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NFC gets out of the hype phase

Week 27, 2007

Our industry has its hype too, NFC. But NFC is a different story, it is the convergence of the efforts of the whole industry, technology suppliers, standardization bodies, and all stakeholders: telecom operators, financial institutions, mass transit operators, etc… Globally, all are pushing into the same direction, making NFC a reality. But in detail, stakeholders may have divergent interests.

There is still some ground to cover before NFC is really a standard as some major issues are still not solved: the NFC application business model is not finalized, as there is no established pattern so far for revenue sharing between the telecom operator and the other involved parties. The location of the Secure Element (removable or not, independent or in the SIM card, or as part of the handset) is still open to discussion. Also, only very few handsets support NFC for the time being.

After standardization will have covered all technology aspects, it will be time for usage standardization and interoperability. According to Ovum, interoperability at the end-user level, will come in steps: at first, several handset models in a single application, then several operators in an application, and, in a third step, nationwide interoperability, and only at the end of the process will we be able to use a Finnish handset, with a British operator subscription, a SIM card made by a French manufacturer, financial services from a Dutch bank, to pay for transit in Spain.

Remember, at the beginning of the 1990's, GSM phone communications was 100% interoperable from day 1. But GSM communication just requires handsets, network operators and SIM cards. NFC ecosystem is a lot more complex; as it involves financial institutions, mass transit operators, and many third parties as diverse as local governments, advertising agencies, etc…

NFC ecosystem is so complex, that analysts come with totally divergent forecasts. Ovum foresees the mass adoption of NFC from 2010, Frost & Sullivan anticipates 33% of NFC handsets in 2010-2012, ABI Research said that 20% of handsets (or 292 million) would support NFC by 2012, and now Javelin forecasts only 50 million NFC handsets by 2012.

This week there are so many events taking place on the NFC scene, that Smart Insights includes two NFC-related articles in the "Focus" section. One is about a trial launched by Wells Fargo, a major bank on the US West Coast. The other is the first commercial NFC application launched in Europe, by Orange in Bordeaux, France.

Thierry Spanjaard
Chief Editor
Smart Insights