NFC: A lot of penetration but very little love. Your Contactless Intelligence weekly news review.

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Dear Readers,

Here at Contactless Intelligence we haven't really spoken about the mobile wallet for a while now. And by mobile wallet I guess that I am referring to what many would call the 'real' deal, ie. the mobile wallet running on NFC technology.

There are good reasons why this subject hasn't surfaced for a while in this newsfeed. I thought it might die a slow and painful death (before finally being resurrected to mass applause and acceptance). I was also starting to be see that others shared this belief. Some of the major operators have gone suspiciously quiet over the subject and are now 're-focusing' their NFC efforts into other areas; media, retail, marketing, to name but a few.

So, it wasn't exactly surprising that last week's Gartner forecast on worldwide mobile payment transaction values called for this year to see a 44 percent increase from the $163.1 billion in mobile payments made in 2012. Money transfers alone are projected to account for about 71 percent of total transaction value in 2013. But NFC eWallet transactions are only forecast to account for 2 percent of total mobile transaction value in 2013. That's because high-profile NFC services like Google Wallet and Isis aren't catching on with consumers, Gartner said.

In fact, the research firm has reduced projected NFC transaction value by 40 percent for its forecast period, which runs through to 2017. By then, Gartner believes that NFC payments will still only account for 5 percent of total mobile transaction value. While NFC remains a niche, money transfers are expected to remain the predominant use for mobile transactions, remaining at 69 percent of total value in 2017. Most growth has come from money transfers, Gartner said, as users have begun to transact much more frequently, at lower values, due to wider availability of services. Mobile transfer services also frequently see lower transaction costs than traditional banks.

The forecast calls for merchandise purchases to account for 21 percent of total mobile transaction value in 2013. Growth in that segment has been stifled, Gartner believes, because "the buying experience on mobile devices has yet to be optimized."

An expected large growth segment in 2013 is mobile bill payment, which the forecast suggests could grow 44 percent this year. The firm noted that more consumers in developed markets are performing bill payments via mobile banking services, and bill payments will grow to account for 5 percent of total mobile payment value in 2017.

"We expect global mobile transaction volume and value to average 35 percent annual growth between 2012 and 2017, and we are forecasting a market worth $721 billion with more than 450 million users by 2017," said Sandy Shen, research director at Gartner. "Nevertheless, we have lowered the forecast of total transaction value for the forecast period due to lower-than-expected growth in 2012, especially in North America and Africa."

Berg Insight, who also brought out their report on the state of the mobile wallet last week, was a little more optimistic concerning NFC-based payments. According to Berg Insight, at the end of Q1-2013, NFC mobile wallet services were commercially live in 13 countries worldwide , up from just 6 countries at the end of 2011. However, these services are still available to a very small number of consumers. “With the exception of a few projects in Asia-Pacific, there are only three NFC mobile wallet services in the world that have an effective addressable market of more than 100,000 people. These three services are Google Wallet and Isis in the US and Turkcell Wallet in Turkey”, said Lars Kurkinen, telecom analyst, Berg Insight.

However, according to Berg Insight, this will change substantially during the next few years due to the massive rollouts of NFC-enabled phones, NFC-ready POS terminals and TSM solutions. The market for NFC-enabled mobile phones reached a breakthrough in late 2011 and accelerated further in 2012 as new NFC handsets were introduced by all leading handset vendors, except Apple.

Berg Insight estimates that total NFC handset sales grew 300 percent to 140 million units worldwide in 2012. The global installed base of NFC-enabled handsets reached 170 million units in 2012, which corresponds to approximately 3.3 percent of all mobile handsets in use. Between 2012 and 2017, the installed base of NFC-enabled handsets is forecasted to grow at a CAGR of 65 percent to reach 2.1 billion units at the end of the forecast period. The penetration rate for NFC across all handset segments will similarly increase to approximately 32 percent by 2017. Global shipments of NFC-ready POS terminals doubled to an estimated 3.9 million units in 2012.

Major vendors such as VeriFone and Ingenico are already including NFC as a standard feature in almost all new products. Berg Insight forecasts that the global installed base of NFC-ready POS terminals will grow at a CAGR of 46.1 percent from 6.7 million units in 2012 to 44.6 million units by 2017. The penetration rate of NFC-ready POS terminals is projected to be an estimated 87 percent in EU27+2 by the end of 2017. The penetration rate in North America and Latin America will be 82 percent and 68 percent in the same year respectively, whereas penetration in the Rest of World will reach 39 percent.

