Contactless Payments Zap Forward

Accelerating the adoption of NFC in the real world has become a mission for some of the industry’s leading thinkers. John T Nagle, CEO, ZAPA Technology, tells C-IQ about his company’s work in this area and you can watch a shortened version of the interview on C-ITV this week

C-IQ: ZAPA has been live for only a few months. Can you tell us about it?

JN: We have been up and running live in the real environment with retailers and consumers for about five months, but we’ve actually been operating for the last nine to ten months.

C-IQ: What does ZAPA Technology do? What fields do you work in?

JN: We’re trying to accelerate the use and adoption of NFC in the real world, in the retail environment. There are existing barriers in the form of a lack of handsets and retail acceptance devices. So what we have tried to do is to bring together the methods and products that will allow the consumer to experience NFC practically much more quickly without having to wait for five, six or seven years for ubiquitous adoption to take place. So we’re effectively leap-frogging the handset barrier by using RFID stickers and we’re leap-frogging the retail barrier by actually installing and deploying contactless readers. And we’re trying to make it a compelling proposition for consumers by sourcing very easy to use, idiot-proof programs that they can adopt very quickly, such as tap and go loyalty, tap and go couponing, tap and go vouchering. But we’re not just talking about it, we’re actually trying to do it in the marketplace and show that if you build a contactless network, consumers will use it and get value from it.

C-IQ: What types of user are you focusing on?

JN: We’re concentrating on five siloed categories where the consumer carries out transactions every day and maybe every week, but certainly no less frequent than that. What we’re trying to do is to look at a number of categories where the consumer has a Monday to Friday experience of using contactless technology to get on a train or a bus, to buy a cup of coffee, a muffin or a croissant, to get a lunchtime sandwich or a burger, and probably to buy a toothbrush or toothpaste at a drug store on their way home and maybe to rent a video. So the categories that we’ve gone into are coffee shops, particularly large vertical national coffee chains, fast food chains, big drug store chains, large entertainment media rental chains and gas stations; these are all places where consumers make classic types of transaction every week. So we’re  trying to capture the consumer experience, how they’ll use contactless in their everyday lives; so they may be tapping once a day, twice a day, ideally five times a day across those five categories, although that’s unrealistic. We’re targeting these high-volume transactions with a low ticket value that consumers make every day. And we’re targeting the retailers where these transactions are most likely to be made, telling them that if they can build a compelling proposition using this technology, making it easier for consumers to do business with them, they’ll benefit from it.

C-IQ: Take us through your products.

JN: The main product is an RFID sticker that is attached to the inside a phone and sits on top of the battery. Consumers then tap their RFID-enabled handset on an RFID reader in the retail environment. We’ve invested heavily in two specific platforms to make sure that the processing piece of the NFC pie is actually complete and robust, and available all the time to the retail network and to us. The transactions are fairly straight forward. There’s nothing special about them – I mean, NFC has been around for a long time. People are telling me that they’re getting invites from mobile operators and banks to do pilots; my view is that we don’t really need to do a pilot. What’s the point in doing a pilot? Pilots are there to test things and see if they work. I think everyone in the industry knows that this works and it’s just a matter of getting on and doing it now. And that’s what we’re doing.

C-IQ: Lack of handsets has been seen as a barrier to NFC adoption for some time. What are your views on this?

JN: I think there’s enough technology out there today to mimic an NFC transaction sufficiently well to prove to the consumer, to the retailer and to the industry at large, including the mobile operators and banks, that it is a compelling proposition. I think there is far too much talk about offering consumers the world when they tap and go and exaggerating the benefits.  Consumers are not looking for that; they just want to tap five times in the coffee shop and get the sixth drink free. I don’t want to have to go into my purse and pull out my loyalty card and find I’ve brought the wrong one, or that I’ve two stamps on one card and four on another and still can’t get the free coffee I’m entitled to.

