An Expert Casts Doubt on Stickers for Mobile Payments at the POS

With near-field communication (NFC) technology seemingly on hold in North America, mobile-payments backers are turning to radio-frequency identification tags with adhesive backing that can be affixed to phones (Digital Transactions News, Oct. 15, 2008). These so-called stickers, offered by First Data Corp., Oberthur Technologies, and other companies, are widely seen as a half-way house to full-scale NFC. But now a noted mobile-commerce expert says issuers shouldn't bother. “The idea of stickers is fundamentally flawed,” Nick Holland, a senior analyst at Aite Group LLC, a Boston-based research firm, tells Digital Transactions News. Holland argues that the stickers, which incorporate an antenna-and-chip inlay much like the inlay in contactless cards, risk putting off consumers, turning them away from NFC when it finally arrives. “There's a danger with these semi-NFC initiatives,” he says, pointing to their limited functionality and the fact that they could be seen as defacing the device. A handset, he says, is a “status device,” a description that may prove to be particularly true with high-end devices many see as best suited for mobile payments. “You don't want to cover it with unnecessary stickers,” Holland says. Far better, he says, to simply get on with introducing NFC, a two-way communications technology that interacts with a mobile phone's operating system to allow users to wave or tap their mobile phones to pay for items at the point of sale, track their transaction activity, and manage their e-wallets. “Let's stop playing around with half-hearted efforts,” Holland says. “The technology clearly works. The industry's just waiting for somebody to take the first step.” Indeed, Holland advises issuers and the card networks to focus on contactless card adoption and on building up the network of available POS readers for contactless transactions. Reportedly, merchants have proven reluctant to install readers without subsidies from Visa Inc. and MasterCard Worldwide, though this infrastructure is crucial for eventual NFC rollouts. Holland says there might be more merchant interest if banks and the networks were doing more to promote contactless cards. “There's a lot of work to be done with that,” says Holland. “What are issuing banks doing [to have cardholders] tap those cards rather than swipe them? The resounding answer is nothing at this point.” In an Aite study released this week, Holland found the U.S. accounting for 39% of mobile-transactions initiatives going on around the world, more than any other country, though some of these projects are taking place outside the country. Mobile transactions include mobile commerce and POS payments as well as marketing functions like electronic coupons and rewards. But more initiatives include POS payments than any other function, with 45 of the 69 projects involving it. Specifically, Holland's research found NFC involved in 13 of the 69 projects. These 13, he says in the report, “are either directly designed around the use of NFC technology, or offer a migration path to NFC with a current-generation technology.” This, the report says, “provides some concrete evidence that this will be the technology of choice for mobile payment.” But somebody has to make the first move in a market where the business case has not yet solidified, Holland says. He doesn't see stickers building that case. “I'm pretty cynical about the stickers,” he says.