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Final hope for NFC payments now rests with ... bankers

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A new report by Juniper Research makes much less bullish predictions of NFC uptake than we’ve seen before – and the report’s author, Windsor Holden, blames Apple for snuffing out hopes of future pay-by-bonk and such wireless stuff.

NFC is a contact-less system that transfers information via radio wave between phones, tablets, payment cards, wall stickers, you name it.

“Our previous predictions were based on the assumption that the iPhone 5 would have NFC,” Holden told The Register. He said there was a “cycle of indifference": Apple is not, to this date, supporting NFC, so other companies have wondered, "why bother?"

Retailers will still put contact-less technology into their tills so people can pay-by-wave with their credit and debit cards; very few customers pay by hovering their phone over the cash register.

Holden points to a YouGov survey in December that found public awareness of NFC in mobile gadgets was not improving.

The big news in the NFC mobile payments world is a switch from the Single Wire Protocol (SWP) – which put the secure element in the SIM card and gave the operators control of payments – to Host Card Emulation (HCE), where the secure element is in the handset and gives the control to piggyback (over-the-top) players, most significantly the banks.

If there are two things banks hate dealing with it's cash and customers. So something that keeps both out of their branches is a retail bank’s wet dream.

Holden believes the last gasp for NFC is if the banks can spend enough money promoting mobile contact-less payments based on HCE to educate customers to use it. He says it needs a “leap of faith”, and that other applications such as loyalty, coupons and ticketing might help win over more tight-fisted consumers.

In 2012 El Reg reported the GSMA Chairman Franco Bernabè claiming that the SWP market would be worth $50bn “in a few years”. Here we are two and a bit years on and the SWP market is worth almost nothing. Even the prediction of contact-less mobile transactions growing from 3bn to 10bn between now and 2018 represents something in the order of one transaction per connected device per year, and pretty much 100% of these will be carried out via HCE.

What we haven’t seen is handset manufacturers who are supporting NFC taking it out of the devices. Yet operator schemes to prop up NFC are failing. Talking of the US joint venture, Holden says, “I fear for ISIS; it’s not quite dead but it’s close.” He also describes mobile operators' payment schemes as “a black hole getting blacker”.

The UK’s Weve consortium was reported by the FT as having lost £25m on revenues of £13m in its first year. This is an ongoing project targeting established, low-hanging fruit like mobile marketing; the real work of wallets leading to NFC has yet to happen.

Holden believes that NFC may survive if Apple does offer HCE. He expects Apple to incorporate Bluetooth Smart or Wi-Fi based mobile payments based on Apple’s patent application but, since Apple makes some negative comments such as “NFC is less desirable for longer transactions such as those that involve transferring more data than used by the payment information”, Holden remains unconvinced that NFC will happen.

It is worth noting, however, that more recently Apple filed a new NFC patent application which might be related to a deal with China UnionPay requiring NFC.

Holden believes the future of NFC is in the hands of the banks, which will need to spend huge amounts of money to change consumer behaviour, and hope that the handset manufacturers don’t give up on a technology which is designed to disintermediate their key customers in the meantime.

If only Apple had put NFC in the iPhone 5. ®

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