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Another Perspective


NOT WEATHER, NOT WHETHER BUT WHEN

In 1974, a band of self-styled revolutionaries, the Weather Underground published Prairie Fire, a manifesto explaining why and how to replace the government of the United States.  Not only didn't this happen, but two of the principals, Bernadine Dohrn and Bill Ayers, have a couple kids and mundane jobs as college teachers.  If they were out to change the world today, they'd be writing revolutionary apps, not manifestos, or composing essays praising or damning those apps.  And just what are those transformational apps doing? Putting money where our mouths are: In our phones.

Prairie Fire cover
Prairie Fire
Manifesto for a revolution that never happened,
its existence a testament to the power
of the First Amendmen

For the past few years, people in Japan, Korea, and elsewhere have been able to pay for things with their phones much the way we in the formerly advanced West pay with credit cards or checks or cash.  The idea came to the U.S.A.  and U.K.  shortly before Christmas 2010 as Google introduced a phone called the Nexus S, a member of the Samsung Galaxy S family that included technology for Near Field Communication, a short-range radio interconnection scheme secure enough to be used for financial transactions.  Basically, NFC is RFID, the radio rival of bar codes, on steroids.  What's important about NFC is that it is small, cheap, and low-powered, so it can be built into all kinds of gadgets, not just phones.  What's not so important is that the Nexus S phone was a flop.  Consumers didn't rush to embrace NFC.

Undaunted, or maybe only a little daunted, Google and Samsung tried again about a year later.  Their Galaxy Nexus phone seemed to catch on, but possibly not because it offered NFC technology.  The Galaxy Nexus was the first phone to include a new version of the Android operating system called Ice Cream Sandwich.  The software has gone over well.  It is now finding its way into a whole new generation of phones and it is also becoming available as a firmware upgrade for some existing phones.

NFC support is now a standard component of the Android ICS software, so if a phone manufacturer wants to provide NFC technology and the latest Android software, it can do so and remain in the software and hardware mainstream.  This was not the case before the Galaxy Nexus and its ICS software became available.

Galaxy Nexus with Wallet
Google Wallet
The Samsung-Google Galaxy Nexus phone
supports an app called Google Wallet
that lets the phone act as a
debit or credit card

Right now passive NFC, which means something akin to an RFID circuit rather than the kind of advanced NFC device that can be tied into a smartphone app, is already baked into some credit cards.  Citibank is emphasizing this concept in the United States, but it is not alone.  In the United Kingdom, the entire transit fare system is based on what are called Oyster cards, which use related passive technology.  The American counterpart is a system that works at a greater distance than NFC, RFIC, or Oyster cards; it is the E-ZPass device for toll roads and bridges on the East coast.  (New York City's transit system uses fare cards that speak using a magnetic stripe rather than a radio signal, operating the way old style credit cards work.)

Citibank and Google and any other outfit that wants NFC to join other payment schemes in a big way had better act fast, because if they don't there are going to be alternatives that sweep them aside and win the hearts, minds, and money of consumers eager to spend, spend, spend.

The Google Wallet app that works with NFC in the Galaxy Nexus hasn't caught on mainly because so many parties with an interest in scraping vigorish off transactions are determined to control not cooperate.  An excellent example is provided by Verizon, the leader in 4G mobile phone service across the United States.  Verizon sells a version of the Galaxy Nexus that works with its CDMA phone network and its LTE data network.  The Verizon Nexus has NFC hardware just like the more generic GSM version sold officially in Europe and less officially in the U.S.  by importers who have the phones but not Samsung warranty support.  The Verizon phones even have a battery that packs an NFC antenna (placed in the battery so it can be closer to the skin of the phone) just like the GSM models.  But you cannot use the NFC technology in the phone.  A Verizon customer cannot officially get Google Wallet from Verizon's Google app store.  If you use the Wallet loader (there's an app for that) to bring in Wallet it probably won't work unless you root your phone (which means grabbing system privileges that are roped off in Verizon's standard software stack).  And if you root the phone, Wallet cannot be properly secured, so you are out of luck for a different reason.

Sprint will soon offer an LTE Galaxy Nexus including NFC that works along with Google Wallet, and that might force Verizon to soak its corporate head in stool softener.

