The first NFC debit cards have been in circulation in Austria
A number of developments are relevant in this. NFC involves not only conventional payment cards like debit and credit cards or the Quickmit NFC chip, but also NFC smartphones. NFC payment cards will become established relatively quickly, especially the debit card. I know of no other country in the world where the Maestro debit card has such a strong market position as in Austria. This makes decisions in this area simpler and faster, as we can also see from the current developments.
The rollout of the NFC debit card should be
The switch has already begun, and this means that NFC technology will be standard in every wallet at the consumer end of things. At the merchant end, I expect that the replacement of payment terminals in the stores will run more or less in parallel, if it is not completed faster. By the end of 2013, retailers will be confronted with the fact that around 50 percent of consumers have access to this payment method, and that a large share of them will also want to use it.
The second development thrust, NFC on smartphones, will take a little longer because more complex infrastructure has to be set up for this. The chicken-or-egg problem here will take longer to solve, but this will be accelerated by the developments in the card segment.
There are many reservations about payment with NFC. How seriously are the individual stakeholders taking the critics` security and data protection concerns?
The general view is that the security concerns of all stakeholder groups can be solved, or that they have already been solved. But "being secure" and "feeling secure" are two different things. This means that there is still a great need for consumer education in terms of security and data protection issues. All involved organizations would be wise to put a major focus on the issues of security and data protection, because how fast the technology develops and is successful will depend largely on this.
Are merchants satisfied with the goals to date?
Various talks have given me the feeling that merchants are pretty relaxed as far as NFC is concerned. They are watching it very closely. For merchants, it is very important that their individual wishes are taken into account in the implementation of pilot projects and the rollout of terminals. One very important issue for retailers is the confidentiality of transaction data, so that the relationship between the merchant and the customer remains protected.
So merchants don`t want to share their customer data?
Exactly. They do not want the sharing of customer data, which mobile communications providers are very interested in, to be permitted. Merchants also want the systems to be interoperable, and do not want a jumble of hardware at the point of sale, like in Italy where there are six different terminals for card payments at the highway rest stops. Things like this have to be taken into account from the start. Retailers have established their own working group for this, and it is already working very actively and formulating its priorities.
What are the biggest problems right now in establishing NFC in Austria?
NFC technology is a cooperation technology. Companies that are competing with each other must find ways to collaborate. This is developing slowly now, but is not progressing fast enough. One area is particularly important in this: the mobile network operators (MNOs). They have not yet realized that they will need to sit down and work together. This has been happening for some time already in other countries in the form of joint ventures that the mobile network operators have set up. Because merchants will not accept having to account for what smartphone or what mobile communications provider a customer uses.
Like Confucius said, even the strongest man cannot pick himself up. But I don`t see that this is clear everywhere in Austria yet. But I do see slow changes. Austria has the potential to become the EU`s pioneer in the spread of NFC technology.
Why does Austria have the potential to become Europe`s leading NFC country?
The initial situation is more or less the same for all EU countries, they are currently all at about the same stage of NFC implementation. But as I mentioned, NFC is a cooperation technology, and requires that the various players make compromises and work together instead of against each other. Austria is known for being a country where people sit down and work out solutions together. There is an organization in the economic chamber that neutrally represents all economic NFC stakeholder groups. It is a country where there is a social partnership. NFC is a "green technology" that offers considerable benefits for everyone. And it of course does not hurt that the technology was invented in Austria. This puts Austria in an ideal position to move into the NFC fast lane.
Where are the greatest differences between the interests of merchants, banks, mobile network operators and the technology providers in Austria?
Between the banks and mobile network operators, there is the question of whether the existing market shares in the value creation chain will shift in favor of the new entrants, for example the mobile network operators. While the MNOs are confident that they will be able to get a piece of the current pie, the banks are also confident and believe that they will be able to maintain their position in payment transactions. I think the banks are right, since they clearly have more leverage.
An increasing number of other mobile payment solutions that may not require an extra terminal at the point of sale are also being developed in addition to NFC. Isn`t NFC on the verge of missing the boat in the payments sector? There are more and more interesting payment solutions aside from NFC.
It`s true that there are interesting mobile payment solutions aside from NFC, most of which I know from the USA. In Austria, I recently learned of a pilot project in Tyrol: paying with an EAN barcode (futurezone reported). This solution is interesting for a number of reasons. One the one hand, it shortens the value creation chain, and makes payment a matter between the consumer, his bank and the merchant. It goes "back to the future" in a sense. On the other, it requires very little from merchants in the way of investment, as the necessary infrastructure has existed for years.
This solution is also interesting from a different angle in that it dovetails with EU efforts to reduce the dominance of the USA in payment transactions. This architecture excludes the payment schemes from the USA (Visa, MasterCard, Maestro, V-Pay, etc.).
Do you think this will be serious competition for NFC solutions?
This kind of solution will definitely shake things up. And this shows that non-NFC technology will also be capable of pushing the implementation of NFC technology. The use of EAN barcodes doesn`t mean that NFC will never be used. The technical and organizational step from an EAN barcode to NFC is relatively small. These paradoxical relationships are what makes NFC so interesting.
What do you think the chances are for an open, standardized wallet solution? Will we see one, or do you think that every individual provider will continue to do "its own thing" (like Samsung, T-Mobile, Google and Apple)?
I think that we will have different wallets from the major players (smartphone manufacturers and mobile network operators). Sooner or later, they will become relatively open. In the end, I think that the smartphone and operating system manufacturers will win the wallet war. Mobile network operators will then "label" these wallets with their own brand. I think the chances for a national wallet initiative are relatively limited, especially in a very small country like Austria.
How are electronic wallets developing internationally?
I have not been following the so-called wallet war between the heavyweights Google, Apple and Samsung closely as of late. We can only wait and see what happens. And this is not yet relevant for the developing ecosystem in Austria.
But I do have some thoughts. I and many others expect that Apple will jump onto the NFC bandwagon with its next iPhone, or the one after that – I think the one after the next. With over 500 million iTunes accounts and saved payment information, this entry will definitely make waves. And when you consider that Apple`s war chest is big enough that it could buy MasterCard twice, you can imagine what changes we could see when Apple gets started. We just have to wait and see.
Where else could NFC become established in Austria?
The Vienna Transport Authority and Austrian Railways are running an interesting NFC ticketing pilot project. There are also international initiatives in the airline industry. There is an awesome amount of potential in any case. There are also highly interesting pilot projects in Austria in the area of access control (NFC Access) that have considerable potential. And there is the healthcare industry. I am confident that NFC will become established in these areas.
Reinhold Bierbaumer is a management and IT consultant, lives in Miami and Vienna and has run the NFC working group at the Vienna Federal Economic Chamber`s association AustriaPro since 2012.
The 54-year-old expert has 25 years of experience with IT projects in the areas of financial services, payment transactions and smart cards, and together with his team specializes in the transfer of NFC-related technology concepts from and to Europe, among other things.