Why NFC payment didn’t take off?

- NFC is the next thing in payment. Every payment will end up on the smartphone.
- Why?
- Because it can only end up there.
- I see, but why?
- Because!

This was a standard conversation about the future of payment taking place between me and basically every people I met on my job a couple of years ago. The NFC was the future, no matter why.

Then time passed by and many carriers rolled out their wallets — Apple rolled out Apple Pay, Samsung rolled out Samsung Pay, Google rolled out Android Pay. Yet today still 97% of potential mobile payment transactions are card-based.

What is NFC? Near Field Communication is a set of close-range wireless communication standards. Simply put, it’s a method of wireless data transfer that detects and then enables technology in close proximity to communicate without the need for an internet connection and low electricity consumption. It is not a new tech, it came around few decades ago but never found an optimal use case.

At the end of the 10s this seemed to be the mobile payment world. Every major mobile operator thought that their SIMs could become a crucial element in bringing security to the mobile payment process: every credit card would have been virtualized on the SIM in few years and every physical payment was supposed to become NFC-based. MNOs, start-ups and established tech companies saw the opportunity and started developing, but unfortunately they all forgot about one small element: old habits die hard, and not for free.

Every main player in this arena missed the importance that a customer gives to payment: ZERO. I don’t know any person who is enthusiastic about payment: it is a commoditized action, it is something that has to work, be reliable, ubiquitous and fast. Nothing more.

These are all features that apply to NFC solutions: they are all more or less reliable and fast, and the whole ecosystem is working a lot to make them also ubiquitous.

So what is lacking to ramp up the adoption? Well probably the right question should sound a little different: is there enough value to change the status quo? What is the incremental value of tapping a phone as opposed to swiping a card?

If there is value, this is not clear enough to users and the stats about NFC payment adoption clearly show that. While there isn’t any public number revealed, these are the latest available data according to the consultancy firm Crone Consultancy (http://www.bloomberg.com/news/articles/2016-03-01/samsung-gunning-for-apple-in-race-to-dominate-mobile-payments).

NFC Wallet adoption — March 2016

What is even more eloquent is that the adoption rate of Apple Pay among Iphone 6 owners actually decreased from Spring ’15 to December ’15. The % users that tried at least once the service declined from 22% to 20% . This is obviously due also to the significant increase of Apple Pay enabled devices, but it clearly shows that the adoption rate is not keeping an exponential pace.

So what? As someone really smart already stated being a form factor substitution is not a value to the XXI century user and this is not enough to push customers to move away from a long, well established habit. Instead, what could really change their behavior is a radical additional value brought by the tapping experience.

The C-less experience has to become something more than a different mean to pay: it has to facilitate customers lives and allow a new set of use cases built on top of the payment feature.

In other words, the wallet has yet to find the way to be truly relevant and its only hope may be “platformization”: turning into a platform in which payments are one of the founding bricks, a clear requirement necessary to untap a new set of financial and retailing services, but not the competitive edge of the product.

Many are working in this direction but yet no one has built THE killer application on top of the payment experience. And once this killer app will materialize , it will probably be NFC based, but I bet NFC won’t be its real driver of success.