Contactless Mobile Payments Finally Gain Momentum

Author:Deloitte Technology, Media & Telecommunications Industry Group


2015 will be an inflection point for NFC-enabled in-store payment Largest card issuers in the UK likely to activate NFC-smartphone payments by end-2015 Security should be a key concern for all players in the NFC space By the end of 2015, about 5% of the base of 600-650 million near-field communication (NFC) phones will be used monthly or more regularly to make contactless in-store payments. This is still relatively niche, but a significant increase from mid-2014 when usage was at very low levels.

Deloitte expects that 2015 will be an inflection point for NFC-enabled in-store payment, as it will be the first year in which the prerequisites for mainstream adoption - satisfying financial institutions, merchants, consumers, technology vendors and carriers - are sufficiently addressed. Consequently we expect the largest card issuers in the UK and the majority of developed markets to have activated NFC-smartphone payments by end-2015.

NFC payments appear to be beneficial for financial institutions (card issuers and banks), NFC in-store phone payments offer continuity and improvement to their business models. The core advantage with any contactless smartphone transactions is the potential for greater security, when payments are made with phones featuring either built-in (via hardware or software) or SIM-based tokenisation capability.

Furthermore, merchants may benefit as NFC-equipped phones can enable fast and, with some systems, high-value transactions.

For consumers, using NFC-equipped smartphones to make payments will be adopted only if it can make the payment process simpler, sleeker or provide specific incentive in the form of digital coupons or discounts. One such reason may be that some contactless smartphone payment systems' spending limit can be the same as the account holder's credit or debit card limit. By comparison, contactless cards typically have a payment threshold (typically about £20 in the UK) and a transaction limit (the number of contactless payments made) before additional identification is required.

The multiple components that enable NFC-smartphone in-store payments have been falling into place over the last few years and some barriers to mainstream adoption have been removed, namely:

most smartphone owners have already submitted their credit card details so as to be able purchase content...

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