Digital Transactions Authoritative, insightful and timely information for payments professionals
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Mobile-payments leader PayPal Inc. is widening its lead while other payments players scramble to get payment systems based on near-field communication (NFC) technology up and running. PayPal now expects to process $3.5 billion in mobile payments this year, up from its earlier prediction of $3 billion, according to a disclosure on Monday by John Donahoe, chief executive of PayPal parent company eBay Inc.
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While PayPal has dipped its toes in the NFC waters, most of its mobile volume does not rely on the technology. And a PayPal executive speaking at a mobile-payments conference in Chicago on Tuesday was emphatic that PayPal is trying to make mobile shopping easy for consumers and not attempting to impose any favored technology.
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“It is not NFC that is driving this world … it is multichannel shopping,” said Don Kingsborough, vice president for retail and prepaid products at San Jose, Calif.-based PayPal. “It is consumers that are driving rapid change.” Consumers, he said, simply want to pay by any channel they want, be it cards, smart phones, or online, and be able to get rewards and other perks through loyalty programs.
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Citing research by Aite Group LLC, Kingsborough said only 18% of retailers would have NFC-enabled equipment for handling mobile payments by 2013. In an interview with Digital Transactions News after his keynote speech at the Mobile Contactless Payment Innovations Summit, Kingsborough said providers should concentrate more on the consumer experience rather single-mindedly focusing on NFC’s tap-and-pay technology, or any other technology, for that matter. “This revolution we’re in is not about tapping,” he said. “Contactless has been around 12 or 13 years. It’s about what consumers want to do. We try and treat these technologies as if they’re separate, and they’re not.”
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Of course, NFC has many supporters because of its ability to securely integrate payments with loyalty and other programs. But several retailing executives at the conference noted that widespread merchant adoption of NFC would be a long slog. “I think we’re probably at least nine years away,” said David J. Hogan, executive director of major accounts at merchant acquirer Heartland Payment Systems Inc. and formerly chief information officer at the National Retail Federation.
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Dave Matthews, senior vice president of technology and operations at the National Restaurant Association, noted that the restaurant industry has national companies at the top with large technology budgets and tech-oriented startups on the bottom. In the middle is a vast group quite satisfied with what’s now regarded as primitive payment technology. Some 40% of restaurants still use dial-up terminals for card authorizations, according to Matthews. “It’s a very fragmented industry,” he said.
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One quick-service restaurant chain trying out NFC is Jamba Juice Co., the San Francisco-based purveyor of smoothies and fruit drinks with 800 company and franchisee-owned stores. In late September, Jamba Juice began using Google Inc.’s NFC-based Google Wallet system in 300 stores in San Francisco, Los Angeles, Chicago, New York, and Washington, D.C. The project required Jamba Juice to upgrade point-of-sale terminals and add contactless readers from ViVOtech Inc., according to Robert Notte, vice president of information technology.
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“It’s been slow,” he said in response to a question about NFC payment volume after only a couple of weeks. He attributed the slowness mostly to the fact that only one phone in the U.S. market, the Samsung Nexus S, is enabled for NFC. Since adding the ViVOtech readers, however, the stores are picking up a number of payments on contactless cards, Notte said.
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The real value of Google Wallet for Jamba Juice, according to Notte, is a related Google loyalty program called Google Offers. Payments, he said, are not as important “as reaching out to our customers.” But Notte says Jamba Juice won’t confine itself to using only Google for its mobile-oriented marketing.
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A senior executive with the NFC-based Isis joint mobile venture of telecommunications carriers AT&T, Verizon Wireless, and T-Mobile agreed that it would take a while to educate merchants and consumers about NFC. “Not every merchant is going to immediately adopt,” said Jim Stapleton, chief sales officer. He later added, “We’re very, very cognizant about consumer absorption.”
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Isis is recruiting merchants in its test markets of Salt Lake City, where the Utah Transit Authority is its first identified merchant, and Austin, Texas, ahead of a planned national launch in 2013. With more manufacturers introducing NFC-enabled smart phones, “The availability of the handsets will not be the issue” in 2013, Stapleton said. The major card networks have signed on with Isis, and Stapleton said there is “very strong interest in the [card]-issuing community.”
