Google Introducing New Mobile Wallet for Android

Google is announcing tomorrow its new mobile phone wallet for the Nexus S NFC enabled phone. Google has paid for readers from Verifone to be installed in a number of merchant locations in New York City and San Francisco including Macy's, Subway and American Eagle Outfitters. Google has made agreements with Citi and MasterCard to handle the transactions. Only Google will have the key to the secure element in the NFC chip set.

This is exciting news for the few of us in the NFC  universe. But it is time for a reality check.

The Samsung/Google Nexus S phone has gotten some pretty bad reviews so far and is not selling well. One of the major complaints has been that the software in the Nexus S requires that you connect to Google's Cloud services for many essential operations. This is problematic for many people including me. Lest we forget, it must be a good phone first, then a good smartphone second. The NFC part is irrelevant for most users. So there are not many Nexus S phones in use in New York or San Francisco. How is Google going to provide for a real trial of NFC without a mass adoption of their NFC phone?

Maybe the mobile division engineers at Google believe the hype from Forrester researchers claiming that 40 - 50 million NFC enabled phones will be sold in 2011. For anyone who believes that figure I have a great piece of land in Siberia for a summer cottage.

Yes, RIM will probably come out with an NFC phone at the end of this year. But how many people will buy it immediately? Maybe Google engineers think that RIM will give them access to the secure element as well in Blackberry phones. Probably not. Whoever has the key to the secure element in an NFC chip set controls the wallet. This will always limit the adoption and usage of NFC phones.  If the NFC tag and secure element are in the SIM card then the mobile operator is going to control it. But NFC SIM cards and microSD cards are very problematic for numerous reasons as discussed in previous posts.

The turnover of mobile phones is about every 2 years in the US and Europe. Penetration of NFC enabled phones will take between 2-4 years for critical mass if there are at least 12 NFC phones available. By that time the Nexus S will be an antique. If companies keep creating unrealistic hype about NFC then it will lose all credibility by the time the technology is mature and ready for mass adoption and NFC chips could then become vintage as well.

As I have said so often, NFC as a transaction medium is coming and will do great things if rolled out properly without all the ridiculous hype and propaganda.

Mainstream Media Jumps Onto the NFC Hype Wagon

I love this headline from Britain's Daily Mail:

"End of the credit card? With one swipe of an iPhone you'll be able to pay for your shopping"
(There is the rumor that the iPhone 5 will have NFC. That may be true, but that was also the rumor about the iPhone 4. Whether it is true or not does not seem to matter to this writer.)

Or from CNN:

"You can already use your iPhone, Droid or BlackBerry to buy a hotdog at the ballgame, buy your Starbucks latté, or give a friend a few bucks by bumping phones. But by the end of the year you may not even think twice about reaching for your phone to pay at the register instead of fumbling for your credit card."

My goodness. You would think that NFC was already in all the phones and POS terminals and that we are weeks away from paying at the POS with NFC enabled phones. I also enjoy the American writers that claim that all of this fantastic technology is already being used here in Europe on a daily basis. I can tell you, as a European resident, it is not. Most Europeans are as clueless about contactless or NFC as are most Americans. What we do see here are Mifare cards for mass transit. There are only 2 phones available that have NFC. One is the new Google Nexus S and the other is a Nokia that is not very popular. And the NFC chip in the Nokia is not capable of working with NFC payment terminals yet.

It is very exciting to see the mobile operators and banks pushing this hype into the media. It means that they are serious about their commitment to mobile NFC payment. It is coming and it will change the way many people conduct transactions. But as I so often write, it is very important for those in the industry and investors interested in this industry to be discerning about hype vs reality.

But the dumbest comment I have read so far is this one:

"Ewan over at Mobile Industry Review says that “once Apple integrates NFC into their devices, it will be game over for every other provider in the marketplace.” He points out that it doesn’t matter if there are a good few billion people in the world who will never be able to afford an iPhone — they are outside the United States."

I do not need to repeat again my view of mobile payment reality. But I would like to add this footnote that came from a response I sent to someone just the other day.

