RBS has launched an NFC-enabled cover that turns customers' iPhones into credit cards. Photo: AFP/Stephane Danna
Currently a trial program with 1000 users, RBS hopes that if successful, the service will be rolled out to all of its iPhone 4 and 4s-owning customers in the coming months. The early signs are good as over 9000 customers registered to take part in the initial trial.
Using radio waves to transfer data between digital devices, NFC (Near Field Communication) has the potential to turn smartphones into true virtual wallets. Rather than search for your credit or loyalty card, simply tap your handset on the card reader at the checkout to pay for goods and services, use coupons and collect bonus points.
According to a Gartner report published in May, worldwide mobile payment transactions are expected to surpass $171.5 billion this year and could be worth as much as $617 billion by 2016. "This will bring big opportunities for service and solution providers who will need to cater to the local demand patterns to customize their offerings," says Sandy Shen, author of the report.
As such, Google has been investing heavily in the technology, and launched its Google Wallet service in the US last year. A group of leading US wireless carriers including AT&T and Verizon has also introduced its own service called Isis. And, with an estimated 448 million users by 2016 it's understandable why a number of leading companies are betting on this nascent technology.
Therefore, despite rumors to the contrary, when the iPhone 5 was officially launched in September without NFC support, many experts were surprised by the omission. However, subsequent interviews with Apple's senior vice president of marketing Phil Schiller revealed that although Apple had considered incorporating the technology, the company didn't believe that it was currently viable. He told All Things D that NFC isn't a solution to a problem Apple users face now. "Passbook [Apple's virtual Wallet app] does the kinds of things customers need today," he said.
Gartner's Sandy Shen also stresses caution: "NFC payment involves a change in user behavior and requires collaboration among stakeholders that includes banks, mobile carriers, card networks and merchants. It takes time for both to happen, so we don't expect NFC payments to come into the mass market before 2015," she said.
At the moment it's a chicken-and-egg scenario. Merchants won't invest in the technology until customers have electronic wallets and customers won't adopt electronic wallets until they can use them in stores. And even as NFC starts to win customers around, there will also be issues with handsets such as iPhones, that don't support the technology, as Sandra Alzetta, senior vice president and head of mobile at Visa Europe, who is partnering with RBS to launch TouchPay, says: "A key industry challenge in bringing mobile contactless payments to consumers is finding ways to enable existing smartphones that do not offer NFC technology. Services like TouchPay show how NFC-enabled accessories for smartphones can deliver the future of payments today and help hasten mainstream adoption."