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29 December 2012

PayPal president: NFC doesn't solve problems or add value for consumers

The president of online payment company Paypal believes that there is no future in NFC technology but other disruptions, such as wallet apps and location-based services, could revolutionize the way people shop.

In his annual list of predictions for the year ahead, PayPal president David Marcus claims that NFC -- near field communication, the technology that enables devices like smartphones to be used in lieu of a credit or debit card -- will fail to gain mass adoption.

"Is tapping a phone on a terminal any easier than swiping a credit card? I don't think so -- it's not solving a real consumer problem and it's not providing additional value to encourage me (or anyone else for that matter) to change my behavior," he said in a blog post.

Mixed predictions for NFC

NFC has been touted by many as the ‘next big thing,' with some analysts predicting that the market for mobile and wireless payment could be worth as much as $110 billion in transactions by 2017. The latest figures published by ABI suggest that as many as 102 million NFC-enabled smartphones will have shipped by the end of 2012 driven by Android and Microsoft's early adoption of the technology.

As Research analyst Phil Sealy explains: "Nine out of the top ten OEMs now have NFC-enabled handsets commercially available, with most housing an embedded secure element solution. We expect handset shipments to more than double next year with NFC inclusion likely to become a default technology integrated into flagship handsets."

Yet in its latest growth forecast on the subject, published on December 5, Juniper Research claims that Apple and its decision not to support the technology in the iPhone 5 is the reason why NFC isn't capturing people's imagination, and as such the company had revised its growth forecasts for the technology.

"While many vendors have introduced NFC-enabled smartphones, Apple's decision is a significant blow for the technology, particularly given its previous successes in educating the wider public about new mobile services," said report author Dr. Windsor Holden. "Without their support, it will be even more difficult to persuade consumers -- and retailers -- to embrace what amounts to a wholly new means of payment."

The virtual wallet alternative

Though he thinks that NFC itself isn't a viable alternative to credit and debit cards, Marcus does believe that virtual wallet apps have a future and will grow in popularity over 2013 as long as they move past simply offering another way to make payments.

"It needs to remove complexity from your life, not increase it. For sure, the technology needs to be great, and simple, but then it should get out of your way and let you focus on the things you most want -- loyalty points or rewards for example. In 2013 payments will finally merge with loyalty and rewards. These three separate businesses will converge to make it easy for consumers and merchants to automatically leverage appropriate coupons and offers," he says.

However, such sentiments should not be taken at face value. PayPal offers a smartphone credit card reader and virtual wallet app called PayPal Here which competes directly with NFC, so Marcus's comments are distinctly partisan. Still, recent reports that Square, one of PayPal's direct competitors in the sector, is currently processing over $10 billion in payments shows that unlike NFC, individuals and businesses alike have been quick to embrace the technology -- a fact also underlined by Apple's refusal to support NFC despite having the capability.

Location-based shopping services

Marcus also believes that location-based services are set to play a major role in the future of shopping.

"The power to be fed just what you want, when you want it, was still a science fiction fantasy in 2011. It is only just now coming to light in 2012 in its most basic form with solutions like Apple's Passbook. I think that location aware, and context-relevant shopping and payments experiences will be one of those technologies that changes much much more for the consumer than even the hard working technologists in Silicon Valley can imagine today." 


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