NFC Forum adds specs, Chase goes QR
The NFC Forum released new specifications intended to enable near field communication (NFC)-enabled devices to communicate more broadly. The NFC Forum is a standards body sponsored by leading payment and technology companies, including Apple Inc., Google Inc., Intel Corp., Mastercard, Nokia Corp., Samsung Corp., Sony Corp. and Visa Inc.
The new specifications address peer-to-peer and broader communications between NFC-reading devices and tags. For example, a new set of specifications details how multiple secure payment applications can be installed and flexibly accessed by end users.
NFC provides a standardized set of wireless communication protocols for interaction between two electronic devices that are in close proximity, such as smartphones and POS devices. All leading mobile operating systems and carriers support NFC. The latest generation of POS terminals (Europay, Mastercard and Visa [EMV]-compliant devices) also can support NFC, which supports tap-and-go payments.
NFC not for everyone
Despite the proliferation of NFC payment schemes, some merchants and banks have shown a preference for an alternative technology: quick response (QR) codes. With this technology a code is displayed to customers at the POS, which customers scan using QR readers in their mobile devices, then press OK to authorize payments.
Starbucks Corp. uses QR codes for its popular mobile payment app, and at last count, one in four of its customers were regularly using the app, according to company statements. Retailing giant Wal-Mart Stores Inc. is also gung ho on QR codes, having adopted the technology to support its Walmart Pay mobile wallet app.
In November 2016, Chase Bank, the U.S. consumer and commercial banking arm of JPMorgan Chase & Co., rolled out Chase Pay, its new digital solution for in-store, in-app and online payments that uses QR codes. Starbucks and Best Buy Inc. stores are the first to accept the new QR code-based payment option, and Wal-Mart stated it, too, will accept the new Chase payment option. Chase said other large retailers will soon join the group. Chase also supports Apple Pay.
"By focusing on merchant needs first – lower cost, zero fraud liability – we've got a real opportunity to break through the mobile payments noise," said Jennifer Roberts, President of Strategic Alliances and Loyalty Solutions at Chase.
QR codes popular internationally
NFC-based mobile wallets have made significant inroads in many developed economies. This may be due in part to the proliferation of smartphones in those countries. According to the Pew Research Center, 72 percent of adult Americans owned smartphones in 2015 (among millennials, ownership was over 90 percent); in India 17 percent of adults owned smartphones. In China it's 58 percent; throughout most of Africa, fewer than 20 percent owned smartphones.
The leading mobile wallet schemes in China, a nation that has become fertile ground for growing card payments, support QR codes. (These schemes also support NFC payments, but a majority of users prefer using QR Codes, according to Chinese media reports.) Recently, Alipay (China) Internet Technology Co. Ltd. (with more than 400 million active users, it is the largest of these schemes) signed deals with leading U.S. acquirer First Data Corp. and device manufacturer Verifone.
Through their agreements, the companies will support acceptance of the Alipay mobile app at top tier merchant locations in the United States that are frequented by Chinese tourists. The app will use geo-positioning data from those tourists' mobile devices to direct them to nearby stores where they can use Alipay, the company said.
QR codes also have proven popular in India, where the government has been actively promoting mobile payments in hopes of moving hundreds of millions of unbanked citizens into the financial mainstream. More recently, the country banned two of its largest denomination currencies in an effort to fight corruption and black market operations. That was followed by the government offering discounts on certain services (like petroleum) and transaction taxes when payments are made digitally, according to Bloomberg.
The largest digital payment platform in India claims over 1 million merchants use its QR codes to support mobile payments. In December, the country's government asked payment companies there, including Mastercard and Visa, to adopt a standardized approach to QR codes to support wider adoption. Credit and debit cards are relatively rare in India – the Reserve Bank of India estimated just over 26 million credit cards have been issued in the nation, which has a population of nearly 1.3 billion. Government officials said they hope to leapfrog the use of plastic credit and debit cards and move directly to mobile payments.