There are a lot of companies jumping into this space.  There is a lot of money out there. There are a lot of potential customers and users out there. It is a big world. No one, two or even 50 companies are going to swallow the whole market. No one technology is going to be, ‘The One’. This is not The Highlander. There will be many winners in this market. There are golden opportunities for different technologies, different markets and different countries. Smart entrepreneurs and investors will have many opportunities to profit.

I recommend this as well:
http://www.pymnts.com/will-apple-get-us-to-wave-at-the-point-of-sale/?l&goback=%2Egmp_116917%2Egde_116917_member_41730939

Mobile Transactions; What Will it Take For Success?

There have been many points in history when humanity changed the way they conducted transactions. From the trade of tangible goods as currency like goats, camels, gems, precious metals and people to precious metal coinage. Then to paper representing the promise to pay precious metals or other valuable goods. It was not long ago that plastic cards with magnetic strips or memory chips replaced  paper currency and checks for many people in many societies. The Internet has also changed the way people transact by creating electronic and virtual currencies. Banks also no longer move paper or precious metals but instead move 0’s and 1’s through electronic pipelines around the world.

We are now at another one of those transition points in our history; when plastic cards will be replaced by small devices capable of conducting electronic transactions of all flavors at physical points of sale, the Internet and between individuals.

Like all transition points in the past this one is populated by many technological differentiations. While in the past it has been different methods of transporting and exchanging things of value, now the differentiations include many means of communicating those digital euros, pounds and dollars. RIFD, NFC, Contactless, USB, SMS, WAP and more acronyms that we can keep up with. Then there are the physical forms of purses and wallets that will carry all the digital money and tickets. Of course the mobile phone operators and manufacturers of mobile handsets have spent millions convincing the press, investors and the technologically savvy that the mobile phone is the wallet of the future. That confluence is about ‘everything in your mobile phone’. Is this true or have we been fed and fallen for the company line? Are there other form factors for that future mobile electronic wallet? The fact is that there are numerous form factors that people will use as their electronic wallet device. It is extremely foolish to think that everyone in the world wants to or will use their mobile phone as their wallet. There will be dedicated electronic wallet devices, wallet watches, wallet mp3 players, wallet keyfobs, wallet cards, wallet smart keys and other wallet devices that we had not even thought of. Let’s examine the mobile phone handset though.

At the time of this writing there are very few mobile phone handsets in the world with native NFC, Near Field Communication, for conducting transactions at point of sale terminals. Also at the present time most companies and developers are focused on the attempt to turn existing mobile phones into payment devices. Many companies have been attempting to use SMS for transactions. This has not gained much traction in Europe or the US where banking is fairly secure and advanced. But it has gained quite a bit of traction in Africa. For POS transactions there are companies attempting to use Contactless tags embedded in stickers, microSD cards, SIM cards and attachments to specific mobile phones. There are software applications on mobile smart phones for online banking, payment, ticketing and loyalty. But mobile phone transactions are still off to a slow start.

There are a number of keys to making mobile transactions a success.

1.   Interactivity. Mobile transactions must include some sort of message back to the user after the transaction. The message must be something that the user deems valuable. A coupon, loyalty message, gift or personal message of some kind.

2.   Security. Users must be able to completely trust that they can conduct their transactions securely. That using their mobile device for transactions will not lead to identity theft or transaction fraud.

3.   Profitability. Mobile transactions must be profitable for every player in the ecosystem.  

4.   Compelling Reasons. There must be compelling reasons for merchants to incorporate mobile transaction technologies at their points of sale such as NFC readers at the physical POS or Java Applets at their web store. Users must have compelling reasons to use mobile transaction technologies. There must be things that they can do with a mobile device that they cannot do with cards or cash.

5.   Simplicity. Mobile transaction technologies must be incredibly simple or no one will use them.

When all of these pieces are in place in a mobile transaction system then we will see the technology explode like nuclear fission. Over the course of the past 14 years I have been involved in the mobile industry I have seen only one system accomplish this.

For more information contact Jon Shore at jshore@corporateconsulting.net or though his consulting website; http://www.corporateconsulting.net/.

Jon Shore has been involved in the mobile transaction space for the past 14 years. Among his invention accomplishments are an SMS ticketing and loyalty system and a very secure NFC transaction system for all sorts of mobile devices.