Contactless payments from smartphones and wearables is still a small segment of the payments market, but might see a surge in usage over the next two years, according to Juniper Research.
The research firm predicts the value of the smartphone and wearable contactless payments to rise from $35 billion to $95 billion in 2018.
Juniper claims that smartphones will account for the vast majority of non-card contactless payments, asserting that “while nearly nine million Apple Watches had been shipped by the end of 2015, these numbers were dwarfed by near field communication (NFC)-capable iPhones.”
It should also be noted that other non-iPhone devices also possess NFC capabilities. These smartphone sales extend the gap between smartphone and wearables capable of contactless payments. As a result, Juniper expects that wearables will account for just two percent of all contactless payments by 2018.
Smartphone manufacturers will take up the lion’s share of contactless payment usage, according to Juniper, while wireless carriers continue to see their shares in the market dwindle. The research firm believes that new encryption and secure elements in smartphones make manufacturers own payments services much more practical than what wireless carriers and other third-party providers can offer.
Apple’s NFC entry as contactless “tipping point”
That may lead to third-parties partnering with manufacturers, to ensure their application is the best payments service for smartphone users.
Juniper considers Apple’s “entry into NFC gave the industry a much-needed boost, and could well be the tipping point for the technology,” but the entry also meant the death of wireless carrier projects.
Apple definitely brought renewed excitement into the mobile payments industry, which was looking grim before the launch of Apple Pay. It also made banks in the United States and United Kingdom look twice at contactless payments.
Since the launch of Apple Pay, we’ve seen Samsung launch its own payments service, called Samsung Pay, which uses MST instead of NFC to reach millions of non-connected card readers. Google also took a second stab with Android Pay, the successor to the unsuccessful Google Wallet.
Xiaomi, Lenovo, and LG all are rumored to have contactless payment services on the way, proving Juniper’s point that the future of mobile payments will be in the hands of the manufacturers, not wireless carriers or third-parties.