So I think the debate that’s still going on out there is about the technology not being complete yet or having to wait for the handsets. The handsets are now going to become available in the next two to three years, which is a very short time in the world of payments. This is where we’re coming from. Two or three years is a very, very short time. So I think the time for talking about handsets being a barrier to execution in the marketplace is over. You do have your purist NFC person who’ll say the sticker is not NFC, it only mimics it. With the fantastic advances now being made in mobile and handset apps, you can easily marry a sticker to a platform-driven app and give consumers an almost complete NFC experience. So they’re 99% there.

I think the strongest barrier out there – and this is where the debate is likely to shift now – is the number of actual acceptance devices in the retail environment. We’ve been asked to get involved in a number of pilots where large sophisticated retailers with average ticket values of 200-300 euros are trying to drive loyalty programs with a contactless sticker. Quite frankly, we’re not interested in that profile because that retailer is doing between five and 10 transactions a day and we want six to 10 transactions a minute. That’s the type of retailer we’re looking for. So we’re aiming to get acceptance devices into fast food outlets where people make habitual everyday transactions. We all go for a cup of coffee in the morning and I want to get value and be rewarded for my loyalty. I want to get a coupon or a voucher. So if someone makes that easier for me, gives me my free 2.50 euro coffee once every two or three days, you know what? I’ll probably go back to him and buy a sandwich and a muffin once a week. Suddenly the proposition becomes very appealing, very easily adopted by me as a consumer. And it’s the retailers that I believe hold the key here, so I think engaging with the retailers is the next challenge. But what we’re finding is that retailers are quite open to our ideas when we talk to them. They’re interested in tap-and-go, increased speed at the point of sale, reconciliation and redemption certification – that they’re not sending out vouchers for 100,000 free Big Macs and not knowing how many of them are actually being redeemed. They actually have the appetite to breach that barrier, whereas the handset barrier has been so significant in the past few years that it almost stopped NFC. Thank goodness there’s technology out there now that’s mimicking it, in the form of stickers, vouchers and coupons and so on.

C-IQ: What’s ZAPA Technology’s long-term strategy?

JN: I suppose you’ve got to look at the industries that the team at ZAPA has come from. We might be a new – and a small – company, but members of our team have been involved in mobile transaction processing for 10-15 years. They’ve been involved in credit and debit card processing in the payments world, Visa and MasterCard prepay direct to consumers and, more importantly, they’ve been involved in deploying technology into a significant number of retailers across Europe. Overall, we’ve had relationships with 200,000 independent retailers. ‘And when you add up all this experience and the collaboration it has involved, it’s not hard to put it all together to form a short-term strategy over the next one to three years and to engage with retailers which want to provide compelling propositions to their consumers. To engage with those consumers and enable them to redeem value and be rewarded for their loyalty helps retailers to win their acceptance and make tap-and-go a reality. I think the three to five-year strategy is to make it ubiquitous.  So this means partnering with mobile operators and retailers. And at the moment unfortunately we have to be the A-Z of that whole process because we have to be the retailer, we have to be the mobile operator, we have to be the bank, we have to be the consumer. So we’re pulling it all together now, but in three or four years time we’ll probably be the D-M or the P-Z or the A-Z or the A-M – we want to be a part of that transaction. And ideally we want to be the preferred partner based on our expertise; that we’ve been there, we’ve done that, we’ve demonstrated to the industry that if you’re committed, and you invest sufficient capital in the right place, that you’ll get acceptance and you’ll actually open up the holy grail of payments to the mobile operators, you’ll open up the holy grail of redemption and certification to the retailers and you’ll open up the holy grail of value to the consumer.

C-IQ: What is your partnership model?

JN: We were very careful who we partnered with. We’ve been in the processing game a long time and having best of breed platforms is critical to the retail environment. Retailers want to know that their customers can access their coupons and vouchers and that their systems are working when they’re making transactions. I suppose we employed a strategy which involved using the best of breed platforms out there, and to that end we didn’t want to reinvent the wheel and try and develop our own. Our NFC deployment couponing and vouchering partner ViVOtech has been extraordinarily helpful and extraordinarily professional. We have a platform that we believe can manage any vouchering and couponing and redemption program. And ViVOtech has been absolutely essential to the success that we’ve had to date, not just in providing the platform but in providing advice, direction and leadership.

So I think the time for talking about handsets being a barrier to execution in the marketplace is over.