NFC market resists security, standardization issues

Featuring applications such as access control, ticketing, data sharing and advertising, near field communication (NFC) market is predicted to reach $10 billion with CAGR of 38 percent from 2011 to 2016. This is according to MarketsandMarkets that cited mobile payment application as the most attractive application of NFC technology. It includes both, in-store payment and on-line payment. It is expected to cannibalize the smart cards market for cashless payments, added the market research firm.

NFC is a set of standards for smartphones and similar devices to establish radio communication with each other by touching them together or bringing them into close proximity, usually not more than a few centimeters. Present and anticipated applications include contactless transactions, data exchange and simplified setup of more complex communications such as WiFi communication is also possible between an NFC device and an unpowered NFC chip, called tag.

NFC is a short-range communication technology that is integrated into mobile phones. It operates at slower speeds than Bluetooth, but consumes far less power and doesn't require pairing. NFC traces its roots back to radio frequency identification, or RFID. It allows a reader to send radio waves to a passive electronic tag for identification and tracking.

In 2011, mobile payment is the major factor driving the NFC market and it will continue to do so for next five years. Currently, security and lack of standardization are the two major issues related to this market. NFC technology is not completely secure and hence customers have many reservations to make payment via NFC device.

NFC market includes products such as NFC chips, tags, readers, NFC-based microSD cards and NFC-enabled SIM/UICC cards. NFC products market is highly fragmented and each segment reflects different trends. For example, NFC chip market currently is almost monopolistic with NXP Semiconductors holding more than 80 percent of the market share, whereas NFC tag market is highly scattered market with many players and flat competition. Both, NFC based SIM/UICC cards and microSD cards are not expected to reach their full potential as they will slide in to obsolescence due to integrated NFC mobile devices.