Payments using near field communication or NFC have barely gotten off the ground in the U.S. but it is headed toward a bright future, according to research firm Juniper, which forecast that NFC transactions will triple to $74 billion by 2015. The use of NFC for payments is part of a larger surge in overall mobile payment alternatives to credit cards and paper tickets, which is one of the fastest growing segments of the mobile commerce market, Juniper said.
The research firm previously forecast that NFC payments would hit $50 billion by 2014. In addition to NFC, Juniper said money transfers, physical good sales and coupons are also expected to triple in the next three years while digital goods sales, banking and tickets will double over the same period.
2015 is a long ways off and trying to make predictions in the fast-moving mobile space can be very difficult, especially with a technology that is still getting underway. Google Wallet has gotten off to a limited start and Isis, the main U.S. rival to Google, is set to launch this summer in two cities, but won’t really start to ramp up until 2013. Many critics are still expecting this year to be a settling-in period for NFC (subscription required), which could cause some confusion in the short-term for merchants and consumers, who will have to contemplate hardware upgrades to take advantage of NFC’s contactless payment abilities.
But we are increasingly seeing manufacturers commit to putting NFC chips in their phones. And POS makers are now building in NFC in most new terminals. Visa has also pushed forward a plan to encourage the adoption of NFC by making retailers liable for counterfeit or fraud if they don’t upgrade to hardware that can handle NFC by 2015. Visa is also working on building in NFC support into its V.me payment platform and separately said that it expects more than half of the transactions it handles by 2020 will be conducted through mobile devices.
Whether we actually hit $74 billion in NFC transactions is up for debate because consumers will still need to find value in contactless payments and the process of delivering that through personalized offers and deals is still being worked out. The confusion over competing NFC efforts that don’t interoperate could also hold back some adoption. And as Juniper points out, security and perceived security risks will be an important issue to ensure mobile payments isn’t held back.
“Even if there is a perceived, if not actual, security risk in the mind of users, not only the specific mobile commerce application, but also the whole mobile commerce market may be set back until user trust is recovered,” Juniper said.
But the entire industry is preparing for an NFC payment future. As we’ve pointed out, there are a lot of other uses for NFC that don’t include payments. Those efforts could actually help prepare consumers for more contactless payments through NFC.