VDC Research: RFID, Barcode, Retail Automation & Self-Service Market Blog

NRF 2013: The Big Show Day 2 in Review

The VDC AutoID team’s second day at NRF was just as busy as the first, and was packed with vendor meetings, new product briefings and walking the show floor. Since our previous post focused on broader trends and observations gleaned from NRF 2013, this blog is dedicated to sharing some of the key vendor announcements and product introductions made during the event:

• NCR and PayPal announced a partnership whereby NCR will leverage PayPal’s leading cloud-based payment technology to augment the functionality of its mobile solutions targeted at hospitality enterprises, particularly restaurant/dining operators. Initially, NCR will integrate PayPal with its NCR Mobile Pay and NCR Aloha Online Ordering applications, giving customers an alternative to using credit/debit cards via enabling smartphone-based online (i.e., PayPal) payment. Besides the convenience and security benefits, PayPal will also bring social commerce features to the apps, including online check-in and reviews. Eventually, NCR also plans to integrate PayPal into its Convenience-Go (C-Go) and Endless Aisle applications. The NCR-PayPal partnership demonstrates NCR’s commitment to “making everyday transactions easier” for the consumer and merchant as well as PayPal’s leadership in the digital payment ecosystem.
• Zebra announced a new line of mobile receipt printers targeted at retailers and other B2C merchants that increasingly leverage consumer grade i-Devices (i.e., iPhone, iPad and iPod touch) as mPOS platforms. The new iMZ220 and iMZ320 are designed for easy integration with mPOS devices (including consumer grade offerings, such as those from Apple) and are among the first Link-OS-enabled products the Company plans to launch during 2013. Link-OS is a new operating system designed for use with Zebra devices which includes a SDK and core software applications that the company believes will make its hardware easier to integrate, manage and maintain from any location.
• HP debuted several new retail-focused POS products that address merchants’ increasingly strong interest in sleek, aesthetically-pleasing stationary terminals and rapidly growing demand for tablet-based mPOS solutions. For retailers seeking a more attractive alternative to clunky, traditional stationary POS terminals, HP introduced its RP7 and RP3 Retail Systems, both of which combine a sleek, modern appearance with the robust connectivity and build quality retail and hospitality operators require. HP also showed its new ElitePad along with a line of peripherals designed specifically for use with the tablet.

As usual, NRF delivered again in 2013 with many great exhibitors, vendor briefings and new product announcements. We look forward to attending next year’s edition, but until then, stay tuned to this blog for more AutoID-related news and opinions. Also be sure to listen to our upcoming NRF Quickcast, in which we will further discuss key takeaways from this year’s Big Show.

NRF 2013: The Big Show Day 1 Recap

The VDC AutoID team attended this year’s NRF in full force. With vendors representing all of the core AutoID markets, including MCET, RFID and Barcode, there were many new and innovative retail-targeted products to see relevant to each of the practice’s coverage areas. The following are a few broader observations from day 1 in the Big Apple:

• Hardware is becoming increasingly less important, and more vendors realize it. Conversely, software, and, more importantly, the functionality it enables, is the critical issue for retailers. Some hardware and solution vendors have been aware of this dynamic for some time now. Others, we think, have only recently awakened to this reality. This is more often (but not always) true in the case of large-scale, enterprise-focused vendors of retail automation and customer engagement solutions that have historically pursued differentiation via hardware ruggedness, lifecycle, and so forth rather than ease-of-use, intuitive functionality and application innovation. During conversations throughout the show, it was evident that several large-scale, traditionally hardware-focused vendors have pivoted to a broader focused strategy—one that seeks to differentiate on innovative software and functionality in addition to hardware.
• Traditional POS terminal refreshes contribute to mPOS growth. The common strategic drivers behind the recent explosion in retailers’ mPOS investment are well documented, and include improved labor utilization and efficiency, better customer service and employee empowerment. However, during our time at NRF 2013, we validated another, more pragmatic factor playing a role in mPOS’ rapid growth: stationary POS terminal refreshes. As merchants update traditional POS systems, vendors indicated that mobile terminals are usually included in their next-generation solution evaluation process. The stationary vs. mobile conversation is different for every retailer, and depends on variables including store format, sub-vertical and strategic/operational objectives, but increasingly the final solution is comprised at least in part by mPOS. While we expect this trend to continue throughout 2013 and well into the future, at the same time we believe stationary POS will remain relevant for many types of retailers as well. 
• The m.Wallet war rages on with no end in sight: The struggle to establish broader adoption in the m.Wallet and contactless payment ecosystem is as highly contested as ever, both in the context of which stakeholder(s) own the m.Wallet (a single retailer, a multi-retailer consortium, the MNOs, etc.) and in regards to enabling technology (mobile barcode, NFC, cloud-based). At this point in time, there is no certainty as to which of these entities and enabling technologies will be successful in the long term. Valid arguments exist both for and against these prospective m.Wallet owners as well as each enabling technology, and all were represented on the NRF show floor. Ultimately, consumers have the final say as to which stakeholders and enabling technologies win. Without consumers’ approval—i.e., their adoption and ongoing use—no m.Wallet or contactless payment technology will be successful in the long term. 

