Analysts see ‘Huge’ Adoption Barriers for NFC Payments

0805

Mobile contactless payment systems based on near field communications (NFC) technology face “huge” adoption barriers, warns a report by Forrester Research.

Forrester analysts Benjamin Ensor and Alexander Hesse say that NFC-based systems offer a much faster way to initiate payments with a cellphone than SMS or other mobile network-based technologies. “NFC provides a clear improvement over earlier mobile payment systems,” they argue.

But the analysts warn that consumers will not necessarily see any material advantage in switching from contact-based cards or cash to contactless NFC payments. Neither merchants nor consumers are likely to see any cost-savings from migrating to NFC payments. NFC systems are not any more secure than other card-based payment methods, and they are also complex to implement.

NFC-based mobile contactless payment systems face many of the same adoption barriers as other new payment systems, the analysts say. “Product managers at mobile operators, banks, and payment networks will need to collaborate to overcome hurdles such as application setup and merchant acceptance and to develop a clear business case,” they write.

Even if technology and card companies can successfully market the benefits of NFC technology to consumers and merchants, NFC payments face the challenge that consumers typically won’t adopt a payment system until it’s widely accepted by merchants, and vice versa. “We expect this to take years,” the analysts warn.

Nevertheless, NFC systems, such as Japan's Osaifu-Keitai mobile wallet platform, will generate plenty of interest and hype over the next five years, the analysts say.

Some 40 million Japanese consumers with compatible handsets have access to NTT DoCoMo’s contactless Osaifu-Keitai system, which can be used both to authorize credit card payments and with the Edy and Suica electronic purse systems.

The Osaifu-Keitai system is now offered by all three big Japanese mobile operators, and offers applications such as rewards, airline tickets, transit payments, and event tickets