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NFC will not power US mobile payments: Forrester

LITCHFIELD PARK, AZ –A Forrester Research analyst at the Mobile Shopping Fall Summit said that she does not expect NFC to ever takeover the mobile wallet space.

During the “Mobile payments: State of the union” session the exec went over a number of the big players in mobile wallets and explained the benefits of each. While the executive did see the appeal to NFC technology, she did not believe that mobile payments in the United States would be a good use case for it.

“I am not bullish on NFC in the U.S.,” Ms. Carrington said. “I think NFC has some great capabilities and will be adopted over time, I just don’t think the best use case for NFC is payments.

“I think there are challenges with our payment ecosystem that will prevent adoption,” Denee Carrington, senior analyst at Forrester Research, Cambridge, MA said. “There’s still the decision to turn it on, and you have to have NFC-enabled phones in consumers’ hands. There are many who wonder whether EMV will happen by 2014.

“I think there are a lot of things standing in the way of NFC adoption. There is a bit of the ‘all-of-the-above’ approach from supporting it for wallets, but NFC is not going to have a rapid uptake in the U.S. It will have more uptake outside of the U.S., but not here.”

Accelerating adoption
According to Forrester, ecommerce will make up 9 percent of total retail sales by 2016, and mobile commerce will only make up 8 percent of ecommerce. However, by 2017, Forrester expects mobile payments to reach $90 billion.

Ms. Carrington expects to see a hockey stick effect where in-store mobile payments will surpass mobile commerce as a whole. She expects mobile payment adoption to grow even faster in the near future.

While consumer adoption of mobile payments has been fairly slow, 26 percent of consumers expressed interest in using in-store mobile payments. Awareness is also up with 61 percent of consumers aware of digital wallets.

As awareness and adoption rise, however, the number of options also rises.

There are all sorts of kinds of mobile wallets entering the market, but the one factor that runs across the board is that each wallet offers value-added services beyond the payment itself. Mobile wallets are enhancing the commerce journey as a whole from start to finish.

Recent Forrester surveys showed that 76 percent of consumers would be interested in having loyalty programs, rewards, coupons, discounts and special offers in a mobile wallet. They also valued being able to see payment credentials and receipts.

Wallet players
According to Ms. Carrington, the most valuable mobile wallets are omnichannel wallets that work with any device, as well as both online and in-store. These wallets remove friction from every kind of payment.

Omnichannel wallets such as PayPal and MasterPass improve the checkout experience overall.

There are also mobile wallets that are only available for use in-store such as Starbucks payment solution and Square Wallet. Amazon and Facebook provide online-only digital wallets.

The wallets also focus on different value propositions. Some focus on enhancing security and others focus on offers or making the checkout experience disappear.

Google Wallet is struggling to energize its wallet and drive consumer adoption. MasterPass is focusing on integrating merchants and letting them feature the MasterPass wallet inside their branded apps.

MCX is another merchant-focused offering that is helping retailers leverage pre-existing apps to integrate mobile payments.

LevelUp is taking a slightly different approach to the mobile wallet by branding it as a marketing opportunity for merchants and driving new consumers to their stores.

“The wallet marketplace is quite complex, and it’s going to increase in complexity,” Ms. Carrington said. “We’re not yet at the tipping point where there’s lots of consolidation. In fact we’ll see more players.

“I’m often asked which will be the winner, and the bad news is at least for now there won’t be one,” she said. “There are certainly leaders, PayPal being one, but it’s a little early to make the call on who will be the one.

“Just as consumers compartmentalize their spend across personal use, family use, business use, consumers will also compartmentalize their use of mobile wallets. So while they may adopt a wallet such as PayPal, if their favorite store also has a wallet that provides value to them, they will use that too. For now, there won’t be just one.”

Final Take
Rebecca Borison is editorial assistant on Mobile Commerce Daily, New York