Financial Services

NFC – Channel to Mobile Payments

Abstract : This written by Sheetal Sharma on linkedin on Sept 28, 2014 “NFC-Channel to Mobile Payments“. From the perception majority of the market say Apple pay is the repetition but again since its coming from tech giant like Apple so it has to succeed. Also point to be noted here Apple has no prior experience or product in financial services domain  but surely scratching their head to make some break through in artificial intelligence.

Apple product has to succeed as there is no second option but ecosystem around is costly. To me its neither Mobile Money nor Mobile Banking its a middleware of both i.e. purely a mobile payment system. Traditional payments services providers, including banks as well as the well established big names like Mastercard, VISA etc have to wake-up, smell the coffee and innovate otherwise MNOs will “move their cheese”. Imagine what will happen when social media makes vibes into the payment space.

The biggest resistance to Apple’s move into the mobile payments space will come from banks and credit card companies who stand to lose significantly if Apple succeeds in moving a percentage of consumer purchases onto the iTunes platform. As one industry analyst, Aaron McPherson, a research manager for payments at IDC Financial Insights, said, “Apple does not care what the banks think. Why should they? What do banks have to offer them?” Apple’s history of bucking carriers’ stranglehold on phone software has made banks nervous that their fate will be similar and that they will be left out of Apple’s payments platform.

A very interesting fact in the mobile financial industry is we usually receive funds once or twice a month as part of salary or fee but spending is done at least thrice a day, sometimes over 5 times. This method of spending is known as micro-payment/micro-spending. Putting in numbers, this can go into billions of dollars; an easy example: if we start charging 1 cent per transaction as commission for micro payments through NFC (the stored value card technology) for food, drinks, snacks, petrol, tolls, souvenirs or any similar purchase each one of us spend minimum $5 a day (assumed at 40% of world population) then the total commission earnings will be to the tune of $4.3 billion per month. This market has clearly not been explored that well and this also goes straight into Mobile Money Market as potential plug.

The primary uses of NFC are

  • Connect electronic devices, such as wireless components in a home office system or a headset with a mobile phone.
  • Access digital content, using a wireless device such as a cell phone to read a “smart” poster embedded with an RFID tag.
  • 2 devices read and write to each other using NFC, touching two handsets together to transfer data like contacts or photos normally called as two-way communication.
  • Device reads and writes to an NFC chip. Touch and go concept like in apple case where touching apple NFC device on NFC reader or NFC POS to debit wallet or card for mobile payment balance written to the card normally.
  • Make contactless transactions, including those for payment, access and ticketing.

It would be very interesting to see in near future how the 1960 technology “Artificial Technology” will change this landscape. How deep learning will impact and fight with touch & go compare to smile &  go. The main drivers behind the success of mobile money are the explosive growth in the number of mobile devices and the fall in the cost of computing power, which have lowered the barriers to new entrants in this field.

Mobile money (m-money) is quite versatile and can support a variety of services, in particular, person to person (P2P) money transfers, which are of significant value for emerging economies. The other key driver for this is the inaccessibility of banking services to the general populace mainly due to poor infrastructure and lack of trust in local banks by country fellowmen and companies.

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