Professional Documents
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September 2011
INTRODUCTION
NEAR FIELD COMMUNICATIONS (NFC) MOBILE PHONES AS THE DIGITAL WALLET
INTRODUCTION
Scope
Disclaimer Much of the information in this briefing is of a statistical nature and, while every attempt has been made to ensure accuracy and reliability, Euromonitor International cannot be held responsible for omissions or errors. Figures in tables and analyses are calculated from unrounded data and may not sum. Analyses found in the briefings may not totally reflect the companies opinions, reader discretion is advised.
Consumer Electronics
Smartphones
Consumer Finance
Card Payment Transactions (excl Commercial)
Consumer Foodservice
Chained Fast Food Transactions
Retailing
Store-Based Retailing (Outlets)
The report studies the market potential of Near Field Communications (NFC) for mobile payments in 2012. Euromonitor Intl projects that high transaction volume and low priced purchases offers the greatest opportunities for NFC mobile payment success, riding on increasing mobile phone ownership and consumers acceptance of alternative payment modes. This study reviews critical industries that offers these characteristics and identifies countries that are ready for NFC mobile payment adoption.
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INTRODUCTION
Objectives
The core objective of this report is to review the potential for the mobile phone to become the new digital wallet through the adoption of Near Field Communications (NFC) in 2012. NFC is a secure, short-range radio technology, which enables communication between a reader and a NFC tag when placed close to one another. This in turns, allows for simplified and time-efficient transactions, data exchange and connections. The following industries have been selected as case studies due to their inherent characteristics that befits NFC usage: Consumer Electronics Consumer Finance Consumer Foodservice Countries and Consumers Retailing For NFC mobile payments to potentially succeed, Euromonitor International projects that high transaction volume, low value purchases inherent in the above industries offers the highest potential for mass NFC mobile payment adoption. Other success factors includes the widening ownership of mobile phones, the presence of built-up Infrastructure such as the number of retail outlets and consumer behavior towards the usage of card payments vs alterative payment modes. In addition, this report examines all the critical success variables and identifies countries with the highest potential for NFC mobile payment adoption in 2012.
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INTRODUCTION
Key findings
Government-backed initiatives key to success A top-down push from the government, especially for public transport systems, holds the key to the potential success of NFC mobile payments.
Company-backed initiatives Consumers are generally not keen to have different versions of mobile limited in impact payments for different products/services/companies, as they typically encounter inter-operability difficulties and are confusing in application. High volume, low value transactions Consumers eager for mobile payment Implementation not costly High volume, low value transactions such as those apparent in fast food services and public transportation offer the highest potential for mobile payments. Interestingly, consumers in developing markets are more receptive to and eager to adopt mobile payments than consumers from developed markets, due to a lack of existing payment options. Cost of implementation lies largely in the installation of payment terminals for retailers, since consumers can convert their existing mobile phones to be NFC-enabled at a minimal additional cost. The lack of an industry-wide standard will be a major growth obstacle if consumers are unable to enjoy a seamless usage experience. Consumers are skeptical of alternative payment options and are concerned with theft and fraud. Putting into place security safety measures and frequent consumer education programmes will be critical to the success of mobile payments.
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INTRODUCTION
NEAR FIELD COMMUNICATIONS (NFC) MOBILE PHONES AS THE DIGITAL WALLET
Payment
For mobile payments as a replacement for credit/prepaid cards and to store credit/bank information.
Ticketing To purchase and add stored value to the tickets to access transportation gates and gain event entry.
Pairing
Ticketing
Sharing
To aid the transfer of documents and content across electronic devices. Service initiation To activate a service on another device, which allows for data transfer, to gain access to websites and discounts on smart posters, amongst others.
NFC Ecosystem
Service Initiation
Pairing Sharing To establish Bluetooth connection by bringing devices to NFC hotspots, by configuring networks automatically between a pair of Wi-Fi devices.
