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NFC RFID to Power $75+ Billion in Transactions in 2013

By 2013 one in five mobile phones will ship with a near field communication (NFC) RFID chip for cashless payment transactions, according to the latest projection from Juniper Research. The firm cited standards developments as removing a barrier to adoption, though NFC use is expected to be light through 2009.
Jul 28, 2008This article was originally published by RFID Update.

July 28, 2008—By 2013, one in five mobile phones will include a near field communication (NFC) RFID chip to enable cashless payment and information exchange, according to new projections released by UK market research firm Juniper Research. NFC RFID performance and price are not expected to be significant obstacles to adoption, report author Howard Wilcox told RFID Update.

"Any technology challenges are able to be fixed by the NFC ecosystem under the guidance of ETSI, the NFC Forum and the GSMA PBM [GSM Association Pay-Buy-Mobile] initiative," Wilcox said. "The retail and financial challenge are much greater because of the number of players involved, and the need to convince them of the benefits. However the acid test is user acceptance, which has been positive across the trials that I am aware of, especially the flexibility of the technology to provide much more than just payments."

ETSI, NFC Forum and GSMA refer to a European technical standards body and trade associations for the NFC and mobile communications industries, respectively. Two developments by ETSI in the past 10 months will greatly reduce NFC technology barriers for mass adoption, according to Wilcox. The first was the October, 2007 ratification of the Single Wire Protocol as the communication standard between NFC chips and handsets. The second occurred in February, 2008 when an ETSI committee approved a standard specification to host applications on mobile phone SIM cards and communicate with other devices.

Wilcox called the developments "landmark" but cautioned: "Successful small-size field trials need to be translated into commercial services."

Juniper predicts the NFC payment market will grow slowly in 2009 (with Asia being the exception), begin to pick up globally in 2010, and expand dramatically from 2011 to 2013. It predicts in 2013 there will by more than $75 billion worth of NFC transactions, with most purchases going for refreshments, tickets and food. Transaction values are expected to quintuple annually between 2011 and 2013.

"NFC will achieve traction initially in developed countries and regions, with Japan already leading the way with FeliCa-enabled phones. North America, Western Europe and countries such as Korea, Singapore and Australia are likely to see service take-up," Wilcox said in Juniper's announcement. "Whilst trial results so far have been encouraging, the industry as a whole will need to convince both consumers and merchants of the merits of yet another payment mechanism on top of cash, cheques, credit and debit cards, and to allay understandable (even if unfounded) fears and skepticism about the security of The Mobile Wallet."

NFC phone volume and transaction value projections are consistent with Juniper's previous studies, but adoption timelines are longer than earlier expectations, according to Wilcox. Other research firms have also altered their adoption predictions (see VDC: NFC Adoption Will Be Slower Than Expected and NFC Projections Revised Down (Again)).
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