Near field communications has been languishing for years as an enabler of mobile payments. Despite the efforts of the GSM Association to build a viable ecosystem around it to enable mobile payments, NFC payments simply have not taken off.
Even if you look at more sober predictions rather than the usual hype cycles, uptake of NFC payments has fallen way short of expectations, and some cellcos are starting to give up on it. In January alone, O2 UK shut down its mobile wallet initiative, while Bouygues said it was putting its NFC project on hold. Isis - the carrier-driven payments service in the US - has been plagued with delays and has underperformed to the point that its own members are looking at alternative mobile payment schemes.
Which model?
And yet we know that a market for contactless mobile payments exists. Japan and Korea have proven that for years. Singapore's IDA believes it so much that it's driving a citywide initiative to make NFC-based mobile payments ubiquitous. On the other hand, Japan and Korea have always been a law unto themselves when it comes to mobile service innovation, while Singapore's NFC rollout is regulator driven.
The perennial problem is that NFC payments requires coordination of a complex ecosystem of handset OEMs, apps developers, operators, merchants, banks, payment providers and regulators. The GSMA has done a lot of work to try and bring that together in a standardized way on the operator/device side of the equation, especially in terms of security. The thing is, standardization just takes too long, and - like with other GSMA initiatives such as RCS, wholesale app stores and OneAPI - web players have stepped in and run circles around them.
NFC's value proposition in the payments space is being sidelined by a number of competing OTT payment services from Google, PayPal and Square, to name a few. Web-based mobile payment startups are popping up almost weekly, according to Forrester Research. Meanwhile, Apple and PayPal are pushing alternative technology like Bluetooth Low Energy for payment apps.
Some analysts note that NFC could get a boost this year from hosted card emulation (HCE) - a cloud-based model for NFC that makes service provisioning easier for third parties (which potentially means more innovation and competition) and provides centralized management (which cellcos are decidedly good at).