That concludes our recap from the first day at NRF. Stay tuned to this blog for another post highlighting some of the key vendor announcements and observations from day two.

VDC Research's 13 AutoID Predictions for 2013: Barcode, RFID & RTLS and Mobile Customer Engagement Technologies

Happy New Year! On behalf of the AutoID team and all of VDC Research Group, we wish you all the
best in 2013.

Although 2012 has just concluded, it is never too soon to look ahead. So to start the new year off in an interesting way, the AutoID team has taken out our crystal ball once again to offer 13 predictions for the AutoID market in 2013, including Barcode, RFID & RTLS and Mobile Consumer Engagement Technologies (MCET). They are presented in no particular order.  

1. Barcode: More market aggregation ahead – Expect continued consolidation of the barcode
   hardware landscape, particularly to achieve growth across following dimensions:
   • Regional – Vendors seeking to grow their presence in emerging country markets,
     particularly targeting barcode printer and scanner vendors based out of
     Asia-Pacific.
   • Vertical – Vendors looking to increase their proliferation into high-growth industry
     verticals – particularly healthcare.
2. Barcode: Vendors will learn to “accessorize” – More barcode hardware players will actively
   look to enter the “accessories” market – developing sleds and/or sleeves to support consumer-grade device usage in enterprise environments. This is particularly relevant to vendors addressing customer-facing applications with their devices in retail, healthcare, hospitality and commercial services. 
3. Barcode: Future with mobility, not without in software market – An increasing number
   of barcode software solution providers will extend label printing support to portable devices (both purpose-built and consumer-grade) – facilitating mobile applications such as field sales, field service and direct store delivery (DSD). Today, mobile barcode label generation software penetration is in a very nascent stage, but we expect that to quickly change. Mobility IS the way forward across verticals and industries and the entire barcode value chain must and will respond accordingly.
4. Barcode: Embrace the tech-savvy consumer – Scanning with and displaying barcodes on mobile device screens will continue to grow significantly among consumers. Barcode vendors and their enterprise and retail customers must continuously adapt to this explosive trend. We predict more QSRs (quick service restaurants), convenience stores, restaurants, theme parks/ entertainment venues and other consumer-facing enterprises will invest in and deploy barcode imagers and consumer-grade mobile devices to interact with consumers (e.g., coupon redemption, payment, loyalty/rewards programs).
5. MCET: Mobile point-of-sale (mPOS) will remain the hottest technology among B2C business operators – This trend will be most prominent in retail, but increasingly in dining as well, despite the fact that enterprises often lack clear strategic objectives guiding their investment in the same. In 2013, MCET solution providers must assume leadership roles in educating their customers on technology selection, software and security, best-fit use cases for specific mobile devices/form factors and total cost of ownership (TCO).
6. MCET: NFC as a broader ecosystem will make little progress beyond incremental gains in
   shipments of NFC-enabled smartphones – Yes, this means more NFC-equipped phones in consumer hands, and limited scale pilots and tests will continue, but 2013 is not the year when the technology gains global-level traction. However, expect more TV commercials for mobile phones and mobile network operators (MNOs) to advertise NFC and its applications – and more importantly, look for more commercials to specifically mention the term “NFC” in order to engrain the technology in consumer minds.
7. MCET: Merchants’ general focus on mobility - mPOS in particular - will bring great opportunity for vendors of adjacent peripherals – POS peripheral vendors (e.g., receipt printers, barcode scanners, payment solutions) are expected to drive growth via innovative, highly-portable versions of these traditional POS extensions. These vendors will be jockeying for competitive position more aggressively in 2013, responding to burgeoning demand among retailers, restaurants, hospitality and other enterprises wanting to differentiate and augment their systems by  “going mobile” at the POS.
8. MCET: Contactless mobile payment via NFC will not explode in popularity among consumers during 2013, but consumer usage and merchant support of this application will experience strong growth – Barcodes displayed on mobile device screens and core/traditional RFID (e.g., contactless tickets, smartcards) – not NFC – will continue to enjoy broader global support for mobile payments in the foreseeablefuture. For NFC to gain ground in 2013, more NFC-enabled devices must reach consumer hands, more NFC-compatible payment terminals must be deployed and more collaboration among invested parties must occur within the NFC ecosystem (especially in terms of consumer education, transaction fee negotiations/resolution, and application development).
