27 Sept 2012
Although I’m not known for short blog posts.. I thought I would try one. Like grabbing a cereal bar for breakfast instead of my normal 3 pancakes, eggs, bacon, OJ, coffee… it will of course leave me with a large empty place… but sometimes it’s good to be hungry.
I read Scott Loftness’ tweet on no need for dedicated POS terminals if phones take off. Also was thinking of Square’s strategy of enabling all consumers to have an account (think cloud wallet), and my blog earlier this week on EMV/Verifone’s imaginary vision of the future (contactless EMV). As a side note Verifone is telling investors the retails will by a massive display payment terminal to market to their customers.. FUBAR! Take a look at how IBM values the POS business.
Forces against NFC
- Cloud Wallets. Much is made of NFCs ability to interact independent of network.. This is great.. but remember the POS system and payment terminal are always connected. How many of you remember the days where someone pulled the blue paper over the embossed card number? All that is needed is a key… voice print, loyalty card, qr code, … There is no need for specialized hardware today.
- Credit card only. Issuers, Mobile Operators and Payment Networks worked to position NFC as a “premium service”. How many of you have seen contactless debit cards? Merchants are aware.. and top 20 retailers (with few exceptions) have walked away.
- POS systems. Why on earth would any small merchant want to buy a dedicated POS system with a cash drawer? I think we will see tablets really start to take over this space. Although I’m not a big fan of in aisle checkout… there are variants that could work. Even more so if you eliminated cash as a payment option.
- If tablets become POS systems…. Then Verifone is a short.. or a long short. In the next 3 years they will see a big bump in re-terminalization due to EMV. Here is a picture of a mobile chip and PIN reader my friends at Baclays put together. All of their UK consumers have one.
- Mobile phones.. there will be instances where consumers can pay for their purchases before they collect them, or for small merchants and small businesses where payment is to a sole proprietor (remember there are 474,000 US restaurants with under 500 employees). IMHO THIS IS WHERE PAYPAL SHOULD FOCUS.
- UBIQUITY. No merchant is going to invest where only 2-3% of customers can use the product. There are not enough phones in the market, and not enough payment terminals (<200k in US) that support them
- No compelling value. NFC must do something else beyond payment… there are no payment problems. Therefore NFC must start with something like unlocking doors or beaming pictures..
- Supply chain chaos and standards. NFC will take off in homogeneous markets (or those dominated by a monopoly) that can force a standard (Edy/Suica in Japan, Octopus, EZ-Link, The French, … ). Today’s phones largely feature an embedded NFC SE made by NXP. The carriers want SWP based solution but Gemalto can’t get the SIMs out the door. It also doesn’t help that NXP’s current chips can take only one card emulation application (only paypass, or only paywave.. but not both).. which means that the little sticker on my phone does just about everything I need.
- NFC is anti cloud.. everything is locked up inside this little secure vault.. it ONLY does POS payments. I can’t do a mobile checkout with an NFC phone….