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NFC-based mobile payments poised to take off, claims study

Google Wallet is helping drive NFC mobile payments

While less than 2 percent of mobile users in the United States and Western Europe currently use a NFC-enabled phone to make in-store purchases, that number is expected to rise to one in four mobile users by 2017, according to Juniper Research.

The report found that more NFC payment pilots are being launched worldwide, driven by mobile network operators and financial institutions. With NFC also beginning to impact the public consciousness, Juniper expects rapid market expansion for the technology from 2012 onwards.

“The adoption of NFC for in-store payments isn’t yet growing or material because there aren’t enough phones,” said Drew Sievers, CEO of mFoundry, San Francisco.

“On a positive note, there are more and more NFC-capable terminals at the point-of-sale, which is a key gating factor for the overall success moving forward,” he said.

“We expect new phones with NFC to start rolling out this year and the growth to accelerate in 2013. As more and more people get these phones, the opportunities for NFC point of sale payments will go up dramatically.”

Mr. Sievers is not affiliated with Juniper Research and spoke based on his experience in mobile payments.

Juniper Research did not respond to press inquiries.

Early days for NFC
A variety of types of mobile retail payment services are gaining in popularity. One example is the use of bar codes on a mobile device at the point-of-sale to make a purchase, such as Starbucks has done with its successful mobile payments app.

While NFC retail payments are still at an early stage, important strides have been made including  the launch of Google Wallet and the growing supply of NFC-enabled smartphone models, such as the Samsung Galaxy Nexus.

NFC holds particular appeal with both users and the various stakeholders, according to Juniper.

The Samsung Galaxy Nexus is one of a growing list of NFC-enabled phones.

In particular, users are attracted to the ability to tap their NFC phone against a retail point-of-sale terminal to make a purchase, the report says.

Additionally, mobile wallet providers and partners like the new retail marketing sales opportunities offered by NFC that go beyond the capabilities of debit or credit cards.

Another appeal of NFC payments is that they can be integrated with other NFC applications such as metro ticketing.

“Consumers aren’t looking to tap and pay,” Mr. Sievers said. “Their plastic cards work perfectly well.

“That having been said, consumers react very favorably when presented with a tap-and-pay solution that adds value,” he said.

“The Starbucks solution shows how something simple, fast and rewarding can drive rapid consumer adoption. If the NFC solutions are simple, fast and rewarding, then consumers will adopt.”

Support system
Despite the appeal of NFC, the technology does present some challenges for retailers, according to the report.

For example, because NFC payments are a complex fusion of mobile, financial and retail technology, it is important to create a single point of contact to take responsibility for resolving any problems quickly and efficiently or users may desert the service.

“Retailers simply need to ensure that they have the standard NFC-enabled terminals in place,” Mr. Sievers said.

“Support for the major card networks will be key versus support for unproven, smaller players trying their luck at NFC,” he said.

“Ultimately, the terminals need to support the big card networks in order to facilitate the fastest, most consistent adoption across merchants and cardholders.”