Mobile industry too focused on NFC: part 1

Guillermo Escofet/Informa Telecoms and Media
02 Nov 2012

Last week I attended the GSMA’s NFC & Mobile Money Summit in Milan to take the pulse of what’s been happening in the mobile contactless payments space over the past year.

Most of the discussions at the conference left me with a tremendous sense of déjà vu. Although the pace of NFC-handset launches has really picked up over the past 12 months, progress in other areas remains slow. And the same old questions that have plagued mobile NFC for years remain stubbornly in place:

Is there much user demand for mobile contactless payments? Is there much of a business case? How should contactless payments on phones be secured? Who should play that pivotal role? Can a premium be charged for mobile NFC?

Perhaps more worryingly, a new question is looming like a black cloud over the nascent mobile NFC industry: Why are there still no convincing examples of enthusiastic user adoption of mobile contactless payments, even in countries such as Japan and South Korea where the technology has reached significant penetration? Could it be that, going back full circle to the first question above, NFC payments don’t meet any fundamental consumer need?

Where’s the user demand?

In Japan, where handsets featuring Felica contactless technology account for more than 60% of the total number of handsets, takeup of the technology is relatively low – reportedly around 15% of Felica handset users – and is largely confined to public transport. It is not used much to pay for goods in shops – even though leading Japanese carrier NTT DoCoMo made a huge investment in helping retailers pay for the rollout of Felica-enabled payment terminals.

And when the iPhone and other smartphones started flooding into the Japanese market, many users dumped their Felica feature phones for these new handsets, casting doubt on the stickiness that the Felica mobile wallet was meant to provide.

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