Credit, Debit or Smartphone?

Lately there's been a lot of noise about NFC - better known as "Near Field Communications" coming to smartphones here in the US. "What is NFC" you ask? It's basically a "contact-less" way to pay for things. There's a little transmitter that will transmit your payment information to a reader so that you don't need to swipe a plastic credit/debit card.


It's already a big hit in Asia, and in some places in Europe - but the whole pay-by-phone thing hasn't really taken off (yet) here in the US. Some companies like ExxonMobil and Visa have experimented with contactless payment and there was some speculation that the next version of the iPhone would include NFS technology - but that's yet to be seen.

Adoption - both by handset makers and retailers is a bit spotty. It's sort of a chicken and egg thing. Eventhough there are some phones by Samsung, Nokia, Google and RIM that have a NFC chip in them - there's not a ton of retailers that have the necessary readers to make it all work. And, because there's not a lot of retailers, NFC adoption by handset makers is still pretty slim.

Now if everyone has to replace their current smartphone to get one with a NFC chip in it - that's going to be a fairly long adoption cycle. Sure, there are other ways to the same thing - there are several domestic airlines that are battling working with the TSA to come up with a digital/secure boarding pass (Contenintal and United have some routes/airports already) - and Starbucks has been accepting digital payments since January - but using a barcode rather than NFC. There's even a company called Zoosh experimenting with an ultrasound-based (generated by a phone's built-in speaker) point-of-sale system to get around the whole NFC-on-a-chip thing.

The Starbucks case is interesting - they knew that adoption of NFC was going to take forever to reach critical mass - so they built an iPhone and Blackberry mobile application (they just released an Andoid version as well) to esentially replace the plastic Starbucks card. There are over 6,800 locations that will accept it, and they're on track for 9,000 locations - including those inside grocery stores - by the end of July.

So far, the results have been pretty impressive - in just the first 9 weeks Starbucks reported to their shareholders that over 3 MILLION mobile payments were made. That's a pretty good start - but when you take into consideration that in just the first two quarters of 2011 there were 37 million card activations and 26.9 million reloads worth nearly $1.2 BILLION (source) - the adoption rate of digital payments still isn't that overwhelming.

If you love your Starbucks and you would like to use the digital version - here's where you can get it.