NFC Payment Role Uncertain Amidst Slower Operator Adoption

Oct. 28, 2013

Strategy Analytics announced that it has lowered its outlook for NFC-based (near field communication) mobile payments to reflect the slow pace at which operators are pushing NFC payment services, limited NFC payment deployments by handset makers and the continued slow adoption of contactless payments by retailers. The Strategy Analytics Wireless Media Strategies (WMS) service report entitled "NFC Mobile Payments Forecast Update: 2013-2017” estimates 115 million NFC handset owners will spend just over $48 billion using their NFC phones by 2017. Although $48 billion is a large amount, it represents a drop in the ocean of the multi-trillion dollar global retail sector, according to the release.

The healthy growth in sales of NFC handsets has yet to be matched by the adoption and use of handset based NFC payments services, with many mobile operators pushing back the launch of NFC-based mobile payment into the final quarter of 2013 or in to 2014 and beyond. "With the exception of China, where we see some momentum from China Mobile deploying its mobile wallet service, fewer mobile operators than anticipated launch NFC payment services in 2013," said Nitesh Patel, director of the wireless media strategies (WMS) service at Strategy Analytics, in a prepared statement. "Furthermore, handset OEM Samsung, which announced its strategic partnership with VISA Inc. in February 2013 has yet to officially offer a secure payments service based on that relationship."

While acceptance of contactless payments at point-of-sales (POS) terminals takes time to grow, and operator efforts at launching NFC services remains anemic, alternative methods of making in-store mobile payments through merchant friendly solutions such as LevelUp and Square Wallet have gained pockets of traction, and are fragmenting the mobile payment sector. David MacQueen, executive director of media and apps at Strategy Analytics added, "The prospect of both Apple and PayPal launching alternative mobile payment solutions based on Bluetooth Low Energy (BLE), not NFC, and increasing interest in dynamic QR codes from PayPal, adds further uncertainty to the role of NFC in supporting in-store mobile payments. Therefore, the success of ISIS, the NFC-supported mobile wallet joint venture between operators AT&T, T-Mobile and Verizon is not guaranteed, despite its scale."