Cell phone as wallet on trial
Sunday, 18 November 2007
Victoria Shannon
Don't look now, but the French are in the technology vanguard again. A dozen major companies have opened the largest trial outside of Asia for the use of cellphones as mobile money -- giving consumers the ability to pay for everything from croissants and toothpaste to subway fare and wine with a wave of a handset.
And they have global aspirations, hoping to prove that their systems, using the short-range radio technology called "near-field communications," or NFC, can work securely on a mass scale.
If successful, cellphones could start masquerading more widely as bank debit cards a year from now -- assuming the manufacturers can get the right handsets to market and the players can agree on how to divide the revenue, two issues that have tripped up the mobile industry in the past.
NFC is already used in hundreds of places around the world, mostly at city transportation centres, where commuters are getting into the habit of swiping "contactless" programmed plastic cards over scanners embedded in turnstiles. The Oyster system in London and Octopus in Hong Kong, for instance, work this way, as does Navigo in Paris.
But putting NFC inside a cellphone and connecting it to the user's bank account is what will give the mobile phone its Midas touch, its backers say.
The French trial, announced Friday and including 1,000 people in Strasbourg and Caen, is not another experiment to see if consumers will use their phones as a payment device; based on dozens of small-scale trials run by industry participants across Europe, the companies are convinced they will.
Nor is it a test of whether the business is a profitable one, since fees will not be involved -- and antitrust law would prohibit price-fixing among rivals, anyway.
Instead, the consortium, operating under the Payez Mobile name, will road-rest how it works when different companies and their specific systems compete in a larger pool of users. Thus, all three French mobile network operators are involved, as are six major banks, Visa and MasterCard and cellphones made by Motorola, LG Electronics and Sagem Communication of Paris.
"The French should get a lot of credit for this," said Lars Vestergaard, wireless analyst at International Data. "They are far and away ahead of the rest of Europe."
Two vestiges of the past may have helped: In the 1980s, the French led the world in electronic commerce with the pioneering Minitel, before it was swept away by the Internet wave of the 1990s.
And the "smart card," the tiny computer microprocessor embedded in plastic and read by a scanner, was invented in Paris in 1974. That evolved into the SIM card, the chip that is used in GSM phones to store personal, account and billing information.
The experience in Asia, where the Sony technology called FeliCa has already turned the cellphone into a contactless mobile wallet, is something of a model for Europe.
But despite more 30 million wallet phones in circulation, success there may be overrated: As with other mobile technologies, Vestergaard said, the Japanese and South Korean markets are "special cases," with dominant players and closed markets.
Card Technology magazine last month called the Japanese use of NFC in train ticketing "less than inspiring," with only 520,000 customers signed up through midyear because of downloading and other issues.
Orange, the European mobile carrier owned by France Telecom that is among the most aggressive promoters of phone-based NFC payments, will bring the technology out of test mode and onto the commercial market in Bordeaux next year. But visions of cellphone-swiping at a vending machine may be unrealistic.
"I don't think it will replace cash," said Jérôme Sion, director for mobile contactless activities at Gemalto, the French company that is the world's biggest maker of smart cards. "Just as checks didn't replace cash, and bank cards didn't replace checks, you will still have cash along with the contactless phone."
Still, the cellphone-as-debit card is seen as special in the world of payments. In some countries, for instance, there are more mobile subscribers than bank card users. Many people are already using the phone's text-messaging capability for limited e-commerce: to pay for parking, vote on TV shows, receive product discounts and gain entrance to events, for example.
Yet it is not the cellphone manufacturers who are calling the shots in this game. Across Europe, network operators like Vodafone have been setting the direction on mobile payments ever since the GSM Association in February endorsed the use of the SIM card as the item that would carry the NFC technology.
That means the SIM card makers in the trial -- Gemalto and Paris-based Oberthur Card Systems, which are also supplying secured application management behind the technology -- are certain winners, analysts say. The chips themselves are from Inside Contactless of Aix en Provence and NXP, a spinoff of Philips.
