NFC-based mobile handsets can be used for peer to peer communication, to download data from smart posters and for use as virtual identity cards. GBI Research expects the NFC market to grow at a CAGR of 68.8% from 2011-2016. Among the different form factors available for NFC IC integration, GBI Research expects the SIM-based model and the handset embedded model to gain the most market share in the future.
The report provides market size figures from 2010-2016 for different NFC secure element (SE) form factors used, and for key NFC end user market applications. The report also discusses the NFC ecosystem and its partners, and the different business models that could be potentially deployed.
GBI Research's new report, “Near Field Communication (NFC) Market to 2016 - Increased Availability of NFC Embedded Handsets Key for Higher Market Penetration”, provides key information and analysis on the NFC market. NFC is a wireless or contactless communication technology based on International Organization for Standardization (ISO), European Computers Manufacturers Association (ECMA) and European Telecommunications Standards Institute (ETSI) standards. It is comparable with other existing technologies such as MIFARE and FeliCa. The main application areas of NFC-based integrated circuits (ICs) are for mobile-based payments in the retail segment and transportation ticketing.
The report covers the latest information and research efforts of a number of NFC companies and organizations around the world. The report provides information on the market size of different NFC secure element (SE) form factors and provides analysis of the key NFC end user market segments. It also provides a comparative analysis of NFC and MIFARE, FeliCa, Square and Bluetooth (BT). The report discusses the NFC ecosystem and its partners, and the different business models that could be potentially deployed. Expert views and comments from various organizations and companies, such as GSMA, Sequent Software Inc, EMVCo and Comprion GmbH, are also included.
This report is built using data and information sourced from proprietary databases, primary and secondary research, and in-house analysis by GBI Research's team of industry experts.
Bluetooth (BT) has become a standard feature in current phones and the majority of smartphones that are currently released, feature BT chips. Bluetooth 4.0 (BLE) was launched in November 2011 and this version of BT is expected to lead handset manufacturers to opt for dual mode chips that support both BLE and the older BT technology. Handsets are already integrated with Wi-Fi, Frequency Modulation (FM) and Global Positioning System (GPS) chips and it is expected that NFC will also be integrated in BT chipsets. Integrations such as these will reduce space requirements and the cost per unit. NFC facilitates the fast and easy establishment of BT and Wi-Fi, through pairing and security authentication. NFC transmissions are also short range, which means they are interception free. BT chips are also used in the automotive, medical and healthcare markets; however, the mobile phone market is the primary consumer of BT chips, and shipments of these reached 1.2 billion units in 2011. BT embedded handset sales are expected to reach 2.4 billion units by 2016, and the majority of these phones will also feature NFC.
At present, the retail industry is the main application area for mobile commerce. Many retailers, such as Woolworths and Coles in Australia, Casino in France, coffee chain Insomnia in Ireland, fashion house Miroglio in Italy, as well as Starbucks and McDonald's globally, have already enabled or announced plans to support NFC-based mobile payments. Although the majority of these transactions are currently limited to $25-$50 by different banking companies, this does not pose a problem as users generally purchase low value goods from these outlets. According to GBI Research, strong growth in NFC-based mobile commerce is expected to result in revenues of $300 billion in mobile transactions by 2015. Features such as security, ease of use and accessibility are expected to increase mobile transactions and will be a key driver for NFC adoption across different markets.
A key restraint for the widespread adoption of NFC is the lack of handsets and terminals available that support NFC-based transactions. The availability of handsets with an NFC feature is dependent on market demand and the availability of NFC terminals when mobiles are used for payments. Many merchants and retailers plan to upgrade their infrastructure if there is widespread NFC adoption among consumers, as Point Of Sale (POS) terminals for NFC use are costly. This unavoidable inter-dependence among merchants and handset manufacturers is creating slow market growth. Although companies such as Orange, AT&T, Nokia, Samsung, Starbucks and Gemalto have begun trials and pledged support for an NFC rollout, merchants have not yet upgraded their POS terminals as aggressively as expected.
A lack of knowledge regarding the technology and advantages of NFC, coupled with concerns about the security of mobile transactions, is slowing the rate of adoption in regions such as the US and Europe. However, China, Japan and South Korea have strong NFC adoption rates because network operators, manufacturers and government institutions have advertised NFC technology to consumers and delivered the technology in an efficient and affordable manner. In the US and Europe, the lack of NFC handsets and the limited number of NFC compatible outlets has contributed to the slow growth of this technology.
The different stakeholders in the NFC business landscape should advertise about NFC and the technological advantages it offers over existing alternatives to consumers in order to strengthen growth. They also need to address concerns about security, fraud and viruses, and explain the role of independent stakeholders in case of complaints filed by the customer. This is so the end user can be aware of who to hold accountable for any deficiencies in service. Nav Bains, business head of Mobile NFC Services at Global System for Mobile Communications Association (GSMA), said the following about NFC industry challenges in an interview with GBI Research in December 2011: "Consumers, retailers, government and industry bodies need to be made aware of what NFC services are and the benefits they can bring."