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November 2013
1
Mike Hendry Page 1
PSE Consulting Merchant Acquiring Conference
November 2013
Mike Hendry
Payment Systems Consultant
Next steps for NFC and mobile wallets
November 2013
2
Next steps for NFC and mobile wallets
State of the (dis-) Union
Infrastructure developments
Stakeholders and their activities
NFC applications and services
Next steps
Mike Hendry Page 2
November 2013
3
NFC and mobile wallets
Convergence of interests:
• MNOs
• Chip manufacturers
• Handset manufacturers
• OS & software developers
• Data ransackers
• Media
• Retail
• Public transport
• Payment
© Mike Hendry Page 3
??
November 2013
4
Mobile
Mobile market
• 2013 has seen new milestones in penetration, data-rates, connectivity and functionality
• UK market is world-leading
Mobile technology
• Nokia -> Microsoft, Windows Phone
• BB deflates
• -> Two Mobile OSs share 85% of market for new devices
• Is this a healthy market?
© Mike Hendry Page 4
November 2013
5
M-commerce and m-payments
M-commerce is booming• Tending to focus sales on most
popular sites
Contactless payments not doing badly (in some countries)
• 0.1% of card payments by value
© Mike Hendry Page 5
Source: eMarketer Sept 2013
Source: UK Cards Association
November 2013
6
But NFC payments and mobile wallets …
Mike Hendry Page 6
November 2013
7
Next steps for NFC and mobile wallets
State of the (dis-) Union
Infrastructure developments
Stakeholders and their activities
NFC applications and services
Next steps
Mike Hendry Page 7
November 2013
8
NFC infrastructure
Interoperability demands hub services and TSMs
• Now easy to set up TSM – plenty exist
• Single TSM vs separate Issuer and Service Provider TSMs?
• As services spread across borders, split model is inevitable
• Some sectors have hierarchical organisations,
others (e.g. retail) are highly distributed
• Hub-of-hubs opportunities for integrators
Secure Elements
• UICC, embedded, SmartSD, sleeves
• Now exist in hundreds of different formats
• Multiple SEs becoming the norm
© Mike Hendry Page 8
November 2013
9
Mobile wallets
Wallets struggling in most of the world
• Google vs Isis (but both now nationwide)
• French rollout delayed
• (Sixpack abandoned in 2012)
• Weve UDI
• But Asians just keep doing it!
What is impact of Android Host Card Emulation?
• Can you build a secure card environment using HCE?
• Could you get it certified by EMVCo?
• Does that matter?
© Mike Hendry Page 9
November 2013
10
Banking technology
How has the infrastructure adapted to technology change?
© Mike Hendry Page 10
ISO 20022 – in
2022?
November 2013
11
Next steps for NFC and mobile wallets
State of the (dis-) Union
Infrastructure developments
NFC applications and services
Stakeholders and their activities
Next steps
Mike Hendry Page 11
November 2013
12
Marketing and advertising
© Mike Hendry Page 12
November 2013
13
Retail
• Store operations
• Customer management
• Loyalty and coupons
• Maximises return on
investment
• Replaces kiosks with
low-cost passive devices
© Mike Hendry Page 13
November 2013
14
Transportation
Public transport
• Mostly ticketing rather than payment
• Download ticket to phone
• Tap in / inspect / tap out
Airlines
• Boarding pass
• Baggage handling
• Information
Parking, taxis
© Mike Hendry Page 14
November 2013
15
Consumer-ready apps (no SP)
Peer-to-peer
• File- and contact-sharing
• Pairing
Quick commands
• Status changes (home, car, office etc)
• Call emergency numbers
• Assistive apps
© Mike Hendry Page 15
November 2013
16
NFC applications and services
Most apps do not involve payment!
© Mike Hendry Page 16
… other than in Japan & Korea …
November 2013
17
Next steps for NFC and mobile wallets
State of the (dis-) Union
Infrastructure developments
NFC applications and services
Stakeholders and their activities
Next steps
Mike Hendry Page 17
November 2013
18
NFC & wallet stakeholders: direct & B2B
© Mike Hendry Page 18
November 2013
19
What are the stakeholders doing?
MNOs Working flat out on 3/4G
Little bandwidth or investment for wallets or NFC
GSMA New standards, e.g. process flow at POS
Handset mfrs Most just doing it (with or without embedded SE)
Apple See next slide
Google Major changes in each Android release (are they all
improvements?)
Chipset & SE mfrs Universal support
App developers Many more open than secure apps
Service Providers Increasing numbers of single-SP (branded) apps
Terminal & reader
suppliers
Making everything portable and wireless
Banks & PSPs More rules …
© Mike Hendry Page 19
November 2013
20
NFC vs BLE
Apple prefers Bluetooth Low-Energy to NFC
• Well, they would, wouldn’t they?
• Broadcast vs one-to-one
• Assange – Snowden vs MI5 – GCHQ models
Horses for courses
• NFC is opt-in, consumer choice
• Need NFC to secure BLE??
© Mike Hendry Page 20
November 2013
21
Next steps for NFC and mobile wallets
State of the (dis-) Union
Infrastructure developments
NFC applications and services
Stakeholders and their activities
Next steps
Mike Hendry Page 21
November 2013
22
Next steps - global
Need major push on interoperability and certification
• Standards for public transport (e.g. OSPT), retail (currently GSMA but needs to be ARTS or similar)
EMV certification: needs
a) Much more consistency in antenna size & placement
b) Application selection: Android changes needed?
Educate developers and Service Providers
• They can help to educate consumers but must first stop misleading them!
© Mike Hendry Page 22
November 2013
23
Next steps – UK
Easy steps first:
Accept that there will be multiple wallets
• Not just focused on payment
Recognise role of integrators & mobile specialists
• They are the people who can get services going
• Interoperability is a precondition for rollout
Consumer education
• Tap when you buy your phone
• Who benefits from promoting the technology?
© Mike Hendry Page 23
November 2013
24
Next steps – Payment Service Providers
Develop business model for mobile payment as a service to be integrated into other apps
• Probably actually a set of functions of which payment message exchange and settlement are the last steps
• Likely to need new risk management and risk-sharing models
M-banking is the Trojan Horse
• Not so good for acquirers
But acquirers as terminal network operators can still play a key role in delivering secure services to retailers & SPs
© Mike Hendry Page 24
November 2013
25
Thank-you for your attention
Mike Hendry
www.mikehendry.com
Mike Hendry Page 25