, and wholesale subs within each carrier
Source: Service provider’s reports and Yankee Group, 2Q07
The Mobile NFC Ecosystem Involves Significant Number of Players with Unique Strengths
Mobile NFC Contactless Ecosystem
Merchants
OTA Provisioning
Banks
Card Associations
POS Terminals
Mobile Carriers
SIM/NFC Chip Manufacturers
Handset Manufacturer
Source: Venyon
How Will Mobile NFC Work in Real Life?Over-The-Air (OTA) Provisioning Facilitates Ease of Use
Defining the Leading Edge of Mobile Transactions
• Involves any type of transaction initiated or completed on a mobile device. These transactions fall into activities of Marketing, Selling, and Servicing customers via mobile devices
• Sub categories of Mobile Transactions include:
– M-Payments (e.g. point-of-sale, peer-to-peer, remote)
– M-Coupons (e.g. discounts, loyalty programs)
– M-Service (e.g. M-Banking alerts and account management, situation-aware Airline customer service, etc.)
• Examples:
– Using a mobile device as a cash replacement at a fast food restaurant to pay for a meal
– Receiving and redeeming a coupon at a retail POS
– Accessing real-time financial account information or executing a trade with your mobile device
– Purchasing a ticket to a sporting event online and receiving an “m-ticket” on your mobile device which you use to enter the event
– Checking in for your flight over you mobile device
– Remittance payments in lesser developed countries
• This is primarily and Interactive activity that involves both the end-user and brand, merchant, agency, enterprise to take action
Mobile Transactions
Mobile Transactions is a Disruptive technology and a key area of focus for YG
Understanding the Importance of NFCIn Mobile Commerce
MobileCommerce
MobileContent
MobileAdvertising
MobileTransactions
M-Payments M-Coupons M-Service
Despite Outstanding Potential, Mobile Payments Have Suffered By Not Leveraging the Existing Point-of-Sale Payment Infrastructure – NFC Changes That
Core Payment Focus
Core Billing/PRM Focus
Global Players
Regional Players
Defining the Value Proposition to Consumers & Retailers
Mobile Wallet Payments Have Important Benefits Over Existing Mechanisms to Gain Traction With Consumers – Striking Important Balance of Primary Payment Characteristics
Cost Efficiency
Convenience
Security
Who is Successfully Leading the M-Commerce Charge? Japan’s NTT DoCoMo Expanding With Diversified Financial Services
Device distribution provides entry point for m-commerce iD Credit Platform services
• DoCoMo-branded DCMX/iD mobile credit services
– Operator expanding into retail credit sector
– Partnering with other financial institutions like Mizuho Bank and UC Card
– Leveraging distribution infrastructure for handsets to drive credit card uptake
– Currently over 3m subscribers and 150,000 iD payment terminals
• Edy contactless payments
– Utilizing Sony FeLiCa technology and bitWALLET platform
• ToruCa data retrieval service
– Allows storage of coupons on handsets
– Coupons and information can be accessed and stored by reader/writers at retail outlets
US Mobile NFC-Based PaymentsEcosystem Is Defining Structure
Player TypePrimary Expected Benefit Key Barriers
Likely Short-term Outcomes Wild Card Options
Mobile Carriers Transactions fee participation
Card Associations, Banks & Merchants
No Major Progress Until 2008
Create Parallel Network to Bypass Cards
Card Associations Expanded Volume of Transactions, Enhance Brand
Contactless POS Coverage Slow to Grow
Driving Solid Volumes of Card-based NFC deployments
Push for OEM adoption of NFC
Issuing Banks Incremental Spend Increase, Potential for Payroll Products
Contactless POS Coverage Slow to Grow
Driving Solid Volumes of Card-based NFC deployments
Integrate NFC Experience with mobile banking services
Merchants/Retailers
Operating Expense Savings, Better Ability to Track Customers
Costs of POS, Compatibility across systems
Larger chains investing in POS upgrades
Could partner with operators to force hand of card associations
US Mobile Wallet Initiatives –Moving From Trial to Implementation
US Market Identifying Business Models That Benefit Whole Mobile Wallet Ecosystem
• For NFC deployments, the key business model is transaction fee participation – operators see little upside to other potential revenue streams (e.g. content discovery, slot leasing, subscriber fees, couponing, etc) that will benefit card associations and retailers
• ISO/IEC 14443 standard is gaining final structure. multiple trials for mobile phone contactless payments:
– Atlanta (Cingular, Chase, Nokia, Philips, Visa, & VivoTech)
– Dallas (MasterCard, Nokia, AT&T & JP Morgan Chase)
• Ramp up period for handset volumes 6 to 12 months
• SMS-based payments gaining acceptance
– PayPal & Obopay SMS-based payments facing difficult push to critical mass
Business Model Structure Benefits Next Steps
Transaction Fee Split
Peaks Carrier Interest and Guarantees Quicker Roll-Out
Credit Cards Associations Work to Develop Marketing & Cost Plans
SIM Slot Leasing
Creates Steady Revenue Stream for Mobile Operators, Potentially Reduces Costs for Cards
Issuing Banks Must Work Out Details for Leasing Space on Mobile Wallet and Ensure Top Placement and Customer Experience
NFC-enabled POS Will Support Payments & More
Strong Future Opportunity for Retailers in Mobile Marketing/Coupons
• Coupons delivered to the phone as a text or dynamic message
• Can use real time analytics from the merchant and real time location from the carrier to deliver the right messages to the right person at the right time
• Can scan the bar code directly off the phone
– Problems with screen resolution, scratch on the screen, etc…leads to an inability to scan a coupon directly from the device
– Merchants want the ability to scan directly from the device to eliminate human error and to identify whether this coupon is unique or has been forwarded
• Coupons should be time based and location based
• Loyalty programs
– Can be stored on the phone so you don’t need to remember all of your cards
– Can be combined with a coupon such as buy 9 get the 10th free promotion