Merchant resistance, particularly because of the MCX CurrentC conflict, has been Apple Pay’s biggest impediment, and despite hurdles Apple has faced, Juniper Research predicts NFC users will quintuple from this year’s 101 million users to more than 500 million by 2019.
Early indications, as reported on PYMNTS.com last week (Nov. 6), shows Apple Pay is the factor that has driven NFC volume and given a boost to other digital wallets like Google Wallet, and Apple Pay and HCE are predicted to be the factors that continue that growth trajectory.
Juniper Research’s report also explores how Apple Pay and HCE developments could hurt development opportunity within NFC for mobile network operators, as Apple Pay already embeds the secure element in the handset and is controlled by Apple. The same case goes for HCE as the SE aspect is no longer needed in the handset. Juniper Research also projects that “the proportion of NFC secure elements controlled by wireless carriers is likely to fall below 50 percent by 2019."
“We would envisage that while NFC deployments and consumer activity will be buoyed by these developments, the opportunities for network operator involvement are limited. Hence we are likely to see more operators re-evaluating their existing commitments to NFC and possibly withdrawing from the space,” Dr. Windsor Holden, Head of Consultancy & Forecasting with Juniper Research, wrote in the report.
Juniper Research’s report digs into the changing NFC ecosystem and discusses how “the emergence of HCE as a substitute for the device-based SE has made NFC deployments more attractive for banks, while weakening the role of network operators.” The report contrasts with how much consideration was given to NFC three years ago, when a report about the prediction of mobile payments market growth lumped together NFC payments, mobile payments and money transfers into one category. A 2011 report by Juniper Research predicted, “total value of mobile payments for digital and physical goods, money transfers and NFC transactions will reach $670 billion by 2015.” Three years later, NFC dominates the conversation.
While Juniper Research predicts the current NFC user base to grow from its 101 million users this year to 516 million by 2019, there’s a potential hitch that could, and already has, slowed down users: Major merchants, like Walmart and other MCX users, saying they don’t have plans to adopt NFC. The MCX conflict itself has thrown another wrench into the mix. The Juniper Research also touches on this subject.
“While NFC can offer retailers a strong value proposition in terms of customer retention and loyalty opportunities in addition to payment, most retailers remain unclear as to its tangible benefits,” the report found. That may play into the overall long-term growth of NFC, but for now it could be stifling growth.
"We in the tech world are willing to fiddle with new methods, but we’ve still yet to find a real reason why an average shopper is going to try to pay with a phone as opposed to a card out of the wallet or purse,” Evo Payments SVP Peter Osberg said in an arstechnica.com article.
In the same article, Marketplace Tech host Ben Johnson said merchants may not be keen to switching since using cash or card still accomplishes the same goal without putting in a password, downloading an app or issues with acceptance at all retailers. The simplicity that marketers have used to push Apple Pay may have been overlooked by merchants and consumers because of the simplicity of not using it, too.
"Ultimately, every [merchant] is trying to reduce friction when a user wants to spend money,” Johnson told arstechnica.com. “They want to use their device to do it and use their device in environments where it’s recognized what they’re trying to do without them trying to say what they’re trying to do.”