Berg Insight was also quick to point out the upsides of the mobile wallet in in-store retail environments and forecasted that in the longer term, universal mobile wallets such as those provided by Isis, Google and MCX will drive the majority of the mobile in-store purchase volume, which is expected to reach US$ 44 billion by 2017. They note that the required infrastructure for mobile wallet services is being rolled out and key partnerships are being formed between mobile network operators, financial institutions, retailers and other companies. However, before mobile wallets can attract the mass market, a broad range of services beyond payments need to be made available to consumers.

“People do not have a problem with cash or payment cards today. Value-added services that enable new shopping experiences before, during and after payments will be what truly distinguish mobile wallets from the traditional payment instruments”, said Kurkinen. He added that the next few years will be a very important time during which mobile wallet operators have an opportunity to improve their services. “Gaining an early lead in the market can be crucial, as in the long term only a limited number of mobile wallet services will survive in each market due to network effects.”

But is the future for NFC acceptance quite so rosy? One person who still believes in the technology is Rupert Englander, Founder and Managing Director of NFC tag company, Wooshping. Rupert got in touch with me last week and asked if he could use the Contactless Intelligence platform to publish and open letter to... well, just about anyone involved in developing NFC technology, I suppose. The ideas he wanted to propose (through the medium of an open letter) made a lot of sense and echoed some of the things we have been saying on Contactless Intelligence for a while now.

With this in mind we published the letter on the Contactless Intelligence site and I have re-printed the letter here on the weekly news review to make sure that as many people as possible can read it. Judging by our site numbers and social media mechanics, a lot of people have read and like what it proposed. I would be interested in what our readers here think about the letter and should you have feedback or comments - just drop us a line and we will be happy to publish them.

Until next week.

Regards,

Steve Atkins

Contactless Intelligence

This week on C-ITV

NXP and SES work to achieve breakthrough for mass adoption of NFC in retail http://wp.me/p1Jrjn-2fG

An open letter to the NFC Forum, GSMA, Mobile Handset Manufacturers, Operators and Retailers http://wp.me/p1Jrjn-2fm

Don't believe the negative press, Berg Insight point to a steady rise in mobile wallet adoption http://wp.me/p1Jrjn-2eO

Top SA travel trade show boasts "Go Green" success using Poken's NFC platform http://wp.me/p1Jrjn-2eC

Bands give fans instant access to music through Wooshping NFC tags http://wp.me/p1Jrjn-2e7

First NFC wallet with remote Mobile MasterCard PayPass issued in Russia and CIS http://wp.me/p1Jrjn-2dF

Electronic Transactions Development Agency of Thailand Joins the OSPT Alliance http://wp.me/p1Jrjn-2cX

New Conexus campaign to drive NFC usage across the Asia Pacific http://wp.me/p1Jrjn-2cT

Visa Europe's "Flow Faster" marketing campaign launches in 19 countries http://wp.me/p1Jrjn-2bU

Payments & m-Commerce

WyWallet cancels mobile payment policy http://bit.ly/15uBDMi

Google Wallet for the Verizon GALAXY S 4 http://bit.ly/15uBA38

Airtel Warid Taking Mobile Money To Another Level http://bit.ly/15uBzw5

Why The iPhone Still Matters To Mobile Payments http://bit.ly/15uBhFE

The cash-free challenge... are contactless cards a safe way to pay? http://bit.ly/11hP3rP

Soon, contactless payment technology considered by banks for Indian Market http://bit.ly/11hP7Yw

SumUp wins funding to expand mobile payments services http://bit.ly/19HXuDg

US mobile wallet users spent $500M in 2012 – nearly all of it at Starbucks http://bit.ly/19HXqDF

NetOne’s OneWallet service expanding http://bit.ly/19HWHCo

Mobile payments soar in tandem with malware http://bit.ly/19HWGhU

Allied Wallet - on board every United Airlines flight http://bit.ly/11wfmhc

Growth in mobile payments spells opportunity for Bitcoin http://bit.ly/16M7YTJ

Mobile Wallet Kuapay Gets An Upgrade, Reaches 600 Locations Through Trials With KFC & Others http://tcrn.ch/16M811N

