Why It’s Time to Believe the M-commerce Hype
Are Near Field Communications (NFC) overhyped? Research firm Gartner certainly believes so. In fact, NFC-based contactless payments have scaled the Peak of Inflated Expectations, according to Gartner’s new 2011 Emerging Technologies Hype Cycle report, which assesses the maturity, business benefits, and future progress of more than 1,900 technologies “to highlight the common pattern of over-enthusiasm, disillusionment, and eventual realism that accompanies each new technology and innovation.”
This is nothing new, of course: Pundits have touted mobile commerce as the next big thing for roughly a decade, outlining digital payment systems that would accelerate point-of-sale transactions, increase customer spending, and streamline day-to-day operations, effectively revolutionizing verticals like quick-service restaurants and convenience stores. Nothing of the sort ever happened, though, meaning Gartner is right to question the latest wave of m-commerce hyperbole.
But this time is different. NFC is real, and it’s happening. Seriously. Mobile payments are already emerging as a mainstream phenomenon, buoyed by ever-increasing smartphone penetration and mounting interest from digital pacesetters. The facts speak for themselves. eBay-owned PayPal anticipates its 2011 mobile total payments volume will reach $3 billion, up from the $2 billion target the company predicted in February. Even the revamped projection could fall short: In mid-July, PayPal announced plans to introduce a peer-to-peer NFC system on Android phones later this summer. At the same time, Square— the much-hyped startup led by Twitter co-founder Jack Dorsey— is now processing $4 million in mobile transactions each day. First introduced for the iPhone in late 2009 and later expanded to the iPad and Android devices, Square enables small businesses and other users to accept credit and debit purchases by swiping cards through a small dongle that plugs into the device’s audio jack; Apple now sells Square readers across its Apple Store locations to boot.
Even so, the future of mobile commerce hinges above all on the commitment of mobile network operators and financial services providers, without whom NFC services won’t function, and transactions won’t process. And that’s why m-commerce is more than hype this time around— both carriers and finance giants are going all in. Verizon Wireless, AT&T, and T-Mobile USA are jointly launching Isis, a nationwide NFC-based commerce network open to all interested credit issuers and banks. Visa, MasterCard, Discover, and American Express all signed on as Isis partners earlier this summer, dramatically expanding the purchase options available to users and extending the network’s reach to payment terminals already installed at U.S. merchant locations. Isis plans to launch m-commerce trials in Salt Lake City, Utah, and Austin, Texas, during the first half of 2012, partnering with local retailers, transit services, and civic leaders to roll out its tap-and-pay services.
Not be outdone, Sprint— the other major U.S. carrier— will introduce mobile wallet services connected to American Express’s fledgling Serve digital payments platform. Serve unifies multiple payment options into a single digital account that consumers can fund from their bank accounts, debit, credit or charge cards, or by receiving cash from another Serve user. Sprint has also stated plans to launch a NFC payment network of its own and additionally offers Android smartphones supporting Google Wallet, the NFC payment platform Google and financial services providers MasterCard, Citi, and First Data announced in late May. Retailer partners including Subway, Walgreens, Toys R Us, and Macy’s have already committed to supporting Google Wallet— in addition, Wallet-enabled devices work anywhere MasterCard’s PayPass contactless payment terminals are available (over 300,000 retail locations worldwide, with roughly 100,000 of them in the U.S.).
The pieces of the m-commerce puzzle are finally in place. But the concept now extends far beyond point-of-sale purchases into customer loyalty programs, flash deals, and a host of other mobile marketing tools designed to boost consumer relations in ways traditional cash and credit transactions simply can’t match. In next week’s column, I’ll explore the myriad marketing opportunities arriving on m-commerce’s coattails; if you don’t believe the hype now, you will then.
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