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Understand the impact of Near Field Communication (NFC) on retail, its benefits, and implementation across various industries with insights into the growing NFC ecosystem. Learn about NFC technology standards and how they enable secure and convenient touch-based transactions. Explore NFC's potential in mobile payments and its integration with existing payment infrastructure.
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Preparing RetailFor the Mobile NFC Transactions Evolution Prepared for VeriFone Andy Castonguay Director acastonguay@yankeegroup.com
Why Near Field Communications Should BeOn Your Short-term Radar – An NFC Overview From the telecom salad of acronyms, one that has potential to make a real impact What is NFC? • A Technology Standard that permits important personal account details to be delivered quickly to a “contactless” or “touch” reader • Near Field Communication (NFC) is an evolution of contactless and short range RFID technologies. NFC enables easy and straight forward use of cards and mobile phones with touch-based technology – operating at a distance of only a few centimeters. • Leverages current payment infrastructure in use through out the world • Currently: A chip and an antenna residing in debit, credit, stored value, and special purpose cards • In the future, NFC will be embedded in mobile phones When will NFC reach the U.S. market? • NFC-style implementations have been a small but growing part of the payments market for years Why is it important to retail and commerce? • Fast, secure payment – Ideal for high volume establishments • Growing demand and usage among US consumers • Future mobile phone deployments have explosive volume potential and dynamic interface
NFC Is Growing Independently of Mobile Operators – Providing Retailers w/ Short and Long-term Benefits US Issuing Banks Estimate Over 15m Have Been Issued Since 2005 NFC cards will outpace mobile wallets,creating behavior that is potentially difficult to alter unless 3-point balance becomes more advantageous. Merchants Deploying POS • McDonalds • CVS • 7-Eleven • Subway • AMC Theatres • Fry’s • Walgreens • NYC’s MTA • Eckerd • Ritz Camera • Wawa • Cold Stone Creamery • KFC • Arby’s • Carl’s Jr. • Duane Reade • Regal Cinemas • Sheetz • QuickChek Credit Card Offerings • MasterCard PayPass • Embedded cards being issued since 2005. • Bank partners include Citi, HSBC, MBNA, KeyBank • Visa Blink • Embedded cards being issued since 2005 • Chase is key bank partner • Upwards of 5m cards already issued • American Express ExpressPay • Embedded in Blue cards and key FOBs since 2005 • Exclusive to Amex
Primary NFC Activities 1. Purchases at POS 2. Ticketing & Transport Pass 3. Content Discovery & Info Exchange NFC-based Programs and ProductsQuickly Evolving Public Transportation • New York City, MTA • Boston, MBTA Charlie Cards • Parisian Metropolitan Subway System • London Oyster Card for the Underground Gasoline Stations • Mobil Speedpass Mobile Operator Trials (for US) • AT&T/Cingular • Verizon Wireless • Sprint/Nextel Social Spending Programs • Health and Food Benefit Programs in US and Western Europe
Mobile Provides Scale, Distribution & Dynamic Interaction Total Mobile Users in US, 2003-2011 Source: Service provider’s reports and Yankee Group, 2Q07 Mobile phones represent the next great focusfor transactions, advertising and marketing
US Mobile Services Market is Maturing & Consolidating 1Q2007 Market Share, by Subscribers* • Provides retailers with a “short list” of potential marketing partners to drive usage of mobile NFC in stores • Heavy competition drives Mobile Operators to constantly offer service technology innovations to gain marketing edge – NFC is among key priorities for 2008 • Competition also ensures constant effort to offer newest, most robust handsets. Like Bluetooth and Wi-Fi, NFC will become a necessary standard for future mobile phones *includes direct, reseller/affiliates, and wholesale subs within each carrier Source: Service provider’s reports and Yankee Group, 2Q07
Handset Manufacturer Card Associations Mobile Carriers Banks Mobile NFC Contactless Ecosystem POS Terminals Merchants OTA Provisioning SIM/NFC Chip Manufacturers The Mobile NFC Ecosystem Involves Significant Number of Players with Unique Strengths
How Will Mobile NFC Work in Real Life?Over-The-Air (OTA) Provisioning Facilitates Ease of Use Source: Venyon