Even though they are not in the driver's seat, cellphone manufacturers still have the power to make or break mobile commerce. If they do not build the capability into a decent selection of phones -- along with cameras, Wi-Fi and all of the other features that users and operators are demanding -- the mobile wallet cannot go forward.
The Nokia 6131 is the only commercially available NFC phone today, but the technology is built into the phone, not the SIM card, so it does not fit the GSMA's requirements.
Sony Ericsson, meanwhile, is providing a SIM-based model for Orange to use in February in a test of ticketing for home games of the Manchester City soccer team, while Samsung created an NFC phone for an earlier Orange test in Caen. The SIM-enabled L7 from Motorola, LG's L600V and the Sagem My700X are designed only for the Payez Mobile project.
While handset manufacturers plot their NFC strategy, other companies are taking advantage of the payment technology cellphones already have - text messaging - which is especially attractive in developing nations.
"You can do lots of sexy mobile payment projects in closed groups, like what's going on in Strasbourg," said Terence Trench, senior vice president at Upaid, a text-based mobile payment company based in Hertfordshire, England, which has signed up carriers, banks and credit card companies in Serbia, Morocco and Jordan.
"But payments are a high-volume, low-margin business, and you need to address the widest possible audience. So requiring people to change their handsets to get the capability - that's akin to issuing new credit cards to each individual," he said.
Indeed, a Nokia trial in New York - involving MasterCard's PayPass system, Citigroup and AT&T, as well as its partner, Giesecke & Devrient, the Munich-based smart card maker - this year required participants to use the Nokia 6131 phone.
Even without Nokia and its partners, Payez Mobile's goal is to debug the interoperability of similar -- but slightly different -- approaches.
"This is a multilateral operation committed to one solution," said Mung Ki Woo, vice president of mobile contactless at Orange. "The introduction of contactless inside the mobile changes the situation entirely."
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International Herald Tribune
Don't look now, but the French are in the technology vanguard again. A dozen major companies have opened the largest trial outside of Asia for the use of cellphones as mobile money -- giving consumers the ability to pay for everything from croissants and toothpaste to subway fare and wine with a wave of a handset.
And they have global aspirations, hoping to prove that their systems, using the short-range radio technology called "near-field communications," or NFC, can work securely on a mass scale.
If successful, cellphones could start masquerading more widely as bank debit cards a year from now -- assuming the manufacturers can get the right handsets to market and the players can agree on how to divide the revenue, two issues that have tripped up the mobile industry in the past.
NFC is already used in hundreds of places around the world, mostly at city transportation centres, where commuters are getting into the habit of swiping "contactless" programmed plastic cards over scanners embedded in turnstiles. The Oyster system in London and Octopus in Hong Kong, for instance, work this way, as does Navigo in Paris.
But putting NFC inside a cellphone and connecting it to the user's bank account is what will give the mobile phone its Midas touch, its backers say.
The French trial, announced Friday and including 1,000 people in Strasbourg and Caen, is not another experiment to see if consumers will use their phones as a payment device; based on dozens of small-scale trials run by industry participants across Europe, the companies are convinced they will.
Nor is it a test of whether the business is a profitable one, since fees will not be involved -- and antitrust law would prohibit price-fixing among rivals, anyway.
Instead, the consortium, operating under the Payez Mobile name, will road-rest how it works when different companies and their specific systems compete in a larger pool of users. Thus, all three French mobile network operators are involved, as are six major banks, Visa and MasterCard and cellphones made by Motorola, LG Electronics and Sagem Communication of Paris.
"The French should get a lot of credit for this," said Lars Vestergaard, wireless analyst at International Data. "They are far and away ahead of the rest of Europe."
Two vestiges of the past may have helped: In the 1980s, the French led the world in electronic commerce with the pioneering Minitel, before it was swept away by the Internet wave of the 1990s.
