QR vs. NFC (Fight!)

I read an interesting article today from the RFIDiva, "Google Decides that NFC Is Cooler than QR" and although my first instinct is to make fun of the name of this blog (I mean seriously, can I really analyze the movements of payments giants from a blog called the "RFIDiva"? Word of warning: she uses the term "NFC, obvi" in this article she wrote, which...well, the term "obvi" always inspires unexplainable hatred in me.) I really shouldn't because, well...people in glass houses.

Anyway. The gist of the article is that business owners and users used to be able to generate printable QR codes for their Google Place listings. For awhile, that functionality went away and no one really knew why. Then, Google came out and basically admitted that it was going to be moving away from QR codes toward NFC. What this means is that, instead of having printable QR codes that customers can scan in a store, Google will now send store owners RFID-embedded stickers that say creative things like "Recommended by Google" so owners can put them on their doors and at their checkout counters. Customers who wave their phones in front of the sticker will automatically transmit their recommendation online. One good point that the RFIDiva makes is that, when you compare this use case to Foursquare, this new check-in process is much better. Instead of sorting through a list of places that may (usually may not) be (relatively) near me, I can tap, check-in and start getting some awesome coupons ($2 off! woot!).

I have made it clear on my blog before that I am a HUGE QR proponent, but this move worries me. If tech giants like Google are hopping on the NFC bandwagon, this could begin to sway the mobile movement toward the NFC channel. However, my argument here is: well of course Google wants people to move toward NFC! They're coming out with NFC-enabled phones for their Droid phones, and if they decide to move to a Google Checkout/mobile payment model than it would probably be easiest in the short term (since they've already promised to seed specialized POS readers). However, in the long run, are merchants going to want the additional hard ware? In my mind, a POS reader with a NFC reader is still hardware, whereas scanning a barcode seems more software based- in the long run it might be easier to maintain and roll out non-hardware based payment solutions. (Especially since Google has been very upfront that it is NOT a hardware manufacturer.)

Also, I would think that the use case between checking in to receive mobile coupons or utilize social networking is going to be very different than the use case of mobile payments. I would hope that customers are okay with checking in as quickly as possible (outbound communication to Foursquare or Google Check In) but probably want slightly more security with payments. What do we know about this space? mopay (yup all lower-case, that is not a typo) recently released a study stating that:

1. Regardless of region, adults use more deliberately and thus, the global conversion rate of adults is twice as high.However, minors are a growing consumer segment and mobile payments is one of the few payment solutions to reach this valuable, untapped, largely underbanked/unbanked market
2. Mobile payments work best within $2.50 and $10. The "sweet spot" for mobile offers is around $8, while only three percent of of offers below $2.50 and only three percent exceeding $14.00
3. Average transaction value increased in 2010 (no surprise as mobile payments becomes more mainstream- I chalk this one up to a sampling skew- an early adopter in 2009 probably doesn't have a lot of opportunity to drop hundreds through mPayments, but 2010 is a different ballgame)
4. Consumers regularly spend up to $50 a month on mobile payments. There is a high percentage of repeat customers and although the pricing seems low, micro mobile payments tend to generate "macro-revenue" per user

So what does this mean? Consumers are edging into the space- they're not spending a huge amount, but they're spending, and the transaction value and volume is slowly increasing. They're strongly incentivized by offers. (Duh, see SK Telecom and their move to a "Groupon-like" service and Living Social's recent interview with Pymnts Adults are surprisingly the most common users, even though everything seems to indicate that younger users will rule the market in the future as they "come of age" (it's the real bildungsroman for the modern age).

[Tangent: Seriously, read LivingSocial's new plans on locally sourced group deals. They're basically making these deals "instant", so that merchants can make offers that will optimize traffic during slower business hours. So a slow restaurant can offer 20% off lunch, but only between 2-5PM. Users looking for deals can check their Instant Deals feed and will see all the deals within a half mile of their current location. They're currently piloting in Washington D.C. and plan to roll out nationwide by the end of the year. Talk about "right here, right now" functionality.]

Bottom line: Google seems to be pushing toward NFC for marketing and although its most likely motivated in part because they already have ponies in that game, it most likely will have a trickle down effect, making NFC the more popular channel for mPayments in the future. However, the question is, in the long run, is this the "right" decision. Shouldn't we be moving toward hardware-less customer interactions? I would guess if that's our goal, minimizing the hardware necessary for a transaction would be a first step, not just upgrading it to accept NFC instead of a card swipe.