Faster, Pussycat, Faster

In the locker room of the Montreal Canadians you’ll find a sign that reads, “Vitesse, Autorité, Enternally,” which translates from the French as “Speed, Authority, Eternally.”

“Speed” does not just reign supreme in hockey. To my mind, it remains the linchpin to the future of NFC in the United States.

We’ve lamented in recent days at Bank Innovation about how much farther ahead is Europe than the US in payments. For example, I was on an Amtrak train to DC yesterday, and Amtrak still required that travelers physically sign the corner of their train tickets before submitting the paper document to ticket collectors who walk through the cars. The whole thing is preposterous, from the paper document to the blokes marching through the trains.

Much of the transition to a cash-less society boils down to near-field communications, and clearly, Europeans are much more comfortable with NFC than Americans, as evidenced most prominently by the successful Oyster transit payment card program in London. (In this post, I am addressing just NFC, and not the other, viable means of alternative payments being born.) But the payments battle is not over. There are two ways the US can get more advanced in payments.

My friend Chris Skinner at the Financial Services Club Blog in the UK published an interesting synopsis of a speech last week by Peter Ayliffe, president and CEO of Visa Europe. Ayliffe made many interesting points, and it was noteworthy to read the degree to which Visa Europe sees its enemy as not American Express or MasterCard, but as cash itself.

But buried in the review of Ayliffe’s speech was a profound point that I think will play extremely well in the US: that the speed of NFC trumps all. A typical contactless payment takes four to six seconds at the POS versus 12 to 14 seconds for cash and 27 to 44 seconds for EMV or magnetic stripe.

I thought about this last weekend. Firstly, it is certainly true. Second, I thought about the 12 second versus six second comparison, and it is not just much the amount of time, but the “annoyance” of longer everyday transactions. Indeed, this weekend I was at a Duane Reade buying something inconsequential, and I realized I was paying by cash just because I didn’t want the hassle of a card transaction. That same decision will eventually be made by consumers when comparing NFC and cash transactions – that is, if payments providers market NFC properly. Visa made some waves with marketing the speed of its check card some years back. NFC has an even better “speed” sell. Until the speed argument is made effectively to US consumers, NFC will remain an also-ran.

The second key to NFC is on the systemic side. When I think about this Amtrak train and its payment options, it is clear to me that the transportation company does not have enough incentives to modernize its payments, even though the economics should work to Amtrak’s benefit. I say “should” because at least on the carrier side, there is still a “fleece the payers and payees” mentality. And obviously that mentality remains because there is not the degree of carrier competition in the US that there is in Europe – and that’s a shame. I’m not certain how to move this ball. I certainly don’t want to see regulatory mandates, and I suppose eventually payments prices will drop, but the thought of waiting for such price drops gives me visions of the US growing 10 years behind the rest of the world in payments. That’s unacceptable to me.

The speed factor could change all that. The word needs to get out that NFC is fast fast, and I have little doubt that the same people who invented the drag race will embrace speedier payments. I realize that many of you might disagree with me on this point. The San Francisco startup community, by and large, believes that speed is not enough to change customer behavior. Rather, for a means of alternative payments to become embraced by consumers, it has to more than just faster than a credit card – it will only become meaningful when it can be used for more applications from library card to payment to whatever. As my colleague Mary Wisniewski explained, the conventional wisdom is, “Waving a phone will do jack until it has greater applications.”

I appreciate that perspective, but I would maintain that until speed is proven to not transform behaviors, I maintain that it might. And if it does, it will be a boon to us all.