NFC-Enabled Phones and Contactless Smart Cards 2008-2018

• Posted: Wednesday, May 07, 2008
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• Author: pradhana
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• Filed under: RFID

NFC-enabled phones have yet to take off, despite phones with the Sony Felica interface, compatible with NFC, being placed in the hands of over 50 million Japanese in little more than two years – one of the fastest adoption rates for electronics ever. So why the delay? Here Dr Peter Harrop shares insight into the topic summarizing findings from the new IDTechEx report NFC-Enabled Phones and Contactless Smart Cards 2008-2018 www.IDTechEx.com/nfc.

Near Field Communication (NFC), by which electronic devices communicate if held within a few centimeters of each other, is underpinned by global ISO specifications. It has attracted the attention of the largest telcos, transport companies, banks and others and new trials are frequently announced all over the world.

However, it has yet to take off, despite phones with the Sony Felica interface, compatible with NFC, being placed in the hands of 40 million Japanese in little more than two years – one of the fastest adoption rates for electronics ever. The many trials confirm that we are all like the Japanese in seeking the convenience that such phones can offer. So why the delay? Why do more and more trials?

History repeats itself?
With NFC phones, the telcos have nearly all the power and they have often failed to seek a mutuality of benefit with others in the value chain. That has meant that very few NFC enabled phones have been made available, banks are cautious about letting their cards be mimicked by the phones and transport operators are cautious about the ticketing option being loaded. As in retail RFID, they can cite technical problems for delay because telcos prefer NFC to be loaded on the SIM and that standard is not quite ready. There are also issues such as the capacity of the SIM cards.

Role model of success
It will all be resolved in due course. The wealth of value added services in prospect for the telcos will see to that but, as with retail RFID, the speed of progress will depend on how much mutuality of benefit is allowed to emerge. At least there is a role model of success. The telco NTT DoCoMo is behind the early success of the Japanese phones now commonly used for shop purchases and ticketing. It struck realistic deals, including emulating the Suica stored value card held by 22 million people.

All was not perfect. The railway function was difficult to download and the railway company JREast initially required purchase through its own card. Japan is now seeing next generation trials and rollouts such as use of its new Ubiquitous Product Code on mobile phones for managing supplies and assets and use of the phones for secure access to buildings.

Some of the foreign trials explore other innovations such as down loading transport applications in Germany simply by holding the phone near a passive RFID tag, say on a ticket machine. But many telcos have to practice mutuality of benefit before real progress is made. That seems likely soon in China and Korea, for example, and rollout there will be aided by existing huge infrastructure for contactless cards and tickets. All those barriers and readers will read the phones.

New IDTechEx forecasts
IDTechEx forecasts that, while the yearly number of mobile phones sold rises from one to two billion in the next few years, the number of RFID enabled phones sold will rise from 134 million in 2008 to 860 million in 2018, mostly all of this is happening in East Asia. East Asians will continue to show the way, not because of differences in consumer wants but because their governments and industry make sure the inter-industry haggling stops and projects that benefit the nation go ahead. For example, IDTechEx sees the following numbers of RFID enabled phones sold in 2013.

Phones do not kill cards
So, as the NFC proponents get their act together, will the business in contactless (ie RFID) smart cards and tickets come to a halt? The answer is no, mainly because the cards and tickets serve many purposes that mobile phones are unlikely to serve and other people are in the driving seat. For example, reloading a national ID card or driving license card on your new phone every year is not worth the hassle if you can, as now, keep the card version for ten years.

Indeed, it may not be permitted by the authorities. A more detailed comparison below shows how all these media have their own fast growth path ahead, with minimal competition, beyond financial cards possibly being impacted by preference to load them on phones in later years. Both cards and phones are now capable of high speed transactions at up to 424 kb/s but other functional differences drive the largely divergent applications.

Source IDTechEx report “NFC Mobile Phones and Contactless Smart Cards 2008-2018” www.IDTechEx.com/nfc.

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