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Train Station
Vehicle
Office
Retail
Gantry entry
Driver licence
Enter/exit office
Exchange business cards
Payment
Loyalty points Discount coupons
Payment
Payment
Computer login
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NFC trials have been undergoing in many countries for some time now, by both governments and private sectors. However, actual country-wide implementation has been limited, due to low consumer acceptance, cost of nationwide implementation and technology sophistication limitations.
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China - Transportation
China Unicom launched a commercial NFC service in Beijing, following extensive field testing in the Chinese capital and in the cities of Shanghai, Guangzhou and Chongqing. Commuters can use their mobile phones to make payments on public transport services and at more than 2,000 other businesses. Users can continue using their current mobile phones, with just the need of upgrading to a new subscriber identification module (SIM) card with the NFC module integrated.
Germany - Transportation
Transport operators and authorities are cooperating to create a national ticketing system, by combining Touch&Travel and HandyTicket. Touch&Travel is a mobile ticketing scheme initiated in 2008 and which has expanded to a Touch&Travel iPhone app in January 2011. There are plans to implement the NFC software into the Android operating system, which will accelerate NFC penetration on mobile phones. HandyTicket works similar to Touch&Travel.
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Belgium - Music/Networking
Fans of music band Faithless tested the NFC system, which allows them to exchange contacts and interact with one another via Facebook. Held during the PIAS Nites festival in March 2011, fans were given NFC tagged cards and they could post on Facebook pictures taken in NFC-enabled photobooths. This system also offers the fans access to games, contests and digital media.
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Consumer usage
Retailers acceptance
Section summary Currently, NFC mobile payment is caught in a situation where all parties consumers, retailers and manufacturers are waiting for each other to bolster the technology adoption and application. Despite this stalemate, the general consensus is when, rather than if, NFC payment will take off. The following slides underpins the importance of mobile phones and identify critical success factors that address the concerns and actions of manufacturers, retailers and consumers in 2012.
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INTRODUCTION
NEAR FIELD COMMUNICATIONS (NFC) MOBILE PHONES AS THE DIGITAL WALLET
75%
of the worlds population will possess mobile phone subscriptions in 2012
28%
the worlds population will have a credit card in 2012
Over the 5 year period of 2011-2015, smartphones will become the top product choice for new purchases (as opposed to feature phones) and increase its percentage contribution significantly as a total of mobile phone sales globally.
1,502
million new mobile phones sales in 2012
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Key Point: Globally, mobile phones have emerged as the most important electronic product of ownership, with mobile phone subscriptions in developing markets such as Brazil being on a par with, if not higher, than developed Western Europe. Especially in developing markets, the first time a consumer accesses the internet could be via a mobile phone rather than a computer.
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Yes No
South Korea
Japan
US and Europe
Source: Accenture online poll of consumers indicating if they favour using mobile phones for most payments
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China
Brazil
US
UK
France
South Korea
Japan
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INTRODUCTION
NEAR FIELD COMMUNICATIONS (NFC) MOBILE PHONES AS THE DIGITAL WALLET
Retailers acceptance of NFC payment Number of retail outlets Card payment transactions
Consumers using NFC payment Chained fast food transactions Expenditure on land transport
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Brazil and Mexicos strong smartphones sales is due to the countries' reviving economic growth and improving income levels, smartphone deals targeted at low-income consumers and growing mobile internet.
Indias strong local mobile phone manufacturers such as Micromax and Spice and having the worlds lowest call rates are incentives to launch smartphones to increase hardware sales and data revenue. Russias Yota is the sole 4G network provider and MNOs will work with Yota to avoid costly duplication of infrastructure investment. Consumers will benefit from faster 4G service access and lower data prices. Saudi Arabias position is driven by its affluent citizens and a large number of foreign workers working in the gulf nation while a third of the Filipino population is below 14 years and rapidly acquiring smartphones.
