The looming war over mobile payments

Tony Poulos
Billing and OSS Supplement

NFC should be a raging success outside of Korea and Japan, but it simply is not.  It's a matter of different worlds colliding.

The traditional payment handlers such as banks and credit card issuers have the credit and distribution channels sown up as well as all the important merchants, and it has taken them years to get to that position. The transport authorities were quick to jump on the benefits of NFC and high throughput of passenger numbers, but they have their own NFC cards and top-up methods.

The idea of putting NFC functionality in a mobile handset adds many benefits such as convenience, especially if multiple "cards" can be stored on one device, and the security of the card issuer having the ability to disable a stolen or lost device simply by sending it a direct message via the mobile network.

The take-up issue is not one of technology or customer acceptance, it's all about trust and who gets a cut of the action. The credit card companies and issuing banks have a cosy revenue arrangement that they simply do not want to share. The CSPs want to get some of this action or charge "rent" on their SIM and provide the necessary security. The transport companies have already made the investment on their own closed systems and don't like the idea of sharing their meager margins with anyone.

Add to this the fact that banks have become very wary of CSPs worldwide, firstly because of the success of their prepaid offerings, and secondly their move into traditional banking areas by offering mobile banking and mobile payments particularly in markets that banks have not been able to address. The final nail in the joint NFC coffin was the realization that if all the parties were to work together successfully they would need another party, a trusted service manager, to act as the arbitrator for all the others. Yet another cost the players simply could not afford.

The result is that all the parties appear to have parted ways and are doing their own thing. We are seeing the card giants like Visa and MasterCard running trials with handset makers and we are seeing CSPs offering card and payment services via their own handset and SIM combinations. The latest technology even removes the need for a special NFC handset by adding stickers, SIM overlays, microSDs and other technologies to the handset.

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