Game On: The Chase for NFC-Enabled Mobile Payments

Banking is serious business for serious individuals and institutions. Financial services are for stable entities in thoughtful, analytical environments. This is real life for the real world. It’s not a video game.

But then again. . .

A couple of years ago, Nintendo earned praise for incorporating some new and exciting capabilities into its new Wii U platform, such as the GamePad, a new controller with a 6.2 inch touchscreen. But there was also something else. In fact, this was the first gaming platform to incorporate Near Field Communication, or NFC.

But that’s gaming. Here’s what it has to do with banking.

First, for the uninitiated, NFC comprises a set of standards for mobile and other devices to establish radio communication through touching or proximity, collectively encompassing a broad spectrum of communications protocols and data exchange formats. We already have quite a few applications taking advantage of these protocols, from contactless transactions to simplified Wi-Fi.

As the industry trade publication American Banker pointed out recently, financial services corporations have long sought to boost the use of NFC services for mobile payments. But as with many other aspects payments, success has been hard to come by. And that’s exactly why hose sober, solid and sensible banking industry types should look to industries such and video gaming—and more specifically companies like Nintendo—for pointers on what to do.

To be sure, there’s quite a bit of success to emulate. The original NFC technology in the Nintendo console didn’t seem to have much purpose, but the company recently that the reader will come to life through a series of NFC figurines that easily interact with many popular games.  Those figurines, incidentally are also sold as action figures; the character equivalents take life in the game, and can follow multiple storylines in accordance with the layers’ preferences.

Here’s one sign of the success. This represents another potentially lucrative channel for the creators and owners of these figurines, including Disney and Activision. The latter’s Skylanders was an original backer of this concept, and the franchise passed $2 billion in revenue earlier this year.

Here’s the point: Consumers can make mobile payments through a variety of channels right now, saving massive costs for the financial services institutions involved. But very few are doing it.  There might yet be large-scale adoption, and the numbers will surely keep growing, but the truth is that technology is a fickle business. We don’t really know why some advances take off immediately and others take time. So far, at least, this one hasn’t.

But we also know that the next generation—the one obsessively playing video games right now—will be opening back accounts soon enough. Those now-youngsters will have absolutely no understanding of a world without millions of mobile apps, and it will be completely comfortable with NFC.

Banking and multi-players games surely make for an odd hybrid, but there are precedents. Innovators such as American Express have been embedded in this market for years, specifically to wean an emerging generation of cardholders. Several telecom giants have also had some success with built-in NFC capabilities.

Today, it seems like a long leap from shoot-’em-up games to, say, mortgage banking. But that’s exactly what innovation requires—a leap in imagination and then practice. Those pesky kids playing games today will be opening bank accounts and making payments tomorrow. We need to find ways to reach them before that.

Don’t Touch the ATM

We have smartphones, and we have ATMs. Why can’t these two essential technologies get along?

It’s a question we’ve asked on this blog before, and with good reason. While every other aspect of financial services has been revolutionized with blizzards of mobile applications, ye olde automated teller machines have remained immovable, like those phone booths no one uses any more. If anything, they’ve proliferated: We see them everywhere, from mega-malls to corner delis, and they still do pretty much what they’ve always done.

Woman Holding Phone 2Of course, that’s not true, and it’s about to become even less so. According to a new report released this week by the ATM Industry Association (ATMIA), the global trade group with 1,300 members in 50 countries, it could be the next market to watch for real innovation. There’s one area in particular that should be really interesting: mobile.

There have been innovations, of course. As we noted earlier, banks in Greece have added elements of social media, with personalized greetings and reminders of other people’s birthdays, enabling instant gifts. Some machines tout their use of solar power.  But fundamentally, it’s still about walking up to that hunk of hardware, pulling out that otherwise-useless debit card, and making a transaction.

For the record, we’ve been hearing for some time now about ‘contactless’ access, which builds on the promise of mobile technologies. Well, it’s here—kind of.

Diebold Federal Credit Union (DFCU) is pioneering what it calls “the world’s first ATM without a card reader or PIN pad that relies solely on mobile authentication.” In a nutshell, here’s how it works. The consumer scans a unique QR code at the ATM using a smartphone, and the ATM authenticates the user via cloud-hosted services to enable secure, cardless transactions. There’s no need for a card or a PIN required, eliminating the fear of card-skimming and shoulder-surfing at the ATM. (Diebold and white-label mobile wallet provider Paydiant developed the cross-channel solutions and hold complementary patents on the technologies.)

An ATM with no card reader sounds basic, but it’s a big deal. Transactions via smartphones and without cards removes a step that is basically very inconvenient and eases theft or fraud. We only accept it because we’re so used to it.

There are other benefits too. For a start, there’s heightened security: While the pho ne could be stolen or lost just as easily, there are new methods of authentication in this arrangement. Bank customers can verify their identity at the ATM by taking a photo of a QR code on the machines screen (yes, despite the frequent criticism, QR codes have some value).

Convenience arrives in other ways, too. By integrating the ATM with Diebold’s Mobile Cash Access (MCA) solution, consumers can actually pre-stage cash withdrawals via their smartphones, even to third parties. Just pick the person you want to send cash to from your contact list, and the app will send a text message to that recipient with a six-digit code. When that person goes to an ATM and enters this code, they’ll get the money. And for those who are environmentally minded, the new arrangement, we should remember, is paperless, delivering receipts via the mobile wallet.

Of course, the real action will be down the road. This is the mobile generation, which the new solution pays tribute to with flick and drag capabilities on the interface. Like most other advances in this all-digital era, the real innovation will come from users. As with Facebook, Twitter and a host of other ground-breaking services, we will routinely use the smartphone-ATM combo to do things we never thought we needed to do. So far, it’s just one bank in one market. Tomorrow, who knows?

All we needed was the technology to get here. Now it has, and it’s about time.