NFC payments in SEA 'at least 10 years out'

Near-field communications (NFC) payments via mobile phones will lag for at least a decade or longer in Southeast Asia as many success factors still missing, predicts Deloitte executive.
Written by Jamie Yap, Contributor

SINGAPORE--Payments via near-field communications (NFC) technology will not see significant traction in Southeast Asia (SEA) for at least a decade or longer, because sporadic trials asides, there are still many missing ingredients for it to take off in the region, said a Deloitte executive.

John Goeres, consulting partner and TMT (technology, media and telecommunications) industry leader at Deloitte Southeast Asia, said that adoption of phone-based NFC payment services were "at least 10 or more years out" across most of SEA. He was speaking at the Deloitte Southeast Asia TMT Predictions forum on Wednesday.

Goeres noted that the emerging economies within SEA had a high physical cash usage and a relative lack of payment substitutes, which made it highly favorable for NFC payment adoption. This was however an exception, as most of the other conditions or "success factors" essential for sizeable NFC uptake currently did not make the cut, he pointed out.

Chief among these was the lack of a "killer use-case", which he described as a reason which compelled consumers to need and "want it". An example Goeres gave was how public transportation payment systems around many parts of the world had adopted NFC and helped it take off. However, he noted that many countries in SEA, the public transportation network was not as developed and organized.

He added that SEA generally also had a significant rural population--as opposed to a dense urban population in developed countries which allows easier infrastructure deployment.

The Deloitte executive also pointed to the lack of infrastructure and regulatory support. These gaps are notable, he said, calling it a "chicken-egg situation" because infrastructure will not exist until someone in the ecosystem is willing to take on the cost of deployment, be it the government, merchants, banks, operators or customers.

While he was skeptical about the overall NFC outlook in the region, Goeres singled out Singapore as having a high market potential, thanks to government-led initiatives.

Singapore's Infocomm Development Authority (IDA) in October last year announced it had appointed a consortium to deploy an interoperable NFC infrastructure by mid-2012 to encourage mobile wallet services in the country.

Industry executives present at the forum also noted that there were challenges in NFC adoption. Ng Yoke Weng, group CIO of SingTel, one of the panel speakers, said the main inhibition against NFC uptake was not the technology, but the economics and standards which have yet to be ironed out.

Besides figuring out who pays for the deployment and the percentage cut from transactions, there were other "tough questions", he said, such as privacy issues over which or how much of the data generated from NFC transactions will "anonymous or trackable".

Cheaper smartphones to come
Another TMT prediction that Goeres highlighted was the boom of the US$100 smartphone in the region. These cheap smartphones--unlike their premium counterparts--typically feature less powerful processors, 2G connectivity, and a limited number of apps.

Goeres emphasized that cheap smartphones had "strong potential" in SEA simply because it addressed the large, low-income consumer segment.

This was particularly so in countries where operators have limited or no handset subsidies, he added, such as Indonesia, the Philippines, Thailand and Vietnam. Deloitte had estimated that by the end of 2012, smartphones at this price level would hit 500 million units globally.

The Southeast Asian perspectives of the TMT predictions are a spinoff from its global forecast. Others trends it predicted for 2012 included the rise of the multi-tablet owner, increased spending on online branding campaigns and the continued dominance of scheduled TV over on-demand programming.

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