Merchants Worldwide Are Installing More Contactless Terminals—And Turning on NFC

With technologies like Apple Pay and host card emulation reviving prospects for mobile payments using near-field communication, merchants are starting to install more NFC devices at the point of sale. And, more important, they’re starting to turn on the NFC capability.

That’s according to a report issued Tuesday by Berg Insight, a research firm based in Gothenburg, Sweden, which follows NFC shipments worldwide.

Some 9.5 million NFC-capable POS terminals were shipped globally in 2014, up 33% from 2013 and bringing the worldwide installed base to 21.4 million units, Berg Insight reported. In the United States, 75% of terminals shipped, or 1.5 million units, were NFC-capable, a number only barely exceeded by Europe, where 80% of shipments had NFC included. In the U.S., the installed base of NFC-capable terminals stood at 3.7 million at year's end, or 17% of the worldwide total.

As a result of the momentum built up last year, the researcher forecasts the installed base of NFC terminals will expand at an annual rate of 28.4% to 74.9 million devices by the end of 2019. That will leave 70% of POS terminals worldwide capable of NFC, a healthy increase from 28% in 2014.

While merchants have installed NFC devices for years, in many instances they have not turned on the contactless capability. Now, they are starting to, according to the report. The number of POS terminals worldwide accepting contactless payments at the end of last year was 9 million, the report estimates, up more than three-fold in just two years. That number represented 42% of the year-end installed base of NFC-capable POS devices. Berg Insight took account of contactless transactions using Visa payWave, MasterCard PayPass, and UnionPay Quickpass.

“The sharp increase marks yet another milestone in the industry’s move towards contactless payments and mobile-wallet services,” said Lars Kurkinen, senior analyst at Berg Insight, in a statement. “The data show that merchants have started to embrace NFC, which up until now has been a missing piece in the puzzle.”

With NFC, payment cards or mobile devices can link wirelessly to POS terminals to conduct transactions. NFC languished for several years as banks and mobile carriers squabbled over a host of issues. Apple Pay, which relies on the technology but is not yet available outside the United States, has given NFC a boost because of the publicity Apple has given it and the support of issuers it has recruited.

Similarly, host card emulation (HCE) has helped revive NFC because it lets issuers load card credentials remotely for mobile wallets. This means issuers don’t have to negotiate with carriers for access to the phone’s secure element, where such credentials were typically stored before HCE became possible.