Near field communication (NFC) services won't take off for at least two years according to latest findings from Ovum, which has also cast doubt on operators' chances in the m-payment market amid a glut of launches in the past two years.
Ovum said the growing availability of cheaper alternatives to NFC will stymie growth of the technology, unless card vendors get behind a new cloud-based version - hosted card emulation (HCE) - that is simpler to provision, and security concerns are addressed.
The high cost of NFC could already have claimed a high-profile victim. French number three carrier Bouygues Telecom reportedly halted its NFC development in recent weeks as part of a cost-cutting programme that has seen it shed €455 million from its outgoings between end-2011 and the third quarter of 2013, NFC Times reported.
The report did not mention whether the move would affect Bouygues Telecom's involvement in Cityzi, a SIM-based NFC mobile payment service the operator provides in France in partnership with SFR and Orange.
Bouygues Telecom said it did not wish to comment on the subject.
Ovum said 2014 will be a tricky year for the mobile payments market as a whole, and hinted that operators could lose out to consumer preferences to use services from their banks and other credit firms.
"Overall revenue growth for mobile payments in 2014 will be slow and steady rather than spectacular, at least in mature markets," said Eden Zoller, principal analyst at Ovum's Consumer Practice.
While Zoller predicted better growth in emerging markets, where higher numbers of unbanked consumers make mobile money services popular, she said the year ahead would be one of consolidation.
"There has been an explosion in digital wallet launches over the last two years, and this is not sustainable going forward," she added.
O2 UK appears to share the analyst's concerns, announcing last week that it will shut its O2 Wallet service by end-March, just 18 months after launching. The carrier said the market and its customers have changed in that time – a view borne out by an Ovum survey of 15,123 consumers in 15 global markets that found 43 per cent would prefer to use a service provided by their bank.
Mobile operators were ranked last after being chosen by 6 per cent of respondents compared to 13 per cent for credit card companies, and 9 per cent for online payment providers.
Several European operators are teaming up with banks to provide mobile money services, and Zoller said such partnerships are likely to succeed. "It is digital wallets of this kind that have the best chance of achieving scale, and also attracting the advertising dollars that are needed to bolster the business model," she commented.
However, Ovum said grabbing those advertising dollars may be easier said than done, particularly when it comes to location-based ads.
The research company said the service is complex, and will get harder to control as the number of location techniques, and sources of data, increase.
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