With the likely commercial deployment of Near Field Communication (NFC) in 2011/2012, there will be a renewed initiative from the financial and payments industry to enable secure mobile payments, predicts global consultancy Frost & Sullivan. The industry's demand for more complex banking and payment cards that result in end-to-end solutions of products and services will further boost the overall revenue of smart card vendors.
According to Frost & Sullivan analyst, Yiru Zhong, "As users' payment habit trends become more entrenched, they will spill over to other regions, enabling lagging countries and regions to leapfrog traditional payment methods and provide smart card vendors with a new avenue of revenue potential." Poland, as the first country in the Central and East European region introduce proximity cards by banks and mobile operators within the last two years, is a good example. The newest methods include the ING Bank sticker that can be affixed to a mobile phone or any personal mobile device and a module in Laks watches introduced recently by Bank Zachodni WBK. Both methods are an enhancement for proximity cards introduced already for use in MasterCard's PayPass networks around the country.
On the one hand, banks have been issuing dual interface cards as well as introducing derivatives of banking cards for debit/prepaid cards, micro-payment cards as well as multi-applicative cards for transit/marketing purposes. The telecommunications industry is pushing for NFC technology as the dominant means for mobile payment, relying on the ubiquitous mobile subscription to overcome underbanked society issues and to capture new ways in which businesses can reach out to customers.
"With expectations that NFC enabled phones will come on stream in 2010 and commercial deployments 2011/2012, we anticipate a fight for a dominant payment form between the two industries to buoy the smart card sector. After all, both industries will require the necessary services and solution backups to ensure a secure seamless payment transaction experience for merchants, users and middlemen," adds Yiru Zhong.
Ultimately, however, these developments suggest that form is less important than transaction volumes and the recent example of the sticker payment card shows that it really serves to increase transaction volumes. Because volume generation is critical at this point, smart card vendors should make this process as easy as possible for their banking customers. Frost & Sullivan maintains that functional convergence is a significant end user driver for smart cards, and the extension to other capabilities is the next obvious step. Not only will its successful acceptance allow lagging regions to leap over traditional payment methods, but it will also provide smart card vendors with a new source of revenue potential.
"The smart card industry should demonstrate its full range of products and services that enable their banking customers to increase their value to their end user customers and businesses for additional services such as marketing and customer analytics," concludes Yiru Zhong.
