EMV Seen as Trojan Horse for Near Field Communication

As the U.S. payments industry advances in its migration to EMV-chip cards, some merchants perceive the EMV push as "a giant head-fake" to establish a foundation for mobile payments based on Near Field Communication technology, says industry consultant Steve Mott.

"Merchants fear EMV is a five-year diversion to get them to terminalize NFC," he adds.

But as the market explores NFC's potential, some providers are moving away from the technology, he says.

Indeed, in the past two weeks, Google Wallet made moves to reduce its reliance on NFC, while Isis, another NFC-based initiative, was coping with some issuers sitting out the next phase of its tests.

Other prominent mobile payments projects, such as the Starbucks app and the Merchant Customer Exchange, never touched NFC.

"Years ago, the industry was saying to do NFC, but something funny happened along the way," says Mott, who spoke at the Chicago Payments Symposium this week at the Federal Reserve Bank of Chicago. "People said no and looked at other technology."

The companies that waited before jumping on the NFC bandwagon are probably in the best situation at the moment, Mott says. "Other contenders are working on consumer convenience and stressing lifestyle, not payments," he adds.

Some merchants that have evaluated EMV aren't convinced they should upgrade — even with the prospect of added fraud liability if they miss the card networks' deadlines for EMV acceptance.

At a retailers' payments conference earlier this year, Bill Deichler, manager of payment methods for Arkansas-based Murphy Oil Inc., made it clear that his company may not make the upgrades to its 16,000 gas pumps to accept EMV. Its own fraud protections are sufficient, he said.

But to Mott and others, NFC hasn't yet made a convincing argument on its own merits either.

And with Google's recent moves to diversify beyond NFC, many are closely watching Isis as the poster child for the NFC wallet.

Isis, a venture of AT&T, Verizon Wireless and T-Mobile, says its tests have been a success. Up to 65% of consumers who used the Isis wallet revisited Isis merchants or used offers more often, Isis said in February. In its test cities, Isis was available at 200 carrier stores and supported at 10,000 merchant locations.

"Over the past nine months, we have proven the power of an open platform, creating an ecosystem of literally hundreds of partners dedicated to making mobile commerce a reality," said Michael Abbott, chief executive officer for Isis, in an emailed statement. "As part of our commitment to consumers, we are incorporating feedback from our pilots into the next generation of the Isis Mobile Wallet as we prepare for national availability later this year."

But after spending time in the Isis test cities, Mott contends consumers are "not showing up" for the Isis tests.

And Carl Rutstein, senior partner with Boston Consulting Group, says he considers Isis' choice of NFC a mistake — "the stupidest idea I ever heard of," he said during the Chicago Payments Symposium — but it represents the type of collaboration needed in the payments industry to get new ideas off the ground.

However, any collaborative efforts must provide value to the end user, Rutstein said at the event. "If it is not right for the customer, it will be like swimming against a brick wall [to get adoption]," he says.