We use cookies to provide you with a better experience. If you continue to use this site, we'll assume you're happy with this. Alternatively, click here to find out how to manage these cookies

hide cookie message
79,018 News Articles

Most NFC mobile wallet talk is 'half-baked,' analyst says

Retailers have to accept NFC for mobile payment services to move forward

Sprint's entry into the mobile wallet technology space could be as early as this year, according to a Sprint executive, but several analysts urged customers not to believe much of the mounting mobile payment hype from wireless carriers and other companies.

Kevin McGinnis, vice president of product platforms at Sprint, told the Bloomberg news service this week that the wireless carrier plans to start a mobile payment service in 2011 based on contactless Near-Field Communication (NFC) technology.

If Sprint launched such a service this year, it would com ahead of the Isis pilot scheduled for 2012 in Salt Lake City that was announced Tuesday by Sprint's major wireless rivals, Verizon Wireless, AT&T and T-Mobile USA.

A Sprint spokeswoman confirmed Wednesday that Sprint "expects to enable NFC technology" and is in talks with other companies that Sprint would not name. Sprint would have mobile payments billed to a user's credit card, not to Sprint, with Sprint's earning revenues by selling targeted ads and coupons that appear on users' phones, the spokeswoman added.

She clarified what McGinnis told Bloomberg by noting that Sprint might not have the NFC capability fully in place by the end of 2011. "Rather than rolling out [an NFC] service, we look at this as enabling a capability," said the spokeswoman Jennifer Walsh Keifer. "And Kevin [McGinnis] mentioned that we could do this by the end of 2011, which of course means we can do it, but not necessarily that we will do it."

Several mobile payments trials using contactless NFC on smartphones and mobile devices are under way in the U.S. Of all of them, Visa may be the furthest along. Visa officials recently said they are prepared to move to a rollout soon based on pilots using multiple smartphone OSes working with four major banks in New York, Washington and San Francisco.

But the convenience of waving a smartphone near a reader to quickly pay for a transit fare or retail purchase is still far off in the U.S., analysts said, and Sprint is no exception. South Korea, Japan and some European countries are far ahead of the U.S. in mobile payment and phone with NFC technology.

"Sprint has been kicking the tires on mobile payments and wallet initiatives for at least three years," said Bob Egan, an analyst at The Sepharim Group, taking note of the recent report of a 2011 rollout.

Others saw McGinnis' comments as trying to prop up Sprint's image without many specifics.

"I take McGinnis' comments as kind of showing that Sprint still exists, and they are not completely out of the loop with NFC," said Nick Holland, an analyst at Yankee Group. "They are definitely a kind of third wheel, since their concept is lacking in detail."

Holland said some mainstream press reports have often quoted anonymous sources about NFC projects in the U.S., further casting doubt on how quickly the various players will roll out the technology. Sometimes executives will provide anonymous comments in the press to stimulate interest in their stock's price or technology, other analysts noted.

"News reports on Apple and Google and others in NFC are often a lot of conjecture," Holland said, as the various parties jockey to set up a mobile payment system that will be widespread in the U.S. "These companies are just making land grabs."

The biggest drawback with mobile payments in the U.S. is not that smartphones can't easily have NFC chips installed, but that retailers have to agree to install new NFC reader terminals. Also, banks and credit card companies have to agree on sharing fees applied to any purchases.

Holland and others noted that even though there are 150,000 contactless NFC retail terminals running in the U.S., they are several years old and probably need to be replaced to include the technology needed to provide information on customer-buying habits to retailers and advertisers.

"The older terminals are not versatile enough for couponing or loyalty programs," Holland said, meaning retailers might be asked to pay thousands of dollars apiece to install newer intelligent terminals unless Sprint or another party pays for the terminals.

"The fact that mobile operators in the U.S. are making bold announcements of bringing out NFC payments is all well and good, but retailer acceptance is what matters," Holland added. "The announcements by Sprint and Isis seem very half-baked at this point."

Egan agreed. "If Sprint is going to move the needle on NFC, it needs to partner with a large issuing bank and get some major retailers on the hook," Egan said. "Otherwise, it's just another science experiment."

Analysts have also noted that to succeed, Isis needs payment networks such as Visa and MasterCard to join its venture.

If a variety of mobile payment providers come forward with separate payment services for use with NFC-capable smartphones, Holland said it will be possible that a single terminal will need to be programmed to recognize different services or even that multiple terminals might need to be installed in a single retail location.

"We're generally lacking a lot of detail in the talk of NFC, and it's not enough to say that putting NFC handsets in the market will make mobile payments happen," Holland said.

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen or subscribe to Matt's RSS feed . His e-mail address is mhamblen@computerworld.com .

Read more about mobile and wireless in Computerworld's Mobile and Wireless Topic Center.


IDG UK Sites

7 coolest 3D-printed objects: Body parts, houses, camera lenses and even pizza

IDG UK Sites

iOS 8 review: Hands on with the iOS 8 beta

IDG UK Sites

Thinking robots: The philosophy of artificial intelligence and evolving technology

IDG UK Sites

Sharknado 2 VFX: how The Asylum created CG flying man-eating sharks