Strategy Analytics slashes forecast for NFC-based mobile payments

Researcher blames tepid retailer adoption, slow operator rollouts and limited NFC-capable handset availability

Strategy Analytics reduced its outlook for near field communications-based mobile retail payments, blaming tepid retailer adoption, slow operator rollouts and limited availability of NFC-capable handsets.

Strategy Analytics forecasts that by 2017, 115 million NFC-equipped mobile device owners will spend just over $48 billion using their phones to complete in-store transactions. This past May, the firm projected worldwide mobile payments would reach $1 trillion by 2017, crediting rapid growth of NFC technologies driven by handset and point-of-sale terminal upgrades.

While sales of NFC-equipped handsets remain strong, adoption and use of NFC payment services remains lax, Strategy Analytics said, noting that many mobile operators have pushed back the launch of NFC-based mobile payment services into the final months of 2013 and beyond.

"With the exception of China, where we see some momentum from China Mobile deploying its mobile wallet service, fewer mobile operators than anticipated [will] launch NFC payment services in 2013," said Nitesh Patel, director of Strategy Analytics' Wireless Media Strategies service. "Furthermore, handset OEM Samsung, which announced its strategic partnership with Visa Inc. in Feb. 2013, has yet to officially offer a secure payments service based on that relationship."

In the absence of widespread contactless payment adoption and usage, alternative methods of in-store mobile transactions like Square Wallet and LevelUp have gained traction, fragmenting the mobile payment sector as a whole.

"The prospect of both Apple and PayPal launching alternative mobile payment solutions based on Bluetooth Low Energy, not NFC, and increasing interest in dynamic QR codes from PayPal, adds further uncertainty to the role of NFC in supporting in-store mobile payments," said David MacQueen, Strategy Analytics' executive director of media and apps. "Therefore, the success of Isis, the NFC-supported mobile wallet joint venture between operators AT&T, T-Mobile and Verizon is not guaranteed, despite its scale."

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