The global adoption of contactless payments, the leading application facilitated by near field communication (NFC) technology, is being hindered by security concerns, according to a report by wireless semiconductor analyst house ABI Research.
Industries wishing to deploy NFC technologies in credit cards and mobile phones to enable low-cost, cashless transactions are deterred from doing so by a lack of standards on the appropriate levels and methods of data protection, the report finds. The ongoing problem is a result of the number of stakeholders involved, including financial services institutions, mobile operators, NFC integrated circuit vendors and original equipment manufacturers, who are struggling to reach an agreement.
According to ABI senior analyst Douglas McEuen, global GSM operators are pushing to have security mechanisms embedded in the SIM card itself which would allow them to more easily monetise payment application management. Financial institutions, meanwhile, argue that the security mechanism should be included in the NFC chipset.
Contactless payments technology provides consumers with an easy-to-use, wave and pay mechanism for low-cost transactions, effectively eliminating the need for cash. When embedded in a mobile phone handset the technology allows consumers increased choice around the payment mechanism which, according to research into consumer behaviour, encourages the user to spend more money — thereby increasing the profitability for all stakeholders involved.
Mobile payment technology offers financial services operators in particular a new means by which to squeeze more money out of their payments businesses, the profitablity of which has been severely diminished in recent years by a glut of regulation.
But growing concerns around protecting stored data, especially financial information, has led many financial service operators to treat the technology with caution.
ABI Research predicts, however, that adoption rates will soar once global standards have been agreed upon.