Guess What’s Coming to America? NFC and EMV!

Guess What’s Coming to America? NFC and EMV!

By Deborah Baxley, Management consultant to the retail payments industry and Managing Principal at Keypoint Consulting

I was fortunate for the opportunity to attend the Smart Card Alliance’s third annual Payment Summit in Salt Lake City last week, and as usual I am “charged up” by the experience of networking with colleagues who are all as passionate about payments as I am.  The two hottest questions at the conference were: “When is NFC coming?” and “Is EMV coming to America?”

When is NFC coming?
I moderated NFC Proximity Mobile Payments: Status and News Panel, which was a spirited and wide-ranging discussion of adoption, retail and transit use cases, the role of standards bodies, and experiences in Asia.  My four panelists included Debbie Arnold of NFC Forum, Dr. Jack Pan, Watchdata’s GM Americas and VP International Business Development and Marketing, Kevin Gillick, Executive Director at GlobalPlatform, and Dave Wentker, Head of Proximity Payments for Visa.
Chickens, Eggs, and ... Roosters?
Debbie Arnold talked about the traditional “chicken and egg” problem in payments with a twist: 120,000 eggs are hatched in the US -- they are the contactless-enabled POS terminals.  Those terminals will work perfectly with NFC today.  “All a merchant has to do is make sure the clerks don’t pass out when someone pays with their phone,” as Debbie puts it.  The chickens are POS terminals with NFC, enabling more than payments – they are “clucking.”  And roosters are phones and other devices with NFC.  The main impediment is business model collaboration.   “I would love to lock everyone in a room and tell them they must work out the business case,” says Debbie. I couldn’t agree more.
NFC Bridging Technologies
Even optimistic forecasts call for reasonable NFC penetration by 2012. In the interim, NFC bridging technologies like stickers and microSD all march in that direction.  Watchdata has a product called SIMPASS that enables 80% of existing handsets with a dual interface SIM chip supporting telephone application and contactless interface.  Bridging technologies will co-exist with NFC for some time to come, analogous to early accessories for WIFI, Bluetooth and 3G which eventually became integrated and ubiquitous.
MNO’s Leading the Way in Asia
Dr. Pan talked about examples in Asia.  China Mobile and China Unicom have issued 50,000 epurse for transit, taxi, ticketing and entertainment in Guang Zhou and Chongqing.  In Thailand, mobile operator TrueMove has sold 100,000 chip through storefronts enabling some excisting epurse applications.  And Singapore’s SIMpass for transit and road tolls includes Visa PayWave for proximity payments.  They have issued 10 million chips.
NFC Drivers and Innovations
We heard results from Citibank’s 3,000-person NFC trial in Bangalore – the largest trial to date - which found that coupons drove higher spending by consumers.  Dave Wentker’s perspective on payments companies’ role as enabling innovations unleashed by mobile with building blocks is supported by Visa’s mobile strategy including proximity and person-to-person payments, POS, advertizing and loyalty applications.  In general panelists believe that NFC has a lot going for it, like transit, POS acceptance, iPhone, and a high level of interest.  However, the reliability of the payments status quo, need for merchant investment, availability of handsets, and requirement for collaboration with mobile operators are still creating an industry stalemate.

Is EMV coming to America?
Jane Cloninger, Partner with Edgar Dunn, talked about creating business cases for EMV.  Surprisingly, a lot of fraud losses are not accounted for, such as lost sales, customer service cost, charge-backs, first party fraud (comprising 10% of all losses), acquirer and merchant fraud losses (7.5 basis points).  The typical business case has quantitative and qualitative of equal importance, but qualitative is often the tipping point.  These qualitative factors include the biggest benefit, consumer confidence, public and regulatory concerns, value-added services including mobile and loyalty applications, global inter-operability: aligned customer experience across products, channels, and borders, faster transaction times and consistency with international fraud control measures.
The final highlight of the conference was a spirited discussion of if and when EMV will come to the US.  Dodd Roberts, representing the Merchant Advisory Group, says that merchants are asking, “Why not move the contactless EMV now?”  He and Robert Carr, CEO of Heartland Payment Systems say that “merchants want out of the PCI compliance business” and would prefer to make a capital investment to address breaches in a more thoughtful way.  The Alliance is seizing this opportunity to establish a dialog to further the understanding and the way forward for EMV.  Watch this space!