Towards a Typology of Business Models for NFC-Based Mobile Payment Services

The last few years witnessed the steady proliferation of hand-held mobile devices, including mobile phones, iPhones, iPods and iPads. This trend was accompanied by the accelerated introduction of new mobile services ranging from basic voice and short messaging services to more advanced mobile internet, multimedia messaging and broadband mobile services, including mobile TV. At the same time, contactless card technology has reached a maturity stage with the successful adoption in the payment, retailing and transport sectors. As a result, the extension of mobile services to contactless services is perceived today as the next natural leap in mobile payment offerings. Near Field Communication (NFC) is the enabling technology for this evolution. In fact, NFC has recently emerged as one of the most promising solutions for future contactless (mobile proximity) payment services and for other ubiquitous contactless applications. According to MacLeod, the number of NFC-enabled mobile phones sold is expected to raise at an 87% annual growth rate to reach around 300 million NFC handsets by 2016 (MacLeod, 2012; cited in Becker, Alper & Lee, 2014). Mobile NFC services make use of the synergetic blending of contactless card technology with mobile telephony, based on NFC technology. This blending creates exciting value-added business opportunities for contactless applications such as mobile payment, transport ticketing, physical access control, personalized/target advertising, loyalty services, hospitality, healthcare, and peer-to-peer data transfers, among many others. Much of the current interest in NFC technology is however directed towards contactless mobile payment (m-payment) applications, where the concept of mobile wallets (m-wallets) is gaining unprecedented popularity. In this chapter, we define NFC mobile payment as the use of an NFC-enabled mobile device to the close proximity of a point of sale (POS) reader in order to conduct a payment transaction. Today, mobile NFC services in general, and NFC m-payment services in particular, offer a compelling business case, with a strong potential for additional revenue streams and marketing opportunities for the various members of NFC ecosystem. In fact, NFC is recognized today as the technology of choice for mobile payment services. The other competing technology is based on SMS text messaging, whereby the mobile subscriber sends a payment authorization request to the Mobile Network Operator (MNO) via SMS messaging. The MNO will charge the requested amount to the subscriber phone bill and the retailer will be informed of the payment success (Ozcan & Santos, 2010). SMS messaging was also used for mobile person-to-person (P2P) payment, but its usage for retail payments is constrained by inconvenience, lack of reliability and security, and delay-related performance issues (Crowe, et. al, 2010). Yet, despite all the attention generated among practitioners, their is a lack of academic research on NFC ecosystem and the associated business models. This chapter aims to enhance our understanding of NFC mobile payment ecosystem by identifying and classifying NFC m-payment business models into a number of typologies. Towards a Typology of Business Models for NFC-Based Mobile Payment Services