Cellcos losing faith in NFC payments

Caroline Gabriel/Wireless Watch
20 Jan 2014
Daily News

Last year saw the peak of cellco enthusiasm for mobile payments as a way to generate a value proposition they could control and profit from. With web providers like Google, PayPal and Square increasingly taking the helm, mobile operators' efforts are in disarray.

Telefonica's O2 UK has cancelled its mobile wallet initiative; Bouygues in France has put its own NFC smart-phone project on hold; the US poster child for carrier-driven payments, Isis, has hardly lived up to its potential and its members are experimenting with alternatives.

Mobile payments are an important business for cellcos in emerging markets with a large “unbanked” population, as the success of Vodafone's M-Pesa in some African countries demonstrates, but the developed economies are a different matter.

One of the problems has been the cellcos' focus on NFC as the dominant technology allowing smartphones to make contactless payments and other transactions. Because NFC is usually deployed tightly integrated with the SIM card, for security reasons, it presented a platform which operators could control.

But payments giants like eBay's PayPal have been cool on NFC and promoted alternatives that play better to web models and do not require new investment in merchant infrastructure and devices. The rise of cheaper options than NFC will deal a significant blow to cellco initiatives and enthusiasm this year.

According to new research from Ovum, the main hope for cellcos lies in a new cloud-based version of NFC, HCE (hosted card emulation), which simplifies provisioning and increases security by centralizing management – a function operators could naturally carry out.

However, the first major to support HCE is Google, which recently deployed the technology precisely to sideline the carrier – making it easier to emulate a payment card in an NFC-capable Android phone without any carrier involvement. And even if the carriers can seize back control of HCE in other markets, they will need the all-powerful payment card players to get behind it, and so far they are hesitant.

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