Efforts to push mobile payments using NFC-ready smartphones have gone through a series of fits and starts in the past three years in the U.S., but have had little affect on how Americans make purchases.
Now, a powerful group of retailers including Best Buy and 7-Eleven plans to roll out mobile payments in 2014 by scanning barcodes from smartphones. That move sets up a potential battle with backers of NFC (Near Field Comunication), including a joint venture of three wireless carriers called Isis, and Google Wallet.
The merchant venture, called Merchant Customer Exchange (MCX), hasn't divulged specific plans. But in December, it announced that ExxonMobil had joined its ranks, bringing MCX membership to about 70 brands with 110,000 retail locations that process more than $1 trillion in payments a year. Other members include Walmart, Sears, Kohl's, Lowe's, Dunkin' Donuts and other national retailers.
Adding to the turf battle now building over mobile payments, a few national retailers who are MCX members have begun turning off the ability of recently-upgraded payment terminals to recognize NFC payments or read smart credit and debit cards embedded with a chip, according to several industry analysts and Isis CTO Scott Mulloy.
Isis is a joint venture of Verizon Wireless, AT&T and T-Mobile US, which launched the Isis mobile payment network national in November 2013.
"A handful of retailers are moving counter to the broader industry movement towards more secure payment technologies," Mulloy charged. "This affects millions of contactless [smartcards] already in circulation as well as new mobile wallet innovations. It's a massive step backwards.
"When a merchant with thousands or even hundreds of locations turns off contactless [NFC payments] and chooses a less secure option, it's significant for consumers and the broader payments industry, as we have seen with recent high profile data breaches" at Target and Neiman Marcus, he added via email.
Without the smart card and mobile wallet NFC capability, consumers are forced to use magnetic stripe credit and debit cards, which are widely considered insecure, Mulloy noted.
Isis, which conducts its own tests of various point-of-sale terminals, estimates there are about 1 million sales terminals deployed in stores that support both EMV (Europay MasterCard Visa) smartcards and NFC smartphone payments. That's up to to 15% of all terminals in use. Both EMV smart cards and NFC smartphones rely upon the same communications protocol, although payments are certified differently by the two technologies.
Several industry analysts said they had heard that some MCX members such as Best Buy and 7-Eleven had installed NFC-ready payment terminals in the past two years, but had recently turned off that capability. One reason often cited is to avoid high fees charged by banks and credit card processors, while other analysts said the retailers are shutting them down to avoid operational costs.