While near-field communications (NFC) technology was punted as the next big thing in mobile payments (m-payments) a few years ago, its slow uptake should not come as too much of a surprise, according to analysts.
The technology, which allows shoppers to pay for goods by tapping their mobile phones against payment terminals, failed to gain global traction, and research firm Gartner noted its "disappointing" adoption in a report published in June last year.
The research firm had previously placed NFC as one of the top emerging technologies in its annual Hype Cycle - a report which tracks the maturity and potential adoption of new technology.
Adrian Hope-Bailie, product development manager at Stanchion Payment Solutions, says SA's adoption has also been slow, because acquiring institutions such as banks and payment solution companies are "caught between a rock and a hard place".
"The acquirers don't want to make the investment in infrastructure until there are enough potential users in the market, and the issuers are reluctant to issue cards or invest in provisioning systems for NFC on phones, unless their customers can use these somewhere," says Hope-Bailie.
Low NFC capability
Gartner's report noted people worldwide were not taking up NFC due to low penetration of capable phones, as well as contactless readers.
But slow uptake of NFC should not signal the death knell for the technology, according to Hope-Bailie. "It will only become mainstream once users are familiar with and confident in using tap-and-go contactless payments."
Hope-Baillie says contactless cards could be seen as the starting point of NFC's expansion, "and these are already being issued by the banks".
Herman Singh, managing executive for mobile commerce at Vodacom, says while the number of NFC-capable handsets will increase locally over the next few years, they are "not yet sufficiently pervasive to reach the tipping point that will result in their widespread and ubiquitous use".
However, payment and point-of-sale solutions company VeriFone says it is working to ensure SA's card acceptance infrastructure is NFC-ready. Gabriel Swanepoel, business development director for VeriFone Southern Africa, says many local retailers are already equipped to support NFC.
"It is now more a question of enabling the technology rather than deploying it," says Swanepoel.
Wanted tech?
A survey conducted by consultancy firm Accenture found South African consumers are ready and willing to adopt m-payments and become frequent users in the long-run.
More than 1 000 mobile phone users were interviewed, along with business leaders in the m-payments services industry, but the survey noted the technology's availability would not automatically lead to widespread adoption.
Accenture noted retailers would need to provide incentives for current and non-users, and find means to demonstrate its value as much as possible.
However, says Hope-Bailie, the idea of using your phone for payments is still seen by many as "solving a problem that doesn't exist".
"It's easy for the romanticism of mobile money to get us excited about the concept, but I believe that for a long time it will be just another channel," adds Hope-Bailie.
Once users see m-payment systems are secure and reliable, he notes, they could be more comfortable with it and begin to see how it has value in their lives.
But widespread adoption of mobile money will be a gradual rather than a "big bang" process, says Singh, and the process could be comparable to the way card payments replaced cash.
"We believe that the NFC opportunity is far larger than just money. It will include vouchers, loyalty solutions and access solutions," adds Singh.
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