Mobile industry too focused on NFC: part 2

Guillermo Escofet/Informa Telecoms and Media
05 Nov 2012

Old and new doubts are surrounding the global NFC market, including concerns that there are still no convincing examples of enthusiastic user adoption of NFC payment services.

[Continued from part 1]

What about the secure element?

The first wave of NFC-chipped smartphones might not have launched with the “secure element” necessary for authenticating NFC payments, but many do come wired with a connection between the NFC chip and the SIM card called Single Wire Protocol (SWP), allowing especially-adapted SIM cards to be loaded on the phone which can act as a secure element. According to the GSMA, there are 53 such SWP-enabled phones commercially available today.

SWP is key to the operators’ ambitions of securing a place in the mobile NFC payments value chain, since SIM cards are the only piece of handset real estate over which they still have control. By controlling the authentication of contactless payments on phones, they aim to get a slice of the revenue generated by these payments. And they plan to do that by charging SIM-space rental fees to NFC app providers, such as banks, retailers and transport companies. But it’s yet not clear how operators will price these fees and whether app providers will be willing to pay them, regardless of price.

A representative of French bank BNP Paribas speaking at last week’s summit referred to a recent survey that found that French consumers would be willing to pay a premium of up to €2 ($2.60) a month for mobile NFC services. The implication there is that app providers could pass on the cost of SIM-rental fees to customers. In China meanwhile, leading operator China Mobile - which is rolling out mobile NFC payments with local card-payment network China UnionPay across 50 cities - plans to charge both app providers and users.

But surveys in most other countries have consistently shown that consumers would be unwilling to pay a premium for the convenience of tapping their phone to make instant payments. And most banks will tell you that they are not prepared to pay SIM-rental fees that exceed their current card-issuing costs. Retailers, meanwhile, are unlikely to want to pay any fees at all.

And, of course, operators are competing with rival visions on how to secure mobile NFC transactions. Smartphone OS and hardware providers that have built mobile app ecosystems around their brands, such as Google, RIM, Nokia and Samsung, are pushing for secure elements embedded in phones to roll out services independently from operators. Meanwhile, banks have been trialling secure elements in microSD cards or smart stickers to roll out services without relying on either operators or handset/OS providers.

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