Deloitte Puts Positive Spin on NFC Take Up Rates

by Tim Sloane 0

This article in WhaTech indicates that Deloitte expects a tenfold increase in smartphones used to make contactless payments at least once a month:

“…more than a tenfold increase in the number of smartphones being used to make contactless payments: from just 0.5 percent of NFC-equipped mobile phones in 2014 to five percent of global population of some 650 million NFC capable smartphones by the end of 2015.
Deloitte, in its Technology, Media & Telecommunications Predictions 2015, says these phones will be “used at least once a month to make contactless in-store payments at retail outlets.” Contactless mobile payment will not be mainstream by end-2015, but “niche adoption will be a major progression from near nil in prior years,” Deloitte says.”

In the Research Note “Apple Pay at Six Months: A Medium-Term Outlook” Mercator identified all four key variables that will impact the adoption of Apple Pay—the number of Apple Pay capable devices, NFC-enabled terminal penetration, user enablement of Apple Pay on Passbook, and, finally, the likelihood of using Apple Pay at the Point-of-Sale (POS). Based on documented assumptions and publicly released data points around these variables, Mercator has offered an estimate of what Apple Pay volume will look like leading up to 2020. The Deloitte report echoes Mercator’s research on the subject of whether physical wallets are on their way to irrelevancy:

“However, “While usage of phones to make contactless payments is expected to increase over time, they are likely to co-exist for some time with all other means of payment, from contactless credit cards to cash,” Deloitte says. “It will be a long while before the majority of us can jettison our physical wallets.”

Moving from broad brush strokes on mobile payments to implementation specifics, however, Deloitte makes the following claim:

‘ According to Deloitte, “When someone pays using an NFC-device, the tokenization facility creates a unique code (known as a token) which is sent from the device to the merchant’s NFC-enabled till. The credit card number is not transferred. … The token is only good for a single transaction and unusable otherwise. A fraudster who intercepted the transaction would only get access to the single-use token but not the card details.” ‘

While this is expected to be one approach used to implement Host Card Emulation based mobile payments, Apple Pay and Samsung Pay both utilize a Secure Elements implementation which eliminates the need for single use tokens; which is a good thing because HCE add significant complexity for issuers.

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group

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