NFC payment services failing to catch on as mobile payment growth disappoints

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NFC struggles to take hold

NFC payment services are struggling to gain traction and adoption is proving “disappointing”. That is the view of Gartner, which is reducing its forecast for NFC transactions by 40% this year as services from the likes of Google and Isis fail to catch on. The research firm predicts that NFC will account for just 2% of the mobile payments market this year with growth remaining slow until 2016.

“NFC transaction value has been reduced due to disappointing adoption of NFC technology in all markets and the fact that some high-profile services, such as Google Wallet and Isis, are struggling to gain traction,” says Gartner.

The poor performance is due to the penetration of NFC-enabled mobile phones and contactless readers remaining low. Apple chose not to include NFC technology in the latest version of the iPhone, a move that is likely to have stunted growth of the format as consumers and merchants hedge their bets over which mobile payment format will win out. Currently, there are a huge array of competing services on offer, from plug-in card readers from the likes of Square and iZettle to PayPal and NFC. And in fact Gartner blames the huge number of “copycat” offerings for low adoption, with firms failing to differentiate or coming up with a clear winning strategy. Nevertheless, growth in NFC payments is expected to increase from 2016, with NFC worth 5% of the total industry in 2017.

Mobile Commerce Also Disappoints

NFC is not the only area where mobile payments are failing to live up to expectations. While merchandise purchases will account for 21% of the market this year, Gartner believes the sector is not growing as fast it should. Much of the blame for this lies in the fact that the buying experience on mobile phones is still poor, with many retailers failing to optimise their sites for mobile and payment methods still clunky. While merchandise purchases will grow to account for 23% of the total market in 2017, Gartner says it will lag well behind the amount spent both in physical stores and online.

Gartner Lowers Forecasts

Despite the disappointing outlook for both NFC and mobile commerce, the mobile payments market is growing. Overall, the industry is expected to be worth USD235bn this year, with that figure up 44% year on year while the number of mobile payment users increases 22% to 245.2m. Between 2012 and 2017, Gartner forecasts that spend will increase by an average of 35% annually to USD721bn, with more than 450m making use of the technology, although that is lower than previous predictions as consumers continue to prefer physical and online payments to using their mobile device.

Money transfers are set to remain the biggest area for mobile payments, accounting for 71% of the market this year. Although this will drop slightly to 69% in 2017, that is due to faster growth in the rest of the market rather than a decline in the value of money transfers, which are set to continue increasing. Bill payment will growth by 44% this year and grow consistently over the forecast period to account for around 5% of the total market in 2017. 

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