Beyond the wallet: New adventures in NFC

In the wide array of wireless applications that have come and gone over the years, few have seemed like such a sure win as contactless payment cards armed with short-range RF chips. The prospect of paying for exact-change services like public transport and toll booths, or small purchases such as a snacks/drinks run at a convenience store, with a card loaded with electronic cash sounds like a no-brainer. And typically, those who have tried it swear by it. For example, MasterCard Worldwide, which issues contactless payment cards under its PayPass brand, cites its own customer surveys in 2006 and 2007: 90% are satisfied with the cards, 87% said the cards exceeded expectations, and 96% will keep using them. 

Little wonder the contactless cards business is growing. According to international smart card specifications association GlobalPlatform, the number of deployed smart cards using its specs alone has grown 15% since October 2007, from 265 million to 305.7 million worldwide.

And if contactless cards sound like a sure-win, then an even surer win would be putting contactless technology on mobile devices. Japanese cellco NTT DoCoMo has been driving that point home with the growing success of its Osaifu-Ketai 'mobile wallet' service, which uses Sony's FeliCa contactless technology and has amassed 47 million Osaifu-Ketai users in the past three years.

Outside of Japan, companies like NXP, Inside Contactless and Infineon Technologies have been championing near field communications, a rival to FeliCa that has the backing of the GSM Association, which wants to enable GSM-based handsets worldwide with NFC capabilities. The GSMA has been encouraging the development of a supporting ecosystem that includes a UICC (Universal Integrated Circuit Card) to host secure apps and a so-called Trusted Service Manager (TSM) platform designed to help banks and mobile operators distribute, configure and activate payment applications on the UICC. (See sidebar, 'UICC 101' on p. 18 for more on the UICC.) Some 45 cellcos, as well as credit card companies Visa International and MasterCard Worldwide, are involved in the GSMA's Pay-Buy-Mobile initiative, although only seven cellcos - including FarEasTone, KTF and, most recently, Softbank Mobile - have live trials running under the program. That said, another seven are expected to kick off before the end of the year.
For the most part, analysts are bullish about the prospects of NFC-based mobile phones. Market consultancy Strategy Analytics forecasts 250 million NFC-enabled phones sold worldwide by 2012. Juniper Research is even more bullish, projecting 700 million mobile subscribers with NFC phones by 2013.

But while much of the buzz is being driven by the prospect of turning phones into wallets, vendors and operators are already looking beyond the micropayment concept, says Cyril Annarella, senior VP of Asia marketing for the telecom business unit of Gemalto.

'Operators are facing a dilemma with NFC payments,' he says. 'They know transportation access can drive the numbers and mobile micropayments can secure the high-end customers. However, when you look at the business model and the relationships between the mobile operators and the transport authorities and payment authorities, there are limited margins to be made by operators for these two apps.'

Consequently, Annarella adds, 'Some operators are being very creative and thinking of their role in NFC and how they can redefine themselves, or which part of value chain they should own.'


Smart posters

For example, one particular app being tested in a number of markets is one that actually reverses the concept of mobile NFC - rather than turn your handset into a smartcard, why not turn it into a smartcard reader‾

That's the basic concept behind 'smart posters', in which mobile users can beep NFC-enabled handsets over RFID tags on advertising posters and displays to access info and promotional items.

'Smart posters can enable users to learn about a product or offer, get coupons, subscribe to services, vote in contests, get directions and download ringtones,' says Ismael Lavergne, business development director for VivoTech. 'They can even make restaurant reservations or call a taxi.'

What's more, the information can be tailored to match the user's location and personal profile, he adds.

'When the user taps the poster, the handset is automatically connected via the mobile network to the backend system that logs the user's ID and the tag ID, so that it knows who you are and where you are,' Lavergne said. 'Then the server sends back the relevant information that can be tailored both to you and the physical location of the poster.'

Smart posters are already being trialed in a handful of Asia-Pac markets by cellcos already running mobile contactless payment trials. In October this year, SoftBank Mobile teamed up with NTT Data, Hitachi and Gemalto to create smart posters for the Disney film WALL-E. Select trial users can use their handset to scan the RFID tag on the poster to download movie stills and trailers. Users who own compatible Hitachi HDTV sets can also get an access code for an HD trailer via Hitachi's content distribution service.

In Singapore smart posters also figure into an NFC pilot launched earlier this year with local contactless payment firm NETS, SingTel, United Overseas Bank and VivoTech. As well as creating a wallet app for the existing NETS contactless payment system with OTA top-ups, the pilot includes an m-coupon app in which users can tap mNETS posters or other smart posters to download promo coupons that can be redeemed at NETS POS terminals.

Meanwhile, MasterCard's NFC pilot project with Taiwan Mobile and Fubon Bank also includes a smart poster trial. One poster for a movie theater awards the user a coupon for free popcorn, while another poster for the Taco Bell Mexican fast food chain promotes a daily special deal, explains Sophia Tso, associate VP of product sales and delivery for MasterCard Worldwide Asia-Pacific.

'To get the details, the user must pass the phone over the chip, and because the actual information is hosted at the backend, Taco Bell can engage its customers with a daily special but doesn't have to print and place different posters every day,' Tso says.

Tso says the beauty of the smart poster concept is that 'it's a simple application, but very effective, and it can foster brand loyalty and recognition as well as create pull marketing to a targeted customer base.'

