"The best way to predict the future is to invent it" said Alan Curtis Kay. This well-known quote could sum up the two days conference about alternative payment systems innovations in San Francisco ...

Mobile payment and NFC at SF Alternative Payments Innovations Conference

"The best way to predict the future is to invent it" said Alan Curtis Kay. This well-known quote could sum up the  two days conference about alternative payment systems innovations in San Francisco. A large panel of experts, decision-makers and executives from different sectors of the payment industry - merchants, payment processors, telecom carriers, bankers, developers and  solutions providers - discussed the mobile payments revolution as well as new expected opportunities. During the exchanges, industry leaders addressed main issues regarding mobile payment: business opportunities, regulations, technical challenges, business models, security, etc. According to the panel, the same way we have seen a move away from cash to other forms of payment such as credit and debit cards and gifts cards, we will probably see a quick adoption of mobile money but only if it will bring value to the customers.

The conference began with opening remarks by Richard Crone, president of Crone Consulting, followed by a speech presenting opportunities offered by mobile payments. These payments could be used to enable cross-channel promotion to steer customers to lower cost, loyalty-building deals at physical point-of-sale (POS) devices and advertise better to customers. An overview of the mobile payment landscape was then given by President and CEO of Merchant Advisory Dodd Roberts, co-founder of BOKU Ron Hirson, and Founder and CEO of Roam Data Will Wang Graylin. Mobile payment tech consists of the use of a mobile phone (not necessarily a smartphone) for a goods or service transaction. Several solutions are available on the market where users can buy something through their phone in a store using contactless technology, via SMS (generally the charge is applied to the phone bill or online wallet), through a mobile website or by enabling the phone to read credit cards with added hardware. In a more general way, m-payment can be considered a part of m-commerce: according to Dodd Roberts  "m-commerce is the exchange of value through interaction and transaction on mobile devices". From a merchant perspective, M-commerce creates entirely new service opportunities and is a new, efficient way to engage customers.

Wireless operators, financial providers or startups begin to see a new opportunity to get into the retail payment business by placing payment systems into mobile phones. The "anywhere, anytime" commerce will probably represent an important part of the e-commerce industry. As reported by Tim Attinger, Managing director of Market Platform Dynamics "Mobile commerce sales in the US were $3.5bn". Growth for 2011 promises to be nothing but explosive. Regarding the first analysis, the initial postulate could indicate that now is a good time to enter the mobile industry because there are a lot of changes in the ecosystem - in other words: Countless of new opportunities. However, as Amtiabh Awasti from SVB Financial Group stated, "Acceptance is key in the adoption of new payment technology.” In relevance to this statement, an example given by Vince Kadar, CEO of Telepin Software.  is that Fiji has experienced a strong adoption in m-payment. In this country, there are more mobile phone users than bank accounts. Consequently, m-payment is an opportunity to "bank the unbanked". M-payment will allow subscribers to pay bills, purchase goods, and transfer money. Lastly, hundreds of m-payment trials have been launched in the US and abroad. Furthermore, several m-payment systems are available on the market, yet the market is still fragmented, making it difficult to clearly see a solution that would be fully accepted by users. However, some countries such as Japan or Korea have used phones to pay for more than 5 years now.

Another clear trend is Near Field Communication (NFC) technology. NFC is a wireless technology that allows devices to communicate with each other over short distances. If you are not sure if you have an NFC phone, or if you plan to buy one, here is a list of current, planned and rumored NFC handsets. According to Mohammad Khan, President of VIVOtech Inc. "2011 is the year of NFC". Most of the attention regarding NFC has focused on mobile payments, because it probably has the greatest revenue-generating potential. But recent technological advances have opened the door to a broader range of NFC applications: interaction with smart posters to receive product details, nutritional information, promotional offers, coupons, loyalty points as well as to connect with social media and other information to enhance the retail experience. “This technology could be an alternative to the Clipper Card - the Bay Area's smart card for transit fare.” believes Melanie Crooty, Director, Regional Commuter Servies, San Francisco Metropolitan Transportation Commission: "the introduction of NFC into Clippers would be relatively easy." 

The panel was composed of retailers 7-Eleven, Walmart Stores and Macy's gave a reat overview of merchant objectives for mobile payment. They are looking for a payment solution which will fully address their needs and expectations which include some of the following: High customer acceptance and value, as well as the service being cheap, convenient, fast and secure. "Our franchises are in the business of selling sandwiches, not managing technology" remarked James Esposito, Director of Operations at Value Pay Services, SUBWAY® restaurants. In other words, merchants fundamentally don't feel concerned by technology - they feel concerned by value added, trust and cost reduction. For Jamie Henry, Senior Director of Payment Services at Walmart Stores "mobile payment implementation is not a technology issue, it's only a business model issue". Payments, loyalties, or fidelity programs - whatever the technology involved, their aim is to engage customers in new ways and optimize the customer experience. 

During the conference, technical aspects and security of the technology were also addressed, however they were not the sole focus. Issues related to storing personal data and applications in a safe place on the NFC handset were also discussed. There are multiple secure element options, depending on the position of the secure element in the handset to be considered (a SIM card, a microSD card or fully integrated into the handset) and NFC stakeholders are having difficulty defining which of these should be favored. There are a handful of things to consider and each solution has pros and cons accordingly. "We see plenty of new ideas, but these ideas don't address the real issue: customer acceptance, "comments Raja Doddala from 7-Eleven. So once again, what appeared clearly during the conference is that above everything, customers would be the real decision-makers.

The conference ended with a panel moderated by Daniel Chatelain, Founder and Managing Director of payment association BayPay Forum,  where payment industry experts discussed the possible paths to making mobile payments a profitable opportunity. In general, people trust the card payment ecosystem, so it will take time to build a relationship based on trust for mobile payment with customers. Banks may have the best position to instill this trust, however customer behavior change takes time to adjust to new technologies. Still, we could see a quick adoption of the new payment ecosystem. To summarize, the different needs of the global market would required a clearer definition of the target market: interoperability and standardization are fundamental to bringing more value and a high convenience for both customers and merchants. The great payment ecosystem overview tackled during the 2-day conference would probably bring forward new solutions, illustrating the Charles Kettering quote:  "A problem well stated is a problem half solved".

By Thibaut Loilier