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While mobile payment will flourish, NFC will lag behind

Thursday 13 June 2013 | 10:43 CET | Background

Mobile payment shows a strong uptake and high growth rates. NFC ticketing in public transport will grow strongly and contactless payment technology is gaining on the retail floor. While mobile and contactless payment services grow, its most advanced form, NFC smartphone payments is lagging.

Over 950 million mobile phone users worldwide are expected to use their handsets for mobile ticketing by 2018, up from 458 million this year, according to a report from Juniper Research. Growth is expected to be mainly driven by key transport verticals, although significant uptake is also forecast across sectors such as live entertainment events and cinema ticketing.

The report indicates that the airline industry was a particularly strong proponent of mobile ticketing, with adoption of mobile boarding passes rising sharply since the worldwide implementation of BCBPs (Barcoded Boarding Passes) in 2010.

Check-in

It must be noted that the airline industry does not use NFC. The boarding passes are barcodes, scanned at the gate. While a growing number of travelers show the code on a device, the paper boarding pass (printed at home or at an airport desk) will stay for the foreseeable future. 

NFC does enjoy a strong uptake in public transport. Speed is a critical consideration, and the fact that public transport is a closed environment means that the contactless interface infrastructure can be made the preferable option. But that does not lead to the conclusion that the infrastructure will be used for other things than ticketing. Speed is nice for travelers who want to pick up a newspaper or a cup of coffee. Yet this has not prompted shops adopting the same payment technology as the turn stiles. After all, people still carry cash and cards and retail chains have most of their outlets outside of the station. Different priorities, technical challenges and roadmaps work against payment in transport environments.

Transport for London is thinking about moving from a proprietary NFC solution to the EMV card infrastructure. This has the benefit that foreign visitors – a not entirely uncommon sight in London – can take the Tube by waving any credit or debit card. The new wallet for small transactions included with cards means that a PIN code is not necessary.

Checkout

Card companies add a mobile option as a way to extend the current business into online checkout, mobile checkout and combinations of those. The more transactions they handle over their networks, the better. Recently, Visa has signed agreements with mobile point-of-sale (mPOS) providers iZettle, SumUp and SCCP Group’s Swiff to enable merchants of all sizes to accept Visa payments using mobile technology. Additionally, Visa has approved two new mPOS devices by Canadian e-commerce and m-commerce services provider AnywhereCommerce and provider of electronic payment hardware Miura Systems to accept Visa payments.

Mobile at point-of-sale is a growth area. A lightweight card reading device paired to a smartphone is enough to accept cards. Speed is an added benefit. Furthermore, a smartphone has the ability to run applications that tie into back-office systems, inventory management and the webshop in a way a traditional cash register can’t. This will continue to drive the development on the shop floor. The boundaries between online and offline payment are starting to disappear, payment service providers see.

Mobile…

Worldwide mobile payments transactions with Ayden increased by 75 percent, with the total percentage of mobile transactions increasing from 8.2 percent in June 2012 to more than 13.8 percent in April 2013, according to Ayden's Global Mobile Payments Index which was taken from over 10 months of payments analysis.

In-store mobile wallet payments in EU27+2 is forecast to grow from less than EUR 0.1 billion in 2012 at a compound annual growth rate of 275 percent to reach EUR 45 billion in 2017, according to a research report from Berg Insight. This will correspond to 1.6 percent of the credit card and debit card payments at the end of the forecast period. The companies behind these wallet services include many of Europe’s largest mobile operators, banks and retailers such as T-Mobile, Orange, Telefonica, BNP Paribas, Barclays and Auchan.

In North America, mobile wallet users completed in-store payments for a total of USD 0.5 billion (EUR 0.4 billion) during 2012. However, the vast majority of these payments were made using Starbucks’ successful smartphone app, whereas mobile wallets that can be used at multiple merchants have yet to gain traction.

…but not NFC

Near Field Communications' (NFC's) transaction value has been reduced by more than 40 percent throughout the forecast period due to disappointing adoption of NFC technology in all markets in 2012 and the fact that some high-profile services, such as Google Wallet and Isis, are struggling to gain traction. Gartner forecasts that NFC will account for only about 2 percent of total transaction value in 2013 and 5 percent of the total transaction value in 2017.

This means that NFC growth will come mainly from cards. The smartphone ecosystem remains locked in wallet wars. The technical complexities remain, the battle over the secure element is not over. Bell ID recently announced a cloud-based Secure Element solution, where data is sent over an encrypted connection to a central point for authentication and validation. The single compelling business case is yet to be found.

In an investor call, Apple CEO Tim Cook has said that NFC is still “in its infancy”, MacRumors wrote in April. The company will expand iTunes and add commercial services, he added. Apple has just released the details on its completely overhauled smartphone operating system, iOS 7. One of the things it will do, is allow more contextual awareness. Your iPhone or iPad will ‘learn’ that you access a certain app (social media, a paper, a news feed) at breakfast every morning and preload content. Likewise, the device will suggest the coffee chain app if you’re near a store. But iOS 7 does again not say anything about NFC.

Mobile commerce and mobile payment are growing across the board, but bypassing NFC. The contactless interface will arrive at some point though, even with Apple.



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