Better than barcodes

Of course, the same can be said for similar solutions already up and running. Advertisers in many markets, for example, make use of SMS short codes to engage users.


And in a growing number of markets, 2D barcodes offer the same service with a different interface.

But Lavergne of VivoTech argues that NFC trumps 2D barcodes out of sheer convenience. Using an embedded barcode scanner on a Nokia N95, for instance, requires opening two menu pages before activating the barcode app and then being asked to scan the barcode.

'With an NFC phone, you just tap the tag. It's a much simpler process,' says Lavergne.
That's key, he adds, because one of the most crucial elements to making mobile NFC a success is ease of use. 'If you have to click 'yes' ten times to download something, people will say 'no' and stop using it.'

Lavergne adds that NFC-enabled displays have an advantage over other short-range wireless technologies like Bluetooth - which is also being tested as a possible channel for directing targeted, location-based ads and promotions at passers-by - in that they don't rely on detecting active signals and pushing content to nearby users.

'It's not intrusive, and it's not spam because the user has to initiate the process,' he says.

DIY tagging

Meanwhile, Alcatel-Lucent Ventures, via its Bell Labs credentials, is aiming to take this idea a step further with 'tikitags', an RFID app with a high-concept approach: to 'increase the value of everyday items by connecting them to online content or applications'.

For example, says Anthony Belpaire, Tikitag GM for Alcatel-Lucent Ventures, 'A teddy bear can have a tag that links to an online story or game starring that bear. Or you can stick a tag onto a picture of a family member, and tapping that tag could initiate a phone call to the person in the picture. If it's a picture of the kids, then the kids can tap the picture when they come home from school to send a message to the parents at the office letting them know their kids arrived home. You can even put a tag on a souvenir bought during a vacation that links to an online photo album of pictures you took during the trip. '

Tikitags are primarily a consumer-oriented DIY affair - customers can buy a USB card reader and a box of 25 tags for $50 on - but Belpaire says that tikitags have non-consumer uses as well, from enabling art galleries to link paintings to Wikipedia profiles of painters to logistics apps like an office cleaner checking off each cleaned area with a tap of an NFC device.
One notable aspect of the tikitag approach is that it's a service-based solution, at the heart of which is an application correlation server (ACS) from Alcatel-Lucent that manages the link between an NFC tag and the corresponding online content and applications.

'We don't hardwire info into NFC tag. We want to minimize that and use only the unique ID and no other information,' Belpaire explains. 'The ID is provided to service, which looks up the app that needs to be configured.'

There are a couple of advantages to this approach, Belpaire says. For a start, it's open to third-party apps developers who can make their apps available on the tikitag website. Also, users don't have to worry about the extra security issues that come with stored value apps on an NFC chip.


'All the logic is managed centrally, which means you just need traditional database security,' Belpaire says.


Coming back to the payments side of mobile NFC, another potential app under development for UICCs is a P2P function under which mobile users can transfer money directly between two phones by tapping them together.

According to Annarella of Gemalto, the P2P idea takes its inspiration from SMS-based remittance services such as Globe Telecom's G-cash, where users can transfer money from one handset to another by SMS. The limitation with such services, he says, is that they are aimed at users in emerging markets who don't have ready access to points of sale to get their money.
'If you receive a G-cash transfer, you have to go to a bank or a POS to actually get the cash before you can use it,' Annarella says. 'But the service is aimed at people who don't have bank accounts to begin with, or live in underdeveloped areas where the POS is just one local village shop, and even if your handset is NFC-enabled, the shop may find it too expensive to invest in the POS equipment to accept NFC payments. But with P2P, the shopkeeper's mobile phone could become the card reader.'

A recent spec finalized by the NFC Forum in July called Connection Handover expands this concept to multimedia files rather than money transfers by making it possible for NFC devices to connect via other wireless technologies embedded the device, such as Wi-Fi or Bluetooth. The Bluetooth SIG has already incorporated NFC as part of its Bluetooth 2.1.specification to make pairing of Bluetooth devices as easy as touching them together. The NFC Forum's Connection Handover spec is aimed at allowing devices to choose different carrier links depending on, for instance, the size of the file to be transferred.

Nice app, shame about the handsets

Whatever applications end up driving mobile NFC, all of them are still waiting for the underlying NFC ecosystem to happen. The runaway success of Osaifu-Ketai in Japan aside, mobile NFC is firmly locked in the trial stage as the ecosystem of banks, cellcos, merchants and equipment makers needed to make it work continues to evolve. While the banks have been a roadblock in the past, primarily due to either stricter security requirements or tough local financial regulations, the key barriers these days - according to Juniper Research - are resistance from merchants and a dearth of handset choice.

Gemalto's Annarella says that the merchant issue depends on the market. 'Apart form the cost issues in developing markets in putting in readers in POS shops, it depends on what's already in place,' he says.

For example, in markets like Hong Kong and Singapore where contactless payment is common but already dominated by one provider - Octopus and NETS, respectively - it's much harder for Visa and MasterCard to come in and ask merchants to install more card readers.

But the most crucial element is getting handsets on the market. Despite the GSMA's enthusiastic push for NFC-based mobile payments, its specs for handset requirements such as the user-interface and l