Defining the Leading Edge of Mobile Transactions Mobile Transactions • Involves any type of transaction initiated or completed on a mobile device. These transactions fall into activities of Marketing, Selling, and Servicing customers via mobile devices • Sub categories of Mobile Transactions include: • M-Payments (e.g. point-of-sale, peer-to-peer, remote) • M-Coupons (e.g. discounts, loyalty programs) • M-Service (e.g. M-Banking alerts and account management, situation-aware Airline customer service, etc.) • Examples: • Using a mobile device as a cash replacement at a fast food restaurant to pay for a meal • Receiving and redeeming a coupon at a retail POS • Accessing real-time financial account information or executing a trade with your mobile device • Purchasing a ticket to a sporting event online and receiving an “m-ticket” on your mobile device which you use to enter the event • Checking in for your flight over you mobile device • Remittance payments in lesser developed countries • This is primarily and Interactive activity that involves both the end-user and brand, merchant, agency, enterprise to take action Mobile Transactions is a Disruptive technology and a key area of focus for YG
Understanding the Importance of NFCIn Mobile Commerce MobileCommerce MobileContent MobileAdvertising MobileTransactions M-Payments M-Coupons M-Service
Despite Outstanding Potential, Mobile Payments Have Suffered By Not Leveraging the Existing Point-of-Sale Payment Infrastructure – NFC Changes That Core Payment Focus Regional Players Global Players Core Billing/PRM Focus
Cost Efficiency Convenience Security Defining the Value Proposition to Consumers & Retailers Mobile Wallet Payments Have Important Benefits Over Existing Mechanisms to Gain Traction With Consumers – Striking Important Balance of Primary Payment Characteristics
Who is Successfully Leading the M-Commerce Charge? Japan’s NTT DoCoMo Expanding With Diversified Financial Services Device distribution provides entry point for m-commerce iD Credit Platform services • DoCoMo-branded DCMX/iD mobile credit services • Operator expanding into retail credit sector • Partnering with other financial institutions like Mizuho Bank and UC Card • Leveraging distribution infrastructure for handsets to drive credit card uptake • Currently over 3m subscribers and 150,000 iD payment terminals • Edy contactless payments • Utilizing Sony FeLiCa technology and bitWALLET platform • ToruCa data retrieval service • Allows storage of coupons on handsets • Coupons and information can be accessed and stored by reader/writers at retail outlets
US Mobile Wallet Initiatives –Moving From Trial to Implementation US Market Identifying Business Models That Benefit Whole Mobile Wallet Ecosystem • For NFC deployments, the key business model is transaction fee participation – operators see little upside to other potential revenue streams (e.g. content discovery, slot leasing, subscriber fees, couponing, etc) that will benefit card associations and retailers • ISO/IEC 14443 standard is gaining final structure. multiple trials for mobile phone contactless payments: • Atlanta (Cingular, Chase, Nokia, Philips, Visa, & VivoTech) • Dallas (MasterCard, Nokia, AT&T & JP Morgan Chase) • Ramp up period for handset volumes 6 to 12 months • SMS-based payments gaining acceptance • PayPal & Obopay SMS-based payments facing difficult push to critical mass
NFC-enabled POS Will Support Payments & More Strong Future Opportunity for Retailers in Mobile Marketing/Coupons • Coupons delivered to the phone as a text or dynamic message • Can use real time analytics from the merchant and real time location from the carrier to deliver the right messages to the right person at the right time • Can scan the bar code directly off the phone • Problems with screen resolution, scratch on the screen, etc…leads to an inability to scan a coupon directly from the device • Merchants want the ability to scan directly from the device to eliminate human error and to identify whether this coupon is unique or has been forwarded • Coupons should be time based and location based • Loyalty programs • Can be stored on the phone so you don’t need to remember all of your cards • Can be combined with a coupon such as buy 9 get the 10th free promotion
Thank you! Andy Castonguay Director, Consumer Research Yankee Group acastonguay@yankeegroup.com