NFC sputtering as mobile payments driver, Gartner report shows

While mobile payments will grow to become a $235.4 billion market this year worldwide, lack of adoption for near field communications (NFC) payments has stunted the technology’s growth potential, according to a new Gartner Inc. report.

The Stamford, Conn.-based analyst firm predicts a 35 per cent growth for volume and value in mobile transactions between 2012 and 2017. That’s clearly very good growth by most comparisons, but Gartner pours a bit of cold water on those hot numbers by saying it has cut its forecast for NFC transactions. That transaction value has been reduced by 40 per cent “due to disappointing adoption of NFC technology in all markets in 2012 and the fact that some high-profile services, such as Google Wallet and Isis, are struggling to gain traction.”

Hype is at a peak for the mobile payments industry, says Payfirma CEO Michael Gokturk in an e-mail. The Vancouver-based mobile payments provider isn’t surprised the market is growing a bit slower than initially predicted by analysts, it plans to focus on the growing North American market for the time being.

“Over the past 12 months at Payfirma, we are seeing an increasing number of large-scale deployments of mobile payments by many of our enterprise merchants. The market always seems to take longer than expected to adopt new technology, but we are seeing strong demand, so we are happy with the growth,” he says.

While mobile users are pleased to complete more banking transactions on mobile apps and perhaps even doing some online shopping on a smartphone, they’re not pulling it out of their pocket to pay at the checkout line. Money transfers account for 71 per cent of transaction value in 2013, and merchandise purchases account for 21 per cent, Gartner says.

Gartner predicts that transferring money via mobile phones will continue to be the most popular transaction type through to 2017. It also predicts some growth in bill payments, to five per cent of transactions by 2017.

It may be no surprise NFC isn’t catching on like wildfire, especially in North America when so many payment options already exist. Consumers already have the option of cash, debit card, or credit card (complete with the “tap to pay” function offered by a NFC chip) when at the cash register. With consumers already comfortable with those payment models, why bother setting up a new solution with a smartphone to do the same thing? Gartner bemoans the mobile efforts made by retailers on this front so far.

While Payfirma is watching NFC technology, it hasn’t released any NFC solutions yet and has no plans too, Gokturk says.

“We have just not seen the demand from merchants. It is very possible, even likely, that NFC will be leapfrogged by a virtual system. Anytime a system is bound by hardware with a 2+ year release cycle, there is a risk of being antiquated before its launch date. We are looking at where the ball is going, not where it is right now,” he says.

North America’s transaction value will grow 53 per cent in 2013 to $37 billion, it notes. But “the region has been impacted by low adoption of NFC payment services and many merchants launching mobile apps in a copycat fashion without a clear winning strategy.”

In Canada, banks and mobile operators have recently started working together to offer NFC payment services. CIBC and Rogers partnered on an app that would allow mobile payments in November 2012, and Bell and RBC also released an app last month.

Gartner’s full report on mobile payments is available for purchase on its Web site.

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Jim Love, Chief Content Officer, IT World Canada

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Brian Jackson
Brian Jackson
Editorial director of IT World Canada. Covering technology as it applies to business users. Multiple COPA award winner and now judge. Paddles a canoe as much as possible.

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