American Express has pulled its RFID-based key fobs off the shelf, but pundits say NFC-enabled phones hold better promise and RFID-based card usage should continue to grow…

American Express announced last week week that it is no longer offering its RFID-based ExpressPay payment product in a key fob form factor. Because they can be carried on a keychain, ExpressPay fobs have been marketed as a convenient alternative to the traditional credit card. But demand for the fobs was too low to support fob production, says American Express spokesperson Molly Faust.

How can we explain that? The consumer interest in RFID-based, or contactless, payment products is waning? Analysts who cover the industry say no but they’re not seeing a strong market for fobs.

MasterCard and Visa have introduced contactless payment products, but the form factor of such products is determined by the banks that issue them. Bank of America and Citibank have offered contactless Visa and MasterCard products in a fob form factor, but some consumers may be less comfortable with key fobs than with traditional cards even if the former do not have the cardholder’s name and account information printed on them.

According to ABI Research, the worldwide market for contactless technology in transportation ticketing and contactless payments grew more than 15% in 2007, as the technology made greater inroads into consumers’ lives worldwide. The market represents more than $200 million, and is expected to reach more than $820 million by 2013.

How to promote this market? The emergence of mobile phones equipped with RFID modules compliant with the NFC specification could boost the popularity of contactless payments. Contactless cards would be then an interim step to NFC phones, because NFC phones will bring additional benefits.

These benefits will include a greater penetration into what have traditionally been cash-based transactions, as well as faster provisioning of new accounts. With NFC phones, setting up an account will be almost instantaneous. Bruce Cundiff, research director for Javelin Strategy & Research, which advises financial institutions on e-commerce, agrees that NFC represents the area with the greatest traction for RFID-based payments. According to Faust, AmEx is very focused on NFC-based payments and is involved in technology trials based on the technology. But with Nokia the only handset maker offering an NFC-enabled phone in the U.S. market, adoption in this country is likely to be slow contrary to many parts of Asia where making payments with mobile phones is commonplace. 19 million contactless payment cards are currently in circulation in the US, according to a report realized by Aite Group, a research & advisory firm focused on financial services. As the number of payment fibs is small relative to the number of cards, the report did’t evaluate it.

To pay with your NFC phone! What’s your mind?

Source: http://www.rfidjournal.com