Financial institutions’ security concerns being met are key to growth of NFC
24 August, 2007
category: Contactless, Financial, NFC
Near Field Communication (NFC), and its leading application, contactless payment, offer financial institutions a way to move small transactions out of the cash economy and into profitable credit-based systems as well as offer faster, easier checkout for customers that don’t want to wait. But the development of the market for the chipsets that underpin the technology has been slow. The main reason for this, according to ABI Research senior analyst Douglas McEuen, is security: the financial institutions and industry standards-setting bodies around the world can’t yet agree on the appropriate levels and methods of data protection. Price is also cited as a factor of slowing roll-out.
Financial Institutions’ Security Concerns Key to Growth of Near Field Communication Chip Markets, Says ABI Research
SCOTTSDALE, Ariz.–Near Field Communication (NFC), and its leading application, contactless payment, offer financial institutions a way to move small transactions out of the cash economy and into profitable credit-based systems. For consumers who hate to wait, they offer faster, easier checkout, just by waving a wireless phone near a point-of-sale reader.
But the development of the market for the chipsets that underpin the technology has been slow. The main reason for this, according to ABI Research senior analyst Douglas McEuen, is security: the financial institutions and industry standards-setting bodies around the world can’t yet agree on the appropriate levels and methods of data protection.
“The main NFC IC vendors, companies such as Infineon, NXP, and Inside Contactless, are locked in a three-way conversation,” he says. “Of course they have to deal in the first instance with the OEMs who make the handsets. But they also have to take into account, at an early stage of design, the security concerns of the financial institutions and the revenue concerns of the mobile operators. Operators in the GSM world would like to see the security mechanisms included in the SIM card to better support their ability to monetize payment application management while financial institutions have pushed for it to be included in the NFC chipset itself.”
Price is also a factor. “Currently, NFC chipsets run over $2,” notes McEuen. “If the price continues to decrease towards the $1 range, and in combination with the already existing NFC market opportunities provided by contactless payment growth, adoption will take off. But ABI Research’s forecasts do not suggest that happening before 2012, due in part to lengthy trial periods attributed to differing viewpoints on the placement of the secure element.”
Once all these conditions are met, however, technical progress is likely to be rapid. McEuen concludes, “The technologies are well-understood and the product development roadmap is very similar to that of Bluetooth, which will make the leaps to next-generation products faster, cheaper and easier.”
The new ABI Research study, “Near Field Communication Semiconductors” (http://www.abiresearch.com/products/marketresearch/NFCS) provides a detailed examination of the NFC chipset and modem, examining both short- and long-term market implications and providing key vendor profiles and market forecasts through 2012. It forms part of three ABI Research Services: Mobile and Contactless Commerce (http://www.abiresearch.com/products/service/ContactlessCommerce_ ResearchService), Short Range Wireless (http://www.abiresearch.com/products/service/ShortRangeWireless ResearchService), and Wireless Handset Semiconductors (http://www.abiresearch.com/products/service/WirelessSemiconductors_ Research_Service). (Due to their lengths, these URLs may need to be copied/pasted into your Internet browser’s address field. Remove the extra space if one exists.)
Founded in 1990 and headquartered in New York, ABI Research maintains global operations supporting annual research programs, intelligence services and market reports in broadband and multimedia, RFID & contactless, M2M, wireless connectivity, mobile wireless, transportation and emerging technologies. For information visit www.abiresearch.com, or call +1.516.624.2500.
Explore more developments dealing with the implementation of Near Field Communications, a short-range wireless technology that promises to revolutionize contactless identification, payment, access, and more. Click to visit NFCNews.