With NFC Stalled, Mobile Payments Will Follow Other Paths, Report Says

While experts once thought contactless payments via a technology called near-field communication (NFC) would drive mobile payments, the sluggish development of NFC now means handset-based payments will grow without the technology, according to a research report released on Tuesday. Indeed, payments by text messages, through the mobile Web, and on mobile applications will together account for $18 billion in sales worldwide by 2013, with $4.3 billion of that volume stemming from the North American market, according to ABI Research, a New York City-based firm that follows mobile technology. That's up from an expected $828 million globally this year, ABI says. Most of this payments volume will come from mobile shopping?consumers using their mobile devices rather than PCs to buy from online merchants. This market will total $766 million worldwide this year but will balloon to $13.5 billion in five years. Of that volume, some $3.7 billion will occur in North America, ABI projects. Mark Beccue, senior analyst at ABI for consumer mobility, credits eBay Inc. and Amazon.com Inc. for lending momentum to mobile commerce. Both companies, he says, have designed their Web sites to be easy to use on handsets. Ebay, for example, lets users set bids via mobile devices, he says. And Amazon allows text-based payments. “They're focused on making it familiar so that what you can do online you can do with mobile as much as possible,” Beccue says. Beyond these online merchants, wireless carriers are working on mobile wallets that will rely on cooperation from a number of outside providers, Beccue says. These wallets will facilitate payments along with other financial services. “The only parts missing are loyalty cards and gift cards, and they're in discussions to bring that on,” he says. Mobile wallets can store data necessary for a range of transactions, including coupons and other incentives and offers as well as card-account and bank-account information. Following mobile commerce, the other mobile-payments markets likely to develop over the next five years include taxis (15% of the projected 2013 volume) and parking and movie tickets (a combined 12%), according to ABI. These markets will rely for the most part on payments triggered by short-message-service (SMS) transmissions, Beccue says, though mobile-Web applications may develop for them. But don't look for NFC transactions in any appreciable number any time soon. NFC holds the promise of unlocking the massive physical-world merchant market by allowing consumers to make contactless payments backed by accounts stored in their mobile wallets. But uncertainties among payments networks and mobile carriers over transaction revenues, along with doubts among merchants about payback for installing the needed equipment, are hindering the technology, Beccue says. Even six years from now, handsets embedded with NFC chips will account for just one-fifth of all device shipments, ABI projects. “That's not a lot,” Beccue says. That void, he says, will be filled by mobile payments based on alternatives like SMS, the mobile Web, and applications designed for mobile devices.