American app developers messing around with NFC buy generic GSM Galaxy Nexus phones, load the Google Wallet app in their un-rooted models, and get the phone to work by inserting an AT&T or T-Mobile SIM card.  While those two networks won't sell you a Galaxy Nexus (because Verizon has an exclusive, at least for now), they will provide service to customers who show a little gumption.  In addition, developers across the EU can get the Nexus with a local warranty because the mobile phone companies there are not allowed to push around consumers the way U.S.  carriers do.  They might not have banking systems that love NFC but they can develop apps for the U.S.  market in the hope that America will eventually embrace NFC and make their little app the Angry Birds of mobile commerce.

Card readers
Mobile Card Readers
Square and now its rival PayPal offer credit-debit card readers
that plug into smartphones;
they are killing the old style merchant processing outfits

Hey, in case you haven't had your daily dose of sweet mobile phone invention, here's a taste of Gingergread or Ice Cream Sandwich: Somebody got Lexus to pay for an ad packing an NFC gizmo.  It shows eaders of this month's Wired how totally tech the GS car has become.

But NFC might not happen any more than the great People's Revolution of the 1970s destroyed the corrupt American empire of the day.  (And maybe that is for the best.  It's sure hard to spot evidence that we would be in a better world if the Weather Underground had achieved its goals.) If anything has ruined America, which does seem to be pretty loused up these days, it has been more of the same old same old, not conflict with the different.

There is no little doubt that the social and political campaigns against America's blunders and misdeeds of four decades ago did bring about change, some to our liking, some not so much.  In any event, revolutions, like wars, have huge unintended and unforeseen consequences.  In the eighteenth century, the French got rid of an odious aristocracy and made room for the bourgeoisie to prosper, but not everyone in the middle class came out ahead.  It was a tough time for the milliners.  In the case of the Weather Underground, people who once imagined they might be heroes of a great revolution, at least the ones we've heard about, live lives as boring as tofu.

But for those who hate banks even if they don't flock to the ramparts, a populace that might include everyone who bothers to think about the issue, cosmic justice is in full flood.  The battle among wannabe mobile transaction barons is proceeding in a way that hilariously squanders opportunity.  Even Google and Citibank, the only players that have actually offered an NFC solution and an attractive pitch for merchants, have not taken the marketplace by storm or, for that matter, any weather above or under the ground.  They have been upstaged by smarter, more imaginative and less venal folk, such as the people at Square.

Yes, Square just keeps on growing.  For some time it has offered a gadget and app that make any smartphone into a credit or debit card terminal.  For a while Square pretty much had this field to itself; all its rivals were in a stratosphere of punishing, high transaction fees.  Now that Square, with its eminently affordable service, is pushing past the $5 billion a year level in transaction volume, PayPal went to Starbucks (which has its own shopping apps) and jumped into the mobile transaction business.

PayPal is a very big name in Internet payments but it remains way behind Square in the mobile part of the game.  Even as PayPal is trying to get its little card reader, a triangle imitating Square's square, out the door, Square is offering a combination of consumer and merchant service that is stunning in its brilliance, simplicity, ease of use and attractiveness.

Anyone can get an app for iOS or Android called Pay With Square.  The app ties to a credit card of the user's choice and to a photo stored by Square.  To shop, the user wakes up the app, plunks in an unlock number, and tells it where to spend money by tapping from a list of nearby places selected by geolocation.  When shopping is done and it's time to pay, the app user simply tells her name to the cashier who has at the till a list of Pay With Square people who are in the shop along with their photos.  The cashier checks the name and photo and taps a button to book the sale.  It's that simple.  Your monicker and your mug shot (along with your prior app setup) have become your payment medium.  You and the merchant trust Square, and Square's business is monetizing trust just the way Google's dodge is monetizing ignorance.  Note to PayPal: It's time to have another coffee.

With this sort of thing catching on like wildfire, or maybe Prairie Fire, you can see that the NFC revolution might not be the next big thing in business history.  It could be, if Google could get the banks, the mobile carriers, and the merchant community to simmer down, negotiate an acceptable way to divvy up the transaction fee take and just plain make money-in-the-phone universal.  But if they all don't move ahead fast, time and popular culture will pass them by.  In fact, the moment when NFC was at its ripest may already have passed.

It probably boils down to an Occam's razor situation.  Consumers will follow their noses and Square to the easiest and most narcissistic way to pay.  Smart merchants (and their technologists) trying to improve the shopping experience they provide will realize that a customer has only one nose.  So don't blow it.

— Hesh Wiener April 2012


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