9. RFID & RTLS: Vendors – especially RTLS solution providers – will develop the “healthcare
   stare” – The use of RFID and RTLS is on the rise in healthcare, most notably in the US thanks to the VA’s announced $540M+ contract to track equipment and supplies at 21 of its Veteran Integrated Service Networks (VISNs).  However, the contract award to HP was not met without controversy in 2012 as IBM filed a protest to the US Government Accountability Office (GAO) and won the decision. The contract will be rebid among, at least, the six original bidders.  This spark to the market (and sizeable contract) drew a lot of attention in 2012 and we expect the RFID and RTLS frenzy to continue in healthcare in 2013. However, we caution vendors (especially RTLS providers) to not focus solely on healthcare and to seek opportunities and market development in other vertical markets where the competitive field may be less crowded.
10. RFID & RTLS: Passive UHF EPC item-level tagging (ILT) in the apparel sector will
    pick up the pace after a somewhat slow 2012 – This past year was a mild disappointment in terms of retailer deployment of RFID for ILT of apparel. For example, no major reader or printer/encoder orders were delivered, several large retailers remain behind originally announced plans (e.g., Wal-Mart, JC Penney) and some newer programs were pushed to or will start in 2013.  So what to expect in the year ahead? Even more American Apparel stores will go live with RFID (a bright spot for 2012 as well), Wal-Mart will reassess its RFID plans but remain committed, Macy’s will make its anticipated move, JC Penney has bigger worries than RFID, international retailer Zara will play a key role in increasing tag volumes and RFID EAS will become a more critical part of the ILT in apparel conversation.
11. RFID & RTLS: Embedded RFID keeps the forward momentum – At the end of 2011 we
    noted the rise of “RFID inside,” or embedded RFID, as a key trend to watch for in 2012.  We are keeping it on the list in 2013 after seeing a great deal of progress in 2012. For example, ThingMagic released a new, smaller passive UHF reader module, Xerafy continued product development for embedded RFID specialty tags (e.g., tools), ICs and chipsets from players such as Impinj, NXP, Murata and AMS decreased their footprints, Coca-Cola Freestyle dispensers with passive UHF technology inside continued deploment, RFID and NFC made their way into consumer devices such as Keurig Vue coffee brewers and Nintendo Wii (Skylanders game) and much more. With price points declining and form factors shrinking, we expect to see solutions and applications such as these expand and new innovations to be introduced in 2013.
12. RFID & RTLS: Honeywell Scanning & Mobility will get strategic on RFID – and quickly
    – after announcing its first RFID product and the acquisition of Intermec in 2012 – After some exploration of RFID while acquiring several barcode scanner and mobile computing companies over the last few years, Honeywell made some eye-catching RFID moves in 2012. They made a subtle move in introducing an RFID reader and then made a major move in announcing the acquisition of Intermec (a major RFID IP holder and RFID equipment manufacturer). We predict Honeywell will aggressively develop its RFID strategy in 2013, becoming a strong competitor in select verticals and applications that play to the combined strengths of Honeywell and Intermec. What’s next for Honeywell – RTLS in 2013 or 2014?
13. AutoID: Governments in China and the EU continue to connect with the concept of the Internet of Things (IoT) – While the US government remains largely silent, China and
    the EU actively fund research IoT projects, create policies to govern the IoT and deploy IoT technologies (including RFID, NFC and sensors). Much of the IoT activity in the US has been at the city level (e.g., smart cities) and we do not expect that to change. In looking ahead and predicting where will be the epicenter of IoT innovation, we are placing our bets on China. Simply look at what is on the list of IoT development subsidy projects from China's Ministry of Industry and Information Technology and Ministry of Finance (announced November 2012). UHF and microwave RFID chip design, product technology R&D, miniaturized intelligent sensor technology R&D, ad-hoc networking technology for wireless sensor networks, intelligent logistics and intelligent traffic are among the 14 categories of project, comprising 149 projects in total, which will receive support from the government.

