As we head back to Barcelona for Mobile World Congress again, there’s more talk about NFC and this time it’s not only coming from the operators.
In her state of the industry address at the GSMA NFC & Mobile Money Summit last fall in New York, GSMA Director General Anne Bouverot said that NFC is gaining traction globally, and it is certainly true the the number of handsets sold with NFC capabilities is steadily rising, even if most consumers neither know nor care that they have NFC. But it’s not just in phones: NFC is springing up in TVs, printers, cameras and all sorts of other consumer electronics. In our corner of the transaction treehouse, however, NFC means making contactless payments in retail environments. This hasn’t been going so well. As I said at the time, consumers can’t use NFC to ride the bus, which was my throwaway and prosaic benchmark of mass-market acceptability. But they might soon.
Madrid-based non-public bus operator Jiménez constellation is to introduce a brand new cloud-based NFC ticketing resolution that allows Nexus five NFC phones to be used as contactless ticketing readers at a “fraction of the value of ancient contactless reader infrastructures”. Ticktrack, developed by Spanish startup Aditium, uses host card emulation (HCE)…[From Spanish bus drivers to check tickets using NFC host card emulation – NFC Business Cards]
Interesting. Something has changed. There were handsets out there. There were announcements all the time about pilots, trials and even live services. But somehow the technology was (and is, to be honest) struggling to gain traction, and every time that Apple announce a new phone without NFC there are a plethora of articles about the death of NFC. If you do have a handset with NFC in it, let’s say one of the super new Samsung S4s, you can’t use it for much interesting. I can’t log in to my bank and load my credit card onto it, for example. All I can do with the NFC on my Android phone is use it as a slightly more convenient version of a QR code. Except in Canada, where I could download my Tim Horton app and buy coffee with a tap.
Something has definitely changed. What? Well, here’s a framing of problem that I often hear. The GSMA (and others) opted for an architecture that put the mobile operators in control. And there’s nothing wrong with that. The GSMA is the mobile operators. But — and let’s be frank, to move the sector forward — the banks and operators have found it difficult to work together. I don’t want to cause trouble, especially since Consult Hyperion advises both banks and operators, but I think we have to be honest and open up the discussions that everyone knows are going on behind closed doors.
These MNOs operate a TSM service and establish the trust. Technically perfect, but this is also the problem that get things stuck. It has no technical issues, it is political. The banks just do not want the MNOs in their food chain.[From EMV compliant NFC transaction from a mobile phone | The Abrantix Blog]
Maybe. And there is certainly evidence from the marketplace that banks will go to some lengths in order to avoid having to deal with the MNOs. This is despite countless attempts to work together. Personally, I suspect that some of this is down to the sheer hassle of it as much as it is to deep-seated strategic aversion to the Single-Wire Protocol (SWP), but it is nonetheless an observable phenomenon.
Bank of China (Hong Kong) is to introduce a microSD card based NFC payments service before the end of the year… BOC e-Wallet will initially be available for the Samsung Galaxy S4 LTE, Galaxy S III LTE, Galaxy Note II LTE, Galaxy S4, Galaxy Note II, Galaxy S III and LG Optimus G Pro smartphones.[From Bank of China launches NFC payments in Hong Kong • NFC World]
Phones such as the S4, as noted, already have NFC. So, you might wonder, why bother putting a microSD NFC card into a phone that already has it if not to go around the MNO? This is the nub of the problem. In the complicated (but, let’s be clear, very secure) SIM-based SE model, the MNO calls the shots. And that has turned out to be a significant barrier to progress. It’s not impermeable: in some places (Canada and Australia spring to mind) where there are highly concentrated industries (ie, a small number of big banks and a couple of dominant MNOs) and a determination to work together despite thin margins there are now multiple handsets and multiple banks with functioning implementations in the market.
So what has changed? Why are the Canadian coffee chain and the Spanish bus company investing in NFC ? Well, the most interesting case study from Mobile World Congress last year was, as I have said before, BankInter in Spain. They launched what we called at the time a “NOSE” (NO Secure Element) payment service that uses tokenization to shift the risk analysis balance away from SE levels of security. The reason why this was such an interesting case study was that Bank Inter own an MNO. When you own an MNO, and still find it too much hassle to launch a SIM-based NFC payment service, that has to tell you something about the chosen model. Last year I called it an earthquake, and I stand by that.
Technically, what they did was to use a version of Android that had Host Card Emulation (HCE). At high level, this means that handset can pretend to be a payment card rather than having to have the SIM involved. When last year Google announced that HCE would become part of Android and that there would be no need to patch any more, a lot of people suddenly regained interested in the technology. The responses to this technology change have been very interesting indeed, as they seem to indicate considerable latent demand for a technology that we were being told was finished.
“With the entry of HCE we are free”[From Spanish bus drivers to check tickets using NFC host card emulation • NFC World]
It wasn’t the technology that was the problem, it was the business model. Having previously criticised the SIM-centric model (with genuine integrity and, I think experience has shown, real cause), I stand in testament to the GSMA’s commitment to explore different views on this important topic and I am delighted to be able confirm that I will be giving part of the breakfast briefing on “HCE: NFC Threat or Opportunity” at the Mobile World Congress in Barcleona on Wednesday 26th February at 8.30am. I am genuinely looking forward to this as I personally think that there is an opportunity for mobile operators to use HCE to revitalise NFC in the mass market and, along with BLE, find new and more flexible business models that will make sense to financial services and other sectors. I expect to learn a lot from my fellow panelists and I look forward to seeing you all there.
Samsung S4 has embedded Secure Element (eSE). Yet, in many countries MNOs are (successfully!) putting pressure on Samsung to restrict access to that eSE (for payments). Talking about being part of the problem…
The simplest way around that, especially with non-NFC phones, is a humble $1 sticker (used for authentication) linked to cloud services. “Asymmetrical” solution which is impossible to block.