Bango Unchains Frictionless Mobile Payments with Data Center Services from Internap http://prn.to/16M8bWN

Mobile wallet Idram has about 4,000 users http://bit.ly/11wfzRt

Apple envisions digital wallet with perks for watching ads http://cnet.co/11wftJv

Boku teams with PlayJam to bring mobile payments to smart TVs http://bit.ly/11wfL36

NFC & Mobile

Russian Issuer to Launch NFC Payment on Embedded Chips in HTC, Philips Phones http://bit.ly/15uBFE7

Telco and Bank in Brazil to Launch NFC Pilot; Rollout to Follow http://bit.ly/11hP8vA

New tech put on show at Taiwan's Computex exhibition http://bbc.in/19HWEGG

Samsung adds rugged Galaxy S4 Active NFC phone http://bit.ly/16M7XyT

Finnish book uses NFC tag for video content http://bit.ly/16M85OS

Garanti Bank to launch NFC and QR payments in Romania http://bit.ly/11wfCMW

Regulatory incoherence could stifle development of NFC - Acma http://bit.ly/11wfAF2

Transportation, Ticketing, Access, Security & Loyalty

Daily Mail over-reaction? "How 30million 'wi-fi' credit cards can be plundered by cyber identity thieves" http://dailym.ai/15uBOat

4 Credit Cards With Smart Chips for European Travel http://bit.ly/15uBUyK

Mobile Ticketing Users to Approach 1bn by 2018, Juniper Research finds http://bit.ly/19HXza0

Pvt. Bus passengers get ‘smart card’ upgrade http://bit.ly/16M7RHF

VMC integrates with YESpay’s innovative omni-channel retail payment solutions http://bit.ly/16M7Nrq

EMV chip technology gives Visa cards, including contactless, the highest level of security http://bit.ly/16M79dx

GM to Make Door Unlock, Remote Start Standard http://bit.ly/16M8a5g

Bell ID Launches Secure Element in the Cloud http://bit.ly/18RcflP

UK tackles NFC-based card fraud with micro-switch http://bit.ly/16M8fG7

the City of Warszawa choose Parkeon's contactless technology solutions http://bit.ly/11wfqxl

Fast, secure authentication for mobile wallets, privacy guaranteed http://bit.ly/11wfM7h

Other News & Opinion Articles

Handpoint Is World's First PCI-Accredited P2PE Mobile POS Application http://prn.to/11wfsoY

Micropross ICTK lab secures EMVCo contactless validation http://bit.ly/19HXDa0

M-Pesa upgrade to ease payment of electricity bills http://bit.ly/15uBEji

A Square Service in a Round, Cash Market? http://bit.ly/15uBAAd

VeriFone Completes Acquisition of EFTPOS New Zealand http://bit.ly/11hOYo0

Wirecard and payleven launch far-reaching strategic technology alliance http://bit.ly/11hPe6d

An open letter to the NFC Forum, GSMA, Mobile Handset Manufacturers, Operators and Retailers

By Rupert Englander, Founder and Managing Director, Wooshping

As a small business with a vested interest in seeing the successful adoption and use of NFC, I am writing this open letter to urge the mobile telecommunications sector to collaborate in a better way to ensure maximum consumer recognition for NFC.

NFC will be pivotal in the next wave of consumer interaction. But the very basic premise of opportunity – that NFC collapses barriers to engagement – are being greatly challenged by the industry voluntarily (through lack of thought, agenda or non-collaboration) putting barriers in place to drive adoption, awareness and usage.

It is now getting to the critical point where devices in the marketplace are becoming more and more commonplace, and unless some of these issues are addressed, I am concerned that it simply won’t matter and consumers will just ignore NFC entirely.

Primarily there is a huge problem with identity of NFC. There are SO many different identities and brands fighting to brand NFC that it leaves the consumer confused. These are just some examples of terms used when referring to NFC :-

- NFC

- Contactless

- S-Beam

- Tap and Share

- Techtiles

- QuickTap

- Xperia Tags

In fact the list goes on and on, but you get the idea. There are also many different visual identities; including variants of the term NFC, the wave marks, and a combination of the two.

My point is that a consumer a) needs to understand when they have the opportunity to engage and b) know how to engage. The second point, as far as NFC goes, is pretty easy – just tap your phone at the target. However, if the consumer also has to know and comprehend all these different identities for NFC, filter them and then convert that to an understanding in that there is an opportunity to engage, then we’ll simply never get there.

