Google’s Schmidt Bullish On NFC Payments

It’s no surprise that a Google executive would be pounding the tablet for tap-and-pay mobile payment solutions powered by near-field communications.

The company one month ago introduced its Google Wallet NFC mobile payment solution, which is expected to go live in New York and San Francisco soon. On 23 June, Google said it was testing NFC-based ratings and review base stations in Japan, perhaps the NFC capital of the world.

An educated guess

Google Executive Chairman Eric Schmidt reiterated the company’s bullish position on tap-and-pay at the Cannes Lions ad conference 22 June, telling attendees that a third of check-out terminals in retail stores and restaurants will be upgraded to allow consumers to tap and pay from their smartphones within the next year.

Schmidt added that Google is pushing payment processors (other than Google Wallet partners Citigroup MasterCard, presumably) to upgrade a third of their terminals. This, according to the Financial Times account, will be sufficient for wide adoption of the technology. Schmidt explained:

“I judge that based on how long I think it takes, because the terminals are available now, the software is available now or this summer. How long does it take an infrastructure player to upgrade a significant percentage of their infrastructure – it’s on the order of a year, it’s not a week, it’s not a month but it’s also not five years. … It’s an educated guess.”

In a way, we’re all just guessing here. It’s a new paradigm, admittedly a super lucrative one. Ideally, Schmidt said a mobile payment terminal uptick would pave the way for a “trillion-dollar” business, which PayPal said yesterday would actually be $3 billion for 2011.

Where’s the demand?

How do we know this market is potentially huge? One of the big infrastructure barriers in my opinion is that most phones simply do not have NFC chips required for tap and pay systems. So how do we address this? Narrate sprang up from almost nowhere (well, they’ve been quiet since forming in 2009) to address this gulf with ultrasonic-enabled NFC.

This solution could be brilliant, but it could also be a bust. Regardless of which way it goes, it goes to show that even though the market has yet to be aggressively defined, alternatives are coming out to enable mobile payment sans those NFC chips used in the Samsung Nexus S 4G used for Google Wallet.

I have no quibble with the idea that merchants will get in on this action going forward or that mobile payments will be huge. What Schmidt didn’t address is the consumer demand for this; I just don’t see it.

Remember that old adage? You can lead a horse to water… There is no guarantee consumers will gulp from the mobile payment pond to warrant the widespread adoption.

People, the vast majority anyway, are more comfortable lugging wallets and purses than subscribing to new, unproven payment services that leverage their credit card info through their phones.

Right now it exists for niche cases – Starbucks loyalty cards, where coffee lovers download an iPhone (and now Android) application to manage their card purchases, may be the best example – and that’s not even NFC-enabled.