Four Factors Critical To NFC Adoption

According to Erik Michielsen, the firm's director of RFID and M2M research, they are:

• Handset availability
• A uniform application programming interface (API)
• Interest and initiatives from mobile operators
• The success of contactless payment trials

Many of NFC's future applications will work via the mobile handset, but the market has not yet seen enough NFC-capable models. "We are a bit surprised that there have not been more phones released to the market," says Michielsen. "One reason is that carriers have been hesitant to move forward with NFC handset requests. We expect that to change: multiple models are under development by Motorola, Samsung, Nokia and others, but handset development does take time."

A second critical factor will be the availability of a uniform API - the "hooks" that software applications use to communicate with hardware. With many proprietary devices destined for this market, a common API means fewer resources spent on customization and more on value-added applications and features. "A uniform API does not yet exist," notes Michielsen, "but there is now a widespread acknowledgement of its importance."

It is vital that NFC trials be launched by operators. At present, Cingular is involved in an NFC trial to understand better how NFC can influence its operating models. Still, CDMA-based vendors with an interest in NFC, in particular Sprint, are unable to run trials due to the absence of CDMA-based NFC handsets. CDMA NFC handsets will promote additional trials which will in turn spur more substantive NFC development among silicon and other component vendors.

Finally, contactless payment systems will show the first quantifiable benefits applicable to NFC payment devices as well. Large trials are under way, and merchant acceptance momentum continues. "Consumer awareness of contactless payments will reach a mass-market level by 2007," says Michielsen. "Contactless shows the same development curve that we can expect to see from NFC as a whole: small pilots two years ago, scalable pilots last year, and now working towards deployments in 2006." (ABI Research will shortly publish a study of contactless payments in Japan and South Korea.)