Thanks to Google and Nokia, in particular, near-field communication technology (NFC) is headed into a phase of "explosive growth" in 2011 that will pave the way for changes in the mobile payments business, iSuppli said in a Dec. 20 report.
The NFC technology, based on short-range wireless connectivity between devices, allows for quick financial transactions that some analysts have said are more secure than credit card payments.
"Imagine paying your bus fare, buying a plane ticket or making an ATM/credit card purchase simply by holding your cell phone near a wireless terminal," Jagdish Rebello, a director and principal analyst with iSuppli, said in a statement. "This is the mobile payment revolution on the verge of being unleashed by NFC technology. With NFC technology expected to be integrated into Nokia's cell phones and Google's Android operating system, the first shots of this revolution will be fired next year."
Worldwide shipments of mobile phones with built-in NFC capabilities are expected to reach nearly 80 million units in 2011, before rising to 156 million units in 2013 and 220.1 million units in 2014. The latter figure puts NFC on 13 percent of all cell phones that will be shipped, up from 4.1 percent in 2010.
NFC has been in the news lately, thanks to the Google Nexus S, the company's second self-branded smartphone (although made by Samsung). Showing off the Nexus S at the Web 2.0 Summit in November, Google CEO Eric Schmidt explained that a consumer could potentially walk into a store and have his or her phone "do commerce" as well know where the consumer is, with his or her permission. "[NFC] could eventually literally replace your credit card," he told the audience.
Schmidt added that, to lessen their fraud loss rates, credit card companies "have a big interest in building out that infrastructure."
Verizon Wireless, AT&T and T-Mobile also have a big interest in the technology, and on Nov. 16 announced they were working together to build out an NFC-supporting solution called Isis.
"Our mobile commerce network, through relationships with merchants, will provide an enhanced, more convenient, more personalized shopping experience for consumers," Michael Abbott said in a statement. A former GE Capital executive, Abbott was tapped to be CEO of Isis. "While mobile payments will be at the core of our offering, it is only the start. We plan to create a mobile wallet that ultimately eliminates the need for consumers to carry cash, credit and debit cards, reward cards, coupons, tickets and transit passes."
Over the next 18 months, Abbott added, the trio will roll out Isis in "key geographic markets." Initially, Isis will use Discover's national payment infrastructure and Barclaycard's expertise in contactless and mobile payments, although moving forward, said Abbott, "Isis will be available to all interested merchants, banks and mobile carriers."
Nokia, the worldwide leader in mobile phone market share, has said that all of the smartphones it introduces in 2011 will include support for NFC-although it's hardly a stranger to the technology. In 2005, Nokia launched the first NFC-enabled phone, the Nokia 3220, and has since run commercial trials in the United States, Germany, Malaysia and China.
"The successful kick-off of the first NFC Mobile Payment Field Trial is very encouraging to all of us participating in the mobile payment value chain. It also demonstrates our confidence in the NFC technology and the new business model it enables," Joseph Zheng, director of Nokia's NFC Consumer Solutions in China, said in a 2006 statement following the China field trial. Finally, it seems that U.S. consumers are ready for-or at least will be treated to-the new business models that NFC makes possible.
"iSuppli believes that 2012 will be the make-or-break year for NFC," said iSuppli's Rebello. "With all the ongoing and planned NFC trials in different regions of the world-as well as support for the technology by major stakeholders, including wireless operators, financial institutions and banks-it is imperative that business models be established that allow each of the nodes to see value in offering the service."