I would like to extend a special thank you to Richa Gupta (VDC’s barcode analyst) and John Shuster (VDC’s MCET analyst) for their contributions to this blog.

Epson Mobilizes to Address Rapidly Growing mPOS Opportunity

Still questioning whether consumer-grade mobile POS (mPOS) devices are a short-lived trend or a here-to-stay expansion of the broader front-end technology solutions at many leading mainstream merchants? Here is another strong point in favor of the latter: Epson, the global market leader in POS receipt printers, recently announced its Mobilink P60 mobile receipt and label printer supports Bluetooth connectivity to facilitate wireless pairing with all Apple i-devices and a diversity of other Bluetooth-equipped consumer-grade devices. The Company simultaneously introduced a new software development kit (SDK) for iOS, Android and Windows operating systems that is intended to expedite the development of mPOS and label printing applications that leverage the Bluetooth-enabled Mobilink printer.

As mPOS solutions gain stronger adoption among retailers and hospitality operators—sometimes as an enterprise’s exclusive POS system—the demand for reliable, easy-to-use printing solutions that complement the mobility and empowerment mPOS provides workers is growing increasingly strong. In response, a number of POS receipt printer vendors—including Epson—have been swift to launch portable versions of their standard, stationary POS printers. These portable printers are certainly smaller than their stationary counterparts and are “mobile” in the sense that they can be easily transported. However, while smaller in relative terms, they are not ideally sized to be wearable for the average worker.

For this reason, we believe a Bluetooth-enabled printer such as Epson’s offering will­­­­ be well-received by many mPOS deploying merchants, especially those using mPOS “within the four walls,” as opposed to in field-sales or other remote applications. The deployment of Bluetooth-enabled stationary and portable printers enables mPOS-equipped associates to fulfill any printing requirements encountered during their shift while freeing them from the burden of carrying another device on their person. Furthermore, enabling on-the-go, mobile printing via shared Bluetooth-enabled (or other wirelessly accessible) devices allows enterprises to reduce printing hardware investment by eliminating the need to equip every associate with their own mobile printer. Accordingly, in the case of many mPOS deployments, we expect this approach to mobile printing will be favored both for its lower investment costs and freeing employees from carrying additional equipment.

VeriFone Furls its SAIL

Less than a year after launching its SAIL m.payment solution, payment terminal giant VeriFone has essentially pulled the plug on the product, which is its version of a Square-style card reader dongle. Citing a number of major challenges, including fierce competition in this nascent, but rapidly-growing market and the razor-thin margins on SAIL-based payments, the Company’s CEO officially disclosed SAIL would cease operations (save for continuing to service current users) in its recent Q4 earnings call.

While it is somewhat surprising that a well-established company like VeriFone is bailing out on a new product so quickly, the closure of SAIL clearly demonstrates the cutthroat competition in this market and could portend further consolidation or business failures of other similar ventures in the near-term. Certainly there is no shortage of Square-like solutions, with numerous hardware- and software-based competitors in the consumer-grade device mobile payment market (including Intuit, Paypal, Dwolla, iZettle and Groupon, just to name some high-profile players). Perhaps even more problematic for these m.payment service providers is that the business model on which they are founded is generally a race-to-the-bottom in regards to profit margins, with the major differentiator between each competitor often being the percentage fee charged for processing payments.

