Examining Potential NFC Growth in Italy and Beyond

by Tristan Hugo-Webb 0

Vodafone Italia and MasterCard’s recentannouncement to begin a NFC pilot program in the country’s secondlargest city in Milan ahead of larger 2013 roll out should not comeas a surprise due to the developed nature of the payments marketthere. The pilot highlights the potential growth of NFC technologyand will provide an interesting case study for future NFC marketentries.

Using existing prepaid contactless cards that were distributedearlier this year, Vodafone will make the cards NFC compatible withtheir customer’s mobile phones. Armed with NFC technology,customers will be able to use their phones to make payments at anyof the existing 10,000 MasterCard PayPass terminals across thecountry. In order to further foster NFC adoption, the number ofterminals is expected to rise to 150,000 by 2013, according toVodafone. “This is a decisive step in the world of mobile payments,with these new services; Vodafone will be able to offer itscustomers more innovative and differentiated services,” says thetelecommunications company.

The start of the pilot program coincides with new findings bymarket research firm ISPO (Istituto per gli Studi sulla PubblicaOpinione) that finds an increasing percentage of the Italian publicare both open to NFC-type technologies and are moving towardsmobile payments versus more traditional payments.

The survey found 21 percent of Italians only used cash, 62 percentused payment cards and 19 percent use mobile payments. While thevast majority of mobile payment adopters are youth and youngprofessionals, 36 percent of the public would be open to usingmobile payments versus cash in the future. “The young, with theirdesire for innovation, represent the future where the dominantinstrument will increasingly be the mobile phone, which adds to andintegrates with payment cards. It is therefore imperative toidentify the actions needed to promote the use of electronicpayments and speed up the process already underway,” remarkedMassimo Arrighetti, CEO of SIA (Società Interbancaria perl’Automazione).

While NFC technology is still in its earliest stages in Italy, thedomestic payments market is ripe for NFC technology expansion dueto its strong mobile phone adoption. Nearly 92 percent ofhouseholds owned a mobile phone in 2011, according to ISTAT. Andthe country has in place a well-developed payments infrastructure.Thus, the technology will undoubtedly play a large role in Italy’sfuture payment landscape, likely rivaling debit and credit cardsand almost certainly usurping cash as a preferred payment optionfor lower-priced purchases. NFC has great potential growth and theresults of its success or failure in markets like Italy willprovide further insight into future adoption in other developedmarkets with similar payment systems as well as lessons forcultivating future NFC migration developing countries.