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August 02, 2012

Near Term NFC Mobile Payments Expectations Are Too High

By Gary Kim, Contributing Editor

Hardware-agnostic mobile wallets face fewer hurdles than wallets using near field communications, and will have faster adoption, says Denée Carrington, Forrester (News - Alert) Research analyst, a not unreasonable point of view. In a broader sense, it is conceivable that NFC will enable other applications, possibly some with greater value than the actual payments function, some might argue.

In fact, some might even argue that the other forms of value are required if NFC is to enable a widespread form of mobile payments.

“We expect NFC usage to remain niche in 2012 and even 2013,” says Thomas Husson, Forrester Research (News - Alert) analyst. Still, at some point, when most smartphones have NFC, use cases other than contactless payment will arise.

With 100 million NFC mobile devices expected to ship globally by the end of 2012 and a growing NFC infrastructure, NFC is emerging as the standard for contactless solutions across the world. Pioneering countries include South Korea, Poland, Turkey, the United Kingdom, the United States and to a lesser extent France, says Husson.

But expectations about NFC payments still are too high, in the short term.

Consider that, by her forecast, about 25 percent of U.S. consumers will own an NFC-enabled handset in 2016. That’s enough to create a market, but still not enough penetration to create a really-big market.

And make no mistake; Carrington believes mobile wallet providers pose a challenge to card issuers.

For credit, debit and other card issuers, mobile wallets represent  a “wedge” between card issuers and consumers, adding one more role in the payments ecosystem. Some would argue there is precious little room for another participant in a business that is seeing challenges to its basic revenue model, but the more-successful mobile wallet suppliers ultimately will be in position to extract revenue from card issuers, some would argue.

Forrester research indicates that perhaps 50 percent of U.S. smartphone owners are open to using their mobile phones for in-store payment and that mobile bankers are overrepresented among those with the greatest interest in doing so.

Although early adopters are ready for this next evolution of their in-store shopping experience, traditional incumbents in the payments space are at risk of losing their existing control and influence of the customer’s purchase journey and experience when consumers adopt digital wallets offered by a third party. Carrington is citing conventional wisdom in arguing that successful mobile wallet services must add significant value throughout the customer purchase journey before, during, and after payment.



Want to learn more about today’s powerful mobile Internet ecosystem? Then be sure to attend the Mobility Tech Conference & Expo, collocated with ITEXPO West 2012 taking place Oct. 2-5 2012, in Austin, TX. Co-sponsored by TMC (News - Alert) Partner Crossfire Media the Mobility Tech Conference & Expo provides unmatched networking opportunities and a robust conference program representing the mobile ecosystem. The conference not only brings together the best and brightest in the wireless industry, it actually spans the communications and technology industry. For more information on registering for the Mobility Tech Conference & Expo click here.

Stay in touch with everything happening at Mobility Tech Conference & Expo. Follow us on Twitter.




Edited by Brooke Neuman
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