NFC is failing retail but drugs could come to the rescue

For years now the industry has confidently predicted that Near Field Communication (NFC) would be the vehicle by which we would all abandon our leather wallets and embrace our smartphones for electronic payments.

It hasn’t happened and I don’t believe NFC is the solution. Here’s what we can learn from the failure of NFC to take off. As enticing as the idea is of using our phone for payments is, there are two problems that the focus on NFC fails to solve.

The first is the barrier of adoption. Until consumers can be confident that all of their purchases can be made with their phone, they don’t dare leave their wallets behind. Similarly, until retailers believe that enough of their consumers aren’t carrying conventional wallets they won’t invest sufficiently to encourage take-up.

The second, and potentially more serious, issue is that the ergonomics are all wrong. NFC payments have been designed to mimic the way retail has been done for centuries with the consumer picking-up products from shelves and taking them to a payment terminal when they’ve made their selection.

Designers of the next generation of payments solution need to step away from facilitating the exchange of currency between consumer and retailer and think about the whole transaction. The highest priority for both shopper and shopkeeper is to rid the store of lines at the checkout and ideally eliminate the final step altogether. If they can do away with shoplifting at the same time then all the better!

While the future of NFC is uncertain, the one technology that we know will have a place in years to come is location services. The ability to know where smartphones, or even wearable machines, are is fundamental to a whole range of new services. Increasingly, knowing that a customer is in a store is enough to establish the beginning of a transaction. It is likely that the early adopters will be in areas such as food service where cafes will enter a virtual contract with their regular customers.

For electronic wallet adoption to really take-off, the supermarkets and department stores need to have a way to allow the store to pair the goods with the customer who is picking them up. Ideally a contract will be established when a customer walks out of the store with the product, perhaps making shoplifting a thing of the past!

However, anyone familiar with this problem will immediately identify that the product identification is the real hurdle with this compelling picture. While Radio-Frequency Identification (RFID) is the most obvious approach, the cost of adding a tag to each product on the shelf is simply too great.

Until someone solves the problem of pairing the product with the customer there is little to make smartphone-based wallets really compelling. However the advantage of eliminating the checkout and reducing shrinkage is so large there is a ready market that will encourage rapid innovation.

The surprising innovators to watch are the drug companies who are keen to find sensors to attach to their medicines to track drug absorption and improve inventory management. If they can make technology which is simple and cheap enough to add to a tablet it is likely that it can be printed onto the packaging of consumer products as simply as a barcode is today.

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About infodrivenbusiness

Robert Hillard is the author of Information-Driven Business, available through John Wiley & Sons. Find out more at www.infodrivenbusiness.com. Robert was an original founder of MIKE2.0 which provides a standard approach for Information and Data Management projects. He has held international consulting leadership roles and provided advice to government and private sector clients around the world. He is a Partner with Deloitte with more than twenty years experience in the discipline, focusing on standardised approaches to Information Management including being one of the first to use XBRL in government regulation and the promotion of information as a business asset rather than a technology problem. Find out more at www.infodrivenbusiness.com. The opinions expressed in this blog are entirely his own.
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