Beyond the wallet: New adventures in NFC

16 Oct 2008

In the wide array of wireless applications that have come and gone over the years, few have seemed like such a sure win as contactless payment cards armed with short-range RF chips. The prospect of paying for exact-change services like public transport and toll booths, or small purchases such as a snacks/drinks run at a convenience store, with a card loaded with electronic cash sounds like a no-brainer. And typically, those who have tried it swear by it. For example, MasterCard Worldwide, which issues contactless payment cards under its PayPass brand, cites its own customer surveys in 2006 and 2007: 90% are satisfied with the cards, 87% said the cards exceeded expectations, and 96% will keep using them.

Little wonder the contactless cards business is growing. According to international smart card specifications association GlobalPlatform, the number of deployed smart cards using its specs alone has grown 15% since October 2007, from 265 million to 305.7 million worldwide.

And if contactless cards sound like a sure-win, then an even surer win would be putting contactless technology on mobile devices. Japanese cellco NTT DoCoMo has been driving that point home with the growing success of its Osaifu-Ketai 'mobile wallet' service, which uses Sony's FeliCa contactless technology and has amassed 47 million Osaifu-Ketai users in the past three years.

Outside of Japan, companies like NXP, Inside Contactless and Infineon Technologies have been championing near field communications, a rival to FeliCa that has the backing of the GSM Association, which wants to enable GSM-based handsets worldwide with NFC capabilities. The GSMA has been encouraging the development of a supporting ecosystem that includes a UICC (Universal Integrated Circuit Card) to host secure apps and a so-called Trusted Service Manager (TSM) platform designed to help banks and mobile operators distribute, configure and activate payment applications on the UICC. (See sidebar, 'UICC 101' on p. 18 for more on the UICC.) Some 45 cellcos, as well as credit card companies Visa International and MasterCard Worldwide, are involved in the GSMA's Pay-Buy-Mobile initiative, although only seven cellcos - including FarEasTone, KTF and, most recently, Softbank Mobile - have live trials running under the program. That said, another seven are expected to kick off before the end of the year.
For the most part, analysts are bullish about the prospects of NFC-based mobile phones. Market consultancy Strategy Analytics forecasts 250 million NFC-enabled phones sold worldwide by 2012. Juniper Research is even more bullish, projecting 700 million mobile subscribers with NFC phones by 2013.

But while much of the buzz is being driven by the prospect of turning phones into wallets, vendors and operators are already looking beyond the micropayment concept, says Cyril Annarella, senior VP of Asia marketing for the telecom business unit of Gemalto.

'Operators are facing a dilemma with NFC payments,' he says. 'They know transportation access can drive the numbers and mobile micropayments can secure the high-end customers. However, when you look at the business model and the relationships between the mobile operators and the transport authorities and payment authorities, there are limited margins to be made by operators for these two apps.'

Consequently, Annarella adds, 'Some operators are being very creative and thinking of their role in NFC and how they can redefine themselves, or which part of value chain they should own.'

Smart posters

For example, one particular app being tested in a number of markets is one that actually reverses the concept of mobile NFC - rather than turn your handset into a smartcard, why not turn it into a smartcard reader‾

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