Chinese Projected to Do $8 Billion in Contactless-Mobile Transactions in 2014

Chinese consumers will conduct $8 billion worth of contactless-mobile payments in 2014, up from about $900 million in payments this year, forecasts research firm ABI Research.

In its new report, Mobile Payments in China, the U.S.-based research firm projects a relatively slow ramp up of full NFC phones in the country, with just 7 million shipped in 2014. There were fewer than 50,000 shipped last year, according to ABI.

The 7 million NFC phone shipments would be only a very small fraction of the total number of subscriptions among China’s three mobile operators, which topped 860 million as of last March.

“It’s partly cost; we’ve seen greater interest with bridging solutions,” John Devlin, ABI’s senior practice director, autoID and smart cards, told NFC Times. “It’s going to be two or three years before more handsets will be available with NFC.”

Until then, Chinese telcos will make more use of bridge technologies, mainly flexible antennas connected to SIM cards that can give non-NFC phones a contactless interface. ABI projects these to rise from 2.5 million units in 2010 to 6.5 million in 2014. There are also some SD cards with flexible antennas being shipped.

The SIM-based flexible antenna units shipped to date are the SIMpass product from China-based Watchdata. No. 3 mobile operator China Telecom has been rolling it out. China’s other two telcos, China Mobile and China Unicom, have also tried it. Watchdata last December announced it had shipped more than 2 million SIMpass units, nearly all of them in China.

China Mobile had been promoting its own proprietary contactless-mobile technology, RF-SIM, as part of an attempt to move into the mobile-payment market. But the giant telco largely abandoned the technology last year. It will use contactless technology supporting the standard 13.56-MHz frequency, like Unicom, China Telecom and Chinese payment network UnionPay are supporting, with backing from the Chinese government. UnionPay has a rollout plan for contactless terminals.

China Mobile and China Unicom appear to be more fully behind full NFC technology, however, either with applications stored on embedded chips or SIM cards. China Mobile is still interested in getting a bigger piece of the mobile-payment pie, which is the main reason it bought a 20% stake in the Shanghai Pudong Development Bank last year.

Some observers believe NFC phone shipments will be higher than 7 million in three years, with Chinese handset makers working on low-cost NFC handsets. At least one China-based chip maker, Shanghai Fudan Microelectronics, has developed an NFC chip.

With Chinese telcos impatient to introduce contactless-mobile payment, ticketing and city applications, China could remain the largest market for bridge technologies for some time to come.

“In 2014, we see the time when that will start to change, and NFC handsets will start to outstrip bridging solutions for the first time,” said ABI’s Devlin.

 

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