1. NFC PAYMENTS AND
$ MARKETING INNOVATION
Current State & Future Outlook
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2. NFC Payments and Marketing Innovation – Impact of NFC-Contactless Payment on Marketing Innovation
Current State & Future Outlook “Who pays the bill? New marketing concepts reallocate budgets
and are the secret sauce for success”
The history of NFC technology goes back as far as 1983 when plications like ticketing, payment and advanced marketing con-
the first patent application of the foundation technology RFID cepts to just name a few.
was registered. It took another 20 years before the first impor- This study was conducted to gain a better understanding of As there is no willingness to pay an extra fee for NFC a sta- vanced business intelligence options and improved custo-
tant industry players like Nokia, Philips and Sony started to en- the current state and future predictions for NFC-based contact- keholder is needed to subsidize the rollout and operations of mer analytics.
gage seriously by founding the NFC communication forum. Alt- less payment and related marketing concepts. It has been de- this technology. It is clear consensus (73%) that new and in- The main application of NFC technology is seen for Discounts
hough the first NFC enabled mobile phone was already shown signed as an expert survey to gather point-of-views from pro- novative marketing concepts are the key for a broad adopti- and Coupons (68%) and Loyalty Programs (65%). Under this
in 2006 mass market adoption has not been achieved yet. With fessionals and specialists in the targeted field from around the on of NFC-based payment technology for consumers and premise it makes sense that marketing budgets are expected
advancements in technology and the support of Google, Apple world. The study was focused on four main areas which will merchants. to shift from paper-coupons and sales promotions to NFC
and other mobile heavyweights NFC technology is finally ex- provide an in-depth understanding of NFC-based contactless The most beneficial marketing drivers (see figure 2) include (figure 3).
pected to grow significantly and to enable completely new ap- payment and aligned marketing concepts. functionalities that foster the understanding of consumer beha- Although NFC contactless payment is best suited for direct
vior in more detail and enable improved customer interaction. sales and brand marketing there is an opportunity for trade
Generally the new technology is expected to improve custo- marketing to bridge the gap between brand and customer and
mer retention and customer acquisition which requires ad- to support in- or near-store promotions.
Market adoption of NFC-Contactless Payment
“NFC based payment to become widely adopted within the next 3 years”
While NFC technology is available for a long time, mass mar-
ket adoption has not yet been achieved. The decision of lea-
mote mobile payment will continue to co-exist. To ensure the
projected growth, expected benefits of consumers and mer-
53% Direct customer interaction, identification and
analytics are seen as the main marketing drivers
ding device manufacturers to support this technology, the sup- chants have to be met (figure 1). Consumers demand highly
port of payment processors and the evolvement of new business integrated functionality in a single device as well as access to
Real-time interaction (e.g. direct respone 53,8% n = 221
and marketing concepts are likely to boost the widespread ap- value added services like special deals, coupons or other ser- in-store, in-store promotions)
plication. This study found that NFC technology will become a vices. Merchants expect to get better marketing options and
standard component on all (premium and non-premium) smart- reduced cost for their operations. Location-based 49,8%
(in-store and near-store, position tracking)
phones (90%). This implies that NFC availability on consumer
devices, starting in 2012, will be linear to smartphone market To make this reality new business models have to be found Advanced customer analytics 48,4%
penetration ratios. The respondents of the study are confident which require new stakeholders because neither consumers
Combination of online marketing with
that NFC-payment will be broadly adopted within the next three (68%) nor merchants (78%) are expected to be willing to pay
offline marketing 38,0%
years. a transaction fee on top of other fees to get access to the new
This study also reveals that NFC-Contactless Payment is not capabilities. Nonetheless more than 40% of respondents be- Combination of time with location
just about micropayment, it will be used for payments of up to lieve that merchants are willing to invest into the necessary in- (e.g. daytime-dependent offers to increase 35,3%
store utilization)
50 US$ in Europe and North America, in other regions even frastructure to upgrade their Point-of Sales systems and their
up to 100 US$ seem possible. Although NFC-based payment card readers. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
will grow massively it will not dominate the market alone, re- Copyright © 2012 StrategyFacts – all rights reserved
Benefits for Consumers
Plurality of functions in
Benefits for Merchants
41% Believe that traditional coupons (paper based) will be
the most affected, followed by direct sales promotions
71,5% Enabling new options for
one device 59,3%
point-of-sale marketing from Paper Coupons in newspapers
to NFC-based marketing 41,4% n = 221
Use of value-added services 51,6%
Reduced cash handling from Direct Sales promotions
49,3% 33,6%
Convenience at Point-of-Sale and operating costs to NFC-based marketing
48,9%
from Newspaper/Magazine ads
Sotring of multiple credit or to NFC-based marketing 18,8%
More efficient marketing 45,2%
debit card into one solution 43,4% budgets through NFC from Display Ads
to NFC-based marketing 18,0%
Trouble-free (no need to
43,4%
carry cash or cards) Reduced transaction times 43,9% from TV Ads
to NFC-based marketing 14,8%
Improved transaction speed 38,5%
Improved reliability of from Radio Ads
transactions 20,4% 13,3%
to NFC-based marketing
Sending money securely
23,1%
between towo devices from Outdoor Advertising
11,7%
Ease of introduction to to NFC-based marketing
existing payment 17,2%
Improved security 17,2% from Search Engine Marketing 10,2%
to NFC-based marketing
0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
n=221 Copyright © 2012 StrategyFacts – all rights reserved n=221 Copyright © 2012 StrategyFacts – all rights reserved Copyright © 2012 StrategyFacts – all rights reserved

3. Challenges and Implications for Players along the Value Chain
“Winners and losers – the game isn’t over yet; get your act together!”
