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5G Edge Infrastructure Market Growing Rapidly Ahead of Standardization

NFC Payments … Good Things Will Come to Those Who Wait

Near Field Communication (NFC) is the focus of much media attention these days, but most of this coverage is concerned more with future opportunities rather than what is happening in the present.  Evangelism and media hype have resulted in consumers who are aware of the technology perceiving it almost exclusively as a contactless payment solution that enables mobile phones to function as a credit/debit card. And with recent announcements, media coverage, and overall activity levels (pertaining to NFC payments) it’s hard not to think of it as such.  For example:

  • Leading payment terminal suppliers shipped record numbers of NFC-enabled terminals during 2011.
  • Credit/debit card issuers such as MasterCard. VISA and AMEX are committed to the solution and are now issuing NFC-enabled cards. 
  • MNOs (Mobile Network Operators) such as Verizon, AT&T and T-Mobile are investing in and collaborating on contactless payment solutions (i.e.: ISIS)
  • 2H 2011 yielded more NFC-enabled device announcements from leading smartphone and tablet suppliers than we have ever seen previously, including Motorola, Samsung, Nokia, RIM and LG (though notably, not Apple).

Although contactless payment is expected to be a significant opportunity for NFC, we believe it will likely be several years before this application is broadly embraced by merchants worldwide, and that several other applications will take hold first.  But If NFC is expected to play a major role in mobile payments and has significant forward momentum, why are contactless payments years away from broad adoption?  Based on research we just completed, there are five key reasons:

  1. NFC payment solutions are expensive and offer no clear ROI at this time – they are difficult to justify.
  2. Many leading retailers went through expensive post-recession refresh cycles of their core systems, and are not allocating significant budgets for new in-store technology (particularly given persistent economic uncertainty).
  3. The percent of consumers with NFC enabled devices remains limited.
  4. Mobile payment application development is limited, suppliers’ mobile-payment product portfolios are slim, there is a lack of a universal platform/high levels  of proprietary platforms and significant customization and integration requirements
  5. The enablement of mobile payments requires extensive cooperation across a complex payment processing landscape, and many of the required relationships are still at their formative stages.

Our comprehensive study of the NFC market makes us more confident than ever that NFC will have a role in the future mobile payment landscape, but we are equally confident that it will take time for its role to be fully realized. Although we absolutely expect contactless payment to be a blockbuster application, NFC’s immediate opportunity lies outside the realm of contactless payment solutions. 

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