NFC Still Searching for Traction - Here's Why


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The NFC story presented by the general and business media is, in our opinion, decidedly rosy compared to actual reality. In a sense, the frequent coverage devoted to NFC is a good thing - recall the adage, "any publicity is good publicity." However, this saying must be taken with a grain (or two) of salt in the context of technology markets, because excessive publicity can lead to hype...and hype may in turn lead to unfulfilled expectations. During this QuickCast, John Shuster discusses some of the key factors limiting NFC adoption and strategies ecosystem stakeholders can use to drive adoption.

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  • VDC Research Group (VDC) provides exceptionally detailed direct-contact primary market research and consulting services to many of the world's largest technology suppliers, innovative start-ups and leading investors.
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  • Limited infrastructure and device availabilitySlow adoptionDifficult to justify/Lack of education Low supply-side revenuesFacilitated adoption in APAC and EMEA due to existing infrastructure, higher user comfort levels and government initiatives.Majority of revenues from horizontal applications like payment, ticketing, marketing and access controlIncreased enterprise investment in NFC solutions for internal (i.e., non customer-facing) applications, including physical security/access control, logical/network security/access control, workforce monitoring/management and tracking/tracing applications.The emergence of alternative (i.e., non-smartphone) NFC device form factors during 2012 and beyond will further broaden NFC’s appeal as well as the potential use cases it can serve—both for enterprise and consumer end users.Governmental investment in NFC initiatives in certain country markets (e.g., Korea, France) will help drive regional contactless infrastructure deployment, application development and adoption.NFC application opportunities/use cases range from the very simple (P2P, pairing, information access) to the more complex (contactless payment, e-commerce). VDC expects most near-term activity will be related to applications that are relatively simple to deploy, do not require the cooperation of multiple stakeholders/decision makers and are deployed within the confines of a “closed loop” environment. Certainly, contactless payment and other commerce applications represent a tremendous opportunity for NFC; however, in most regions, VDC expects that these applications will remain challenged by barriers related to stakeholder cooperation and the availability of contactless infrastructure.
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  • NFC Still Searching for Traction - Here's Why

    1. 1. AutoID & Transaction Automation Practice QuickCast NFC Still Searching for Traction–Here’s Why August 2012 By: John Shuster – Analyst © 2012 VDC Research QuickCast AutoID & Transaction
    2. 2. Recording Available A full audio recording is available for download at: © 2012 VDC Research QuickCast AutoID & Transaction
    3. 3. About Us Market Intelligence for Technology Vendors & Investors  Direct-Contact Primary Market Research  Deeply Segmented Data  Expert Insights  Validated Results Custom Consulting Services for Your Most Critical Business Decisions  Research-Based Consulting  Transparent Tools & Methodology o Highly Customized Survey Guides & Output Templates o Sophisticated Market Estimate & Forecast Models o Detailed, Flexible Stakeholder Maps & Profiles o Industry Development Scenarios o Market Opportunity Fit Screening, Rating & Ranking © 2012 VDC Research QuickCast AutoID & Transaction
    4. 4. Our Core Coverage Areas AutoID Embedded Hardware & Systems Embedded Software & Tools Mobile & Wireless © 2012 VDC Research QuickCast AutoID & Transaction
    5. 5. Ways to Work With UsOur market research is the basis for the many other ways that VDC can help you to grow your business. Our clients rely on us to provide actionableinsights that support their most important strategic initiatives including: corporate development projects, opportunity assessments and leadgeneration programs. © 2012 VDC Research QuickCast AutoID & Transaction Automation
    6. 6. Today’s Speaker John Shuster Analyst John is an analyst in the firm’s Auto ID practice and covers the markets for NFC, emerging RF solutions and Customer Engagement/Retail Automation Technologies. Prior to working as an Auto ID analyst, John worked in VDC’s Mobile and Wireless practice. John has also worked as an Associate at Stax, Inc., a Boston-based strategy consulting firm, focusing on investment diligence and market opportunity assessment engagements. During his post-graduate studies, John completed a year-long corporate residency program at BV Investment Partners (formerly Boston Ventures), a middle- market private equity firm, where he was responsible for supporting operations in the finance and accounting department. John is a graduate of Dickinson College (BA, English) and Northeastern University (MBA, finance).For complimentary insights and marketing data: © 2012 VDC Research QuickCast AutoID & Transaction Automation
    7. 7. Today’s Agenda State of the NFC Ecosystem NFC Awareness/ Understanding – Challenges & Solutions Compelling Competitors – NFC Alternatives It’s Not all Doom & Gloom © 2012 VDC Research QuickCast AutoID & Transaction
    8. 8. NFC Ecosystem – Still Seeking Traction“Smartphones do not an ecosystem make”The Good…  Media coverage – and hype – remain strong  NFC-enabled smartphones widely available – with a strong pipeline  Pilot tests expected across all regional marketsThe Bad…  Despite broad availability, end-user awareness/understanding is low  Still waiting on the ecosystem…little progress to date and lack of a true sphere of influence  Strong competition from alternative mobile technologies (e.g., QR Codes, m-wallets)The Ugly…  Recent high-profile hacks undermine confidence in NFC’s security  Multiple prominent NFC suppliers facing strong headwinds © 2012 VDC Research QuickCast AutoID & Transaction Automation
    9. 9. NFC Understanding – or Lack Thereof…Technology remains hamstrung by weak awareness among end users What is the Greatest Barrier to Your Key Takeaways: Adoption of NFC? (n=593)  Lack of familiarity remains #1 adoption barrier  Education of all end users is needed 20.1% immediately  Awareness can drive adoption… conversely, lack thereof will stall it 47.7% 32.2% Not familiar with NFC technology Perceived lack of requirement/use case Unclear on benefits of NFC © 2012 VDC Research QuickCast AutoID & Transaction Automation
    10. 10. NFC’s Challengers…Competing solutions offer similar benefits with fewer barriers to entry Cloud-Based Solutions  Leverage existing payment terminals  No consumer-owned device required  Notable initiatives include Home Depot (PayPal), C&K Markets (Retailix) 2D Barcodes/QR Codes  Leverage existing imaging/imager solutions  Can be used with almost any smartphone/mobile OS  Notable initiatives include Starbucks (mFoundry), LevelUp, PayPal Common (and Key) Differentiators vs. NFC:  Larger addressable market  More familiar, easily recognizable  No special infrastructure necessary; Leverage existing infrastructure  For m.Payment applications, fewer “moving parts”  Lower cost © 2012 VDC Research QuickCast AutoID & Transaction Automation
    11. 11. Despite Challenges, Strong Potential RemainsSeveral potential catalysts could facilitate broader adoptionConsumer Demand for NFC-Enabled Devices…  NFC smartphone sales robust  Many new models in the pipeline  iPhone 5 could be the “silver bullet”  Increasing consumer penetration bodes well for ecosystemHigh Profile Pilots/Scaling Slated for 2H 2012…  France – scaling transportation deployment  Singapore – national m.wallet / transit initiative  US – ISIS m.walletTo Harness this Potential:  Education & awareness are critical  Application development is needed — now  Think value, user experience & security first (profit will follow) © 2012 VDC Research QuickCast AutoID & Transaction Automation
    12. 12. Thank You for Attending this VDC QuickCastFor more information please contact: John Shuster – Analyst Michael Liard – Director Mike Collette – VP, Sales & Enterprise Accounts | 508.653.9000 x112For complimentary insights and marketing data: © 2012 VDC Research QuickCast AutoID & Transaction Automation