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Apple, not carriers, will drive NFC growth

Smartphones incorporating the payments technology will rise from 10% to 50% of the total, but cellcos' power will erode, say analysts


Published: 24 November, 2011

READ MORE: Metrics | iPhone | NFC | Windows Phone

Mobile payments based on NFC have been talked up relentlessly this year by the operators, which believe this is a link in the mobile chain they can control because NFC is usually integrated with their SIM cards. But the actual installed base of NFC-enabled handsets remains fairly small, and though it will increase significantly next year, that will mainly be driven by Google Wallet and by other vendor launches.

According to research carried out by Taiwan's DigiTimes, which monitors the country's device supply chain, over half of smartphones will support NFC by the end of 2014, compared to less than 10% now. The big change will come with wider Android and Google Wallet support plus the entry of Apple and Microsoft. These will join the existing mobile NFC platforms, Symbian, BlackBerry and bada.

The main obstacles to growth, according to DigiTimes' sources, are standardized specifications plus the need for a wider ecosystem. The latter could be delivered by the iPhone 5, which will almost certainly include the m-payments systems, and by Microsoft, which has already promised it for WP7 next year. But the biggest brakes on growth in 2011 have really been a low level of consumer awareness, which has led to merchant apathy in adopting the necessary terminals. This was highlighted by the caution of eBay and its PayPal unit in embracing NFC - the firm is more focused on web-based solutions which do not require new infrastructure in stores.

However, support from Apple and Microsoft, to add to that of Google and Nokia, could make NFC almost a default in phones, and then spur user activity. This will be driven by the creation of compelling NFC-enabled applications - not just for payment but data exchange, location services and so on. And the track record of the software giants in this respect is far better than that of the carriers, which could see them having to be more forthcoming towards the OEMs than they had hoped.

"By the end of 2012, Google will prove that Google Wallet is a hit with consumers. By 2014, we will see Google Wallets supported alongside competing MNO offerings globally," Mark Beccue, senior analyst at ABI Research, told EETimes. ABI thinks that operators will provide 75% of mobile wallets in 2012, falling to 63% in 2016, in a total market of 594m wallets.

While the cellcos and platform suppliers tussle, over-the-top wallet providers such as banks, payment providers and retailers, will have a bigger challenge in gaining critical mass for their offerings, believes the research firm.

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