And what does this mean for an implementer? They have to make a choice on which identity to go with, without fully understanding the implications of going with one identity over the other. In the case of Bluetooth this was never this issue. ‘Bluetooth’ as a term and visual identity was consistent. We NEED that collaborative adoption with NFC.

The broader industry within which you are all active participants needs to wake up and get some consistency baked into this capability. It doesn’t matter what you think of the name, so long as everyone is consistent. Personally, if consumers can get HD, Wireless Lan, 3G, 4G etc then there’s hardly a great jump to accept NFC. So agree the term, agree the visual identity, adopt it, implement it, promote it and support it.

Once everyone can agree to a consistent approach, there then has to be consistency at every touchpoint; be it in blogs and articles, software settings in the phone, tags on posters, calls to action, pay terminals etc.

The NFC Forum has developed this identity, but in my view is not able to, or has chosen not to, mandate it, causing this confusion and lack of consistency. It needs sorting and pro-active handling.

Other areas for action

I have had the pleasure of using many different devices which support NFC and have found a wide range of implementations. I have drawn up what I would suggest is an optimal approach for manufacturers to adhere to. These are all designed to help consumers become aware of, adopt and use NFC. Accordingly my request to the manufacturers and operators are :

1) Turn it on.

Please turn NFC on by default so that it is enabled from the outset. If the consumer doesn’t want it they can turn it off, but if you turn it off by default the chances are that consumers will never turn it on. In my experience NFC doesn’t affect battery performance noticeably so I am not quite sure why it would be disabled by default.

2) Tell us we have it.

Please tell us we have bought a phone with NFC AND add an NFC tag in the box. Something that provides value to the customer if they do it every day or makes a specific task easy and spontaneous. That way they’ll be more aware of the capability, retailers will be happier to start rolling out solutions because more people will know about it. Currently you are increasing your Bill Of Materials and not providing any benefit for the consumer, most of whom wouldn’t know if they had NFC or not. This doesn’t really make sense and you will end up in a vicious loop of not understanding the ROI on NFC implementation and the capability will continue to be questioned.

3) Don’t prompt.

When someone taps a tag please don’t insist on asking for confirmation every time. At least provide it as an option for the consumer to turn prompts on, but turn it off by default. The phones which don’t prompt provide a more delightful and spontaneous experience in use than phones that insist on prompting every time. NFC is very much a pull mechanic so there’s much less danger of nasty things happening by passers-by “skimming” your phone. But at least if you make it a configurable option, it’s the users choice.

4) Identity.

Referring to my main point above, let’s standardise on one term, one identity and move on.

5) Marketing campaigns.

As an industry you’ve given good examples in the past of co-operative marketing campaigns. NFC is screaming out for high profile and co-operative marketing campaigns where the quid-pro-quo for driving footfall to one-another’s physical presences is truly untapped (excuse the pun). Whilst the recession bites hard in the high-street, co-operating could be key to survival and growth in these hard times, showing retailers how they can compete better when their customers are walking around with their competitors offers in the palms of their hands.

Collaboration on this scale will drive other industries and sectors to take a closer view of NFC and the benefits will be clear for all. More engaged and active mobile users. If the forecasts are correct NFC will one day become ubiquitous and the opportunity for many multiple spontaneous, delightful interactions for consumers through their living days will exist. But let’s make it happen because of our work – not despite of it.

Bands give fans instant access to music through Wooshping NFC tags

If you remember, last year Wooshping ran a successful competition to find companies wanting to create some innovative campaigns using NFC. This year they are running another competition but this time aiming it at published music bands.

Wooshping recently demonstrated the ability for bands to give their fans instant access to their material by using NFC and Spotify to give a “spontaneous” experience to users and are now giving the opportunity to all published bands to win up to 100 NFC tags for use at their gigs, on marketing, collateral etc.

To enter the competition, all you have to do is send them a link to your best track. The link can be a video on YouTube or a track on Spotify. Wooshping will judge the tracks they receive, and will choose a winner from the submitted tracks.

To enter, please email contactus@wooshping.com stating “NFC Music” in the email. The competition is open until 30th June at which point they will decide on the winner. Good Luck!

Watch video here

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NFC: A lot of penetration but very little love. Your Contactless Intelligence weekly news review.

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