Changing consumer behavior is very difficult. Making things more efficient, easier, faster, or more convenient isn't enough if it requires a change in normal consumer behavior. Many tech startups fail because they don't consider the user experience and behavior changes required to use their amazing tech solutions. NFC (Near Field Communications) enables your smartphone to make digital payments. But will consumers care? Jean-Louis Gassee has an interesting take on NFC on Techmeme today.
There have been many transitions in payment "technology" over the last 75 years. Cash was king for many years. Back in the day companies actually paid their employees every week in cash...not a check...cash. People used to visit their local bank every week to deposit or withdraw cash. Everything was done with cash. When checking accounts came along it took years, maybe decades, for everyone to get on board with this new way of paying for things. Credit cards were a huge change for consumers and retailers too. I can still remember when the cashier at a store would say "Cash, check, or charge?" The same happened with ATMs. Believe it or not, people were suspicious of ATM machines. It took decades for consumers to become comfortable with them, and for banks to install them everywhere.
Why did these payment transitions take so long? The technology worked reliably from day one. It did take some time for retailers to deploy the new payment technology to every store and restaurant, but it was the consumer adoption that really lagged. Why? Because people get comfortable doing things a certain way. Added convenience isn't enough to change consumer behavior. Early adopters will try anythng new. But most people wait for their friends to start using it. Geoffrey Moore called this the Technology Adoption Life Cycle.
Every new technology goes through an adoption cycle. The innovators create and try everything. The Early Adopters select the new technologies that interest them, try them out, and become the evangelists for more early adopters. It is at this stage, that Geoffrey Moore calls "crossing the chasm" where many technology companies fail. They fail to cross the chasm to significant early adoption. Once there is momentum an "Early Majority" starts to form, and the rest of the normal adoption curve plays out. The time needed in each phase varies, but the progression through the phases is always the same.
Will it save me money? Consumers are slow to change and adopt new technology, even for obvious added convenience. But allow them to save money...and they will stampede. The key to consumers adopting NFC payment technology will be SAVING MONEY...not convenience. The key to retailers and businesses adopting NFC will also be saving money...not fancy technology. Then there are the credit card companies. For them it may be more about saving their lives than saving money. The credit card companies need to consider "The Innovators Dilemma".
How will consumers save money using NFC? Think about money saving coupons. Think about Groupon style 50% off offers. Now think about not having to remember to bring your coupon with you, or needing to respond to an email offer and pay in advance. If by using NFC payment technology you get convenience AND save money...consumers will stampede. Groupon grew from nothing to a mutli-billion dollar company with 7,000 employees in two years. That is how fast consumer behavior can change when they can save money.
How does NFC work? Basically there is a microchip in your smartphone that stores your credit card information and maybe your loyalty cards and all your rewards programs. No more need to carry around all these cards. That is convenient, but not enough. Google has a web site that explains the vision around NFC and how it works. The stores and retailers will have new "card scanners" with an NFC chip that will read the payment information from your phone when you tap the phone to the scanner. It must be within 1.5 inches to be read. Near Field means within 4cm or 1.5 inches. In the future individual products on the store shelves will have tiny dots or labels similar to QR Codes. When you tap your phone to these products you will get access to product information, advertising, money saving coupons or offers.
Disrupting the payment processing business will take time. If consumers see a clear money saving benefit...it will happen faster. Retailers will want to save on credit card fees and maybe make their existing loyalty programs actually work. If retailers see the benefits...they will quickly adopt.
The real battle will be among the technology providers. Google, credit card companies, and wireless carriers will all be competing to provide the best solution. There will be lots of competition. The winner will be the one who focuses on the consumer, and stays in the battle for the long term.
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