NFC-enabled cars, the 'tap and go' mobile wallet and location-based applications have all been identified as applications for the technology, and smartphones are now coming to market that take the installed base one step further. Payment services remain at the core of NFC propositions, and the good news is that the complex value chain involved in enabling NFC appears to have come together, opening up a wider range of applications.
Even so, 'financial institutions will be among the first to take mobile payments seriously in 2011,' says Tony Virdi, head of banking and financial services, UK and Ireland, at Cognizant. 'As adoption of mobile phones overtakes PC purchases and operators continue to improve the technology and user experience of mobile devices, it's time for banks and other players in the ecosystem to recognise the benefits available.'
That's borne out by Thomas Gregory, head of digital payments at Barclaycard Consumer Europe, who says: 'Payment is a key application to drive NFC adoption and in turn, we believe that mobile and digital devices are the future for how we will pay for things. For NFC to gain true ubiquity, the availability of a wider set of services on the smartphone alongside payments will be important, ensuring the customer has a great overall experience.'
Barclaycard has recently formed a partnership with Everything Everywhere, the merged operations of Orange and T-Mobile in the UK, to provide commercial contactless mobile payments. 'We believe that 2011 will be the year when contactless mobile payments become a reality for our customers,' adds Gregory.
That sort of partnership is what¹s required for the market to flower. 'We were over-optimistic a few years ago and thought it was just a question of service launch,' admits Vincent Barnaud, who is in charge of design, development and delivery at Orange Group. 'We had to agree on how and why to implement with a number of industries and that took us more time than expected, but we now have agreements with players on how to implement NFC technology.'
For Sören Babra, CEO and founder of Payair, assembling those agreements has been at the heart of NFC deployment delay in Europe. 'Since the birth of the NFC vision there have been too many arguments about the business model around NFC and too few agreements and compromises,' he says. 'The focus has been too much on technology and too little energy and too few thoughts have been placed on the user experience and how the end consumer will adopt the new behaviour required.'
Jörg Suchy, senior manager, strategic marketing, chip card and NFC for EMEA at Samsung Semiconductor Europe, feels part of the problem has been the breadth of options NFC enables. 'NFC already offers a variety of different business models for the industry to implement,' he says. 'NFC is not searching for a business model. The companies involved have to decide which business model is the most suited to them when it comes to the implementation of the technology.'
Gregory admits he feels that, finally, everyone is on board. 'The great thing from our perspective is that so many organisations and individuals are following our lead and pushing in the same direction; phone manufacturers, mobile operators, software developers and the wider financial services industry,' he says.
The real market is already in existence: 'We¹ve issued over 11.4 million contactless-enabled credit and debit cards [in the UK], and put in place 52,000 payment terminals across outlets as varied as EAT, Little Chef, Wembley Arena and the Co-op,' he adds.
'Within the wider industry, both McDonald¹s and TfL have announced their commitment to rolling out contactless payments in the run up to the 2012 Olympic Games. Between January and December 2010, our monthly usage figures for contactless more than doubled.'
Operators emphasise that the benefits for users aren't just about 'tap and go' payments. 'NFC is not primarily for payment,' adds Barnaud. 'There is no doubt that we will all want to be able to promote payment by NFC. but all the applications we see from developers are unrelated to payment.'
James Le Brocq, MD of financial services at O2, agrees. 'NFC is really exciting, but payment is only part of the experience users will have through the O2 Wallet in the future,' he says. 'The applications will dictate the pace at which payment expands.'
Gregory explains the corollary benefits. 'For our retail partners, such as EAT and Pret A Manger, the experience has already been extremely positive,' he says. 'Research from MasterCard shows that contactless can cut waiting times in shops by up to 20% and for stores with express lanes by as much as 40%. By replacing small value cash transactions, the shift to contactless payments can help retailers avoid the hidden costs of cashing up, and the cost of mistakes and theft. Contactless transaction costs, in contrast, are completely transparent.'
Babra is less convinced NFC payment brings an obvious advantage to users: 'The NFC-enabled credit card does not really give the end user the carrot to change their behaviour,' he says. 'To the shopper, you are going from swiping the magnetic-stripe to inserting the chip to holding the card in front of the NFC-reader.
'It is a bit like if digital camera storage technologies would have been launched years before the personal computer and LCD-screens. Everyone would have thought that it would have been a cool way to use the technology, but the user would not really see the point of switching habits, since it would not have given any new functionality or real improvement, and they would still have to go to the photo shop and get printouts,' says Babra.
That arguably has been the case with NFC deployments to date, but Le Brocq thinks the tipping point will come later this year. 'There are 64,000 contactless payment terminals across the UK and that delivers the scale required to drive a change in consumer behaviour,' he says.
'NFC is very important and very exciting and I think the time is right. The third quarter of 2011 seems right to me.
'The Olympics is expected to be a contactless showcase and the investments the banks are making and they don¹t invest without good reason demonstrate the extent to which this is happening,' adds Le Brocq.
'We're just waiting for a couple of triggers, such as a major retailer like Tesco deciding it is time to go contactless. For an organisation like that, NFC will have to work, and I think we'll see something happen within 12 months.'