iPhones, NFC and Rewards Cards

January 23, 2013

Today the Official Merchant Services Blog brings NFC technology back into the spotlight, with a look at a pilot program U.S. Bancorp is running in two test cities. The company, one of the nation’s more tech-oriented big banks, is joining the ranks of companies testing near-field communication (NFC) technology by pairing a rewards credit card with Apple Inc.’s iPhone in Salt Lake City, Utah, and Portland, Oregon.

It’s been a while since we discussed the technology surrounding Near Field Communication, or NFC, so lets take a moment to recap. NFC is a short-range high frequency wireless communication technology which enables the exchange of data between devices with a touch. This touch capability allows for sharing, pairing, and transaction capability between the NFC devices. A smartphone or tablet that is NFC capable can be used as a keycard or an ID card. The same device can also be used to make credit card payments.

U.S. Bancorp, based in Minneapolis is offering new holders of its FlexPerks Travel Rewards Visa Signature card a special sleeve for the iPhone 4 and iPhone 4S. The sleeve contains a microNFC chip, and an antenna that facilitates payments by communicating with contactless point-of-sale terminals. Unlike a small but growing number of smart phones running Google Inc.’s Android operating system, the iPhone does not have a built-in NFC chip. With the sleeve and U.S. Bank’s new Go Mobile app, cardholders will be able to use their iPhones to make purchases at any merchant location that accepts the contactless Visa payWave card.

Cardholders will receive the case free for participating in the test.  The case also includes a battery that extends the iPhone’s charge time by more than 50%, a feature U.S. Bank says will appeal to frequent travelers. The card itself is free in the first year but afterward charges a $49 annual fee.

U.S. Bank, already has offered the FlexPerks card with a Europay-MasterCard-Visa (EMV) chip so that international travelers can use their cards easily in EMV countries, which is now most of the industrialized world. The new test is part of an effort to learn how consumers and merchants take to NFC, according to Dominic Venturo, chief innovation officer at U.S. Bank Payment Services.

Some major players in mobile payments, notably PayPal Inc., Square Inc. and Starbucks Corp., are using non-NFC technologies such as browser-based systems or 2-D bar codes. NFC is a high-capacity, fast technology, but skeptics cite its need for chip-equipped phones and POS terminals as reasons to use other technologies. And while still small considering that the U.S. has about 8 million card-accepting locations, Venturo says the number of locations capable of accepting NFC payments, is now up to about 300,000 and growing.

U.S. Bank picked Salt Lake City and Portland for the NFC testing because of their tech-oriented populations and previous experience with high-tech card or Internet systems. Salt Lake City, for example, is one of the two test cities for Isis, the NFC mobile-payments joint venture of AT&T Mobility, Verizon Wireless and T-Mobile USA. Also, the Utah Transit Authority, the Salt Lake area’s mass-transit system, already accepts contactless cards. Google, meanwhile, picked Portland as its first test site for Google Offers, a competitor of Groupon Inc.’s daily-deal offers now available in about 40 cities. U.S. Bank has no end date for the test and in fact considers it a limited rollout that may expand later this year.

This technology is being embraced by some major companies in the e-commerce industry for its ability to process credit card transactions. PayPal purchased Zong for just that reason. Visa invested heavily in mobile payments, as seen by their marketing plans for the 2012 Olympics. Google is making its Google Wallet and Google+ beta work toward that same vision of mobile payments made through NFC-based touch technology. Only time will tell if the future of NFC payments is in fact bright and as usual, Host Merchant Services will keep you up to date on any new developments.

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