Why Is Tim Horton Embracing NFC? It Illustrates Why NFC For Payments Is Dead In The U.S..

Written by Evan Schuman
December 16th, 2013
To be nice, it's fair to say that Near Field Communication (NFC) has hardly been a smash when it comes to mobile payments in the U.S.. But the key reason it's gone nowhere is not it's technical hurdles—although those tech hurdles are many—and it's not been a lack of household name retailers backing it.

Even mild-mannered Tesco—the world's second most-profitable retailer and the third-largest by revenue—couldn't resist stomping on NFC. The cause of NFC's U.S. mobile payment death has been a lack of incentives for shoppers to use it. Most critically, it simply wasn't any easier to use than regular magstripe swipes and it required a change of behavior.

That's why it was genuinely surprising when $3 billion Canadian and U.S. restaurant chain Tim Hortons announced Dec. 12 that it was beginning a mobile payment rollout using NFC. That overshadowed the almost-as-surprising detail that they were launching it solely on BlackBerry. Say what you will about Blackberry users, but if they're still using Blackberries in 2014, they certainly don't crave the latest cutting-edge gadget. So why is this 4,350-restaurant chain (including 817 stores in the U.S.) embracing NFC for payment? The reason actually reinforces why the technology has cratered in the U.S..

NFC's American payment history is a textbook case of deploying because you agreed to—and because you were given vendors dollars to—not because you want to. Even though major chains—including Walgreens, Macy's, American Eagle Outfitters, Toys R Us, RadioShack, Guess and Subway—agreed to use it, they created no signage, they mentioned it in no ads and it was not referenced on their site homepages (and in many cases, not at all). Employees were not briefed on how to use it and if a shopper somehow asked about it, they got blank stares.

But apathy was not entirely it's undoing. The change of behavior needed to get shoppers to switch from magstripe to card wave was not going away. Tim Hortons, however, is based in Canada and has the vast majority (some 3,500 restaurants out of 4,350) of its stores in Canada. And Canada made the move years ago to mandatory EMV and Chip & PIN. Hence, shoppers has already gotten comfortable with smartcards and waving instead of swiping. For them, the Tim Hortons move is no big deal.

"This is partly due to the fact that we have moved away from swipe," said Gordon Phillips, VP/restaurant technology for Tim Hortons. "We have already changed their behaviors. They're now accustomed to Chip & PIN."

Also, the chain recently upgraded all POS to support NFC. That makes the NFC rollout a much easier choice.

In the beginning of any mobile rollout, there are always some customers who will try the new functionality for the novelty of trying something new, which is a trait that we see especially often with iPhone users, much less with Android and certainly very rarely with BlackBerry users in the U.S.. (BlacvkBerry's marketshare is much stronger in Canada than the U.S., so the BlackBerry move makes more sense in its Canadian stores.) Phillips said that he is very much expecting that in the initial period of the rollout. "There is a cool factor. I think customers are attracted by that," he said.

Does that mean that the chain sees no need for additional incentives for this payment and loyalty/CRM mobile app? Not necessarily, Phillips said, as Tim Hortons will likely roll out those inducements a bit later.

Why not introduce it from Day One? That's where this chain got clever. If a business offers customer incentives (for example, extra discounts on a purchase) right away, Marketing will have no way of knowing how much those incentives helped. If, however, you offer the app with no incentives and track behaviors and you then—perhaps three months later—offer the incentives, you and your analytics can figure out the differences. Voila, instant ROI. Well, at least evidence that might establish ROI.

What if NFC doesn't wow restaurant goers in either Canada or the U.S.? The chain is also simultaneously running some trials at about 150 stores in the Niagara region in Canada and U.S. stores in Maine, Michigan, New York, and Ohio. Those trials will evaluate something no more complex than simple barcode scans. And for the barcode trial, the only platforms are Apple and Android. The assumption is that the U.S. stores may gravitate toward the barcode option, but that's what trials are for.

If someone, however, uses the Tim Hortons embrace of NFC as an argument for U.S. companies to re-evaluate NFC, it's also a good idea to probe into the details. This restaurant's reasons for embracing NFC actually reinforce the U.S. reasons not to. Given that the chance of the U.S. moving to Chip & PIN any time soon are nil, NFC for payments is still dead, unless you happen to be traveling North of the border.