Proximity Mobile Payments: Leveraging NFC and the Contactless Financial Payments Infrastructure

• Download white paper

The convergence of payments and mobile communications is not just logical–it is inevitable.” In March 2007, John Philip Coghlan, then CEO of Visa USA, made this announcement at the CTIA Wireless Conference. Yet only a few years ago, people were still saying, “Some day, we will pay using mobile phones.” The Smart Card Alliance and related industry groups representing financial institutions, merchants, and mobile operators have talked and written about “some day” for almost a decade. But now, virtually every industry group involved in the transaction chain is investigating the use of mobile payments. And mobile payment will soon be a standard transaction method for payment in many North American merchant locations.

What has happened to move mobile payments from “some day” to “inevitable?”

• Contactless payment adoption by payment brands, issuers and consumers. American Express, Discover Network, MasterCard, and Visa have issued contactless payment cards and devices based on a single standard. These contactless payment products (ExpressPay™ from American Express, Discover® Network Zip^SM, MasterCard® PayPass™ and Visa payWave™) have shown both merchants and consumers the benefits of contactless payments. Consumers enjoy increased security, speed, and ease-of-use.

• Contactless payment acceptance by merchants. Merchants have seen the benefits of faster transaction time, increased spending and increased customer loyalty. Plus, transactions using contactless cards and devices are processed through a single, contactless-enabled point-of-sale (POS) system and through the existing financial networks, encouraging merchant adoption.

• Mobile phone ubiquity. Mobile phone subscribers don’t leave home without their phones. In addition, near field communication (NFC) technology has established communication standards that can facilitate a simplified and robust implementation of contactless payments using the mobile device. NFC, a short-range, standards-based wireless connectivity technology, will soon be available as standard functionality in most mobile phones. NFC will allow consumers to perform safe, contactless transactions, access digital content, and connect electronic devices simply. An NFC chip in a mobile device can act as a card and/or a reader–enabling consumer devices to connect, receive and share information, content and data, in addition to making secure payments quickly.

• Expanded mobile functionality. The mobile device can deliver a variety of payment and payment-related services. The mobile device is a powerful new tool that can enable proximity mobile payments, remote payments through the mobile Internet or text messaging, and person-to-person money transfers. Value-added applications can enrich the purchase experience and include account management, banking, offers, and security applications.

What would drive a consumer to adopt and use mobile payments? The answer may be expanded payment functionality, increased convenience, enhanced security, and faster transactions.

The debate about who is going to build and deploy the infrastructure for mobile commerce has gone on for years. Some argued that the mobile operator would take on the payment process; others, that the financial institutions would deploy readers, software, and the necessary technologies. With the introduction of contactless financial payment cards and NFC-enabled phones, however, the debate is getting more interesting.

This white paper outlines the findings and conclusions of the Smart Card Alliance Payments Council. Specific to proximity mobile payment, it is the conclusion of this Council that proximity mobile payment, because it leverages the well-established financial payments infrastructure, and because it is based on NFC technology and the ISO/IEC 14443 standard, will become the mobile payment technology of choice for consumers using mobile phones for retail payment transactions in the United States.

This white paper describes what is necessary to implement and deploy proximity mobile payment systems, discusses the relevant technical and business issues from the perspective of the various stakeholders (e.g., mobile operators, the financial industry, end-users, providers and vendors), and outlines the potential opportunities and barriers that may impact its market adoption.

About the Smart Card Alliance Payments Council

The Payments Council is one of several Smart Card Alliance technology and industry councils. The Payments Council was formed to focus on facilitating the adoption of chip-enabled payments and payment applications in the U.S. through education programs for consumers, merchants, issuers, acquirers/processors, government regulators, mobile telecommunications providers and payments service providers. The group is bringing together payments industry stakeholders, including payments industry leaders, merchants and suppliers, and is working on projects related to implementing EMV, contactless payments, NFC-enabled payments and applications, mobile payments, and chip-enabled e-commerce. The Council’s primary goal is to inform and educate the market about the value of chip-enabled payments in improving the security of the payments infrastructure and in enhancing the value of payments and payment-related applications for industry stakeholders. Council participation is open to any Smart Card Alliance member who wishes to contribute to the Council projects.