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U.S. NFC transaction value catching up with Far East

Global near field communication mobile contactless payment transactions will reach nearly $50 billion worldwide by 2014, with the United States starting to catch up to other countries, according to a study by Juniper Research.

Prospects for NFC have improved significantly in the last half year and the potential is there to make consumers lives easier via simpler payments, coupons and promotional offers. This should help drive transaction frequency and value. 

“The various parts of the NFC ecosystem are finally coming together,” said David Snow, senior analyst at Juniper Research, Hampshire, England.

“In addition to the steady increase in trials worldwide, we are now seeing commercial service announcements from tier 1 mobile network operators in conjunction with major banks and financial institutions in Western Europe and North America,” he said.

“These have been made possible by significant technology progress from vendors and standards bodies, more mobile devices with NFC built-in being available, more contactless POS terminals rolled out to merchants and user-awareness and acceptance of contactless technology increasing.”

Competition heats up
In the United States, ISIS, Google and Visa are helping to drive wireless payments while in the United Kingdom, the new Orange Mobile Payments service is paving the way for NFC service rollouts in 2011 and 2012.

“The U.S., along with Western Europe is starting to catch up with the Far East and China in terms of transaction values and the ISIS venture is unequalled in the rest of the world,” Mr. Snow said.

“With the recent announcement of mobile wallets by Google and Visa, the competitive environment is clearly heating up which can only accelerate the NFC market and should Apple add NFC to the iPhone, then a significant market watershed will be reached,” he said.

Juniper is predicting NFC will launch in up to 20 countries in the next 18 months.

The research firm also predicts North America and Western Europe together will exceed the Far East region in under three years based on transaction value. North America and Western Europe will account for 50 percent of NFC payments market by value in 2014.

Challenges remain, however, such as getting the business model resolved and making NFC-enabled POS terminals more widely available.

There also the need to educate consumers about NFC technology.

“User acceptance can still be a challenge with concerns over security and transaction resilience,” Mr. Snow said.

“Nevertheless this is more a perception issue which will gradually be overcome as good user experience is shared by early adopters,” he said.

Final Take
Chantal Tode, Mobile Commerce Daily