April 21, 2011, 11:37 AM

North America will be the top NFC market in five years

Juniper Research predicts $47 billion in purchases via Near Field Communication in 2016

Lead Photo

Near Field Communication chips engage in two-way communication to pass data between devices.

Pay with a wave is—finally—coming to America, contends one research firm.

In 2016, the value of transactions made using Near Field Communication, or NFC, services in North America will reach nearly $47 billion, or 41.6% of the global share, says a report from Juniper Research Ltd.

The report, “The NFC Briefing 2011-2016,” forecasts that consumers worldwide will buy tickets and make retail purchases totaling $113 billion by 2016. The report also examines potential uses of the technology, challenges to its adoption and ways to overcome those hurdles.

NFC is a wireless technology that enables devices to exchange information—including encrypted payment card data—over a short distance. For example, a consumer could pay for goods in a store by waving a smartphone with an NFC chip near an NFC-enabled terminal, or she could tap an NFC-enabled card on a special terminal to pay for a subway ride. NFC uses a merchant’s point of sale system to initiate and authorize transactions. It would require point of sale system upgrades as well as handset makers putting NFC chips in mobile phones.

In addition to enabling payments, merchants can use NFC technology to employ one-to-one marketing programs for consumers, delivering customized sales messages to their devices.

Juniper predicts that in five years the Far East and China will account for $31 billion, or 27%, of NFC transactions, with Western Europe following at $23 billion, or 20% of global transaction value.

Other regions will comprise the remaining 12%, Juniper says.

In NFC’s favor is the seemingly insatiable demand for smartphones. Juniper says there will be more than 23 million NFC-capable smartphones in use by the end of 2011, a number the consulting firm predicts will grow to almost 300 million by 2014. Most of those will be in North America and Western Europe, Juniper says.

But challenges abound, Juniper says.

Still missing are a large number of terminals that can communicate with the NFC chips in those phones, an agreed-on business model that ensures wireless telecommunication firms and payment companies share in revenue, and merchant NFC acceptance of the concept. One venture, Isis, appears to have solved the problem of creating a revenue-sharing arrangement acceptable to mobile network operators and financial institutions. Three wireless carriers, AT&T Mobility, T-Mobile USA and Verizon Wireless, are working with Discover Financial Services and Barclaycard U.S. to test NFC transactions.

But still to be solved, Juniper says, is the challenge of getting merchants to accept NFC. Without a place to pay with NFC, consumers won’t use it.  That means ventures like ISIS must encourage plenty of merchants to invest in NFC-compatible hardware and software.

Then merchants must provide consumers with reasons to use their NFC smartphones, Juniper says. Discounts, coupons and special offers will be required to encourage consumers to try NFC transactions, Juniper says.

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