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Could NFC Fail to Take Off?

Europe is home to some of the few live Near Field Communication rollouts, but they remain small and services are limited.
By Jonathan Collins
Feb 15, 2008—By Jonathan Collins

As a young lad who dreamed more about being a football (soccer) player than a technology analyst, I learned a painful but valuable lesson from watching the 1974 FIFA World Cup. The final match was played between West Germany, the home-team favorite, and the Netherlands, the team I was rooting for. The Dutch team had a flowing, intelligent, skillful style of play and even a new philosophy: "Total Football" set out the future of the game, and the future was bright.

Within a minute of the game getting under way, the Netherlands took the lead. But West Germany went on to score twice in the first half and win both the match and the title of World Champions. The lesson? What should happen doesn't always take place.

So what is the link to Near Field Communication? Well, here is a technology with a bright future. Building on the infrastructure already deployed in many European cities to enable contactless payments for public transportation, it allows people to use their mobile phones to make instant payments for transportation, groceries, movie admissions and other services. Numerous trials in Frankfurt, London, Paris and other European cities have shown that consumers like the benefits and ease of using their mobile phones to make payments. And NFC technology promises new revenue streams for the handset manufacturers, credit/debit card issuers and transportation providers that bring it to market and offer NFC services.

But since the technology was first announced in 2003, it has failed to win over any handset manufacturers to start mass production of NFC-enabled phones, or any mobile operators to buy such phones and promote NFC services to customers. Last year, ABI Research reduced its NFC market forecasts to better reflect some of the complexities around global NFC standardization and the wider complexities involved in bringing NFC to market. Since then, 2007 also played out slower than expected, and 2008 looks like a year of continued trials and small-scale deployments instead of notable adoption. As the technology continues to await uptake and deployment, doubts about its eventual adoption have grown in some quarters.

However, lower-than-expected near-term NFC handset sales are a reflection of the business issues and partnerships required for NFC payment applications, not a judgment on the potential of the technology. The new year is certain to bring news of more commercial rollouts and open-ended trials. In addition, the list of mobile operators and partner companies getting involved in trials continues to grow, which will help establish the intracompany relationships key to supporting NFC services.

So will NFC deliver on its promise? I believe the answer is an emphatic yes—but it might require extra time to do so. Within five years, more than 20 percent of European mobile phones will be NFC-enabled. Interestingly, when the World Cup returned to Germany last year, all the turnstiles were equipped with contactless readers capable of working with NFC handsets. Perhaps the differences between soccer and technology analysis aren't so great after all.

Jonathan Collins, former RFID Journal European editor, is now a principal analyst with ABI Research. Based in London, his focus is on contactless commerce and RFID.
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