Mobile NFC Facing Hurdles, Opportunities, Say Analysts

It will be three or four years before NFC-based payment becomes commonplace in smartphones—but those players that want to take advantage of the trend had better start partnering today.

Those were among the points brought out Tuesday in a Webinar, “Mobile NFC: Cutting through the hype,” from UK-based market research firm and conference organizer Informa Telecoms and Media. Senior analysts Guillermo Escofet and Shailendra Pandey presented the results of what they said were five months of research.

The total number of smart phones shipped with NFC should grow from 44 million this year to more than 630 million in 2015, the analysts predicted, assuming that Apple releases an iPhone with NFC next year. The number of active NFC or contactless-mobile users is expected to grow from 16.7 million this year to 250 million in 2015. While 95% of the active users are currently in Japan and South Korea, that ratio should fall to 70% in 2015, thanks to growth in other regions, they said. Japan uses a technology similar to NFC and plans to move to standard NFC phones in late 2012.

The analysts also predicted that the transaction value of mobile-NFC payments would rise from $2.4 billion this year to more than $71 billion in 2015. While more than 80% of the transaction activity was in Japan and South Korea in 2011, the ratio should fall below 40% in 2015, they said.

But while a lot of attention in the NFC market has been focused on contactless payments, Escofet noted that this attention has actually been detrimental since contactless payments offer the highest potential revenue but are the trickiest services to enable.

“How should the transactions be secured? Every player is pulling in different directions,” he noted. Differing plans put security at the server level, within the phone, or built into microSD cards, he said.

He added that operators have largely given up the idea of taking a cut of merchant-transaction fees for mobile-NFC payment. There are a few markets where telcos still plan to try to earn transaction fee, however.

Most operators are planning to charge rental fees for NFC applications secured on their SIM cards. And some operators have been talking about trying to earn fees from mobile-coupon redemption and through co-branding agreements with banks or other financial institutions.

But until the necessary infrastructure is in place, more immediate opportunities for telcos and other players will include public transportation and access control, and in marketing activities, such as coupons and loyalty programs, Escofet indicated.

Pandey also noted that the fragmented nature of the mobile-NFC market will restrict the growth of commercial services using the technology for the next several years or, “until they (players) can figure out whom to partner with,” he said.

He counted nine types of players in the market: payment-service providers, software vendors, authentication services, banks, mobile operators, handset vendors, payment networks, merchants, and hardware-component vendors.

“Mobile NFC has the potential to generate significant revenue in the long run, but right now the players need to be looking for other players to partner and collaborate with, to share the risks and the investments–that would be the key way to expect faster growth in this market,” Pandey said.

Meanwhile, the market will become even more fragmented if the participants do not keep interoperability uppermost in mind, he added.

In the end, the priority of everyone in the market should be to get NFC into phones, regardless of whether contactless-payment systems using the technology are in place yet, Escofet indicated. Once the technology is in place, developers and end users will create applications that use it, he predicted.

Escofet and Pandey also noted that. among Silicon Valley giants, Google's main interest in mobile NFC is as an advertising medium and Apple is the best positioned mobile player to exploit payment services because it already has a formidable payment infrastructure, thanks to its iTunes online retail system. Also, PayPal and other online payment platforms see NFC as a way to encroach on the turf of banks and card-payment networks and generally get involved in real-world payments, they said.

Other observers have noted that Apple has given no real sign that it wants to enter the payment market directly. They say PayPal will use different technologies–not only NFC–to make the jump to the physical point of sale. That PayPal-payment launch could happen before the end of the year, the observers say.


In-Depth: Five Years After Transport for London Launched Contactless Across Its Transit Network, UK Open-Loop Rollout Remains Uneven

Aug 15 2019

NFC TIMES Exclusive Insight – Five years ago next month, Transport for London introduced open-loop contactless payments across its transit network, including metro, trams and commuter rail, following an earlier launch on buses. The service now accounts for more than half of all pay-as-you-go journeys and has become a global showcase for the technology.

