Near-field communications models for making m-payments and engaging in next-generation mobile marketing got accelerated yesterday when 45 of the largest carriers in world committed to support a “SIM-based” NFC solution. It will help standardize the security necessary to make the system work.
NFC is an extremely short-range communications method that allows phones to act as credit cards and make instant payments with a tap or close pass of the device near an NFC reader. The GSMA organization announced a series of standards and specs that carriers and handset makers can use to perform NFC operations that are interoperable across carriers, networks and countries.
Among the 45 carriers agreeing to support the standard are Roger Communications, China Mobile, Vodafone, Verizon, AT&T, SK Telecom, Orange, Telecom Italia and Deutsche Telekom. In addition, ISIS -- the U.S. consortium of major providers and credit card companies, including Verizon, AT&T and T-Mobile -- will support SIM-based NFC.
Many analysts say that after first emphasizing the convenience of m-payments, the NFC industry now recognizes that it is the additional services, offers, marketing and functionality around contactless payments that will sell consumers on the idea. When the convenience of m-payments is combined with the computing power of a smartphone, the NFC system can deliver geotargeted offers, loyalty card tracking and even personal budgeting services, all tied to the payment process.
One of the points of contention in evolving NFC payment systems involves who controls the “security element” in a phone that manages user and account authentication with the NFC receiver. A SIM-based approach makes a user’s security information transferrable from phone to phone and maintains the relationships between the user and the carrier issuing the SIM.
One concern about other models being pursued is that it puts the secure element under the control of a specific credit card company or bank, thus fragmenting the market across different technologies and models. They may not work well together to respond quickly to changes or security threats.
GSMA has issued a set of handset and SIM requirements that define a common API for communicating with the NFC functionality in a phone.
“With the increasing deployment of commercial SIM-based NFC services in a range of markets worldwide, it is critical to embrace common standards that will promote the global interoperability of services and accelerate time-to-market,” states Ann Bouverot, director general, GSMA.
In the U.S., we have already seen two different platforms for NFC payments and service emerge -- one from the ISIS consortium and one from Google in its pilot Wallet program with Sprint. Sprint is the one major carrier which is not a part of the ISIS consortium. It is unclear whether handset manufacturers and carriers would or could offer phones that managed the security and authentication protocols needed for both systems.
The market potential for NFC is enormous. Despite a slower-than-expected start in recent years, analysts predict that NFC-enabled handsets will be the norm in the next three to five years and that the retail payment infrastructure will be there to handle it. ABI Research says that by 2016, 85% of all point-of-sale payment terminals will be NFC-capable.