In the evolution of near-field communication-based mobile payment technology, 2011 was a big leap forward for NFC handset distribution. But experts are stopping short of calling it an unqualified watershed year for NFC, a short-range wireless technology that enables devices (such as a mobile phone and a merchant terminal) to communicate with one another.
"After seven or so years of false dawns and frequent disappointment, 2011 has proved to be something of a breakthrough year," Don Tait, senior analyst at United Kingdom-based IMS Research, wrote in a Dec. 15 report summing up the year's NFC handset-manufacturing numbers.
Manufacturers, including Samsung Group, Research in Motion LLC, Nokia Corp. and HTC Corp., in 2011 shipped 35 million NFC-enabled phones globally, IMS estimates. Apple Inc. remains the only major player not to release an NFC-enabled handset, IMS noted in its report. However,
Sales of NFC handsets in 2012 will reach nearly 80 million, an increase of 129% from this year, the firm predicts. Such growth seems "promising," according to the report.
Significant developments driving NFC handset sales include the launch of Google Wallet in the U.S. in September and the French government's funding of NFC payment efforts in France in cities that include Paris, Bordeaux and Nice, with French telco Orange projected to sell 500,000 NFC-enabled handsets in France by the end of the year, IMS said.
Orange UK and Barclaycard's contactless payment operation, with participation from merchants that include Boots drug stores and eateries McDonald's Corp. and Pret-a-Manger, also is helping to drive interest in using NFC-enabled phones, the firm noted.
At least one observer agrees that more pieces need to fall into place before NFC handsets are on track for a major breakthrough in major global markets.
"Hitting 80 million by next year is about 8% of about a billion total handsets worldwide, and that's pretty significant," Todd Ablowitz, an emerging-payments consultant and president of Double Diamond Group in Centennial, Colo., says. "But all the pieces aren't there yet."
If Apple launches an NFC-enabled iPhone, "it might by itself create a breakthrough with NFC because Apple alone could make the market, in a sense, given their market share and consumer effect," Ablowitz says.
Once NFC chips are included in most new phones, "one of the major barriers to NFC adoption will be knocked down," he says.
Many hurdles would still exist before NFC could take hold widely.
"Widespread availability of NFC phones is only one piece of it; you still need to have a compelling reason to buy an NFC phone, and to get a mobile-payment program or wallet onto the phone," Ablowitz says. "All the other players in the industry still need one another to make it happen-merchants need to accept NFC, telecom carriers need to work with banks to reach consumers, mobile wallet providers need to work with banks and handset makers to reach consumers. … We've got a long way to go before we reach the point of an unqualified NFC breakthrough."
