NFC has to be more than just payment - ABI

Thursday 29 March 2012 | 13:23 CET | Background

Interoperability, or rather the lack thereof, is one of the key issues that need to be addressed for NFC mobile payment, ABI Research says. Another key issue is simply the use case. Operators must communicate the value of contactless payment, especially to point-of-sale merchants.

This year’s Mobile World Congress delivered loads of new NFC-capable devices, mainly smartphones, and newly integrated circuits from all major manufacturers. Nokia pegged the value of easy device peering and lifestyle integration. Sony demonstrated that NFC tags can be used to quickly change devices settings – for instance turning on the bedside mode by touching an NFC-tag attached to the bed.

Motorola Mobility did not show NFC, which is intriguing, and there are concerns about interoperability within the Android ecosystem. ABI believes those issued will be solved, but probably not before 2014. The fact that Vodafone and Visa (to name but two) made TSM announcements showed that ‘things are happening’. Setting up a Trusted Service Manager to handle mobile payment is a serious commitment. However, mixed messages were sent by device OEM’s, smart card OEM’s, mobile operators and TSM’s over the approach, which could lead to new fragmentation issues.

ABI Research estimates that the annual SIM shipments will rise from 4.7 billion in 2011 to 6.2 billion in 2016. It is believed that up to half of the number of mobile phones sold by 2015 will be NFC capable. Shipments of SWP NFC SIMS will rise from 10 million to 700 million by 2015. The total number of dual mode debit/credit cards will reach 3.6 billion by 2016.

Mixed feelings

However, building a clear business case for retailers and point of sale mobile payment is not a clear cut business case at this moment. This is perhaps reflected in an end user survey done in the United States, The UK and Japan. Enthusiasm is mixed at best. While a significant minority of smartphone users in those countries felt positive about NFC, many said they had never heard of the technology. Even Japan, widely seen as fairly open minded to new technology, showed lukewarm results.

Several use cases beside m-payment are relevant. On the matter of use cases, loyalty programs saw a mixed reception, with positives from younger respondents and iPhone users. Consumers carry often more than ten different loyalty cards, including ones that are very rarely used. For a merchant, it will not make sense to replace a paper barcode card with an expensive NFC card if it’s never used.

Access control is a strong case for NFC in public transport. It can be valuable in other closed environments, like sports venues and festivals. However the local gym has a very high replacement rate and/or reissues cards often.   ABI believes there has to be more than just payment to win over customers and reach a broad acceptance under retailers and service partners. Otherwise, merchants will just see higher investment, without added value. But successful use cases will be able to create a positive momentum for NFC.

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