Looking ahead to the future, we believe the mobile payment competitors that will be viable for the long-term will be those that successfully layer value-added applications/services such as loyalty, coupons/offers and other mobile commerce functionality on top of their basic payment processing service. To the extent that these adjacent applications drive stronger customer loyalty, larger average ticket sizes and increased footfall for merchants, m.payment service providers can leverage them to generate additional revenue streams, differentiate their offering and attract new merchant partners. Conversely, we expect m.payment providers that remain reliant on processing fees for the majority of their revenues will see fiercer competition, shrinking margins and increasingly stronger chances of failure as payment processing service becomes more commoditized.

 

 

 

Gemalto, G&D and ARM Launch Trustonic JV to Ease NFC SE Pains, but Will it Really Help?

If you frequent this blog, you already know we are generally bearish on the NFC’s near-term prospects as a m.payment and m.commerce enabler. While the technology certainly has some great features and benefits, NFC faces too many challenges—several of which are highly complex and/or expensive to address—for it to reach mass adoption at a global level for the headline applications with which it is associated, at least for the next several years. Among the thorniest issues associated with NFC-enabled secure applications (i.e., use-cases that require transmission of sensitive and/or personal information, including payment, ticketing, loyalty, etc.) are those related to the secure element (SE), the part of a smartphone where this information is kept:

• Where does the SE reside on a smartphone? (SIM, MicroSD, embedded, elsewhere?)
• What entity owns/controls the SE? (MNO, device manufacturer, card issuer, multiple entities?)

These questions are of material importance to the above-mentioned stakeholders (and others), especially in the context of m.payment, ticketing and other contactless applications where funds are transferred between parties (e.g., customer-to-merchant, person-to-person). Just as credit/debit card companies generate billions in fees annually from processing “plastic” payments, so too could NFC SE owners generate handsome interchange revenues (as well as “rental” fees if a third party entity requires use of a SE for its own app) for NFC-enabled contactless payment. As a result of the high stakes and multiple, self-interested entities jockeying for position, no clear, broadly-accepted determination has been reached on either of these SE-related issues—nor do we expect one to emerge anytime soon.

In the meantime, NFC market players ARM (a smartphone chip vendor), Gemalto (a TSM provider) and Giesecke & Devrient (a payment security solution provider) have launched a joint venture called Trustonic to create a semi-secure alternative to NFC SEs called Trusted Execution Environments (TEE). Essentially, the TEE resides in the main processor of a smartphone, which positions it to execute transactions and other processes more expediently relative to a standalone SE. However, since a TEE is not entirely isolated from the rest of the device, this increased speed comes at the expense of security—meaning that it is unlikely credit/debit card providers and other credential issuers with high security requirements are unlikely to grant approval to TEEs like Trustonic.

While it is promising to see the emergence of new and innovative solutions to address some of the challenges hindering NFC adoption, we do not expect the emergence of Trustonic or other SE alternatives to have a material near-term impact on the NFC ecosystem. VDC views NFC’s great potential as an enabler of B2C applications as being a “package deal,” where payment, loyalty, couponing and other functions are united by one contactless application. Unfortunately, in maneuvering around the sticky SE issues, Trustonic also has diminished the SE’s value as a vault-like safeguard for the most sensitive credential types, meaning the TEE only can support semi-secure NFC apps. In our opinion—one we suspect is shared by many B2C merchants—this approach limits NFC’s value proposition and Trustonic’s potential to drive broader adoption of the technology.

France-based m.Wallet Consortium Leader Chooses Barcode, not NFC

Auchan, a leading French supermarket chain, announced plans to launch a cross-merchant m.wallet app called Flash ‘n’ Pay (FNP). The FNP app will be very similar to the one currently in development at the Merchant-Customer Exchange (MCX), which we discussed in a previous post. Like MCX, the FNP app can be used with all credit/debit card brands, supports loyalty cards and is MNO and issuing-bank agnostic. FNP also shares the same enabling technology as MCX—the app will be barcode-based, not NFC.

Whereas France is among the countries leading European NFC adoption, one might understandably assume that a retailer-led m.wallet app designed for that market would be NFC-based, not barcode. However, NFC faces many of the same fundamental challenges to mass adoption in France that it does in most other countries: 

• NFC-based apps cannot be used by many current smartphone users—barcode is accessible to virtually all
• NFC-based payment requires cooperation across multiple stakeholders—barcode does not
• Barcode-based apps are easier and less costly to support—and many B2C merchants already have the requisite 2D imagers installed at the POS

Certainly, NFC adoption in France is stronger relative to most other national markets, thanks in large part to the French government’s recent commitment to fund contactless transportation infrastructure in approximately 15 cities. However, NFC’s long-term potential as a B2C commerce enabler in France—and in most countries, save for a select few in Asia-Pacific—remains highly uncertain.

