Wave & shop!!
Posted by Ajay Kelkar on Mon, Jul 19, 2010
I saw this interesting story about Citibank launching a pilot in Bangalore to test out what it claims to be the world's largest Near Field Communication (NFC) contactless payment pilot. Mobile Proximity or “contactless” Payments are made at the point-of-sale (POS) by physically touching or tapping the phone on a contactless reader device.
NFC was one of Gartner's 8 Mobile Technologies to Watch in 2010. Mobile payments offer the possibility of entirely new ways of making payments and moving money to and from individuals, businesses, and other entities. Look at this interesting Coke vending machine-just wave your mobile and take your Coke!
I found this interesting because I have been observing customer payment behaviour change for over a decade now. Not very long ago, share of credit card spends in department stores was not more than 35 %(that is 35% of total store sales came from credit cards)! Today it is more like 50%!
I wonder how migration to newer payment technology will progress. This is why I found the Citi Tap and Pay pilot to be a very interesting experiment run with commitment & with strong investment. The pilot enabled Citibank MasterCard credit cardholders to use NFC phones to make payments at the point-of-sale and to receive promotional offers and discounts at a wide range of department stores, food courts, restaurants and fast food outlets, book stores and multiplexes.
The catch with contactless payment is that any device to be able to carry out such payments has to be embedded with near-field communications NFC chips; in most cases in India, for example with the Delhi Metro card, consumers are being issued separate cards. The problem with NFC deployments is that no handset manufacturer, except in Japan has taken on the additional cost and effort of embedding NFC chips in their phones.
To take part in the trial, Citi customers first needed to purchase a Nokia 6212 Classic phone, pre-loaded with the Citi Tap and Pay application and enabled with MasterCard's PayPass contactless payments technology. The Nokia phones were made available for sale from a number of Nokia stores in the city and, as an incentive, Citi offered cardholders a rebate if they purchased a phone and then used it to make purchases
Contactless payment allows issuers to compete with the cash payment market. Retailers realize benefits due to faster transaction times, increased revenue, improved operational efficiency, and lower operating costs. Consumers enjoy the convenience of hands-free payment, the ability to pay for multiple services using one device, and the security of not having to display a card for payment.
Contactless payment applications are particularly attractive to retail segments where speed and convenience of payment are essential (for example, quick service restaurants, gas stations, convenience stores, parking facilities, transit services, entertainment venues and unstaffed vending locations).
Here are some thoughts that came to my mind:
- Convergence is about changing customer behavior-can be done through "trickle marketing" (one to one communication with relevance!)not "mass marketing"!Customers do not suddenly move towards Internet banking or Mobile banking or NFC (contactless payments) !
- This change does not happen without a structured marketing effort to reduce consumer barriers. These barriers are at 3 levels: a)information barrier-I did not know you could do this? b) payoff barrier-What do i get if i change my behavior-and this need not be only price led & c) transactional barrier-how do i make this new behaviour a habit!
- Making this kind of change requires marketers to think "one to one" and not "mass". It all starts with understanding & analyzing customer adoption. Analytics can uncover a lot of valuable information about customer paths as they adopt new payment methods.
Meanwhile read about this interesting Citibank pilot here
http://www.edgardunn.com/uploads/100012_english/100366.pdf