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13 14 15
Russia
Saudi Arabia Philippines Mexico
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India
UK Russia Italy Algeria South Korea Netherlands Spain
12
13 14 15
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12
13 14 15
Netherlands
Australia Argentina Taiwan
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Japan
China Canada South Korea Taiwan UK Germany Thailand Australia Mexico France Brazil
In Taiwan and China, fast food sales via convenience stores such as 711 will continue to rake in high volumes due to outlet density and extensive ready-to-eat product ranges.
In Thailand and the Philippines, burger chains are targeting families and youths while expanding aggressively and renovating current outlets. Increasingly, fast food joints are being leveraged upon as hangout joints. Fast food popularity in Mexico and Brazil is expected to increase in tandem with economic recovery and rise in working population. A distinct shift in individual portions orders, rather than family meals. Convenience stores fast food image in France is evolving to that of bistros. Here, consumers read newspapers, purchase flowers or chat while consuming fast food meals.
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13 14 15
Philippines
Spain
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US
Thailand Philippines Japan Italy Turkey Pakistan Spain
In Brazil, heightened retailing competition has resulted in mergers and acquisitions, with more retailing outfits being set up in the Northeast.
While the retailing scene in Philippines will see expanded number of shopping malls nationally, Thailand continues to grow as non-store retailers such as Avon increase their visibility in store-based retail channels, unaffected by its unstable political climate. The retail scene in Pakistan remains highly fragmented, with large retail stores found largely in the major cities such as Lahore and fuelling growth, even as the risk of inflation escalation remains high. Grocery retailers Coop and CONAD continued to fight for retail leadership while foreign retailers are moving into the Italian market, opening more outlets.
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12
13 14 15
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INTRODUCTION
NEAR FIELD COMMUNICATIONS (NFC) MOBILE PHONES AS THE DIGITAL WALLET
Smartphones
Store-based retailing
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The transaction cost of NFC payment is lower than credit cards, which will encourage retailers to set up NFC payment option. With local governments pushing for NFC as alternative payment option and its implementation on public transport, the sheer volume of transactions will trigger uptake by other merchants.
Economies of scale
Inter-operability
The unique selling point of NFC mobile payments is to enable a seamless user experience for consumers. The absence of industrywide conformity to a common standard in terms of technical infrastructure for NFC presents an obstacle for mass adoption. Consumers are concerned about security as electronic fraud becomes increasingly prevalent. Consumer education programs are critical in allaying these fears. Small retailers are not keen on electronic payments as the transaction costs are seen as additional costs when compared to cash..
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Summing up
Euromonitor Internationals final country ranking list of NFC mobile payment ready markets offers a dynamic mix of both developed markets such as the US, Germany, Japan, Spain and the UK, alongside developing ones such as Brazil, China, India and Mexico. Developed markets offer ready and established public transportation systems, strong financial institutions and necessary technical expertise for successful, end-to-end implementation. The presence of chained operators with presence across numerous countries also eases the adoption process as they are constantly on the lookout for means to increase/expedite transacting volumes and grow revenues. Developing markets, on the other hand, offer large population numbers who are keen to try out new technologies, aside from cash payments. The low penetration of card payments with minimum income qualification works to the advantage for NFC mobile payment adoption, by reducing the number of payment mode options. NFC enabled mobile phones offers usage beyond payments, including that of access to discount coupons, user identification (eg. driver licence), access transport ticketing and more enabling their device to act as a wallet replacement. NFC functionality can also replace existing store loyalty cards and help retailers identify its customers purchasing behaviors. While obstacles such as technology advancements, cost of implementation, consumer acceptance and retailer attitude have significant impact on the successful rollout of mobile payments, these identified countries possess the underlying fundamentals for successful implementation of nationwide mobile payment sooner rather than later. While the demand and market potential for NFC mobile payments is clearly strong, the onus is to convert feasibility studies into actual, cost effective implementation.
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