Where Is My Magical NFC Phone Wallet?

According to Gartner Group report, there are 141.1 million mobile payment-ready devices in circulation and that the vast portion of the world’s population (mostly in Asia) is actively using NFC and other techniques to pay for items via mobile. However, the US is lagging wildly in this regard, with nearly no activity in the space at present even though two-thirds of young people would be happy to wave their phones in front of a candy machine to grab a bite. Sadly, two-thirds of older folks would balk at the opportunity.

Clearly there is demand, but what is it in our psyche that is so against the concept of NFC and cellphone payments? First, a word from Gartner:

In developed markets, companies are trumpeting the prospects of NFC without realizing the complexity of the service model,” says Sandy Shen, research director at Gartner.

“We believe mass market adoption of NFC payments is at least four years away. The biggest hurdle is the need to change user behavior by convincing consumers to pay with mobile phones instead of cash and cards.”

Ultimately, when you come down to it, the service model isn’t particularly complex. Instead, it is the hardware expenditures necessary to prepare every credit card station and vending machine to begin accepting payments. I also think that our own current vision – an amalgam of Paypal-esque “SMS payments” and the dumb NFC payment systems offered by some credit card issuers – is at odds with what we truly need to implement in this country. I don’t think Visa and Mastercard will run the next generation of mobile payments. They will be carried on the back of an NFC juggernaut that is connected to an open standard found in almost every phone. But never and in no way will credit card companies control the manufacture of devices themselves.

Our own use cases are strangely quaint. In Japan, where the Suica payment platform is king, NFC is popular because phones have been ubiquitous for almost two decades and everyone takes the metro. For example, our biggest “NFC” play are the vehicle-based EZPass systems that use a radio transmitter to pay bridge and highway tolls. This, in short, is the primary reason why handheld NFC devices seem alien to us – we’re more used to driving than taking mass transit. Everything else has fizzled. For example, the most recent example of NFC hoopla I can think of was the rush of NFC key fobs offered a few years ago at gas stations and McDonalds. Those fobs, I suspect, are now filling our junk drawers at home.

Besides the logistical issue of getting new hardware to countless points of sale, the NFC market in the US is fractured. I believe that soon Wal-Mart will offer an app and NFC component that will allow folks to collect discounts and pay for goods at the register. When – and only when – this giant takes up the flag will the rest of the squabbling NFC camps follow suit. Do I want Sam Walton’s beast to control NFC adoption in the US? No, but it makes the most sense.

In the end, I agree with Gartner: we’ll see NFC payments in the next four years to half decade. I also see the potential for credit card obsolescence by 2020 and – hold onto your hats – the slow reduction of cash usage by 2025-2030. By then we’ll all have our jetpacks and space cars, so we won’t miss these old artifacts of a benighted economic time.