Apple's NFC Rumors May Be True, But Irrelevant. Mobile Payment Is Visa's Call

Reports resurfaced this week suggesting that Apple will include native NFC (near field communication) in its next iPhone. Those reports—which are true in the sense that the iPhone will include such technology, but flawed in the timing—are being coupled with the on-the-record comments from Google about Android's imminent NFC support. The conclusion: In-store mobile payments are imminent. The reality: Hardly. Those who see the native-NFC shipments as fueling mobile payments don't understand what the key mobile payment roadblocks are.

If we set aside mobile payments for the moment, native NFC will enable some wonderfully powerful capabilities, particularly in the marketing world of digital-signage. It can allow the phones to exchange extensive information with barcodes, price tags and CRM cards. Native NFC also could allow one-way information from mannequins and other store displays, and to do so in a more forgiving manner than 2D barcodes.

Let's not overlook the tons of wonderful capabilities native NFC on popular handsets could offer retail by getting fixated on one—mobile payment—that has quite a few other challenges.

What challenges? The enthusiasm assumes that the only hurdle for mobile payment has been getting a large enough group with the ability to do it. This is similar to the contactless payment argument, and we all know how well that did. (In its last chance, advocates are hoping that mass transit might save contactless.)

There are two problems with that thinking: First, it assumes that there are millions of consumers just dying to make payments with their phones, if only those devices had the capability built in. (Reality: Not quite. There are about 49—and three-quarters of them are not old enough to vote.)

That said, I think there are millions of consumers who could be easily persuaded to do mobile payment. But it will be up to the retailers to make it worth their while with discounts and other incentives, plus lots of aggressive marketing.

Concession point: Having NFC functionality embedded into phones before they ship to consumers is a critical prerequisite for such a retail move. So this is a crucial step. But it will take many changes before retailers will make that leap.

What this is truly all about is the complex payment world. All of the players—handset manufacturers and carriers for the phones; banks, Visa/MasterCard and assorted processors for the existing payment environment; and retailers, squarely in the middle—have to work things out. Yes, we're talking interchange concessions, some way to bring zero-liability-like programs to debit and agreements all around on revenue splits. That's the killer.Many other efforts have tried tackling these payment issues, with Bling making a good-faith effort—against extreme odds—along with ISIS—the AT&T, Verizon and T-Mobile effort—that started out touting almost no changes to the existing structure, including promising to not use existing telecom bills. The group seems to have backed off from its earlier position, as retailers expressed unhappiness.

StorefrontBacktalk IT Columnist Nick Holland this week made a powerful argument on why Google's efforts to become a payment power won't go anywhere. (This is Google as Google, as opposed to Google as Android phone creator.)

Holland's argument is strong indeed, but he might have focused too narrowly on Google literally mastering payments. Google as a search powerhouse has the ability to make connections between consumers and retailers and payment players.

That connection power may prove to be much more powerful—and lucrative—than directly handling the transactions, so don't count out Google just because it can't out-payment Visa.

Then again, that's the same argument Google and Yahoo made in the early days of E-Commerce—that they would be E-Commerce Gods and that retailers would be powerless to make any sales without their help. It seems that retail brands are a lot more powerful than that. PayPal is doing quite well, but Visa hasn't been hurt by it.

The sad truth is that Visa, MasterCard and others have poured in billions of dollars over the years—with a lot of bank support—and created an immensely sophisticated payment network. Replacing it won't be easy, and there are a lot of reasons to not even try.

Mobile payments will indeed happen, probably about 2 to 3 years from now in a meaningful way. But it won't happen because of handset technology. The current payment players and the telco players and the major retailers will all have to agree to make less money than they want to, in an attempt to make the next evolutionary payment change.

Hence, the irony: Apple and Google and Verizon will be side-players here. It's the Wal-Marts, Chase Manhattans and Visas that will make this happen. And they're simply not yet ready.