ABI Research downgrades NFC projections

ABI Research downgrades NFC projections

US-based ABI Research has cut its projections for the number of mobile hand sets that will support near field communication (NFC) technology in 2011 because of challenges facing carriers in implementing a contactless payments business model.

ABI now predicts that 30% of all hand sets - 450 million units - will features NFC technology in 2011. But in May this year, the company had predicted that 500 million - or 50% - of handsets would sport NFC.

The research firm says the slow growth of the technology is due to challanges faced by mobile operators which are struggling to find 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 hand sets due to the addition of more components is offset by a larger revenue return, says ABI.

Stuart Carlaw, principal analyst at ABI, 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 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."

He believs the inertia in the market will eventually be broken and that mobile virtual network operators (MVNO) will begin to look more favourably at NFC-based contactless payment services as a way to differentiate offerings.

"The industry needs to standardise 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.

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