Eric Schmidt reckons a third of shops will be NFC enabled in 2012, but Google won't pay for the terminals – that's up to the credit card companies.
According to Google's executive chairman, credit card companies will pay for the new terminals, with the critical mass of one in three to hit sometime next year and enabling Google to tap into a "trillion dollar" business though Google Wallet as we all start paying by tap.
Schmidt was speaking to reporters, including the Financial Times blogger Tim Bradshaw, at the Cannes Lions advertising festival, and explained that credit card companies are keen to enable contactless payments "because the fraud rates are so much lower", which is a hitherto unexploited spin on the technology.
Pay-by-tap is normally associated with increasing usage rather than decreasing fraud: compared to the chip-and-PIN system commonly used in Europe, paying by tap is obviously much less secure. But in America credit cards don't routinely have chips in, which makes them vulnerable to skimming (copying), and NFC makes that much more difficult.
Payment systems using NFC, in common with chip-and-PIN, have cryptographic keys embedded in the card to authenticate transactions. As the keys are never transmitted it is effectively impossible (or, more accurately, unprofitable) to make an exact copy of a pay-by-tap card, which should reduce fraud in the USA.
In Europe, the driver is increasing the use of credit cards. The credit card companies will ask for a smaller cut of NFC transactions, and the fact that transactions are capped at £15 will encourage people to use NFC for low-value transactions. The merchants don't like handling cash anyway (its expensive to transport, store and you have to employ trustworthy cashiers too) so are happy with the switch but that's a matter of convenience rather than measurable financial gain.
If Schmidt is right – and he claims to be have been discussing the migration with key industry players – then the increased protection from fraud could motivate card companies to drive the USA into the lead in NFC adoption. ®