South Africans may have to wait a little bit longer than expected before they can be empowered to use their mobile phones as a fully fledged electronic wallet through the near field communications (NFC) technology platform.
This view emerged from Tim Walter, head of marketing at Nashua Mobile, who said the take off in NFC, locally and to a certain extent in developed markets, was still far down the line largely as a result of slow infrastructure development investment.
NFC is a short-range wireless technology that was designed to allow people to use their mobile phone as a wallet. The technology has been punted as the next big thing by its promoters. Walter seems to have doubts at least for now.
Walter said South African banks and retailers are likely to be slow to adopt NFC for mobile payments because of the high costs of installing point-of-sale terminals and other enabling infrastructure. He said that there was little appetite among institutions to drive adoption of yet another new point-of-sale payment technology. This is after they just rollout the EMV credit card standard.
Walter noted that NFC has proven to be a viable technology in trials in countries such as the US. He said many of these trials have also shown that NFC was still an immature technology far from the mainstream. Quoting research by Berg Insight, he said NFC enabled handsets increased ten-fold in 2011 to 30 million units. Shipments are forecast to touch 700 million units in 2016. “With just 30 million NFC handsets sold in 2011, these devices represent a tiny fragment of the overall mobile phone market. The growth is exponential, but even in advanced markets, NFC looks like it could be two to three years away from mainstream adoption,” says Walter.
In South Africa, it is the capital-intensive process of rolling out point of sales terminals by stores, hotels, restaurants, services firms and other merchants that will be the big barrier to adoption, said Walter. It took a good 10 years from when banks first started talking about EMV until it became common in South African shops – and even now the rollout isn’t 100% complete.
“Retailers and banks will need to see some clearly defined benefits in security, convenience and cost-reduction before they adopt NFC in a big way. We will need to see big retail groups, mobile operators and banks cooperate closely to nurture an NFC ecosystem based on a sound business model that works for all of them – and that could take some time,” said Walter.
“That doesn’t mean that we won’t see other applications for NFC-enabled phones in the next two to three years. The technology can be used for applications such as paring devices to establish Bluetooth or WLAN connections, electronic ticketing, loyalty programs and coupons, parking payment, buying goods for vending machines, and more.