Wireless payments, perhaps powered by NFC technology or something like it, are definitely inbound—for a bunch of reasons that start with consumer convenience and end with dynamic personalized advertising and shopper analytics. Odds are it'll be a billion-dollar industry soon enough—which explains why there's such a complex, layered, and consumer-hostile battle for the tech going on behind the scenes. Fascinating then that Visa, a master of the current plastic card payment paradigm, is so active in its wireless innovations.
To wit: Last week Visa chose the very public CES show as a great time to flex a little muscle, and announced that it had certified a bunch of Android-powered phones to be compatible with its PayWave systems. Android is the most ubiquitous smartphone operating system, so this move can only be a good thing. Visa also licenses PayWave royalty free to Google and ISIS, and, says Bill Gajda, the Global Head of Mobile Product, "is in discussions with a number of other mobile operators, handset manufacturers, OS providers on how we can license PayWave as broadly as possible to give our issuers as broad and flexible an opportunity to participate in NFC payments as possible."
That got us thinking: What about Apple?
"I can't tell you when Apple is going to put NFC in the next version of the iPhone," Gadja says, "but we've had discussions with them around the PayWave standard and they've asked to look at our specification and certification process so that when they decide to do something those lines of communication are open."
Meanwhile the smartphone certification move is aimed at the mobile operator partners Visa's working with around the world, "so that each issuer doesn't have to look at them seperately. They can rely on Visa to certify these devices so that the PayWave application is stored and works properly, but also so that the NFC radio, as a connectivity to whatever secure element, works as well. Because they have to be as reliable as a plastic card swipe, whether it's the radio range, the connectivity to the SIM, or the other secure element."
The company is also working on the trusted services part of the system, where banks have to trust Visa, who have to trust the PayWave installation on handsets and thus the tech of the maker, and trust that everything works in a secure fashion with the tech inside store registers—and so on. Visa's hoping to make itself the go-to point for this solution, so "handset manufacturers don't have to do a deal with 26,000 banks".
It all comes down to this, Gajda says: "You need a handset that's enabled, you need a merchant that's enabled, you need a bank that's given their permission, you need a mobile operator who's given their permission to access one or more secure elements, you need a Trusted Service Manager in the middle, and you need a willing consumer" to make NFC payments work. By being open with its tech to everyone in this debate, including conglomerates like ISIS and individual phone makers like Samsung, Visa is trying to make the process frictionless. Not unlike, perhaps, Visa's existing role in the current payment paradigm—for everything from helping to standardize payment security to developing tech for merchants.
To start with Visa's aim is at simply innovating payment from plastic card into NFC payment, but it is sensitive to the immediate future—tech Gajda outlined by using examples like "micropayments, whether it's payments between friends that're maybe cash-based today, or parking meters." But he was careful to point out that the real value in NFC, above pure payments, is "all the other non-payment actions, which is a much bigger space," things like analytics and loyalty schemes, and related systems like transportation tickets.
"We've often said, as it relates to mobile commerce and mobile payments, that it should be open, a level playing field, that people want to have what they have in their leather wallets and replicate it on their device as they want to. We recognize that it's not just going to be Visa in these [digital] wallets, it's going to be Visa plus all of our traditional competitors plus loyalty cards and private label cards and the other things people have in their wallet. We should facilitate the broad growth of that, and not try to create a semi-closed loop where Visa may for some short time get some proprietary advantage. We just don't think that's the way the ecosystem is, or quite frankly should, evolve."
Gajda even hinted that in markets where smartphone devices are heavily subsidized, as in the U.S., the mobile operators may be acting a little less openly because they may perceive other players taking a free ride on their core business offering (and those phone subsidies) to steal a march on a new, enormous financial opportunity—something we've considered before, suggesting NFC may bloom overseas before it does in the U.S.
Hence Visa is Switzerland in all of this, confident in its financial strengths and trying to remain impartial when it's approached by anyone—including the handset makers behind the phones it certified last week—to promote NFC tech.
Visa, of course, stands to ultimately profit from all of this. By taking a central role, it's trying to cement its foundation in the next generation of payment systems. And thus it'll build its future billions of dollars of revenue. But it's refreshing to see that a long-established financial institution is being pretty open-minded, (not to mention open-systemed) and perhaps innovative, in pushing a tech that'll ultimately benefit us all.
[Image: Flickr user danoxster]