Mobile payments war looming

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.

The recent news that Verizon Wireless and AT&T are planning a joint venture to break Americans' love affair with plastic and sideline Visa and MasterCard is a clear sign that the gloves are off. According to insiders, T-Mobile USA will also join the crowd, working with Discover Financial Services and Barclays. The first test are planned for later this year.

MasterCard and Visa also have been investing in their own mobile solutions, Visa working with DeviceFidelity on a technology to turn current handsets into payment devices handling multiple accounts. Visa says it is in talks with numerous CSPs round the world. MasterCard has worked with Citigroup to launch MasterCard PayPass stickers that can be stuck to the backs of cellphones to make contactless payments at about 230,000 US stores.

It appears the strategy of Visa and MasterCard is to play down the potential threat from the telcos. 

There's plenty of reasons why replacing your wallet with a mobile phone is still a ways off, but now there's an all new one: regulation. According to Consumers Union, mobile payments may not be safe and is working with regulators to implement protective standards, reports the Los Angeles Times.

Perhaps the biggest disruptor to the mobile industry in the last five years may also have a say in the NFC revolution. Over a year ago, Apple applied for patents around NFC technologies built into the iPhone and has just announced the appointment of NFC expert Benjamin Vigier to its ranks.

Is this just a case of d'vu or could Apple really do it again. While all the traditional players bicker, could it sneak up from behind, again, and teach them how it's done?

Tony Poulos is the TM Forum's BSS evangelist

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