NFC: A New Way to Think About Payments
Contactless technology is ushering in a whole new way to think about payments. It’s not just about a set of procedures at the point of sale. Rather, contactless technology is part of a paradigm shift in consumer and merchant interactions. By understanding how contactless technology fits into this new order, your merchants can focus their businesses to meet customer expectations.
Millennials are driving the trend toward convenience, personalization and customization in retail. The US Chamber of Commerce reports, “With brands and services, what used to be a one-way conversation is now a multifaceted, 24-hour-a-day, seven-day-a-week dialogue between brands and their customers.” (1) Commerce has become individual-focused, rather than retailer-based. Traditionally, consumers bent themselves to accommodate the structure of brick-and-mortar business. Consumers expected to shop during normal shopping hours, and bank during normal banking hours. There was no great expectation of a personalized experience. But now, the consumer experience has completely shifted. With online banking, there’s no need to wait for your local branch to open. With mobile shopping, you can browse and buy whenever it’s convenient. And with targeted marketing campaigns, B2C interactions are more personalized and relevant than ever. Instead of dealing with a traditional storefront, consumers have come to expect a highly personalized shopping experience. It’s crucial for retailers to adjust to, and capitalize on, this sea of change.
In our industry, it’s easy to think about contactless technology only as it pertains to the point of sale. But that’s only one part of the picture. Contactless technology is all around us. From highway toll transponders, to keyless entry cards, to sporting event wristbands, contactless reaches far beyond the cash register. Contactless technology has become an essential component of people’s lives, probably more than we even realize. As various industries expand their use of this technology, consumer barriers to the use of contactless technology at the point of sale will continue to ease. This increased acceptance will lead to increased adoption. Already we can see enormous growth. Contactless payments in the US are forecasted to increase nearly 62% in 2016 over 2015 rates, with a revenue of 27.05 billion. (2)
Benefits of Contactless Payments
While NFC terminals will soon become an essential component of your merchants’ portfolios, the benefits of contactless technology are not limited to checkout. VeriFone notes, “With NFC, merchants and retailers of all kinds can turn their point of sale into a much more valuable “point of interaction” (3) Contactless is more than just another way to pay. With the data collected through today’s technology, your merchants can employ predictive marketing to build customer loyalty like never before. From targeted marketing campaigns, to special in-app offers, to product promotion based on a customer’s past purchases, contactless technology helps businesses provide the individualized attention that customers both appreciate and are increasingly growing to expect.
NFC: A Million Ways to Pay
Contactless technology may conceivably be delivered in an endless variety of forms. Within the US, smartphones are the primary means for NFC payments. And of course, don’t forget the ubiquitous Apple Watch, which can be used at millions of retail locations. But smartphones and the Apple Watch are just two of many viable forms. Outside the US, contactless cards are the gold standard, with over one billion contactless cards issued in 2015 (5). Other forms currently available globally (though slow to catch on in the US) include Barclaycard’s bPay keyfobs, wristbands, and NFC stickers. As providers continue to expand their forms, consumers will enjoy even greater convenience in payments.
Some NFC development goes far beyond the norm, to the realm of the offbeat and even futuristic. Right now, it seems as if innovation labs are throwing everything at the wall and seeing what will stick. Some unusual forms include wearables such as jackets with embedded tags, NFC jewelry such as rings for your fingers, and even temporary tattoos. Incredibly, some brave (or foolhardy?) souls have even tested implants under the skin. While these forms are unlikely to ever become mainstream contenders, they still point to the fact that contactless technology is a growing and essential component in the communications landscape.
Fortunately, unusual NFC forms are not a concern for retailers. All NFC transmissions follow established communication protocols. Therefore, any NFC-enabled payment terminal should be able to read tag data, whether it’s supplied by a smartphone or a heart tattoo. Right now, only about half of US merchants are equipped to process NFC payments. However, as the US continues its shift to EMV compliance, a majority of merchants will be upgrading their terminals. Now is a prime opportunity for retailers to choose terminals that provide NFC capability.
In addition to payments, NFC technology permits retailers to enhance the shopping experience through customized or promotional tags in the retail location. Potential uses are endless - links to store wi-fi, promotional posters, product information, daily deals, and more. (4) NFC tags can enable a wide variety of contactless communications. Creating NFC material for in-store use is a surprisingly simple process. Almost any object can serve as an NFC source, simply by inserting a tag or affixing an adhesive sticker. For DIYers, blank tags are readily available for purchase, as are tag-writing apps. Just write some code, scan your tag, and voilá - merchants can produce their own NFC tags. For a more elegant product, as well as for implementation on a large scale, NFC marketing specialists such as Tagstand are a great resource.
The Big Picture
NFC is more than just a way to pay; it’s a way to interact. Contactless technology is a matchless tool for connection, allowing retailers to provide their customers with communications that are individualized and relevant. By tapping into the contactless revolution, retailers have an unparalleled opportunity to build customer loyalty and increase profitability. By providing your merchants with NFC-capable payment devices, along with an education in new market opportunities, you can position your merchants to succeed in this changing consumer environment.
- “The Millennial Generation.” US Chamber of Commerce Foundation. 2012. https://www.uschamberfoundation.org/sites/default/files/article/foundation/MillennialGeneration.pdf
- “Mobile Payments will Triple in the US in 2016.” emarketer. Oct. 26, 2015. http://www.emarketer.com/Article/Mobile-Payments-Will-Triple-US-2016/1013147
- “NFC Payments and the Point of Sale.” VeriFone. Accessed Oct 12, 2016. http://verifonezone.com/fstore/0a463145bbfccb42_-6b6a8b6a_131622799b3_-6202/NFC%20Primer%20White%20Paper.pdf
- “Opportunities for Retailers and Brands.” NFC Forum, Accessed Oct. 12, 2016. http://nfc-forum.org/opportunities-retailers-brands-provide-relevant-convenient-enhanced-store-experience-nfc-technology-infographic/
- Two sources:
- “Facts and Figures.” Eurosmart. Accessed Oct. 14, 2016. http://www.eurosmart.com/facts-figures.html,
- “Contactless Made Up Over Half…” Payment Eye. Ben Rabinovich. April 26, 2016. http://www.paymenteye.com/2016/04/28/contactless-made-up-over-half-of-all-cards-issued-in-2015/
in Industry News, Tagstand, Technology