NFC: To wait or to create?
Today, with over three billion mobile phone owners worldwide more than double the number of credit card owners mobile payments seems to be the next logical step. Revenue and business assurance management expert, Maria José Gonçalves explores the big questions surrounding near field communications (NFC) technologies
Today, with over three billion mobile phone owners worldwide – more than double the number of credit card owners – mobile payments seems to be the next logical step. Revenue and business assurance management expert, Maria José Gonçalves explores the big questions surrounding near field communications (NFC) technologies
Research from analyst firm Frost & Sullivan predicts that by 2015, NFC will be the most-used solution for mobile payments with total sales in Europe reaching €41.9 billion (£33.8bn). Despite this, Maria José Gonçalves, retail market director at WeDo Technologies, says retailers technology is not keeping pace with market demands and needs and asks “why?”
NFC, more than any other type of payment technology has a wide variety of stakeholders involved in developing initiatives; vendors, retailers, merchants, content providers, mobile operators and banks. But Gonçalves said the reality of the situation is that not all of these stakeholders are ready for NFC and, as a result, some retailers are forging ahead and developing their own solutions. Starbucks, for example, launched its own mobile payment solution at the end of last year that allows customers to pay instore via its mobile phone application.
Staying ahead of market trends
Gonçalves explained: “Although these solutions seem to be catering to shifting market trends in the short term, if more retailers follow suit there will be an increased risk of market segmentation that leads to inconsistency in the consumer experience. Furthermore, retailers that are unfamiliar with mobile fraud tactics and communications infrastructure open themselves and their customers up to security risks which could cause long term damage to reputations that take years to build. Particularly if retailers are found to have been less than thorough in initial risk assessments or fail to put in place robust anti-fraud solutions to combat these cyber assaults.”
She said many retailers, for example, will choose the lowest common denominator when implementing m-commerce solutions and expect network security to be taken care of by the mobile operators. “The major problem with this is that mobile payments currently operate on GPS, 2G or SMS – all technologies developed over two decades ago,” Gonçalves pointed out. “As a result, there are inherent weaknesses in the systems and operators simply cannot control everything. Retailers therefore need to build in their own layers of security to reduce chances of the systems being breached. However, without working with operators in the first instance to understand the nature of the threats, it is fairly impossible to put in place the correct provisions.”
Risk to consumers is also an important factor for retailers to consider as brand loyalty can be easily damaged if they become victims of fraud due to neglect of the retailer. “Educating consumers of the risk involved in mobile payments is therefore essential, particularly with something like ‘walk by theft,’ which takes place due to consumers leaving phones unlocked, applications open, using default PIN codes or the same password for multiple log-ins. Implementing payment thresholds and additional verification processes is not enough, consumers need to know the vulnerabilities of the system and how to protect themselves. Retailers should remember that it only takes one customer to be a victim of walk by theft to damage even a well-built reputation,” warned Gonçalves.
Prioritising mobile investments
The assurance expert said that retailers, however, feel they have little choice than to find an alternative mobile payment solution to NFC – and it’s hardly surprising. With the number of NFC-enabled handsets on the market still limited, it doesn’t make sense for retailers to make such huge investments in instore technology to process the payments. “However, if retailers continue to forge ahead on their own without really understanding the risks involved, they not only put their reputation on the line, but create a market with specific offerings from a range of retailers and no synergy for consumers,” she added.
Gonçalves called for a technology that will improve the overall consumer experience: “And this can only be achieved through collaboration of all the main stakeholders. Vendors, retailers, merchants, content providers, mobile operators and banks need to start singing from the same hymn sheet in order to meet consumer demand and accelerate the adoption of NFC; compatible equipment needs to be implemented and made widely available and stakeholders should be working together to identify and fix any possible security risks. Then, and only then, will we see the shift in consumer behaviour needed to make NFC mainstream.”
WeDo Technologies provides profit optimisation and fraud management software for managing financial, contract compliance and stock-related processes, as well as professional services, consulting, training and support, for retailers and telecommunications, energy, insurance and banking companies.