Juniper Research said that the integration of near-field communication (NFC) or contactless payment technology into the Apple iPhone gave the industry a "much-needed boost", but further weakened the contactless prospects for mobile network operators that were effectively cut out of the value chain.
As researcher and analyst Nitin Bhas pointed out, "most operator-led pilots and commercial ventures have now closed down. Apple's entry into NFC… could well be seen as the tipping point for the technology, but at the same time it sounded the death knell for the mobile operator projects."
Indeed, while some mobile operator-led NFC projects such as Orange Cash are still active, the market is littered with the corpses of failed projects.
For example, in May last year O2 UK acquired all shares in UK mobile payments venture Weve after founding partners EE and Vodafone UK exited it. In Denmark, TDC, Telenor, Telia and Three sold their mobile payments venture Paii to a rival company owned by banks, while in the U.S. Google bought Softcard, the mobile payments joint venture backed by Verizon Wireless, AT&T Mobility and T-Mobile US.
Many companies have been forced to reposition themselves following the launch of competing services such as Apple Pay and Google Wallet and the growing interest of banks in host card emulation (HCE). These applications leave mobile operators out of the value chain as the SIM is no longer relied on as the secure element.
Juniper Research noted that several vendors are now following in the footsteps of Apple and embedding secure elements within the smartphone. Although Samsung is the only other OEM to date to launch an own-brand contactless payment service, Xiaomi has filed patents for such a service, while both ZTE and Lenovo have begun rolling out eSEs (embedded secure elements) in selected handsets.
At the same time, the research company paints a positive picture for growth in the contactless payments market. In its latest report, it predicted that the global value of mobile and wearable contactless payments will reach $95 billion (€83 billion) annually by 2018, up from less than $35 billion last year.
According to the study, the growth is in part due to the emergence of a range of connected wearables that use NFC technology. Watches and wristbands are expected to be in the vanguard of these developments, although the sector is expected to take several years to reach critical mass.
Juniper Research also noted that while Apple Watch shipments reached nearly 9 million by the end of 2015, these numbers were dwarfed by NFC-capable iPhones. As a result, wearables as a whole are not expected to account for more than 2 per cent of non-card contactless payments by value in 2018.
- see this Juniper Research release
Juniper Research: Global digital payments to reach $3.6T this year
Swatch CEO says company remains focused on mainstream smart watch market
KPN teams with Rabobank to launch Android-smartphone NFC mobile payment service
Gartner: 50% of consumers in mature markets will use smartphones or wearables for mobile payments by 2018
Orange rolls out NFC-based Orange Cash across France