Mobile contactless payments in Europe: reality beyond the NFC hype

Hardly a week goes by without a press article or conference reporting how ubiquitous mobile payment services and their adoption are in Japan. Forrester decided to put some figures on the so-called Japanese mass-market reality and to understand why Japan is the declared leader in mobile contactless payment services. What lessons can others learn from the Japanese market and to what extent do they apply to Europe?

There are several reasons why Japan is ahead of the curve among which the role of Felica Networks in the value chain and the scale merchants could benefit from (Sony and DoCoMo invested several dozens of million euros to make sure that retailers and points of sale had the technology to read the chipsets embedded in mobile devices), the loosening of Japan's financial regulations (making it possible for non-banks to become financial services players), operators' role in paving the way for mass market adoption of mobile Internet and higher usage of mobile services (fostering the natural expansion of mobile payments).

Despite this, reality is that the mobile contactless market in Japan is only reaching critical mass, not mass-market adoption. In Europe, conditions differ quite a lot and even if Near-Field Technology is likely to play a key role in the future, the technology is only entering the pre-commercial era.

There are some very positive signs such as banks rolling out NFC payment cards (Barclays in the UK), hypermarket chains like Carrefour adding NFC to their loyalty cards, transporters adding NFC to their transport cards (Navigo, Oyster Card), card networks (Visa, Mastercard) and technology vendors (handset/hardware and smart chip manufacturers) evangelizing the solution, governments offering pre-live conditions (many regions in Europe will help funding live tests such as the one starting next year in Nice). 

However, two key inhibitors will prevent mobile contactless from becoming mainstream anytime soon: conflicting interests and the classic chicken-and-egg situation (handset manufacturers won't start mass production of NFC-capable handsets until the supporting infrastructure is in place) and the huge marketing efforts needed to convince consumers of changing their habits since mobile contactless payments provide only marginal improvements over established systems like cash and credit/debit cards.

However, NFC is much more than a mobile payment technology. It will enable a range of applications and services from various industries, linking together mobile marketing, mobile CRM, and mobile commerce. That's the reason why we believe in its long-term potential.  

If you want for more information, see the full report "Mobile Contactless Payments in Europe: Reality Beyond the NFC Hype".