Lack of Awareness Hampering NFC Adoption in Transportation
CAMBRIDGE, Mass. — Considerable user indifference and lack of awareness for the technology remain significant barriers to installing Near Field Communication (NFC)-enabled credentials in mass transit systems and elsewhere, according to a new report by research-consulting firm IDTechEx.
When IDTechEx issued its first NFC report five years ago, it found there were major concerns about the use of NFC-enabled credentials due to lack of deployment of the technology. That is much less an issue today given the widespread use of NFC-enabled mobile phones and tablets in the past year. Instead, erroneous concerns are said to be holding up the market, such as the slower speed of transaction when entering a mass transit system using NFC vs. a transport contactless card.
Educating the marketplace, in part, will be needed to overcome lingering misinformation. IDTechEx cites subject matter expert David deKozan, vice president of Cubic Transportation Systems, who contests the arguments that the old problems of slow speed and difficulty of coping with a physically closed system are sidelining mobile phone ticketing in mass transit systems, such as subways.
“Absolutely not. A significant percentage of transportation ticketing will be by [NFC-enabled] mobile phones in the future,” he tells IDTechEx, pointing out that Mifare for Mobile from NXP provides a speed the same as transportation card ticketing.
As for the entry-and-exit transaction with knowledge of location and therefore distance traveled on railways and subways, said to be a problem for financial cards set up for one-shot transactions, deKozan notes that Cubic’s Chicago system has one of several possible workarounds by having the back office assemble the “taps” (transactions/ events) ahead of the bank card interrogation which can then be one shot.
However, he says some emulations of financial cards on mobile phones require the phone to be switched on, the card selected and the PIN entered. “This is not the greatest use case for transportation,” he says. Also, there is a conflict of objectives with EMV financial cards. The contactless PIN in mobile wallets also has issues, deKozan says.
Dominic Hirsch, managing director of RBR (formerly Retail Banking Research) provided IDTechEx a somewhat different view. RBR is a strategic research and consulting firm with three decades of experience in retail banking, banking automation and payment systems.
Regarding the financial and transport ticketing aspects of NFC, Hirsch points out that the banking community tends to refer to the contactless phenomenon that has included contactless cards for years and now adds the more recent NFC. He notes how it took many years for contactless cards to be accepted but now are widely used for small payments, e.g. the stored value (prepayment) MasterCard PayPass and transit ticketing. Where it is best suited, NFC will catch on, Hirsch says, but on a timescale about five years behind. “In five years, NFC will be where contactless smart cards are today,” he says, pointing out that his observations refer to his field of expertise, financial payments including transport ticketing.
Hirsch tells IDTechEx that contactless cards have been primarily aimed at small payments, although they are not adopted by the likes of newsstand vendors and vending machines in the main because merchant fees would wipe out their profit. Contactless payments therefore stick at only certain small payments, including a rapidly increasing number of retail stores. Even here, though, the majority of retailers still do not have contactless terminals.
Hirsch says this has implications for how fast NFC can roll out. It is relatively unattractive to use a payment medium only some of the time, though that is a problem all other payment media also face. Still, NFC-enabled payment can represent proliferation of partial solutions.
In IDTechEx’s report (“Near Field Communication, 2014-2024”), author Peter Harrop writes, “There are now fixes for all the major impediments to use in payments and ticketing of NFC-enabled mobile phones and tablets, but considerable user indifference and ignorance remains and alternatives are well embedded in the market and in some respects superior.”
NFC electronic devices will certainly be used for an appreciable number of payments, including “much transportation ticketing over the next decade, but will not be dominant in that timeframe, if ever,” Harrop says. In contrast, he writes, “there is a frenzy of activity with non-payment uses of NFC and the huge enthusiasm of most in the value chain will result in widespread use, given that device owners increasingly welcome a lot of this.”
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