Near-field communications (NFC) may be the sexy side of the mobile payments sector, but SMS transactions will continue to dominate for the next four years as NFC struggles with technology fragmentation, according to a new mobile payments study from Gartner.
NFC technology enabling contactless payments via mobile will account for 30% of total transaction volume worldwide in 2014 but only 5% of the $246 billion (€200.9 billion) in global transaction value, the report says, because most transactions will be used for small payments and transport ticketing.
By contrast, SMS payments will account for over 60% of transaction volumes by 2014 and 80% of transaction value.
SMS will have the edge primarily because of ubiquity and ease of use - factors that make it popular in both developed and developing markets - while SIM toolkits enable deployment of preinstalled SMS payment apps, the report says.
Contactless mobile payment services have been runaway successes in Japan and South Korea primarily due to an existing contactless ecosystem and the dominant role of mobile operators in pushing such solutions.
NFC will need that kind of leadership in other markets to foster a collaborative ecosystem with partners and take the risk to move forward, says report co-author Sandy Shen, research director for Gartner's Mobile Devices and Consumer Services group.
Shen adds that despite the efforts of organizations like the GSM Association to standardize mobile NFC rollouts via its Pay-Buy-Mobile initiative and UICC (Universal Integrated Circuit Card), NFC technology remains too fragmented to gain any serious traction in the near future.
“[T]his level of fragmentation will keep NFC from seeing mass adoption until at least 2015,” Shen says.
Gartner estimates that prepaid top-ups will be the biggest category in terms of transaction volumes in 2014, but money transfer will be the biggest category in terms of value, accounting for 63% of total transaction dollars in 2014, driven by huge demand for remittance payments in developing markets.
Asia-Pacific and EMEA will be neck-and-neck for the biggest regions for mobile payments in that time frame. Combined with Eastern Europe, they will account for 81% of the global transaction volume and 69% of the value in 2014.