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Where’s the V in NFC?Where’s the V in NFC?

PSE Consulting Merchant Acquiring Conference

Where s the V in NFC?Where s the V in NFC?

PSE Consulting Merchant Acquiring ConferenceNovember 2012

Mike HendryPayment Systems Consultant

November 20121

Mike Hendry Page 1


How far have NFC and m wallet deploymentsHow far have NFC and m-wallet deployments reached?

h b i i ?What barriers remain?

Who is making money?Who is making money?

What role can acquirers play?

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UK mobile marketUK mobile market

UK consumers and businesses are addicted to smartphones and to e-commerce

•• Highest penetration of Highest penetration of smartphonessmartphones in Europe (50% at end 2011, in Europe (50% at end 2011, cfcf 1 1 in 6 worldwide)in 6 worldwide)

•• Highest perHighest per--capita B2C capita B2C ee--commerce spend in the world (£1000)commerce spend in the world (£1000)g pg p pp p ( )p ( )

•• But not yet to NFC!But not yet to NFC!

Source: Ofcom International Communications Market Report (December 2011)

•• But not yet to NFC!But not yet to NFC!

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NFC in the Hype CycleNFC in the Hype Cycle

Source: Gartner (August 2012)

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Do you have an NFC phone?Do you have an NFC phone?Acer E320 Liquid Express, Liquid GlowBlackBerry Bold 9790, 9900, 9930BlackBerry Curve

Lenovo K800LG Optimus 3D Max, 4X HD, EliteLG Optimus L5, L7, LTE & LTE Tag

Samsung Galaxy Ace 2, Mini 2, NoteSamsung Galaxy S Advance, Blaze 4GSamsung Galaxy S II (some) and S III

9350/9360/9370/9380C-mii 1 and 3Casio DT-X8 and IT-800 (PDAs)Fujitsu Arrows µ F-07D

l l

LG Optimus Net, Vu, ViperLG T530 EgoMobiwire CosyphoneMotorola Razr 1, Droid Razr

Samsung S5230 NFC (Tocco Lite)Samsung S5260 NFCSamsung SHW-A170KSamsung Wave 578 (Quick Tap), Wave M / YGoogle Galaxy Nexus

Google Nexus 7 & Nexus SHTC Desire CHTC Droid Incredible 4G LTEHTC E 4G LTE

Motorola MC75A HF (rugged terminal)Motorola Photon Q 4G LTENokia 603, 700 / 701, 801T, 808 PureView

M / Y Sharp Aquos Phone SerieSharp RW-T107 NFC TabletSharp RW-T110 NFC TabletSonim XP1301 Core NFC XPand NFCHTC Evo 4G LTE

HTC IncredibleHTC One X/XLHTC Ruby/Amaze 4GHuawei Ascend Y201

PureViewNokia C7/Astound, N9, OroOrange San DiegoPanasonic BizPad, ElugaPantech Sky Vega LTE, Racer

Sonim XP1301 Core NFC, XPand NFCSony Xperia Acro S, Ion, P, S, SolaTurkcell MaxiPRO5Turkcell T11/ZTE Racer IIXolo X900Huawei Ascend Y201

Huawei Sonic/Turkcell T20Kuoziro FT701W NFC Tablet

y g ,Porsche Design P’9981Prada phone by LG 3.0

Xolo X900ZTE Blade II, KisZTE Turkcell MaxiPLUS5

Source: nfcworld com (6 Nov 2012)

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Source: nfcworld.com (6 Nov 2012)

NFC deploymentsNFC deployments

Japan: 17M users of mobile FeliCa, ~ 50 applications … but not actually NFC!Korea: mobile T-money has >1.5 million users (cf 25 million T-money cards):

transport ticketing is core application but LV payments also accepted (e.g. Seven-11). Again, it’s not true NFC (but NFC now being deployed)

China: transport ticketing in several cities, 2M Watchdata Simpasses(b )Singapore: payment, taxis (but not yet MRT)

Australia: several pilots, mostly tagsFrance: Nice, Strasbourg pilots covered payment, ticketing and smart posters –

further 17 cities now planned under CityZi umbrellafurther 17 cities now planned under CityZi umbrella.Germany: Transport ticketing focus (DBahn), now moving towards paymentSpain: several (unlinked) city transport schemes, campus schemesT k t h h i (NFC f id t)Turkey: payment, home shopping (NFC fridge magnet)Russia: transport, vendingIreland: Zapa loyalty stickers

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UKUK

Many retailer smart tags / posters•• Huge interest in couponing and loyalty but not yet much actionHuge interest in couponing and loyalty but not yet much action

Cinemas, pubs (NFC beermats …)Time and attendance, campus schemesPhone-specific apps: e g file-sharing Bluetooth device pairingPhone-specific apps: e.g. file-sharing, Bluetooth device pairingBarclayCard: Orange QuickTap (payments) & PayTagOscar / Weve: initial focus on smart tags and coupons: wallet and

t t f llpayment to follow

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NFC services launched in Oct / Nov 2012NFC services launched in Oct / Nov 2012

Malaysia (public transport)Canada (payments)(p y )Poland (payments)China Mobile (payments will go live in Feb 2013)Poste Italiane (payments e ID / personal authentication)Poste Italiane (payments, e-ID / personal authentication)NZ (wallet with payment and transport)UK: RBS (payments)

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MM--walletswallets

3 main options:•• Individual MNO walletsIndividual MNO wallets•• SuperSuper--wallets (ISIS, wallets (ISIS, WeveWeve etc)etc)•• “Independent” commercial wallets (Google, “Independent” commercial wallets (Google, V.meV.me …)…)

Globally there is not yet a clear leader among these groups•• But there are leaders in several countries (particularly in Asia)But there are leaders in several countries (particularly in Asia)

What is the role of a wallet?•• Store of value?Store of value?•• Protect private data and identity?Protect private data and identity?•• Mutual authentication?Mutual authentication?

