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NFC Technology Keeps its “Hypergrowth” Status

If you’re as bullish as we are about mobile payment growth, you might not want to hear what Gartner has to say in its new report.

The research firm claims that the industry isn’t proliferating as fast as analysts previously predicted.

For example, Juniper Research estimated mobile payments would hit $240 billion this year, and catapult to $670 billion by 2015.

But Gartner is not convinced.

Its numbers are a bit more conservative, projecting that mobile payments will experience 38.2% growth this year. That means worldwide payments will only reach $86.1 billion in 2011.

According to the firm, the biggest “hurdle” NFC faces “is the need to change user behavior by convincing consumers to pay with mobile phones instead of cash and cards.” And without that motivation, “mass market adoption of NFC payments is at least four years away.”

For starters, understand that a 38% growth rate is phenomenal, anyway.

But even more importantly, I’m not convinced this “mass market adoption” will take four years.

You see, I’ve been tracking some recent developments that show how the race to deploy Near-Field Communication (NFC) functionality is only gaining momentum… not losing it. 

Let me show you why Gartner is wrong.

NFC’s New Growth Phase

As we’ve discussed before, interest in NFC technology has seen a huge boost this year.

In May, for instance, the biggest contender in the space, Google (Nasdaq: GOOG), announced plans to launch its Google Wallet application later this summer.

And if you recall, an NFC chip installed in a smartphone powers this platform. The chip stores credit card information, loyalty information and coupons so you can make payments at local retailers using only your mobile phone.

Well, since our first look at the breakout potential of NFC technology, a number of industry giants have signed up to incorporate NFC chips into their consumer products.

~PayPal Talks Up NFC Plans: On July 13, PayPal took its first step towards NFC adoption. It unveiled a service that allows Android users to transfer funds between NFC-enabled mobile devices, simply by tapping them together.

PayPal already supported a similar feature using Bump Technologies’ accelerometer-based application. And as the company says, “We’ve been looking at NFC technology for a while and saw a tremendous opportunity to combine the best of NFC and the best of PayPal.”

~ISIS Now Backed By Four Major Credit Cards: ISIS, a joint mobile payment venture between AT&T (NYSE: T), Verizon (NYSE: VZ) and T-Mobile, just announced partnerships with three new credit card companies: Visa (NYSE: V), MasterCard (NYSE: MA) and American Express (NYSE: AXP).

With Discover (NYSE: DFS) already in the mix, ISIS is now “the only mobile payment product that accepts all four major payment networks,” according to E-Commerce News.

This is huge, considering support from credit card companies is crucial to NFC’s survival.

As Tole Hart, senior analyst at the Yankee Group says, “ISIS had to gain the support of all the major credit cards to gain legitimacy with merchants… [and] the early holdup with credit card companies as to fee distribution was settled.”

Sorry Gartner, but that’s not what I’d call evidence of an industry slowdown.

And when it comes to convincing consumers to ditch the plastic in favor of NFC, look no further than the history of the credit card itself.

Superior Technology Always Turns Heads

In 1950, one of the first credit cards, The Diners Club Card, was handed out to only 200 people and accepted at just 14 restaurants in New York.

Not the best incentive to leave your cash at home.

Still, despite pushback from merchants, and consumers’ reluctance to sign up with so few retailers involved, people quickly realized its potential. By the end of that first year, 20,000 people were using the card.

Considering MasterCard’s PayPass system alone is used in 300,000 retail locations in the U.S., I’d say NFC’s already off to a much better start.

Plus, once more consumers see how the technology streamlines day-to-day expenses, discounts and store loyalty bonuses, you can bet that “mass market adoption” won’t be far behind.

And certainly not four years behind. Stay tuned for more NFC updates.

Good investing,

Justin Fritz

Justin Fritz

, Executive Editor

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