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NFC mobile phone set to explode

Contactless –enabled points of sale, NFC-capable mobile phones are both poised to take off, according to analysts

Near-field communications (NFC) mobile phones and contactless-enabled points of sale (POS) are both expected to take off in the next few years, creating a perfect storm for mobile payments and couponing, according to two different analyst houses this week. Juniper Research is forecasting that one in six mobile subscribers will have a NFC phone by 2014, and IMS Research said today that the number of locations that accept contactless payments will increase to more than 12.5 million by the end of 2013.

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According to IMS, growth in contactless POS will accelerate six times faster than the overall electronic funds transfer at point-of-sale market. According to research director John Devlin, the market took a downward dive in late 2008 and the first half of 2009, primarily in the retail and hospitality sectors, but is now returning to growth. Those companies that managed the economic downturn well are now investing in new contactless technologies rather than replacing their existing, essential POS equipment, Devlin said.

Also helping the demand of contactless POS is that card vendors and banks are beginning to issue more contactless cards and consumer awareness is growing in many countries. Devlin noted that as the retail and hospitality sectors continue their recovery, differentiation will be increasingly important to compete. Accepting new forms of payment, including contactless cards, fobs and NFC and mobile payments will be key.

The growth in contactless points-of-sale will likely have a positive effect in driving Juniper Research’s forecasted surge in NFC phones as well. The firm puts the opportunity in NFC at $110 billion by 2014. While adoption of these handsets is currently confined to the Far East, it will spread until 2014 when Juniper expects one in six to have NFC-equipped handsets, including in North America and Western Europe.

“Going forward, what we will see is that NFC is going to become just part of the device like Bluetooth is now, the camera is now and GPS is becoming more and more so; it’s integrated just as a matter of fact,” said senior analyst and lead author Howard Wilcox. “I think vendors will increasingly see NFC as just part of the build.”

These NFC handsets will be primarily used for payments and retail transactions, including coupons, according to Wilcox. He said that the rollout of NFC-embedded handsets is the bigger limiting factor than POS equipment, but that it is beginning to change with Nokia’s 6126 Classic NFC phone coming to market before the end of the year and others expected to follow suit. NFC is “poised to enter an operational build-up phase culminating in mass service rollouts across many countries,” he said.

This will be especially true for metro areas driven by transport ticketing, Wilcox added, and retailing ARPU from NFC mobile coupons and smart posters will also be lucrative, exceeding ARPU from NFC payment transactions. Juniper believes that by 2014, more than one mobile subscriber in 10 in developed regions will use mobile coupons, and that usage will generate close to $6 billion globally in retail redemption value.

“More and more, as the phone becomes the centerpiece of the mobile wallet, which will have coupons on it, virtual credit cards, NFC, it will become a central part of our purchasing as we go forward over the next few years,” Wilcox said.

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© 2014 Penton Media Inc.

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