• X
  • Listen in to our latest podcast!

    April 25, 2012

    NFC Adoption in SA still far off

    South African banks and retailers are likely to be slow to adopt near-field communications (NFC) technology for mobile payments because of the high costs of installing point-of-sale terminals and other enabling infrastructure. That’s the word from Tim Walter, Executive Head of Marketing at Nashua Mobile, who says that there is little appetite among institutions to drive adoption of yet another new point-of-sale payment technology just as the end of their protracted rollout of the EMV credit card standard is in sight.

    NFC is a short-range wireless technology that will eventually allow people to use their mobile phone as a wallet. It will enable consumers to make secure payments to compatible point of sale terminals or to another user’s smartphone. NFC has proven itself to be a viable technology in field trials in countries such as the US, and South African banks (like ABSA) are reportedly also trialling NFC. But, as yet, there are not enough NFC compatible handsets in the market, nor is there a compelling commercial model for the rollout of the technology in South Africa, says Walter. The only brand to actively deploy NFC on new handsets is RIM with their latest Blackberry devices.

    Most of the major handset manufacturers are bringing NFC to market in the latest models of their mid to high-end smartphones,” Walter says. “Yet we are still a long way off from the critical mass that would really justify massive investment in the technology by banks and retailers.

    Walter notes that despite the many experiments with NFC as a payment technology in the international market, it still is an immature technology far from the mainstream. According to research by Berg Insight, global sales of handsets with NFC increased ten-fold in 2011 to 30 million units. Shipments are forecast to touch 700 million units in 2016.

    With just 30 million NFC handsets sold in 2011, these devices represent a tiny fragment of the overall mobile phone market. The growth is exponential, but even in advanced markets, NFC looks like it could be two to three years away from mainstream adoption,” says Walter.

    In South Africa, it is the capital-intensive process of rolling out point of sales terminals by stores, hotels, restaurants, services firms and other merchants that will be the big barrier to adoption, believes Walter. It took a good 10 years from when banks first started  talking about EMV until it become common in South African shops – and even now the rollout isn’t 100% complete.

    Says Walter: “Retailers and banks will need to see some clearly defined benefits in security, convenience and cost-reduction before they adopt NFC in a big way. We will need to see big retail groups, mobile operators and banks cooperate closely to nurture an NFC ecosystem based on a sound business model that works for all of them – and that could take some time.

    That doesn’t mean that we won’t see other applications for NFC-enabled phones in the next two to three years, says Walter. The technology can be used for applications such as paring devices to establish Bluetooth or WLAN connections, electronic ticketing, loyalty programs and coupons, parking payment, buying goods for vending machines, and more.

    How popular NFC will become for such applications depends on market penetration of enabled devices and the benefits companies see in adopting it. But in the meantime, expect the banks to experiment and investigate NFC very thoroughly during 2012.

    Listen in to our latest podcast!

    • kobuse

      NFC is already outdated, old and unnecessary. There are much more interesting things as alternatives. And some of them will launch later this year in SA.

      • Wf

        Such as?

    • NFC does not bring any value proposition to the merchant and the customer. It’s going to be a hard sell to convince merchants to adopt this expensive solution. When authentication is involved to secure the transaction it is not any faster or more efficient than the existing chip & pin.

      I like what square offers where they focus on a value proposition for their merchants and customers through integrates POS and Mobile apps.

      In South Africa how long will it take for consumers to have NFC enabled phones? Apple don’t even make a NFC phone. How can we enable the existing customer with their existing devices to process mobile payments. There are solutions available and that’s what we should be focusing on instead of the NFC hype!