As smartphones with Near Field Communication become more common, the global market for NFC payments will grow to exceed $180 billion by 2017, a nearly eight-fold increase from $23 billion this year, a new report projects.
North America, Western Europe, and the Far East and China will contribute 90% of the NFC-payment activity, according to Juniper Research.
"We've found increasingly that, while we're not nearly at critical mass, NFC is moving away from just the traditional markets of Japan and South Korea," Windsor Holden, co-author of the Juniper report and the company's research director, said in an interview.
In the report, Juniper refers to 2011 as a "watershed year" for NFC payments. Last year, the industry finalized major technology-infrastructure standards, many mobile-network operators committed to the market, and many mobile operators and financial institutions transitioned NFC-payment pilots to commercial service.
Holden cites as examples the UK postal service, which intends to install more than 30,000 contactless terminals in 11,500 post office branches. Moreover, MasterCard is working closely with telecommunication company Orange in the UK on NFC, and in the U.S. Google Wallet is supporting the technology, he says.
"It's really positive what we're seeing," Holden says. "We now have a large number of NFC-enabled handsets in the market."
United Kingdom-based IMS Research in November projected NFC handset distribution to soar 129% this year alone.
And there are indications that Apple Inc. will support some form of NFC technology in an upcoming iPhone, Holden says. Apple could provide an "enormous boost" to the market, especially with regard to educating the public on contactless payment, he says.
Some prognosticators have suggested that Apple might turn its attention to supporting two-dimensional bar codes for payments. Holden does not view that as a potential setback for NFC but something that could move more consumers to using their phones to pay at the point of sale.
Certain issues still could impede NFC's growth, including slow consumer adoption of contactless payment, he says. In the UK, where some 20 million contactless cards have been issued, for example, the cards are used for just 13% of payments at McDonald's restaurants that support the technology, Holden says.
Besides the influx of educational marketing Apple could provide, financial institutions and the card brands also must step up their educational roles, Holden says.
"These guys have a keen interest in having NFC/contactless as part of their portfolios, whether on handsets, cards or both," he says.
Moreover, some merchants still must be convinced of the benefits NFC could provide them, Juniper warns. These include retailers who are unwilling to invest in the contactless infrastructure after having just committed to supporting EMV chip-and-PIN technology, the research company noted in a news release.
Despite the dramatic growth in projected NFC payments, Holden stresses that the volume would be miniscule when compared with the $16 trillion in overall payment volume this year.
Juniper projects that more than 24% of mobile users in the U.S. and Western Europe will use NFC technology to pay in stores by 2017. Moreover, mobile-network operators can offset declining average revenue per user as they commit to NFC payments, the Hampshire, England based research company said.