mWallets & NFC Are the Future

Problem Definition

Mobile payment systems also known as mWallets rely on a wireless technology called “Near Field Communication” (NFC) that allows for day-to-day transactions make payments by tapping their smart phone against special wireless readers like MasterCard’s PayPass. It started becoming a hot topic and an exciting potential for future transactions the past few years, but retailers and companies have been dreaming of becoming a widely used system for making payments.

In simpler words, the customer’s credit card details are stored on a smartphone chip that allows secure communications with a similar transmitter at a retailer’s cash register or on a transit system, and pay for a wide range of services and digital or physical goods and products.

What mWallet promises is convenience. Mobile payments can facilitate in putting everything in one place, consolidated in the single device customers always have at hand. The fast pace of smartphone adoption will soon make it viable for more consumers to use their devices as a payment mechanism.

Based on a report conducted by Simon Kucher & Partners 90 per cent of smartphone users are willing to use NFC and mobile payment technologies for purchases and money transmissions, resulting in the realization that “mobile phones and in particular smartphones are the gateway to digital payment usage”.

But there is more to that than a simple credit card alternative. The integrated mCommerce initiative will combine mobile coupons and loyalty programs with mobile payments, giving retailers the almighty power to track customer purchasing decisions without the need to ask them to subscribe to a service or provide additional information.

From now on, retailers and marketers can retrieve all the data required to answer imperative questions about consumers: Who are they? What is their purchasing behavior? How often are they shopping? How much do they typically spend? – Leading to the always dreamed and desired “one-to-one targeted” advertising.

Mobile marketing relies on the notion that consumers are relatively attached, if not completely addicted, to their mobile devices. The mWallet creates an even deeper connection between consumers and their phones, thus giving mCommerce the potential to be one of the leading drivers for mobile marketing.

Some experts say the technology presents privacy concerns while offering a target for cyber-thieves. Mobile payment systems are a dramatic improvement from the “devious” system of plastic credit cards; millions of which have fallen into the hands of cybercriminals who hack into unprotected computer systems.

mWallets & Payments in Action

Although the mWallets started appearing as a potential mobile marketing solution heavily last year, there are a number of companies competing in the so prosperous mobile environment with robust technologies; many marketers are starting to grasp the effects that they will have for the retail and mCommerce sectors.

The most noteworthy ones and those who shape the NFC industry is Google WalletIsis and PayPal mobile payments.

Google Wallet

Google Wallet became available only on Nexus S 4G Android devices and Citi Master or Visa cards holders. The service is built on an open platform that combines multiple credit cards, consumer loyalty programs and special offers once payment has been made through what Google calls “SingleTap Experience”. Payment is as simple as swiping the smartphone at the checkout counter on every retailer that has PayPass installed. Essentially, Google is turning your phone into your wallet.

As an addition, the application has a section called Google Offers where the user can browse through various offers at merchants that are affiliated and using Google Wallet. Using the Google Offers app that can save coupons directly to Google Wallet, make a payment with your preferred payment type, apply the coupon you have saved and also apply the purchase to your loyalty card for that store.

The Google Wallet must be associated with a Google account in order to use it and add your credit card information that is rumored to be stored in the device hardware and not the application and therefore might trigger some privacy concerns.


Isis, the joint venture between Verizon Wireless, AT&T and T-Mobile USA that will be enabling consumers to conduct transactions for physical products at retail locations, redeem coupons as well as use store merchant loyalty cards via the mobile phones.

Isis has already started securing support for its mobile wallet system from the majority of leading device makers, including HTC, LG, Motorola, RIM, Samsung and Sony Ericsson, as well as from NFC hardware provider Device Fidelity, who we will analyses briefly below.

Isis plans to begin consumer trials in the Salt Lake City and Austin, Tex. markets.

PayPal mobile payments

PayPal Mobile has supported bump-style mobile peer-to-peer payments in its iPhone and Android apps enabling users to transfer funds by bumping their smartphones together. PayPal’s expanding mobile payment platform puts the company in direct competition with the Google Wallet mCommerce application solution.

PayPal is looking to enhance and expand their NFC solution in the near future and they are looking to create an Android app that limits the process for initiating and confirming payments using the NFC feature in just two taps per user, rather than the multi-stepped process required in the bump-powered implementation.

Finally, PayPal will be rolling out a “one-stop shop” for retailers, both online and physical businesses, to manage customer payments. Features of this new solution will include LBS offers, enabling payments accessible from any portable device as well as offering payment flexibility and CRM to customers after they have checked out.


DeviceFidelity is an NFC hardware provider with a patent-pending product and solution called In2Pay that is based on a microSD solution that transforms smartphones with a memory card slot into an interactive contactless transaction device. It is known as the only plug and play mWallet solution in the market.

Additionally, DeviceFidelity have created the In2Pay® iCaisse for iPhones where the user simply enters the microSD into the case’s slot.

Their API is available for all popular smartphone operating systems including Android, iPhone iOSx, Blackberry and other J2MEbased operating systems.

Market Opportunities

The obvious answer to the question of “Who is going to benefit from such technology?” is “The Retail Industry”. Of course it is not going to have a great impact on the retail sales since Google Wallet seems to be the only ‘all inclusive’ solution out at the moment. Having said that, there is a great opportunity on the longer run benefits for retailers, as this will include better loyalty conversion rates and an increase in qualified traffic.

Taking into consideration the perceived value and safety barriers that have to be overcome, mWallets will mostly be used for everyday and smaller amount transaction. Users do not seem to be willing to purchase expensive products i.e. a vehicle or an apartment, via their mobile device. This leads to the realization that the industry that looks more prosperous for NFC and mWallets is the FMCG industry where users can control their expenses and they come across on a daily basis.

comScore estimates around 10% of mobile subscribers in Japan, because of their advanced technology and telecom infrastructure, have used their mobile wallet to make a purchase, mostly from convenience stores, vending machines and on public transport.

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