Not wallet wars, but certainly skirmishes

Google has chosen the UK as the second market for its mobile wallet service, with a trial set for early next year ahead of the London Olympics

[From Finextra: Google Wallet coming to UK ahead of Olympics – report]

When I was chatting about this with someone yesterday, we agreed that things are looking for mobile proximity in 2012. And indeed they are. But I couldn’t quite shake off the nagging feeling that something is still unresolved. There is a tension in the air between mobile operators and other stakeholders (e.g., banks).

Remember NFC was a construct of the NFC Forum, a group formed in 2004 to design a new protocol that could be controlled by MNOs and Handset MFGs. Again.. it was designed for CONTROL….

[From NFC – Announcements Galore ! « FinVentures]

Ouch! But Tom is spot on. From the mobile operators’ perspective, this is fine and, as I’ve noted before, there are some genuinely good reasons for opting for a SIM-based NFC ecosystem. Consumers already understand SIMs and they understand that moving a SIM from one handset to another moves their “identity”, so they would reasonably expect their payment cards and such like to go with it. Mobile operators in many countries have already gone live with services using this model.

This follows the launch earlier this month by Turkcell of its own branded Android NFC phone from Chinese manufacturer Huawei. The phone stores MasterCard Worldwide PayPass applications on SIM cards the telco issues. The operator launched the Huawei handset July 7 and has it on sale in about 1,000 shops in Turkey, as it continues to roll out its NFC mobile wallet, called Cep-T Cüzdan. Subscribers with NFC-enabled SIM cards can pay with a PayPass application issued by either of two banks, Yapı Kredi and Garanti bank, with applications from more banks and other service providers planned to launch by the end of the year

[From NFC Retailers Blog » Turkcell to Expand NFC Rollout with More Branded Phones, Applications]

Why does this matter? Well, it’s because there are people (like me) who really believe that mobile wallets are the next big thing.

An NFC-based mobile wallet that “will work with not just Visa cards from multiple banks, but other cards like American Express,” is set to be introduced in August or September next year, Visa Europe commercial director Steve Perry told delegates at the payments network’s security summit in Frankfurt last week,

[From Visa Europe plans NFC wallet • NFC World]

The mobile operators are developing wallets, the schemes are developing wallets, Google already has a wallet, Visa in the USA not only has the “V.me” wallet but is building a developer community around it. There’s going to be some competition developing in this space, and even the most rudimentary analysis of the emerging ecosystem would immediately alight on the control issue that Tom highlights as a potential point of conflict.

And guess what? While this post was in a first draft, the interweb tubes delivered this…

Verizon Wireless said it is still negotiating with Google about installing the wallet, which it said must be integrated into “a new, secure and proprietary hardware element in our phones.”

[From Verizon Blocks Google Wallet on New Smartphones – WSJ.com]

This is precisely as predicted. The battle for the secure element has been seen by some as an obscure techie dispute over keys and crypto, but it has serious implications for future commerce business models (since future commerce will be mobile-centric to the foreseeable horizon). And the idea that the operators’ decision to go with SIM-based SEs is the end of the discussion is just wrong.

This model may be disrupted, because it was founded on the assumption that the SE would be under the control of the MNO and that the TSM would have to cut a deal with the MNO to rent the SE space (what you’ll often here telco people refer to as the “apartment model”).

[From Google are legitimising NFC, mobile operators should be playing with it]

But if the SE isn’t under MNO control (as in the case of the Google Wallet, which uses the SE in the Google handset rather than the Verizon SE on the SIM) then both the operators and the payment providers will have to cut a deal with the handset guys and Google and Apple will be in control. Fascinating. Banks, in particular, have found it hard to work with mobile operators and it’s taken a lot of hard work just to get where we are. If they now have to begin working with handsets too, life is going to get complicated. Is this doom of both the banks and the operators to become background utilities? And if it is, so what?

I expect to see these and other topics at the intersection of business and technology to be discussed at the International Payment Summit in London on March 12th-15th 2012. We’ve been working with our good friends at ICBI to develop a great programme [download PDF] for this major annual event, to the extent that there will be a special Future of Money Summit on 12th March including Consult Hyperion, HSBC, PayPal, Nokia, Monitise, Wizzit, Telefonica, Equens and many more. ICBI have very kindly given me a delegate pass to the Future of Money Summit and the three days of the conference worth an astonishing TWO THOUSAND FIVE HUNDRED AND NINETY EIGHT POUNDS plus VAT to give away on this blog as a competition prize. So if you are going to be in London on those dates and you’d like to come along to learn more about the state of the art in the world of payments, all you have to do is be the first person to respond to this post with the name of the Orange NFC handset with Barclaycard payment capabilities for sale in the UK market as of 1st December 2011.

In the traditional fashion, this competition is open to all except for employees of Consult Hyperion and members of my immediate family, is void where prohibited and has not been tested on animals. The prize must be claimed within three months. Oh, and no-one can win more than one of the Tomorrow’s Transaction Blog prizes per calendar year.

(If you don’t win, don’t despair: register using the Tomorrow’s Transactions VIP code FKN2323CHYP and you can still benefit from a 30% discount. For the latest programme or to register online, please visit http://www.informaglobalevents.com/FKN2323CHYP.)

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Consult Hyperion or any of its clients or suppliers