6 reasons for mobile operators to move to NFC now, or not at all

As discussed in a previous post, NFC services and the inherent security of the operator-owned SIM will put the operator back in the driving seat, with a walled garden of secure services. But why should mobile operators decide now if they want to move to NFC? Is the market really ready for NFC services? Why not apply a wait & see strategy to follow how the market is evolving and how the competitors are behaving and challenge them later on?

1 reason why MNOs should move to NFC

From today and for the next 5 years mobile payment services and services for payment & shopping are seen as being the main key drivers for NFC. Related transaction value is estimated at 180bn US$ for 2017 and more than 25%  of mobile phone users in Western Europe & USA will use NFC payments (Juniper Research). To ensure the highest security possible and also make the end-customer feel confident a secure element is mandatory. Among the different options, the SIM card is the operator owned secure element, widely distributed and well understood. Mobile operators can rent out and manage space on the card to the service providers (banks, credit card etc) as well as offer their own services.

2 motivations for deciding on NFC now new entrants & a long learning curve

There are other options for the secure element and new entrants are not sleeping as everybody will try to get the biggest piece of the NFC cake. We have already seen Google launching a mobile device with a secure element included (Samsung Nexus S).  Fortunately for mobile operators this is the only device so far working with Google Wallet and also a bank licence may be required to launch credit card or similar services.  But, the new entrants are ready to give away everything to merchants (POS terminals, digital wallets, TSM services) in order to make it happen.

Apple devices may also soon go NFC.  With their widespread store system, we can imagine that in future they will also resell the mobile subscription and perhaps even the mobile network operator not reselling their IPhone.

Long learning curve:  Mobile operators are very accustomed with the sourcing process for a new mobile device or a new SIM card which can take several months.  For NFC, they also have to take into account that some Service Providers – banks – have much longer validation cycles due to the security issues.  If a mobile operator decides today to go NFC, it may take at least 18 - 24 months before being ready with the basics where they can start gaining experience. After market acceleration in 2011, industry experts expect the NFC take off in 2016 (MforMobile).

3 basic NFC ingredients pointing towards green  (Handset, SIM, POS)

• According to Berg Insights, last year 30 million NFC capable phones were shipped and 40 new NFC handset models released; in 2016 predictions foresee700 million NFC phones shipping.
• 11 million NFC SIM cards have been shipped in 2011 according to SIMalliance.
• 2.5 million NFC ready POS were shipped in 2011; the installed base is nearly 4 million NFC POS worldwide (2011) Europe should reach a penetration rate of 78% by 2017 (BergInsights).

The NFC ‘Chicken & the Egg’ story has ended and it is time to work on NFC strategy & tactical plans now. As soon as longstanding competitors and new entrants have established their services it may be too late.

Did you find the 6 reasons in this article? If not, just comment below and I will let you know!

Click to learn about SecureMe, the NFC enabling solution.