December 5, 2012
When Apple Inc. this fall launched its latest smart phone, the iPhone 5, without a near-field communication (NFC) chipset, the move was widely seen as a blow to the prospects for NFC as a technology for mobile payments. Now comes a report estimating just how damaging that blow could be. Worldwide transaction volume based on NFC will be 39% less than expected by 2017, according to the report, released on Wednesday by Juniper Research, a U.K.-based firm.
Juniper, which in May forecast that volume at $180 billion, now says the number will come in at $110 billion, and blames most of the shortfall on Apple’s decision to omit NFC from its device, one of the most popular smart phones in the U.S. market. Most of the $70 billion difference will be felt in North America and Western Europe, Juniper says. These regions, expected in the May forecast to generate close to $120 billion by 2017, will instead account for just about half that volume, the new forecast says.
Juniper’s new report says its May forecast was based on its expectation that Apple would put NFC chips in its new iPhone. Now, the absence NFC from the influential device will lead to fewer retail installations of NFC readers, the company reasons, which in turn will lead to less promotion and lower awareness, leading finally to less consumer adoption. With NFC, smart phones link wirelessly to NFC-enabled point-of-sale devices to transmit payment or promotion media. A powerful technology, NFC has been hobbled by sluggish consumer and merchant adoption.
"While many vendors have introduced NFC-enabled smart phones, Apple's decision is a significant blow for the technology, particularly given its previous successes in educating the wider public about new mobile services," author Windsor Holden said in a statement. "Without their support, it will be even more difficult to persuade consumers – and retailers – to embrace what amounts to a wholly new means of payment."
Juniper also blames slow uptake of Google Inc.’s NFC Wallet and the repeated delays of the Isis NFC pilots for its scaled-back forecast. Isis, a joint venture of the three leading U.S. mobile carriers, finally launched in October in Austin, Texas, and Salt Lake City.
Not all experts and forecasters agree with Juniper’s numbers or its reasoning. Aaron McPherson, an analyst at IDC Financial Insights, Framingham, Mass., recently predicted global NFC volume would hit $273 billion by 2017, well above even Juniper’s original forecast. McPherson bases his forecast on widespread NFC installations by merchants, in part driven by the need in the U.S. market to deploy EMV terminals. These new point-of-sale devices are expected to also have NFC capability.
McPherson also disputes the emphasis Juniper lays on Apple’s decision to take a pass on NFC this year. “My forecast was done with full knowledge of Apple's decision, and I just don't think it's going to have that much impact on a global level,” he tells Digital Transactions News in an e-mail message. Apple could introduce NFC in the iPhone as late as 2015 and still be in time to accommodate merchants’ upgrade cycle for EMV, he points out. A key date in the U.S. market, the date by which merchants must deploy EMV-capable devices to avoid taking on the risk for counterfeit cards, doesn’t occur until October 2015.
In any case, McPherson expects an NFC-capable iPhone sooner than that. “I'm confident the iPhone will get NFC in 2013, or 2014 at the latest, and that's plenty of time to get to the numbers in my forecast,” he says. All in all, he argues, “Juniper ought to have stuck to their guns.”
Still, the revised forecast is far from pessimistic, predicting a nearly five-fold jump in worldwide volume by 2017. It also predicts a substantial geographic diversification for NFC. While China and the Far East now account for nearly all of the approximately $23 billion in global NFC transaction value, that share will plummet to 42% in five years as other regions rise in prominence, Juniper says.
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