Tuesday, September 1, 2009

P2P use cases will get NFC started in the US

I came across an interesting post by Celent on Mobile NFC. This report claims that cash displacement is the main motivation behind Mobile NFC deployment. The report claims that there will be an annual revenue increase of $1.83 per debit card for banks.

I agree that cash displacement is a major driver. For small-value transactions, e.g., at a fast-food restaurant or at a drug store, both the merchant and the consumer would like to get thru' the checkout lines quickly. Eliminating cash handling, doing away with signatures for payment card authorizations are definitely desirable.

If banks stand to make $1.83 per card per year from Mobile NFC, there is very little incentive for mobile operators to invest in NFC technology on handsets in the US. Payment cards, the purported killer app in mobile NFC, become marginal. Other apps on Mobile NFC, such as, Loyalty cards and coupons are stretch goals and would become difficult to fund.

Looking at Japan as a trendsetter, Lars (Mobikyo, Japan) had these insights to share:
  • Cash replacement is a major use case across a variety of locations, including quick-serve restaurants (QSRs), convenience stores, transit (trains, buses and taxis) and vending machines
  • Exchange of information is a major category: Smart posters providing coupons, receive and redeem coupons, tickets..., access information (to unlock a PC)...
These use cases have been the mantra of NFC practitioners the world over. What is daunting about these use cases is that the 'network' is a critical component, which makes NFC deployment a classic chicken-n-egg situation.

P2P (Peer-to-Peer) use cases may help break the NFC logjam in the US. For e.g., when I buy my fancy mobile phone with Bluetooth (obviously this is a 2005/6 scenario), all I need is my fancy Bluetooth headset to start using Bluetooth. I don't have to wait for the ecosystem to be enabled and up-n-running. This instant gratification is necessary for people to fork out their valuable money for new features/gizmos, and get the market going.

We need such P2P instant gratification use cases for Mobile NFC. Exchange of business cards is an example of P2P mobile NFC (if you recall, this use case was used during the early days of Bluetooth as well). However, these uses cases have to substantial (from a business model perspective, to justify OEMs/operators to invest in NFC).

What do you think will help get mobile NFC started in the US?


  1. Manju:

    No idea how Celent gets to those numbers but would suggest NFC activities here over the last 5-years prove the model works.. 8-)


  2. Lars,

    I agree that Celent's numbers don't make sense. However, American Banker seems to have a similar observation (http://bit.ly/3Qx1TS). Having said that, I would love to get hold of some stats that gives some feel for payment transaction flow thru' FeliCa network. This will lay to rest some amount of speculation and hand-wringing in the US.