November 6, 2014
Verifone recently released a white paper titled 'NFC Payments and the Point of Sale' on 22nd of October and we came across some interesting points.
Factors like EMV liability shift and cross-industry collaboration are leading to broad merchant collaboration in NFC terminals for payments. With new mobile wallet services like Apple Pay gaining traction in the market, new innovation will be enabled at the point of sale driven by NFC. Many industry observers and participants believe that the shift to EMV-enabled payment terminals combined with adoption of NFC payments by big brands like Apple will be driving force behind the next wave of payment innovation.
With NFC, new media technology is converging with new payment solutions. This shift brings a whole new category to the forefront that's all about engaging the customer at the merchant location and seamlessly bridging the online and offline worlds. This 'new' media is at the point of sale with every electronic transaction that a consumer makes, thus enabling the convergence of offline and online marketing and promotions. NFC also leverages presence which involves connecting location-based, online social media services and capabilities to the offline store, the lane, and the checkout.
NFC payments enable additional security layers that can curtail the easy counterfeiting of traditional mag-stripe plastic card data. In the case of a payment system utilizing a SIM or Secure Element, a digital token that replaces the Primary Account Number with a surrogate value is transmitted to the consumer’s phone and securely stored, as is the case with Apple Pay. HCE can also utilize tokenization, but in a different manner: for each transaction a different token is generated and sent to the consumer‘s device to authenticate the payment.
NFC is now quite likely to succeed
NFC encompasses contactless payment technology, but it does much more than enable electronic transactions. A key advantage of implementing contactless solutions is that the technology can be readily adapted to current payment systems.
When NFC is deployed as a two-way communication between a consumer device and payment terminal, however, the speed and convenience factor of contactless is enhanced with substantial incentives for both merchant and consumer. For the merchant, there’s the prospect of combining ‘brick & mortar’ checkout with online promotions and electronic coupons. For the consumer, there is the allure of electronic wallets stored conveniently on a mobile phone, and the opportunity to easily earn cash in rewards, gift cards and discounts electronically as part of the payment process and to leverage social media-based applications.
The need for interoperability, industry collaboration, and standards compliance will become even more critical to ensure a secure and cost-efficient NFC ecosystem. It is no easy task getting card brands, retailers, issuing banks, wireless operators and handset manufacturers to all agree on NFC mobile payments. The announcement of Apple Pay in September 2014, however, set a new standard for cross-industry collaboration: those participating include credit card processors, banks and major retailers.
The entire NFC segment looks like as if it’s on steroids right now. The boardrooms are busy these days in any company involved in NFC terminals or payments. This is the first time when there is significant momentum to make contactless wallets happen. Even if Apple pay does not succeed as much as is being talked about, it would have a lasting impact on EMV and NFC being adopted in the industry. Everybody will benefit from it including other wallets.
Let’s Talk Payments has released a report titled NFC Projections taking into account Apple Pay and Liability Shift (NFC Smartphone, Terminals and Payments forecast, 2014-19). The LTP report includes how Apple Pay and Liability Shift will impact the NFC POS Terminals, NFC Payments and the NFC user base. This report also illustrates how BLE and NFC can go hand in hand.