Apple Again Promises to Push Transit Ticketing as It Seeks Broader Adoption of Apple Pay

NFC TIMES Exclusive Insight – While noting to financial analysts late Tuesday that Apple Pay is now approaching 1 billion transactions per month globally and is in 47 markets, perhaps Apple CEO Tim Cook’s most significant comments about Apple Pay this week was to again emphasize that Apple wants to enable users to routinely tap to pay for bus, subway and other transit rides with their iPhones and Apple Watches. 

Chinese Mega Wallets Continue to Expand QR Code-based Transit Ticketing, while Major Agencies in West Stay with NFC

NFC TIMES Exclusive Insight ­– China’s mega-mobile wallet providers have continued their rollouts of transit payments in China, with Tencent Holdings announcing Tuesday that two years after launching its first QR-code-based WeChat “Ride Code” service in Guangzhou, total users for its transit payments services has reached 100 million.

Sydney Transit Authority Gives Users of Contactless Bank Cards Nearly All Discounts They Get with Closed-Loop Opal Cards

Jul 29 2019

NFC TIMES Exclusive Insight – Transport for New South Wales, Australia, the authority that oversees transit in and around Sydney, has taken a step toward phasing out its closed-loop contactless Opal fare card, today extending nearly all of the discounts it offers on Opal to users of open-loop Visa- Mastercard- and American Express-branded contactless cards.

In-Depth: 2020 Could Mark Landmark Year for Contactless Payments in U.S.

NFC TIMES Exclusive Insight– October will mark the fifth anniversary of the launch of Apple Pay in the U.S., Apple’s first country for its groundbreaking NFC payments service. 

Filings Point to Plans for Global Expansion of Apple Card and Apple Cash

NFC TIMES Exclusive Insight – Following Apple’s imminent entry into the credit card business in the U.S. with its planned Apple Card, the tech giant is showing signs it is looking to roll out the branded credit card in a number of other countries, as well.

Analysis: It's Likely Too Little, Too Late for LG Pay

Jul 25 2019

NFC TIMES Exclusive Insight – It was the fall of 2015, and interest in the Pays wallets was burgeoning. Google and Samsung had each launched their respective payments services in September of 2015 in the U.S., following introduction of Apple Pay a year earlier.

Apple Pay to Finally Support Octopus Card in Hong Kong, as Competition Grows in Market

NFC TIMES Exclusive Insight –  Apple Pay will offer support for Hong Kong’s popular closed-loop contactless transit and retail payments card Octopus later this year, adding a much-needed service to an Apple Wallet that launched three years ago in Hong Kong for credit and debit payments at retail.

Visa Promotes QR Codes in Contactless Hot Spot Taiwan, Hoping to Capture Merchants That Refuse to Accept Cards

NFC TIMES Exclusive Insight – While Visa’s country office in Taiwan was touting the fact that Taiwan ranks as one of the top countries in Asia Pacific for acceptance and use of contactless payments only six months ago, that hasn’t stopped the big payments network from actively promoting QR code payments on the island nation, too.

In-Depth: As Mifare Alternative Cipurse Nears 10th Anniversary, Major Rollouts Prove Elusive So Far

Jul 12 2019

NFC TIMES Exclusive – The mid-tier city of Vinnytsia in the Ukraine is rolling out its first transit smart cards for payment of fares on buses and trams this summer, replacing cash, which riders have used for years.

Lax Security Blamed for Hack of 7-Eleven’s Mobile Payments Service in Japan

NFC TIMES Exclusive Insight – Japan’s popular 7-Eleven convenience store chain reported Thursday a major hack of its QR code-based mobile-payments app, but the breach appears to be due to poorly designed security protections in the app. 

In-Depth: More Nordic Banks Support Payments on Passive Wearables with Provisioning after Sale

NFC TIMES Exclusive Insight – Two more large Nordic banks, Nordea and Swedbank, have launched contactless payments on analog watches, using technology from Swedish provisioning company Fidesmo that enables consumers to buy the watches and provision them with tokenized Mastercard-branded cards after the sale by tapping the watches on Android NFC phones.