What is its scope?•• GeographyGeography•• ApplicationsApplications

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Barriers Barriers –– marketmarket--relatedrelated

Markets are fragmented•• Few common or interoperable solutionsFew common or interoperable solutions•• Many vendors with proprietary solutions but no obvious winnersMany vendors with proprietary solutions but no obvious winners

Infrastructure roll-out•• How to achieve critical mass for both issuance and acceptance?How to achieve critical mass for both issuance and acceptance?How to achieve critical mass for both issuance and acceptance?How to achieve critical mass for both issuance and acceptance?•• What core infrastructure is needed (What core infrastructure is needed (TSMsTSMs etc)?etc)?

Trust issues•• Not a problem for pilots butNot a problem for pilots but•• Not a problem for pilots, but …Not a problem for pilots, but …•• Security, data protection and liability issuesSecurity, data protection and liability issues

Making the business case•• No examples of proven successNo examples of proven success•• No examples of proven successNo examples of proven success•• Is there something better round the corner?Is there something better round the corner?

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Barriers Barriers –– technical & operational technical & operational

Technical compliance•• With ISO 14443 / card scheme specs if not ISO 18092With ISO 14443 / card scheme specs if not ISO 18092•• Transmission distances, antenna sizes / powerTransmission distances, antenna sizes / power•• “Card emulation” too narrowly defined for true interoperability“Card emulation” too narrowly defined for true interoperability

Slow transaction times•• Particularly when modeParticularly when mode--switching is requiredswitching is required•• Does NFC only work in pilots and lowDoes NFC only work in pilots and low--volume apps?volume apps?

Operational issuesOperational issues•• Size / form factor of phones compared with cardsSize / form factor of phones compared with cards•• Different combinations of technology lead to different rulesDifferent combinations of technology lead to different rules

UsabilityUsability•• Menu / function structures and hierarchyMenu / function structures and hierarchy•• Whose app is in control?Whose app is in control?

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Who is involved?Who is involved?

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Handset manufacturers Added-value, differentiator – but it’s a big punt

Application developers Yes, but not from paymentsAggregators and prog mgrs Some may be starting to make money

M bil t Still i i t t hMobile operators Still in investment phaseTSMs Still in investment phaseWallet operators Not from the NFC aspectTransport operators Early days – but hopefulRetailers & service providers

Early days – but hopeful

Acquirers High costs but few benefitsCard issuers, account-holding banks

?? Extension of mobile banking proposition

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All mobile propositions depend on following All mobile propositions depend on following the transaction from start to finishthe transaction from start to finishthe transaction from start to finishthe transaction from start to finishWhat initiates the transaction?

•• Create desire or follow pattern?Create desire or follow pattern?Where does the mobile aspect add value?

•• Is it about mobility? (e.g. travel)Is it about mobility? (e.g. travel)•• Ubiquity? (Independence of physical networks or location)Ubiquity? (Independence of physical networks or location)Ubiquity? (Independence of physical networks or location)Ubiquity? (Independence of physical networks or location)•• LocationLocation--awareness?awareness?•• Link between local and wideLink between local and wide--area networks?area networks?•• Authentication / mutual authentication?Authentication / mutual authentication?Authentication / mutual authentication?Authentication / mutual authentication?

Which parties need to co-operate to achieve this?•• Retailer / transport operatorRetailer / transport operator•• MNOMNO•• MNOMNO•• Other service providers: Other service providers: TSMsTSMs, added, added--value services, advertisers …value services, advertisers …

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Acquirer’s role in 4Acquirer’s role in 4--party modelparty model

Own physical network, own or manage devices at Point of Interactionof Interaction

Own relationship with acceptors (& often with third-party payment service providers)

Manage data flows, add value to transaction dataAll these are valid for NFC payments – but what about other NFC transaction types?other NFC transaction types? Clearing &

settlement mechanism

Acquirer /Payer bank

Issuer /Payee bank

Merchant /business

Consumer / payee

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What role can acquirers play?What role can acquirers play?

Support customers•• Mainly retailers and public transport operators at this stageMainly retailers and public transport operators at this stage•• Opportunity to bring more transactions into card payment chainOpportunity to bring more transactions into card payment chain

Acquirers need to have relationships with MNOs, TSMs etc•• They are part of the network & acquirers may be their best route inThey are part of the network & acquirers may be their best route inThey are part of the network & acquirers may be their best route inThey are part of the network & acquirers may be their best route in

All transactions have a value •• Including nonIncluding non--payment transactionspayment transactions•• Adjust pricing models to take into account new transaction typesAdjust pricing models to take into account new transaction types•• Adjust pricing models to take into account new transaction typesAdjust pricing models to take into account new transaction types

How to work with wallet providers?•• Proposition developmentProposition development•• Relationship with merchantsRelationship with merchants•• Relationship with merchantsRelationship with merchants

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An acquirer view of the valueAn acquirer view of the value--chain?chain?

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ThankThank--you for your attentionyou for your attentiony yy y

Mike [email protected]@mikehendry.comwww.mikehendry.co.uk

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Mike Hendry Page 21

Documents

Where s the V in NFC? Where’s the V in NFC?pseconsulting.com/wp-content/uploads/2016/01/mac12_4... · 2019. 9. 9. · Do you have an NFC phone? Acer E320 Liquid Express, Liquid