Near field communications (NFC) technology enabling mobile phone users to make contactless payments has not caught on in the UK in quite the way many were hoping. Chris Donkin investigates why this is
Making wireless payments using near field communication technology (NFC) is failing to catch on in the UK.
This is according to industry experts, who were asked by Mobile News why the technology, which has been discussed for the best part of a decade, has had only a minimal impact here to date.
NFC has proved popular in other parts of the world, particularly in parts of Africa, Europe and Asia, since the technology launched commercially in 2010.
The expectation surrounding NFC, which allows two-way contact between devices by touching them or placing them close to one another, is still high.
To make a payment using NFC users typically require a ‘mobile wallet’ service on their phone, which stores their back details. Tapping the device against a wireless payment terminal completes the transaction.
According to Juniper Research, NFC will account for around $50 billion in transactions by 2014. And research from Berg Insight shows sales of NFC-equipped handsets increased tenfold to 30 million in 2011, with numbers expected to reach
700 million units by 2016.
More than 20 countries are expected to roll out NFC services by the end of 2013.
It was initially thought that NFC had strong potential. More than 140,000 contactless payment terminals in the UK were set up to accommodate wireless payments, of which mobile was expected to play a major role.
But according to those we have spoke to, the service is yet to hit the heights many had hoped for, and wireless terminals are being used almost exclusively for wireless card payments. So why is this?
Not ready for change
Analysts describe the UK as still being in a largely trial stage for NFC, but efforts have been made to get the public on board.
Orange partnered with credit card firm Barclaycard in March last year to become the first UK network to offer NFC payment services through its Quick Tap product.
This enables customers to pay for items such as festival and bus tickets using their NFC handset, which can be topped up with a debit or credit card.
The Quick Tap app keeps a record of all payments, allowing users to monitor their spending. They can add up to £100 credit at a time, and the maximum single Quick Tap transaction is £15.
Orange has since made attempts to increase customer NFC usage by launching Quick Tap treats, which allow customers to receive free gifts, such as food and drink in EAT stores, by tapping their handset on a specially designed poster.
But CCS Insight analyst Digantam Gurung says the service is yet to catch on as there are too many restrictions in place hampering widespread adoption.
These include limited availability of NFC-enabled handsets – at launch only the Samsung Tocco was compatible, and users had to have a Barclaycard account to use the service.
Gurung also argues the offerings available to consumers are not appealing enough to encourage them to make the switch from tried-and-tested card payments.
“When Orange launched Quick Tap they promoted it for a while, but it hasn’t taken off in the way they expected,” he said.
“It was steering consumers to something there wasn’t really demand for in the first place – you could use it like your bank card but that was about it.
“NFC has taken off in Japan and Turkey, but we’re still in a very early stage here – trials are still going on and people need to be persuaded of how useful it is.”
Ovum principal analyst Eden Zoller agrees there are still a number of barriers holding back the wide-scale adoption of NFC payments.
Zoller says for consumers to adopt NFC services they need to be easy to access and appealing, but he adds the UK is still some way from achieving this.
An investigation by Mobile News in a number of NFC-ready outlets revealed staff had little to no knowledge of the technology.
Zoller claims this is why NFC payments often take longer than those made by card or cash.
He says: “Although support for NFC payments is improving, there are a number of significant barriers that must be overcome.
“Most consumers have yet to embrace mobile payments, and if NFC solutions are to act as a catalyst for this change they need to be more convenient and useful than existing contactless solutions.
“At the moment most NFC payment solutions are not. In fact, NFC payment solutions often require more actions and steps from a consumer than contactless cards.”
Zoller also fears businesses could be holding up the widespread adoption of NFC by choosing not to invest in the technology.
He believes many are unwilling to gamble on an untried payment model that so far lacks penetration in the market.
“Merchant POS terminals, even those that currently support contactless payments, need some level of upgrade to support NFC mobile payments,” he says.
“This requires investment, and merchants are understandably reluctant to invest in NFC POS when the penetration of corresponding handsets is still low.”
NFC handsets
The lack of NFC-compatible handsets in the UK is a key stumbling block in the roll-out of the technology.
But that is now beginning to change at considerable speed, with the majority of handset manufacturers now releasing devices with NFC capabilities.
Everything Everywhere director of new business Jason Reese, whose department covers mobile payments, admits his company’s efforts to release NFC-ready handsets for use with its NFC Quick Tap services have been slow until now.
However, he says the feedback the network has received about the offering has been positive, and he expects retailers and customers alike to embrace the loyalty element of mobile payments.
“Customer loyalty will play a big part in the adoption of NFC payments,” he told Mobile News. “Things like getting discount vouchers or free offers on your phone, which you can then tap your phone in store to redeem.”
Reese also dismisses concerns about security when using a handset to make payments, claiming the technology is safer than carrying a wallet.
He explains: “Some people have perceived it’s even more secure than chip and PIN and losing your wallet.
“If you lose either of these, you have to make lots of calls and worry about what you have lost inside. But if you lose your mobile phone you only have to make one phone call.”
Full article in Mobile News issue 522 (September 10, 2012).
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