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NFC still faces roadblocks; Isis rollout may help

September 20, 2013 by Terry Dooley — SVP & CIO, ITS, Inc

The Verizon, AT&T, and T-Mobile-backed Isis mobile payment service, which is still only available in limited U.S. markets, recently made two big announcements that may have ramifications for financial institutions.

First, Isis plans to expand to nationwide coverage by the end of the year. Second, developers say it will be compatible with the Apple iPhone.

Isis is a near-field communication service designed to provide mobile carriers a portion of the mobile payments revenue pie. NFC technology allows users to make purchases by simply waving their NFC-enabled smartphone at point-of-sale terminals.

Despite Isis' intentions to go nationwide in 2013, a number of roadblocks still stand in the way of widespread NFC adoption. In fact, NFC's failure to gain traction resulted in Gartner lowering its NFC forecast by 40 percent. Gartner forecasts NFC will account for just 2 percent of all mobile payments made this year, and only grow to 5 percent by 2017.

Below are three issues standing in the way of broad NFC success:

1. Isis and NFC need to become recognizable, and their functionality more widely understood. As with most emerging payment solutions, consumer education will be key to the success of NFC.
2. The groundwork needs to be established and streamlined. In order for NFC to work, NFC chips and antennas must be embedded in both the smartphone and the payment terminal. This means more merchants must adopt and promote NFC as a payment option.
3. With the wide array of other payment options available, consumers need a reason to get on board with NFC payments. Offering customer incentives is one way to attract new NFC users.

Despite these hurdles, FIs should keep an eye on this developing arena of the payments field. With Isis' national rollout, and iPhone getting into the game, NFC still has the potential to convert FI customers' mobile devices from a service and information channel into one that directly generates revenue via customer transactions and purchases.

If the success of mobile banking is any indication, mobile payments will soon be a hot consumer service. Yet, FIs stand to be outdone if non-traditional players capture consumer loyalty first.

Be sure to get educated on all the pros and cons of mobile payments, as well as interoperability issues, liability issues, fraud issues, and consumer experience. Being prepared to educate and consult with your customers, will equip your FI with the necessary tools to give them exactly what they want.

Read more about mobile banking.

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