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NFC mobile payments

Is 2016 the Year of NFC Mobile Payments?

Brant Schelhaas

In 2014, tech companies began to release near-field communications payment technology to consumers. Mobile payments didn't take off immediately because consumers were unsure about the technology and few retailers had the equipment necessary to process NFC payments. While adoption has lagged so far throughout 2015, it's likely that 2016 will be the year NFC mobile payments truly take off.

The growth of NFC payments

Research firm eMarketer predicted between 2015 and 2016, the number of U.S. consumers using NFC payments will grow almost 62 percent, from 23.2 million people to 37.5 million (1). Not surprisingly, younger groups will lead adoption. By 2017, 37 percent of those between 25 and 34 will use NFC mobile payments, compared to 24 percent of the total smartphone-using population. By 2019, eMarketer anticipates 31 percent of smartphone users will use NFC mobile payments to make purchases in brick-and-mortar stores. At this point in time, 45 percent of 25- to 34-year-olds will use their mobile devices to make payments. By 2020, there's no doubt mobile payments will be a significant part of the credit card processing landscape.

The following are just some of the reasons NFC mobile payments will see growth in the next year:

There are more ways to pay than ever

While NFC payments began with Apple Pay, iPhones and Apple Watches are no longer the only ways to make NFC mobile payments. Consumers now have the option of Android Pay and Samsung Pay when choosing a mobile device for payments. Swiss watchmaker Swatch recently announced it will bring NFC payments to China (2). When consumers upgrade to the next generation of digital devices, it's likely they will have the necessary technology to make NFC payments, which means adoption will increase.

Convenience

Mobile devices enable consumers to consolidate their items into one small computer. A smartphone is a phone, mp3 player, day planner, calculator and many other things rolled up in one. Wallets are a natural extension of the trend of the smartphone to become an an all-in-one device that meets every need. Once customers realize adopting mobile wallets will enable them to leave their old wallets behind and carry only their smartphone, the number of NFC payments will rise considerably.

Security

NFC mobile payments are more secure than magnetic strip card payments, which can easily be duplicated. In addition, while thieves can steal a phone, they won't be able to use it to make a payment because the mobile wallet will require a passcode or even a thumbprint for use. These systems also generally offer some sort of encryption so the customer's actual credit card number isn't stored in the system. Instead, mobile wallets generate a one-time code that is virtually useless to thieves if obtained.

EMV

On Oct. 1, 2015, liability for some cases of card-present fraud officially became merchants' responsibility. Because upgrading to EMV-compliant equipment may be in merchants' best interest, they might as well prepare for the future by implementing NFC-enabled payment processing equipment while they're at it. Since adoption will likely start to grow over the next year, merchants should get out ahead of the pack now and offer this technology.

Loyalty programs

Many customers already use app-driven loyalty programs with their favorite brands. Businesses have an opportunity to connect NFC payments and existing loyalty programs to increase engagement. Apple Wallet now allows customers to store loyalty cards in addition to credit and debit cards. In addition, Walgreens just integrated its loyalty program with Apple Pay and many other retailers, including Dunkin Donuts and Panera Bread, have announced similar deals (3).

It remains to be seen whether 2016 will be the year NFC mobile payments truly take off. However, Many signs indicate that NFC mobile payment adoption will increase dramatically, so merchants should be prepared. Customers enjoy having more options to make payments, and for early adopters, the ability to make a NFC mobile payment will be exciting and memorable.

  1. http://www.emarketer.com/Article/Mobile-Payments-Will-Triple-US-2016/1013147
  2. http://www.wsj.com/articles/swatch-launches-payment-watch-in-china-1444793543
  3. http://techcrunch.com/2015/15/walgreens-becomes-first-retailer-to-integrate-its-loyalty-program-with-apple-pay/

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