We view Auchan’s selection of barcode for its m.wallet as a particularly noteworthy development by virtue of its regional context. If an NFC m.wallet is not viable for a French retailer, in which countries is it?  From our perspective, the FNP announcement demonstrates how far NFC has yet to progress before it attains mainstream status, even in the countries/regions where adoption is relatively strong today.

NCR Continues to Diversify with Acquisition of Retalix

NCR formally announced this past Wednesday an agreement to acquire Retalix, an Israeli vendor of retail, marketing, supply chain and logistics software solutions. The transaction is valued at $30 per share, or approximately $650 million and is expected to close sometime during Q1 2013. NCR intends to finance the acquisition via a combination of cash and an existing debt facility. Via the acquisition of Retalix, NCR strengthens its competitive position in several respects:

• Expanding its retail automation and customer engagement hardware offerings to include a more diversified range of software solutions, both for customer- and employee-facing applications
• Broadening its services portfolio to include additional professional/integration and managed services options
• Solidifying its status as a go-to vendor for end-to-end solutions that meet the specific, unique requirements of retail end users

We view the Retalix acquisition as a well-advised strategic move that furthers NCR’s diversification into the enterprise software market. While it has historically been known for high-end customer engagement and retail automation hardware (in addition to kiosks, ATMs, etc.), during the past 18 months, NCR has made a concerted effort to broaden its software portfolios—especially those geared towards retail and hospitality end users—via strategic acquisition and organic development.

For example, in August 2011, NCR acquired Radiant Systems, a specialized provider of hospitality POS software and solutions, for approximately $1.2 billion. The addition of Radiant materially strengthened NCR’s competitive position within hospitality, where the company had historically been weak relative to its status as a retail leader. In retail, the company recently launched its NCR Silver product—which enables merchants to integrate POS-enabled iPads, iPhones and iPod touches with stationary POS terminals—to address the rapidly growing demand for consumer-grade mobile device use in the enterprise. While Silver is geared towards SMBs, we expect the Retalix solutions that will soon be part of the NCR portfolio will appeal to a broader range of retailers, including Tier 1 leaders like Home Depot and Walmart, where the company has a well-established installed base.

Furthermore, we believe NCR’s efforts to diversify its software and service capabilities are indicative of a broader interest among end users (merchants and hospitality operators especially) to leverage technology platforms for a set of applications well beyond those with which they are traditionally associated. In the context of POS systems, for example, requirements now often include applications besides typical sales and payment functions. In hospitality, operators also need to accept/administer loyalty programs, manage digital menu boards, accept mobile payments/coupons and potentially support a range of back-of-house functions as well. Retail has similarly diverse requirements—and the acquisition of Retalix will enable NCR to meet these needs more consistently across a broader range of merchants. 

The growing importance of specialized merchant/hospitality solutions is a topic we will explore further our upcoming MCET research—contact us for details.

To NFC, or Not NFC? That Was My Personal Smartphone Question...

I admit it—I’m an Apple user. Call me whatever you want…fanboy, sheep, mindless minion worshipping at the altar of the Great Jobs. It doesn't bother me. In my experience, Apple stuff—while pricey—lasts longer, is generally easier to use for those of us who are not (and have aspirations of being) computer programmers and is usually (but not always) very well-designed and supported from UI, UX and aesthetic perspectives. Case in point: my recently deceased (cause of death: buggy “home” button) iPhone 3Gs provided nearly 4 years of trouble-free service despite the general abuse I heaped upon it.

Contrary to what one might assume, despite being a technology analyst, I do not eat, breathe and sleep tech. Certainly I appreciate technology for the conveniences and other benefits it provides me, but generally view any device as if it were an appliance. Sure, I get excited whenever it is time to look at a new laptop, smartphone or what have you—but after the initial novelty wears off, I just want the thing to function as intended—with minimal hassle and no headaches. I’m not the guy camping out in the mall for the latest i-device. I AM the guy who waited 7 years between getting a new laptop.