Asked about the challenges the respondents believe that the Marketing Service Providers and Card Issuers are also expect-
general availability of NFC-enabled smartphones (72%) and ed to be impacted significantly.
trust in security and privacy (62%) will post the biggest chal- Point-of-Sale Manufacturers and Merchants are seen to get
lenges for consumers while merchants are struggling with ad- the biggest operational benefits, specifically additional or new
ditional cost to upgrade their Point-of-Sale infrastructure (82%) revenue streams and lowered cost.
and missing interoperability standards (53%). Network Operators (45%) and Marketing Service Providers (39%)
NFC-based technology brings new players to the ecosystem are seen to have the best starting position to grow along the
and causes disruption in the value chain. Trust and Service value chain.
Manager and Wallet Platforms are seen to have the best po- But there aren’t just winners - Card Issuers, payment-focused
sitioning with 38% believing that their business model is safe. Wallet Platforms and Payment processors are expected to suf-
Marketing Service Providers are expected to suffer. fer the most – defensive strategies require careful thinking and
Although Wallet Platforms have a good starting position they execution.
are expected having to deal with disruption to their business If Wallet Platforms take a strong integration role (e.g. as main
model (36%) in the future if they stay focused on payment only; service hub) they are well positioned.
Future Role of the Big 4 - Google, Apple, Amazon and Facebook
“Google and Apple will play – they will face stiff competition”
73%
While Google is already in the market with Google Wallet and Google is clearly expected to be in a
expected to be the strongest contender it will be closely fol- dominant role, Apple follows –Amazon
and Facebook are seen less dominant
lowed by Apple. Amazon and Facebook aren’t seen as strong
players (figure 4).
Although equipped with valuable assets Google hasn’t won Google 73,3%
yet; whether Google’s approach with Google Wallet will help
to rule competition and define the standards of the industry
is not proven yet. Although Motorola can be seen as a strong Apple 56,9%
asset, Google is not likely to benefit from it. Motorola is not
seen as a Trojan horse for Google to manipulate the market;
also the close integration of Google Services into Motorola Amazon 25,3%
devices is – at this time - not considered to be a big threat to n = 221
competitors.
Facebook 21,7%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Copyright © 2012 StrategyFacts – all rights reserved
Conclusion
NFC-contactless payment is at the turning point to become in a leading position. Whether this party will come from an exi-
widely accepted. Although it will co-exist with other technolo- sting market member or be one of the new contenders is not
gies the inherent marketing advantages will make it a winner clear yet. The race is open and significant disruption to be ex-
in the mid-term. Closer interaction and more intimate know- pected.
ledge about the consumer at the point of sale are the biggest Read more in our full report with more than 270 pages of de-
drivers for success. tailed data, deep analysis of various dimensions and signifi-
The party which is able to monetize on this marketing oppor- cant additional insights into the future of NFC-contactless pay-
tunity and wisely supports the rollout of the technology will be ment.
Description of the Study Order the Full 270-Pages Report
Type: Expert Research (Primary Research) Full report: 270 pages with about
Method: Online Questionnaire 300 charts and detailed data
Expert Group: Experts in the area of NFC, Contactless Price: € 2,400 (digital copy,
Payment and aligned value added ser- single user license)
vices. Handpicked experts from around ORDER ONLINE: www.strategyfacts.com/nfc
the globe and from various industry do-
mains were identified and invited
Survey Timeframe: Nov. 14th and Nov. 29th, 2011 DIRECT ORDER WITH INVOICE:
StrategyFacts GmbH
Total Participants: 734 with 221 completed responses. Only Dr. Ralf Kaumanns
completed online surveys were used for Managing Director
evaluation in this study kaumanns@strategyfacts.com