LONDON – The market for near field communications technology for mobile payments in cell phones is going to rise to nearly 550 million units per year in 2015, from about 50 million units in 2010, according to market research company IHS iSuppli. The market research company has raised its estimates for NFC penetration based on moves by mobile phone carriers in the United States.
A faster market ramp, by about 100 million units per year from 93.2 million units in 2011, is supported by the recently announced agreement of three major U.S. wireless carriers to partner with leading credit card companies on a mobile commerce initiative, IHS iSuppli said.
AT&T, Verizon and T-Mobile have said they would work with Visa and MasterCard on their Isis joint venture, which was established to form a nationwide infrastructure for NFC-enabled mobile payments using mobile handsets in the United States. The original announcement of the Isis joint venture in November 2010 did not include Visa and MasterCard.
With the participation of Visa and MasterCard, the Isis system will allow consumer credit card information to be securely stored on cell phones, and will use NFC as the communication protocol to facilitate the financial transaction.
The changes to the Isis initiative together with Google's efforts to promote mobile payments with Android smartphones, has prompted IHS iSuppli to increase its forecast for global shipments of NFC-equipped cell phones. IHS now predicts 93.2 million NFC-equipped cell phones will ship worldwide in 2011, up from the December forecast of 79.8 million. In 2014, 411.8 million NFC cell phones will ship, compared to 220.1 million in the previous prediction. Shipments then will rise to 544.7 million in 2015. This means that 30.5 percent of all cell phones shipped in 2015 will have the capability to conduct mobile commerce using NFC technology, IHS predicted.
"By partnering with the dominant players – Visa and MasterCard – the wireless carriers are making the right moves to create an ecosystem that will allow consumers to become comfortable with making NFC payments through their cell phones," said Jagdish Rebello, director and principal analyst for communications and consumer electronics with IHS. "The carriers hope to leverage the dominant position enjoyed by Visa and MasterCard in credit card payments to ensure a seamless consumer experience when customers use their mobile phones to make payments. Such a move will drive an increase in unit shipments of cell phones with embedded NFC capability in the United States and around the world."
With NFC, consumers can pay their bus fare, buy a plane ticket or make an ATM/credit card purchase simply by holding their cell phones near wireless terminals.
Visa and MasterCard's move to participate in Isis represents an attempt by the credit card companies to prevent Google from gaining a strong foothold in the market for mobile payments, IHS said.
With the addition of the major financial firms, the Isis effort is set to gain momentum over the long term. However, Isis is facing some short-term delays while it recalibrates its mobile payment strategy to suit Visa and MasterCard. It has delayed a Salt Lake City trial of the NFC technology from early 2012 to summer 2012. Similar trials are already underway in Nice, France and nine other major cities. In Nice the trial is supported by four carriers; Orange-France, SFR, Bouygues Telecom and NRJ Mobile.
The elephant in the room is that security on current credit cards is pretty much broken. That holds true for both mag stripe cards in the US and smartcards in Europe. There is a void in the market for credit payments as a result, which this could fill if they do it right (big 'if').