Card-based contactless payment systems may be new, but the signs already point to a coming migration from cards, with their limited functions, to mobile handsets making use of near field communications (NFC) to enable a whole range of sophisticated services including, but not limited to, contactless payment.
This migration will offer market participants a constantly changing and expanding set of opportunities to cement customer loyalty and reap the benefits of co-branding and cross-promotion.
ABI Research, when it first examined the contactless payment market one year ago, forecast that over 10 million contactless payment cards would be issued in North America during 2005. As the year drew to a close, that forecast proved highly accurate. Now, in the latest updated 'Contactless Commerce Research Service' ABI concludes that over 40 million cards, mini-cards, and fobs will ship globally in 2006.
"Contactless commerce is on a steep growth curve, but cards are only an intermediate step," says Erik Michielsen, director of ABI Research's RFID and M2M practice. "By 2010, more than 50% of cellular handsets -some 500 million units - will incorporate NFC capabilities that will be used not only for payments at points of sale and remotely, but also to access information from 'smart objects'. Imagine, for example, seeing a poster advertising a concert you want to attend. Hold your phone near the poster, and it connects you to a website where you buy your tickets, download them to the phone, and tap the phone at the turnstile to enter the show."
That one example suggests the multiple opportunities that will arise as this technology moves from card to phone. "Technology vendors, cards issuers and a wide variety of service and product providers will have to think holistically," says Michielsen, "not just about the technology - the silicon, antenna, memory and software - but about how to use the wealth of realtime usage information that more sophisticated systems can provide."
Michielsen adds that a key long-term challenge for the industry will be the management of customer relationships and brand identity across integrated payment platforms. "Within NFC, carrier and issuer cooperation has been inconsistent thus far, but consumer expectations will create increasing market pressure for industry players to find common ground on mutually agreeable business models."
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