Mobile Commerce Insider Featured Article

June 03, 2014

Contactless Payment Systems to See 300 Million Users by 2017

When online shopping first emerged, there were many who simply wouldn't have it. Putting credit card information on the Internet was, to these folks, akin to tattooing it on one's own forehead and walking around the bad part of town. After a while, though, it became much more accepted and commonplace. Mobile shopping shared similar troubles, and now, the contactless payment system is having its turn. But a new report from Juniper Research suggests that contactless payments will be a huge market, and soon.

The Juniper Research report, titled “Mobile Contactless Payments: NFC, iWallet & Host Card Emulation 2014 – 2018” suggests that, by 2017, fully 300 million consumers worldwide will turn to mobile handsets to make payments, which is up from just around 110 million in 2013. Several factors were contributing to this likely growth, including an increased rollout of contactless card systems, as well as contactless point of sale (POS) terminals. Much of this in turn is being driven by near-field communications (NFC) mechanisms, with Ingenico and VeriFone reportedly leading the pack in terms of overall use of NFC systems in POS terminals.

However, there were some potential troubles ahead for the contactless payment market as it's known today. First, the report noted that it would be extremely important to make consumers more aware of mobile contactless payments, as well as making retailers more aware of how to put such systems into use in current facilities. Worth noting here are the ideas that not only can contactless payment systems increase throughput at the POS—essentially getting customers to move faster through the process of making a sale—but also that there's a better opportunity to understand the customer's buying patterns and make further sales accordingly. The report actually suggested that NFC stakeholders needed to absorb some of the costs directly, offering NFC stickers to end users at no charge. 

A bigger threat, however, was that host card emulation (HCE) systems were making some interesting gains, offering a complete secure element (SE) system, which can in turn reduce the time-to-market and potentially even take mobile operators out of the loop altogether, allowing banks to offer contactless payment systems to users. That could mean mobile operators could lose out on quite a bit of business, a development that mobile operators will have to work hard to preserve by offering key competitive advantages to potential users.

Basically, there's a two-fold issue for mobile providers in all this: mobile providers will have to work harder to get customers' business, and will have to likewise work hard to keep it. The better job that the mobile providers can do in the first point will actually likely have a direct impact on the second point. If mobile providers can win over potential customers now, that means said customers will be less likely to switch once the banks can step into the program with HCE. Even if the banks start offering such services, if the customers are already happy with mobile device-based contactless payment systems, there will be little point in making the switch. Yes, banks will still be able to get in on the market of those who don't want or don't have a mobile device, but it will be a comparatively smaller market.

This is a market that could see some very big changes in short order, and how those changes will look depends ultimately on how mobile devices handle the field in which, for the time being, said devices are in charge.




Edited by Maurice Nagle




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