PayPal predicts imminent demise for NFC, but analysts are split

“It’s not solving a real consumer problem,” says PayPal president, David Marcus.

The end is nigh for near field communications (NFC) mobile payments, if PayPal president, David Marcus, is correct in his predictions. However, Australian industry analysts we contacted had differing views on the fate of NFC.

A number of NFC-enabled devices running Google's Android mobile platform are available in Australia, including smartphones from Samsung, HTC and Sony. The technology allows users to pay by tapping their smartphone against a payment terminal.

PayPal president, David Marcus, predicted in a blog post Monday that NFC for payments will “fail to gain mass adoption” and the debate over NFC’s suitability for payments “will slowly die in 2013.”

“Is tapping a phone on a terminal any easier than swiping a credit card?” he asked on the PayPal blog. “I don’t think so—it’s not solving a real consumer problem and its [sic] not providing additional value to encourage me (or anyone else for that matter) to change my behavior.”

PayPal made the controversial prediction amid a fight with banks, telcos and technology companies to become consumers’ default mobile digital wallet. The top Australian banks are moving forward with plans to support NFC payments, while Visa recently announced a NFC payment app for Vodafone smartphones.

IBRS analyst, Guy Cranswick, told Computerworld Australia he “completely agree[s]” with Marcus.

“Too often the technology is seen as the catalyst but it’s not and his argument is one I have made on NFC,” Cranswick said. “It’s the reason why I analysed the market because there was so much hype on the NFC gate but it will fade.”

However, Telsyte analyst Rodney Gedda voiced optimism for NFC catching on.

“NFC is quickly becoming a standard for all smartphones and the technology can be used for many applications, not just payments,” Gedda said. “NFC will gain mass adoption the same way Bluetooth and Wi-Fi gained mass adoption by being integrated into devices people carry with them all the time.”

PayPal chose not to use NFC technology for its recently announced in-store mobile payment system. With that system, customers can open the PayPal mobile app and check into the store they are visiting. The store can then see their customers PayPal profiles on their point-of-sale (POS) terminals and charge the customer’s PayPal account by tapping his or her picture.

Businesses trialling the system have praised the PayPal system for an intuitive customer experience, but admitted that customer uptake of the payment method is still low and transaction fees are as expensive as American Express.

In his blog, PayPal’s Marcus predicted that payments, loyalty points and coupons will merge into one digital wallet next year. “These three separate businesses will converge to make it easy for consumers and merchants to automatically leverage appropriate coupons and offers.”

Marcus also said that the cash register will become mobile, so store employees can charge customers for products anywhere in the store.

Follow Adam Bender on Twitter: @WatchAdam

Follow Computerworld Australia on Twitter: @ComputerworldAU, or take part in the Computerworld conversation on LinkedIn: Computerworld Australia