Cards today, phones tomorrow


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, says consultancy firm ABI Research.

When ABI first examined the contactless payment market one year ago, it forecast that over 10m contactless payment cards would be issued in the US during 2005 (MPW 68). As the year drew to a close, that forecast proved highly accurate. With another year’s worth of insight into market dynamics, the latest update to the firm’s ‘Contactless Commerce Research Service’ concludes that over 40m 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 RFID and M2M practice, ABI Research. “By 2010, more than 50% of cellular handsets – some 500m 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 example suggests multiple opportunities as this technology migrates from card to phone. “Technology vendors, cards issuers and a wide variety of service and product providers will have to think holistically,” continues Michielsen. “Not just about the technology – the silicon, antenna, memory and software – but about how to use the wealth of real-time 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.”