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The CTIA Wireless 2011 Conference is over and it’s time to wrap my head around what I absorbed during a very busy week. As expected, mobile payments was a big topic. The event gave me some insights into how the market is evolving and where I think it’s going.
Here are some of the big lessons:
Lesson #1 – NFC mobile contactless payments will happen, but not before you get tired of hearing people talk about the subject.
Expect to hear about near field communications all the time and everywhere at every wireless, payments, security, retail and fantasy football conference for several years. It may replace "Gesundheit!" as a response to be uttered when someone sneezes. It was everywhere at CTIA, from sessions to exhibitors to casual conversations.
Moment I learned this lesson: While waiting to speak with two very experienced payment industry leaders (leaders of companies that have nothing to do with NFC, mind you) I heard one ask the other: "Why is there a session dedicated just to NFC? It's years away. People are already using other technologies now—in Kenya!" The meaning was clear: NFC is being embraced at the expense of substantive discussions about other relevant and available mobile payment technologies. It would have been nice to hear more about those methods, but everyone was focused on NFC, and not always in contexts where NFC was even applicable.
Lesson #2 – Many people, even very smart people, do not get what NFC is about.
As the saying goes, "To a man with a hammer, every problem is a nail." NFC is a very powerful little technology that has a number of uses. For instance, to an app designer, it's great for sharing information. But to a payments person, it's all about payments. The difference is that, of all the potential uses for NFC, payments may be the most complex. It's going to take time for standards and systems to evolve to handle that complexity. If NFC payments doesn't happen in 2011, the "Year of Mobile Payments," many may say it's taking too long. NFC payments will happen (see Lesson #1), but it will be doing lots of other very cool and useful things first.
Moment I learned this lesson: During a pre-conference session on NFC, Damien Balsan from Nokia asked the audience, "How many of you have used NFC for a transaction?" Few in the very full room raised their hands. Even I thought, "NFC payments aren't available in the United States." It was a trick question. CTIA was using NFC chips embedded in conference IDs to allow access into sessions. That meant every single person in the room who had been scanned at the door had "used NFC for a transaction." So while "NFC" is becoming synonymous with "a payment method meant to replace credit cards," it’s bigger and broader, both in terms of other applications and even within payments. We will all grow very accustomed to NFC long before we buy a single item with it.
Lesson #3 – A lack of understanding of payments and technologies is leading to hype, confusion and a feeding frenzy of investment.
The singular focus on NFC technologies means money will begin flowing into any company that has anything to do with it. That's good for those companies, but for a while it may crowd out more immediately available but less sexy payment technologies. That's bad for those companies, and probably the market. Across the market, entirely new types of companies are being created to handle the management of finance and wireless concerns. Many will see that as an opportunity to cash in. It may not be a bubble (yet!), but not every company I saw this week will survive. And some of the good ones will, sadly, wither on the vine for lack of capital chasing after hype.
Moment I learned this lesson: While standing at the Korea Electronic Banking Technology Co. booth at the back of the vast hall amongst the emerging technology companies, I watched a demonstration of NFC at a sample point-of-sale terminal. It was a basic swipe-the-phone-to-make-a-dummy-terminal-beep demo. Since KEB Technology does more than that, my discussion with a company rep moved onto things only tangentially related to NFC. Midway through the discussion, another conference-goer walked up. Apparently the talk had grown too esoteric for him, so he wanted to see more of the NFC chip "talking" to the terminal. As the discussion devolved into the rep making various things go beep, I excused myself, but not before hearing the conference-goer introduce himself as "a technology investor." Expect many more such "technology investors" to see NFC as an investment.
(Bonus lesson for mobile payment start-ups: Include something that goes beep in your pitches to investors.)
Lesson #4 – Mobile payments is now, essentially, a discussion about payments, not mobile.
(Corollary to lesson #4: Wireless people are not payment people and payment people are not wireless people.)
The technologies are already available to make payments on phones and turn them into mobile wallets or whatever metaphor you choose. The big challenge isn't making payments with cellphones. The challenge now is enabling that technology to work securely and reliably and get it adopted by consumers and merchants. The next few steps are all about building business rules, analyzing risks and understanding who owns that risk. Those are no small tasks, but they are tasks that payment companies and financial institutions do better than wireless companies. On top of that, making a payment happen in milliseconds is what payment processors and credit card brands have been doing for decades. It is institutional knowledge that gives them an advantage in creating mobile payment methods.
Moment I learned this lesson: During Fabio Sisinni’s keynote starting the pre-conference "Money Over Mobile" sessions, he said, "To do mobile payments well, first you have to do payments well." The good sense of that statement seemed so obvious, and yet many seem to believe that making a transaction happen in the blink of an eye is a parlor trick. It isn’t. Expect to hear a lot about this topic in the future.
Lesson #5 – Securing payments on the phone may be impossible according to today's standards, and it’s not talked about enough.
Mobile payments in its many forms is being pushed along by forces from all sides. Whether it's closed-loop, contactless NFC, m-commerce or some other technology, allowing people to pay with mobile devices will become a reality soon. Unfortunately, for all the discussions about standards and technology and the inevitability of certain methods, there were few discussions this week about how to make all of the methods completely secure and safe. Sure, security was discussed, but in way that said, "We'll solve that detail soon enough. Let's talk tech!" For merchants — who bear ultimate responsibility for consumer data and who are still reeling from the fallout of a decade of data breaches — "soon enough" should mean "now." The players involved, from carriers to card brands, better start addressing the rules, making exemptions and doing what is necessary sooner rather than later.
(It could be that lack of discussions on payment security was because it was a wireless conference, and not a payment conference. In a strange coincidence, the Merchant Risk Council conference was this past week in Las Vegas. Perhaps that's where all the risk talk was taking place.)
Moment I learned this lesson: In the "Merchants Over Mobile" session, Dodd Roberts, president and CEO of the Merchants Advisory Group, provided a sobering assessment of the security requirements merchants face. There is confusion and concern in the merchant community, and mobile payments looks to them like one more place where consumers' data must be stored securely at great cost. Roberts said that $20 billion has already been spent by merchants on complying with PCI standards that have failed to prevent major thefts of consumer data. To them, the supposed convenience of mobile payments pales in comparison to the risk. That risk/reward balance will have to be addressed soon.
These are only a few of the big lessons from CTIA Wireless 2011. There were plenty of little lessons as well. And there was certainly plenty of hype about how mobile payments will soon become ubiquitous. (And the word "ubiquitous" got to be slightly silly in its ubiquity.) I even heard one attendee say that mobile payments is experiencing "a gold rush" at the moment. Such exuberance is understandable when surrounded by so many people discussing the possibilities for mobile payments.
All things considered, though, the conference left me with the impression that some very bright minds and very good companies are looking at making mobile banking, finance and payment solutions available soon. There are still some details that need to be worked out, but with all the energy and attention being paid to this market, I wouldn’t be surprised to see many of the solutions live up to the hype.
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