Research Notes

There is no money in NFC. There are countless mobile market players that currently have a vision of creating new businesses and large fortunes based on NFC

But is there really a chance of reaching the revenue volume that for example mobile operators are hoping for?
Let us just make one thing clear from the beginning; NFC is a fine invention that will be used to create contact and transmit data between an increasing number of devices in the future. There is also no doubt that many mobile phones and credit cards will have NFC in the future. But the big question is how much money there will be in this future market and whether mobile operators can make money on NFC-based solutions that reside on mobile phones?

Strand Consult has been analysing the mobile market for years. We were already in this business when infrared communication was launched on the first mobile handsets. We were still analysing and publishing reports about the mobile industry when Bluetooth launched on the market and now we are taking a closer look at NFC and how NFC will influence the future mobile market.

We were publishing reports about the mobile industry when the first premium SMS services were originally launched in Norway. It is interesting to note that many operators now believe that NFC is their ticket to playing a leading role on the mobile payment market.

Through the years there have been many new products and applications that have led people in and around the mobile industry to believe that they would now be in a position to sell services at the same profit margins that mobile operators originally had on the market. To be somewhat blunt, the number of slightly naive people has not diminished with the launch of NFC.

In our opinion you cannot assess the NFC business opportunities for various market players unless you analyse NFC from a value chain perspective. If you put NFC into a value chain you can start looking at who currently controls the various parts of the value chain today and what it would cost to find an alternative solution to what mobile operators are hoping they can make money on.

In other words, how large a share of NFC-based cards that companies will issue to customers will be replaced by people using mobile phones where the NFC solution resides on the mobile handset? How big a piece of the NFC market do mobile operators have a chance of acquiring in the future and what are customers willing to pay to access and use NFC via mobile operator controlled solutions – instead of a card?

Our initial studies show that some operators will find it difficult acquiring a share of the cash flow that NFC-based bank cards and other types of credit cards will generate in the future. We also believe operators will find it difficult to justify charging extra for configuring mobile phones with NFC information, whether they are pre-configuring mobile phones or offering over-the-air configuration.

We believe that NFC can in many ways be compared to Bluetooth and what happened on the Bluetooth market. In our opinion NFC is basically a technology that will help speed up certain close-range applications and tasks in the future. As you know, Bluetooth did not create new large revenue streams for mobile operators and right now we do not see how NFC will be any different.

This does not mean that we do not believe that NFC is not important to mobile operators. If operators can get customers to start using NFC via their mobile phone, it will make it more difficult for individual customers to switch mobile operator. In our opinion the value of decreasing churn by offering customers NFC on their mobile phones has so much potential, that the mobile operators should forget about the business models surrounding NFC that some people are currently talking about and that have little chance of success in the future mobile world. Instead mobile operators should focus on the potential customer loyalty factor they can gain by investing in their customers having NFC on their mobile phones.

We therefore strongly recommend that mobile operators actively participate in this market in the future and that they should work towards an increasing number of NFC solutions moving away from plastic cards and instead onto NFC-based mobile phones. In the short term this will help mobile operators reduce churn and in the longer term could easily result in new business opportunities based on mobile customers’ willingness to pay for the convenience of having their NFC payment solution on their mobile phone.

Strand Consult has held numerous workshops during the past year where we have described the opportunities, challenges and underlying business models that are already emerging on this new market. If you would like to learn more about this market, its current status and how it is developing, please do not hesitate to contact us.Contact Us
More information:
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OneAPI – Next Generation Value Added Services in the Mobile industry

Show me the money – The future Business models for mobile Broadband Services

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