- We forecast that mobile in-store payments will grow at a five-year compound annual growth rate of 154%, reaching $189 billion in transaction volume by 2018. There are a few different types of mobile in-store payments, and recent developments on the merchant, consumer, and developer side put near field communication (NFC)-enabled payments back in contention as a leading mobile payments technology.
- On the merchant side, the EMV security standard is driving retailers in the U.S. to upgrade their payment terminals. Many of these new terminals are also NFC-compatible, which means that consumers will have plenty of options for where they can use NFC-based mobile wallets. Ingenico, the world's largest vendor of payment terminals, included NFC on half of the units it shipped in 2013.
- In addition, a new technology called host card emulation (HCE) significantly reduces the barrier to entry for NFC-based mobile wallet providers, which will most likely lead to more competition and experimentation, and ultimately better NFC mobile wallet products. Already, some major financial companies have launched HCE-supported mobile wallets, including BBVA, Sberbank, and Capital One in collaboration with MasterCard.
- Globally, over 400 million NFC-enabled phones will ship this year, according to IHS, rising to 1 billion by 2018. That means that the foundation is laid for NFC-based mobile payments on the consumer side as well.
- Apple's inclusion of NFC on the iPhone 6 and 6 Plus will spur a change in consumer behavior. Apple is the only smartphone manufacturer that has enough influence over its customers to change payment behavior en masse.
Contactless cards will act as a bridge for getting consumers to pay with their phones. Contactless cards, which interact with readers that are also NFC compatible, are already gaining popularity in Europe for low-value transactions. Because using a contactless card is almost identical to making an NFC-based smartphone payment, consumers will easily transition from contactless card payments to NFC phone payments.
- Public transport systems will spur large-scale contactless card and NFC-based smartphone payments adoption. In big cities like New York and London where a huge number of people use public transport each day, consumers will more or less be forced to adopt NFC. Once people get used to tapping a card or phone to pay at the subway, it will seem more natural to [...]