Ovum’s Big Tech Prediction: NFC Won’t Become Popular This Year – or Next Year

People have been waiting for near-field communication technology to take off for a couple of years now—but it’s still very far from becoming ubiquitous, and global analyst firm Ovum doesn’t expect 2014 to be the year it breaks major ground.

According to Ovum’s “2014 Trends to Watch” report, there are outstanding issues in most mature markets linked to low consumer uptake and usage of m-payment and digital wallet services. The report suggests that there will be increasing complexity within the mobile payments ecosystem this year, and on-going challenges around the business model for digital wallet services.

“Overall revenue growth for mobile payments in 2014 will be slow and steady rather than spectacular, at least in mature markets,” explains Eden Zoller, principal analyst with Ovum’s Consumer Practice. “The different dynamics at work in emerging markets will make for stronger growth among unbanked users. We expect to see much consolidation in the digital wallets space in 2014.”

“There has been an explosion in digital wallet launches over the last two years and this is not sustainable going forward,” Zoller continues. “Consumers will not adopt multiple digital wallets and instead will focus their loyalty and spending with one or possibly two services. The best positioned will be those associated with the financial brands that consumers trust most and are familiar with. It is digital wallets of this kind that have the best chance of achieving scale, and also attracting the advertising dollars that are needed to bolster the business model.”

In fact, Ovum doesn’t see NFC taking off even in 2015. This is largely due to a growing number of alternative enabling technologies that are readily available at lower cost to merchants and consumers.

Location-based advertising, on the other hand will be a priority focus in 2014—but many service providers underestimate the challenges involved. Location-based advertising is rightly seen as promising because of the tangible benefits it offers to both retailers and consumers, but it is complex, and will become more so as location techniques and sources of data proliferate.