NFC – Channel to Mobile Payments

“NFC-Channel to Mobile Payments” – The race/efforts by nonbank organizations are still on to find innovative ways to get excluded customers on board. Our focus on NFC in this post will be limited to payments only. The idea was to depict the perception majority of the market which says Apple pay (NFC payments) is the repetition. Sadly since its coming from a tech giant like Apple so it has to succeed. This written post was by Sheetal Sharma on LinkedIn on Sept 28, 2014.

Apple Pay – A Repetition With Noise

Apple has no prior experience or product in the financial services domain but surely scratching their head to make some breakthrough. Now adding artificial intelligence taste to it after gathering data for machine learning algorithms to learn and support their business.

Apple product has to succeed as there is no second option but the ecosystem around is costly. To me it’s neither Mobile Money nor Mobile Banking it’s 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 banks think.
• Why should they?
• What do banks have to offer it?”

Apple’s history of bucking carriers’ stranglehold on phone software has made banks nervous that their fate will be similar. They will be left out of Apple’s payments platform very soon.

Micro-Payments – The Frequent Payments Hub

Mobile financial services industry consumers usually receive money once or twice a month as part of salary or fee but spending is done at least two to three times a day. Sometimes even more than 5 times though. 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 a commission for micropayments through NFC interface for food, drinks, snacks, petrol, tolls, souvenirs.

Any similar purchase we make and pay just one us cents for every transaction. As each one of spends a 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 a potential plug.

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.

With NFC any device can be a payment device. How smart it would be if you just tap your NFC card, any hand-phone (with a sticker on back), your smartwatch/phone or any item with a small sticker on it. It introduces a better way to add secure payment capabilities based on NFC to add to any object like car keys, or things you wear, like wristbands, jewellery, and other fashion accessories.

NFC Primary Uses Cases

It would be very interesting to see in the near future how the 1960 technology “Artificial Intelligence” will change this landscape. How deep learning will impact and fight with touch & go by introducing 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 has lowered the barriers to new entrants in this field. Some of the benefits of NFC are as below.

• Connect electronic devices, such as wireless components in a home office system or a headset with a mobile phone.
• Access digital content, with 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.
• The 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.

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.

Points to Note:

All credits if any remains on the original contributor only. We have covered all basics around myth on mobile payments via NFC, its models and the importance of quality of NFC services. In the next upcoming post will talk about implementation, usage and practice experience for markets.

Books + Other readings Referred

• Research through open internet, news portals, white papers and imparted knowledge via live conferences & lectures.
• Lab and hands-on experience of  @AILabPage (Self-taught learners group) members.

Feedback & Further Question

Do you have any questions about AI, Machine Learning, Telecom billing/charging, Data Science or Big Data Analytics? Leave a question in a comment section or ask via email. Will try best to answer it.

Conclusions- Although we have made great strides to expand access to financial services through new technologies and innovative business models, the gender divide stubbornly persists in most emerging markets. The report estimates about 1.1 billion women globally are excluded from the formal financial system. In developing countries, 59 per cent of men holds bank accounts compared with 50 per cent of women. Speed is what customers and sellers looking through the checkout process. Its proven fact higher the speed higher the adoption rate. Thus to increase payment instrument speed the answer may be NFC gets fit in here to reduce average purchase amount transactions.

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