That being said, I have a soft spot in my heart reserved for NFC—both because I think it is a (potentially) useful technology and because I spend a significant amount of my work focuses on the market. With my iPhone having been on its last legs for the better part of this year, I (like many others) wanted a new iPhone with NFC. But, as we all know, the iPhone 5 is not NFC enabled. Thus, I had a decision to make with my new phone: stay loyal to Apple/iOS, or jump ship to Android or Windows and get a phone with NFC.

I thought long and hard about going the non-iOS/NFC route. I read many online reviews of leading Android and Windows smartphones. I tested the devices in-person at the store. I imagined what I might use NFC for in my day-to-day life—now, probably not much, but perhaps in the future, paying for lunch or a coffee with a tap of my phone. As someone who dislikes cash, contactless payment is an appealing concept.

Conversely, I envisioned the potential downsides of straying from iOS—mainly, hassles with syncing to my home computer (yes, it’s an Apple) and learning a new  mobile operating system. While both of these are relatively minor issues, I was left with wondering, why bother? What benefits does NFC offer that justify these (and other) compromises? I could not find a compelling answer to that question—and so I went with another iPhone.

Certainly, my personal technology usage, preferences and views may be unique. But, strictly in the context of NFC, I believe they are generally applicable to most consumers—and indicative of the NFC ecosystem’s shortcomings. Other than the increase in NFC smartphone availability seen in 2012, what material progress has the ecosystem made recently? Very little.

At present, in most regions, NFC cannot be used for the headline applications—payment and ticketing, for example—for which it is billed. Right now, most consumers using NFC are confined to simple, basic applications like P2P sharing and pairing.  For me—and I suspect many other consumers—these features are “nice-to-haves,” not “must-haves” when shopping for a new smartphone. Perhaps in the future, the NFC ecosystem will progress to the point where contactless payment and ticketing are broadly-accessible to the average consumer. But, until that time, it’s hard to envision NFC having a material impact on consumers’ device preferences—particularly those that are hooked on iOS.

Google Wallet to Go “Back to the Future” to Drive NFC Adoption?

It is no big secret that Google Wallet has been challenged to gain adoption since it officially launched in September 2011. While the app faced a number of headwinds in its very early days, the initial version of Google Wallet was especially hamstrung by the very limited number of payment card types and smartphones that supported the app. Since its introduction, these problems have generally been addressed, as the app is now available on a broader range of devices and has implemented a new hybrid architecture that leverages cloud-based technology to enable almost any common credit/debit card to be used with Google Wallet.

Still, despite these improvements to accessibility and usability, Google Wallet has yet to gain traction with consumers and has left its management looking for other strategies to drive adoption. If recent rumors prove true, Google plans to introduce a decidedly low-tech expansion—in the form of a traditional plastic payment card—to its solution sometime soon.

Essentially, the Google Wallet card—as it is rumored—will enable consumers to load all the cards in their wallet onto an online portal and link them to the Google Wallet card, thereby offering the potential to slim down the brick-like stacks of cards many of us carry in our pockets and purses. The Google Wallet app (in conjunction with the online portal) would provide consumers the ability to manage which credit/debit card they want to pay with when using the Google card and continue to offer contactless payment for devices and merchants that support it. Rumors indicate that the card will only be available to Android users if/when it launches. Perhaps it will eventually be offered to iOS users too, but given the state of affairs between Google and Apple, we are not betting on it.

From a strategic perspective, we think adding a card extension to Google Wallet is well-advised, as it opens the app to a broader audience of potential users—including the majority of the US population that does not own an NFC-enabled phone. Furthermore, a Google Wallet card is a palatable intermediary step that could allow Google to ease mobile-payment-weary consumers into migrating from traditional card-based payment to mobile contactless payment.

From a consumer’s standpoint, consolidating multiple credit/debit cards into a single one is certainly an agreeable concept to those of us—myself included—that carry overloaded wallets. However, it is difficult to envision many consumers taking the initiative to obtain, configure and use a Google Wallet card/app solution for this benefit alone. To justify consumers’ investment of time and effort, there needs to be some kind of compelling, undeniably attractive incentive to reward them—something along the lines of cash-back rewards, discounts or some other feature that will capture consumers’ attention and keep them coming back for more. Otherwise, we see this rumored Google Wallet addition being another payment innovation flop.