And the "smart card," the tiny computer microprocessor embedded in plastic and read by a scanner, was invented in Paris in 1974. That evolved into the SIM card, the chip that is used in GSM phones to store personal, account and billing information.
The experience in Asia, where the Sony technology called FeliCa has already turned the cellphone into a contactless mobile wallet, is something of a model for Europe.
But despite more 30 million wallet phones in circulation, success there may be overrated: As with other mobile technologies, Vestergaard said, the Japanese and South Korean markets are "special cases," with dominant players and closed markets.
Card Technology magazine last month called the Japanese use of NFC in train ticketing "less than inspiring," with only 520,000 customers signed up through midyear because of downloading and other issues.
Orange, the European mobile carrier owned by France Telecom that is among the most aggressive promoters of phone-based NFC payments, will bring the technology out of test mode and onto the commercial market in Bordeaux next year. But visions of cellphone-swiping at a vending machine may be unrealistic.
"I don't think it will replace cash," said Jérôme Sion, director for mobile contactless activities at Gemalto, the French company that is the world's biggest maker of smart cards. "Just as checks didn't replace cash, and bank cards didn't replace checks, you will still have cash along with the contactless phone."
Still, the cellphone-as-debit card is seen as special in the world of payments. In some countries, for instance, there are more mobile subscribers than bank card users. Many people are already using the phone's text-messaging capability for limited e-commerce: to pay for parking, vote on TV shows, receive product discounts and gain entrance to events, for example.
Yet it is not the cellphone manufacturers who are calling the shots in this game. Across Europe, network operators like Vodafone have been setting the direction on mobile payments ever since the GSM Association in February endorsed the use of the SIM card as the item that would carry the NFC technology.
That means the SIM card makers in the trial -- Gemalto and Paris-based Oberthur Card Systems, which are also supplying secured application management behind the technology -- are certain winners, analysts say. The chips themselves are from Inside Contactless of Aix en Provence and NXP, a spinoff of Philips.
Even though they are not in the driver's seat, cellphone manufacturers still have the power to make or break mobile commerce. If they do not build the capability into a decent selection of phones -- along with cameras, Wi-Fi and all of the other features that users and operators are demanding -- the mobile wallet cannot go forward.
The Nokia 6131 is the only commercially available NFC phone today, but the technology is built into the phone, not the SIM card, so it does not fit the GSMA's requirements.
Sony Ericsson, meanwhile, is providing a SIM-based model for Orange to use in February in a test of ticketing for home games of the Manchester City soccer team, while Samsung created an NFC phone for an earlier Orange test in Caen. The SIM-enabled L7 from Motorola, LG's L600V and the Sagem My700X are designed only for the Payez Mobile project.
While handset manufacturers plot their NFC strategy, other companies are taking advantage of the payment technology cellphones already have - text messaging - which is especially attractive in developing nations.
"You can do lots of sexy mobile payment projects in closed groups, like what's going on in Strasbourg," said Terence Trench, senior vice president at Upaid, a text-based mobile payment company based in Hertfordshire, England, which has signed up carriers, banks and credit card companies in Serbia, Morocco and Jordan.
"But payments are a high-volume, low-margin business, and you need to address the widest possible audience. So requiring people to change their handsets to get the capability - that's akin to issuing new credit cards to each individual," he said.
Indeed, a Nokia trial in New York - involving MasterCard's PayPass system, Citigroup and AT&T, as well as its partner, Giesecke & Devrient, the Munich-based smart card maker - this year required participants to use the Nokia 6131 phone.
Even without Nokia and its partners, Payez Mobile's goal is to debug the interoperability of similar -- but slightly different -- approaches.
"This is a multilateral operation committed to one solution," said Mung Ki Woo, vice president of mobile contactless at Orange. "The introduction of contactless inside the mobile changes the situation entirely."
................................................
International Herald Tribune