NFC-Enabled Cellular Terminal Forecast Downgraded

In recognition of continuing challenges surrounding the contactless payments business model for mobile operators, ABI Research has adjusted its forecast for Near Field Communications (NFC)-enabled cellular phones downwards to 450 million units in 2011, representing nearly 30% of handsets shipped worldwide in that year.

Operators are faced with a difficult task: they must come to terms with unfamiliar service scenarios in which they struggle to see viable methods of extracting value from the provision of contactless payment services. This situation is further compounded by the need to ensure that any increase in the cost of handsets due to the addition of more components is offset by a larger revenue return.

Principal analyst Stuart Carlaw says, "Carriers are to some degree stuck in a particular mindset: they believe that they need to recoup the cost of adding NFC to phones through the provision of contactless payment services alone. ABI Research believes that this is view is too narrow, and that significant revenues will be generated from services such as ticketing, access control, online mobile banking, service discovery, and connection enablement, all of which build upon the core characteristics of NFC." Carlaw remains confident that the inertia in this market will eventually be broken and that MVNOs will look very favorably at NFC-based contactless payment services as an additional way to differentiate their offerings.

"The industry needs to standardize on an operator-friendly approach to the security element in the phone, as well as defining a standard connection between the NFC IC and SIM, and identifying a common third party for application management," adds Carlaw. "Finally, carriers must be careful not to try to extract too much out of the transaction value chain, and should look instead to generate revenues from hosting applications and from the traffic generated by application download and associated banking services."

Posted to the site on 12th September 2006