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Wireless carriers could withdraw from NFC payments: report

While the launch of Apple Pay and Host Cost Emulation promise to boost near field communications-based payments, one group that is likely to see its role diminish is wireless carriers, according to a new report from Juniper Research.

The report, NFC Mobile Payments: Apple Pay, Host Card Emulation & SIM Based Opportunities & Forecasts 2014-2019, forecasts that just 3 percent of NFC mobile payments customers will be controlled by wireless carriers in North America by 2019. Given recent developments, Juniper expects wireless carriers to reevaluate their existing commitments to NFC and possibly to withdraw from the space.

“With MNO-led ventures still struggling to establish themselves, MNOs [mobile network operators or wireless carriers] face the danger of being bypassed by FIs and, in North America, by Apple,” said Dr. Windsor Holden, head of consultancy and forecasting at Juniper Research, and author of the report.

“In the latter region, we believe that just 3 percent of customers will be controlled by the MNOs by 2019,” he said.

“Indeed, we believe that there is a strong possibility that MNO-controlled customers will be in decline in both North

Secure elements
The findings suggest that Softcard, the NFC payments solution created by AT&T, Verizon Wireless and T-Mobile USA – will face a tough time getting users to sign on.

Juniper predicts that the proportion of NFC secure elements controlled by wireless carriers is likely to fall below 50 percent by 2019.

Previously, NFC payments typically required access to a secure element controlled by the wireless carrier offering the phone.

However, this is starting to change.

For example, with Apple Pay, the secure element is embedded on the handset and controlled by Apple.

With HCE, the secure element does not need to be physically present in the handset.

New developments
The carriers’ role will shrink even with relatively strong adoption of the carrier model in some developing markets as well as the Far East and China.

With wireless carrier-led venture still struggling to establish themselves, the report suggests that wireless carriers are in danger of being bypassed by financial institutions and, in North America, by Apple.

NFC payments have been slow to catch but recent developments such as Apple Pay and HCE are likely to push NFC payment users to more than 500 million by 2019, according to Juniper Research. This is a significant increase from the 101 million users in 2014.

HCE is a cloud-based protocol developed by Google and introduced last year. It enables NFC to work without the need to access the secure element in a smartphone. Google developed HCE after several wireless carriers refused to give access to the secure element to Google Wallet

HCE solutions have been gaining traction within the banking sector. For example, BBVA and Bankinger in Spain as well as CUA IN Australia have already launched commercial services. There are also pilot programs taking place in Russia and New Zealand.

The halo effect
Apple Pay will help drive NFC payment adoption by addressing key challenges such as awareness and acceptance.

Other findings include that three quarters of smartphones worldwide will contain an NFC controller chip by the end of the decade.

“We would now argue that Apple Pay will not only drive, but will create a ‘halo effect’ towards contactless payment in general,” Dr. Holden said. “We still believe that in most markets this will primarily be driven by contactless card transactions, but that the greater awareness of handset contactless payments that Apple will generate will, in turn, result in an uplift in adoption and usage.”

Final Take
Chantal Tode is senior editor on Mobile Commerce Daily, New York