On paper, mobile payments look like the wave of the future, an example of how hardware, software and network can come together to benefit consumers in a new and efficient way (while making various companies a whole boatload of cash). In reality, though, mobile payments are experiencing quite a bit of turbulence on their way to widespread adoption.
Neither of Apple’s latest smartphones, the plastic-bodied iPhone 5C or the higher-end iPhone 5S, features the NFC (Near-Field Communication) technology widely viewed as a necessary component of mobile payments. Considering Apple’s sizable share of the mobile market, this refusal to embrace NFC is a serious blow to the mobile-payment endeavor—especially considering how the other serious contender in the mobile-device space, Google, can’t quite seem to transform its own Google Wallet solution into an internationally accepted means of payment. (The iPhone does let users scan barcodes as part of its Passbook app, which can open the door to NFC-style functionality; but it’s not quite the same thing.)
Google Wallet allows users to tap an NFC-enabled phone against a compatible reader and make a payment. While a growing number of Google Android devices feature NFC hardware, and Google has made an effort to update and enhance the underlying software, Google Wallet has faced everything from controversies over privacy and security to competition with Isis (a rival system that various carriers and banks have embraced). Google’s plan for increased Google Wallet adoption lies in tethering the app to Google’s other services, such as Chrome and Gmail, and hoping that synergy will give it more visibility. As a few publications have pointed out, it won’t be an easy battle.
On a broader level, widespread NFC adoption faces two big issues: convincing retailers to install the infrastructure necessary to use the technology, and settling on a handful of standards that allow for seamless transactions. The former is a question of convincing retailers that the infrastructure is worth the investment, which is difficult when the current methods—cash and plastic—are so very quick and easy; the latter depends on all the competitors in the mobile-payments arena, from giants such as Google and PayPal down to the tiniest startups, fighting until only the superior (or at least well-funded) few are left standing. Carriers such as Verizon and AT&T will need to be onboard with whatever solution gains popularity, and software builders must resist the urge to charge exorbitant fees to those retailers that embrace the technology.
The path forward may come from dedicated e-commerce companies such as PayPal and Square that have a vested interest in making payments of all kinds as seamless as possible—so long as those payments happen via their platform. (PayPal is rolling out a new system, Beacon, designed to make the mobile-payments process much easier.) Those companies may have the heft to reconcile greater adoption of NFC and mobile payments with the fragmented state of the technology and networks underlying them. But it doesn’t seem likely that’ll be a smooth or short road.