NFC is it a Hype or Real Opportunities?

Excerpt from “ NFC-Enabled Smartphones to Account for 28% of Global Market by 2015” by PYRAMID RESEARCH 

From Mobile World Congress in Barcelona 2011, session “Mobile Money: NFC — Moving Beyond Payments”: Near-field communication is clearly one of the hottest topics in the telecom industry this year. Many of largest handset manufacturers are launching new NFC-enabled smartphones or are, at least, stating their intent to include the technology in their future models. At the same time, hoping to seize the potential opportunity captured by NFC technology, mobile operators are creating regional and global partnerships.

Meanwhile, an abundance of other large businesses, such as Google, Visa, MasterCard and Barclays, are proactively seeking profitable business models that would allow them to tap into the NFC goldmine, too. Their solutions often bypass the need for mobile service providers’ involvement. We believe that this elevated interest and sizable new investments in NFC-enabled devices and services will eventually result in the rise of a healthy NFC ecosystem and trigger high demand for NFC-enabled handsets. More precisely, we project that almost 28% of total smartphones sold to end users will be NFC-enabled in 2015.

Despite the positive early trends in the nascent NFC market, many are still skeptical about the future of NFC-based services. Some point out the lack of industry standards, others the lack of profitable and attractive business models. Finally, some claim that there is a genuine lack of interest in NFC-based services from end users. Our opinion is that the overwhelming supply of NFC-enabled handsets will result in strong sales of these devices in the short run (2011-2012).

In the medium to long term, as NFC-based services become ubiquitous, consistent and secure, the sales of NFC-enabled devices, including handsets, will continue to grow, at that point driven by the growing demand for NFC services on behalf of end users and retailers. Over 250m mobile handsets sold to end users in 2015 will be NFC- enabled.

Key finding

• The overwhelming supply of NFC-enabled handsets will result in strong sales of these devices in the short run (2011-2012). In the medium/long term, as NFC services become ubiquitous, consistent and secure, the sales of NFC-enabled devices, including handsets, will continue to grow but will be driven by growing demand from end users and retailers.
• Mobile handsets that are NFC-capable will see skyrocketing sales in 2011 and 2012. These sales will be driven by the overwhelming supply of NFC-enabled smartphones that will hit the market in the next two years and service providers’ “push” marketing strategies across the globe.
• In the medium to long term, as the NFC ecosystem rapidly evolves, there will be an abundant supply of other NFC devices. In order to trigger demand for these devices too, equipment vendors will have to convince their users (mostly retailers) that the benefit from NFC will outweigh the cost of investment in NFC-enabled devices.
• Over the next five years, as a number of high-impact partnerships and profitable business models emerge in the NFC marketplace, the NFC-based services will become ubiquitous, consistent and secure. That will ultimately create sustainable demand for NFC-enabled devices, including handsets.