January 10th, 2018
Near Field Communications – competing technologies
The predominant competition of NFC is Bluetooth technology, which has been predominant throughout the cell phone industry. Nearly every mobile phone manufacturer is equipped with Bluetooth, and they are paired devices such as PDAs, computers, GPS devices, and car entertainment systems such as the Ford Syncs (Bluetooth, 2012). However, there are some negative aspects of Bluetooth technology, one of which is the fact that it takes a lot of effort or manpower to pair each device. NFC, on the other hand, aims to improve upon this issue by requiring only a tap or quick swipe to transfer information. An additional NFC advantage over its main competitor Bluetooth is that the shorter range of NFC provides additional security in crowded public areas. Mumford (2006) stated that, “in contrast to Bluetooth, NFC users are compatible with RFID systems and are easily integrated in to a multi-platform wireless system.” Therefore, NFC provides a more reliable and more secure system than Bluetooth as well as a simpler way to transfer data.
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Appendix A:Porter’s Five Force
Exiting Rivalry: Moderate
- Mobile payment companies such as PayPal and ISIS have similar technology and can be rivals.
- PayPal, a well-established Internet-based payment business, has taken the lead in e-commerce.
- There are a number of brands and customer preferences, so there are several players in the industry.
Bargaining Power of Suppliers: High
- The suppliers differ depending on the company’s position. Google Wallet, for example, has large suppliers of mobile services such as Verizon, AT&T, Verizon and T-Mobile (Smith, 2011).
- Credit card companies such as American Express and Visa have launched their own mobile payment systems. Other major credit card companies are also working with AT&T, Version and T-Mobile to develop mobile payments via smart phones. Therefore, it is difficult for small and medium-sized companies to collaborate with such big organizations unless they provide enough of a trade-off to appeal to those large suppliers (Yu, 2012).
- Merchants also can be major suppliers. Acceptance of the technology among merchants is the key to success to provide the link between customers and a company.
- There is still strong retail industry power, so mobile payment companies might find it costly to cross the chasm.
Bargaining Power of Buyers: Moderate
- Consumers will use any available payment model as long as the switching cost is low.
- Retail merchants are indirect buyers of mobile payment services. They have a lot of options in the e-commerce industry, which gives them high bargaining power.
Barriers to Entry: Low
- Low switching cost: a company provides their customers mobile payment services without any investment. Therefore, the switching cost makes the entry barrier low. Merchants require new software and modified hardware to equip mobile payment services. I just focus on switching cost at customer’s level.
- Non-traditional players such as Google and ISIS have been joining in the business (Knibbs, 2012). They increased competition in the industry through value-added services such as financial planning and new payment services, which can bypass the mobile banking services that banks offer (Tandulwadikar, 2012).
Threat of Substitute: High
- Banks have been developing customized apps for smart phones, giving benefits to its users through savings. This can be a big substitute threat (Alexander, 2012).
- Visa, despite pairing with the mobile payment sector, has plans to start their own services in the future. Given that they might achieve sizable involvement with the mobile payment market, users will prefer credit card companies that provide similar services in the future compared to other mobile payment services (Yu, 2012).
- Apple will be another major threat because they plan to create a mobile payment app that uses cloud computing (Tandulwadikar, 2012).
- Merchants have been working to create their own business models and develop their own customized payment apps for smart phones. If this type of app can be further developed, users will have a lot of substitution choices, making it difficult for the mobile payment business.
Porter’s Five Forces Analysis
NFC mobile payment has competitive advantage based on Porter’s five forces analysis (see Appendix A) (Porter, 1979), the following points can be concluded:
- The rivalry in the NFC industry is very strong, so a mobile payment service provider needs to analyze the market dynamics by, for example, performing continuous assessment of competitors during business projects and reaching out to customers as soon as possible.
- The industry is not by limited by major players, so the entry barriers are low. Unless companies can join forces with them, it is difficult to gain a competitive advantage in the market.
- The bargaining power is high from both buyers and suppliers because of the lack of product differentiation of payment processing at no cost for consumers.
Therefore, according to a five forces analysis, companies will face strong competition in the mobile payment industry.
Value chain of card-based payment and mobile-based payment
Core competencies of the value chain participants in mobile payment industry