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Isis CTO accuses U.S. retailers of turning off NFC and smartcard payment tech

Matt Hamblen | March 18, 2014
A powerful group of retailers plans to roll out mobile payments in 2014 by scanning barcodes from smartphones, a move that sets up a potential battle with backers of NFC and Google Wallet.

"I imagine these retailers are turning off the technology because there aren't any shoppers with NFC and smart card payment capability walking into the store and it costs more to keep those features turned on," said Avivah Litan, an analyst at Gartner.

Analyst Julie Conroy at the Aite Group added, "There's the ongoing battle between merchants and [banks and credit networks] over the fair cost" of using smartcards and mobile payments. Several years ago, merchants and banks predicted that merchants would buy payment terminals with the dual ability to support EMV smartcards and mobile payments with NFC, under the theory that customers would move from smart cards to mobile NFC payments eventually.

"People thought [smartcards] would take off, but it's hard to change consumer behavior and there's no incentive to change, so it hasn't taken off," Conroy said.

Another factor affecting the slow smartcard rollout in the U.S. has been the estimated $10 billion to $11 billion in costs faced by banks to provide consumers with smart cards, Conroy said in a video interview last year.

At a Best Buy store located in Harrisonburg, Va., a clerk confirmed that the ability to make NFC mobile payments and related smart card payments at its point-of-sale terminals had been turned off after a directive from the corporate level. A spokeswoman for Best Buy declined to comment.

At one large 7-Eleven store also in the area, a clerk said some of the mobile payment point-of-sale technology had been removed from some checkout counters. Another 7-Eleven store, however, was promoting its mobile app with a notice where customers pay.

A corporate spokeswoman said the 7-Eleven app does not currently support mobile payments, but said the app -- available for iOS, Android and Windows Phone -- does allow customers to redeem coupons and offers by using a barcode on the app that is read by a barcode scanner at the checkout stand.

"We hope to include this [payment] function in the future," said the spokeswoman, Margaret Chabris.

Starbucks, which is not a member of MCX, has successfully used barcode scanning with its Starbucks Card stored on customers' smartphones for three years. Analysts last year said that up to 10% of Starbucks' revenues are earned through mobile payments.

MCX did not respond to a request for comment on its plans or steps taken by member retailers with payment terminals.

Jordan McKee, an analyst at Yankee Group, said MCX plans to use barcode scanning for the "forseeable future,"adding that MCX "has a lot of potential as a disruptor. It's going to be big."

McKee said MCX plans to sidestep any requirement that customers load up a Visa or MasterCard card to a smartphone, and will instead require them to make purchases with phones and barcodes directly from their bank accounts -- a significant departure.


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