Last week I wrote about the ISIS partnership in the US - where the major mobile network operators are getting together to develop an NFC based mobile payments platform and service portfolio. A similar move is happening in parallel amongst the German operators.
Well, this was the latest move in a complex chess game between the mobile operators, the banks, card issuers such as VISA, Mastercard, Amex and Barclaycard an a number of independents such as BT. All want to control the secure element of the transaction so that they can consequently control how much each party gets in terms of transaction revenues, more importantly how much they get specifically... The operators want the secure element to be on the SIM card because they own that. The banks and issuers see this as a potential threat as, traditionally, the secure element has been on the credit/charge card. BT and other independents believe they can act as mediators and provide the control that's needed independently, together with a range of support services such as auditing and MIS - the role of Trusted Service Manager (TSM). Personally, I always believed TSM was the best way forward to ensure cross-compatibility across all mobile devices and cards, ending the practice of having to hoard different secure transaction devices (credit cards) in our wallets and avoiding only your O2 phone, for example, being able to undertake transactions in certain retail outlets that partnered with O2 to provide O2 NFC readers. The latest move by the US operators, weakens the TSM's role somewhat as, by getting their heads together they remove some of the uncertainty about compatibility. Not entirely, because it's not clear what you would do if visiting the US as a UK citizen, would your NFC mobile work for payments over there?
The card issuers and, to some degree the banks, are also impacted by the operator's latest stratagem. If the operators can sort out their conflicts and competitive streaks, then they can essentially establish the phone as a complete secure transaction device which could eventually replace the card. 4bn phones worldwide and only 1.6bn bank accounts speaks volumes on the potential of the phone as a secure device. Who wants a plastic card with a chip in it when you can simply put the chip in your phone and play games whilst queuing to pay at the checkout?
VISA are hitting back though as they sit with elbows on knees contemplating the chequered board, carefully analysing their next move. At the moment it appears their Queen is staying where it is and instead they're scoffing at the previous moves made by the operators. In a recent blog post. VISA hit back at critics who claim they are behind the technology curve. They point out the intricacies of the behind-the-scenes processing that needs to be undertaken to facilitate a simple NFC transaction such as paying for a colleague's lunch when they are caught a little short at the canteen checkout. I was recently at a conference where someone put up a network diagram slide of the systems involved in a simple credit card transaction. 3,000 different systems were impacted for each and every transaction, some of these systems have been around since valve computers hit the shelves. This is why the banks feel they are crucial, because they are the only ones who can understand the end to end process. I'd query this though, as although the back end is highly complex, the front-end isn't and if regulators force the banks and card issuers to open up their interfaces, then the operators might find they have a simple, one interface route into the spaghetti that the banks then have to manage. The pain without the gain perhaps? Or maybe the banks will simply charge a transaction fee to the operators, which starts to impact the attractiveness of the mobile payment transaction for the consumer. Paying £2.50 for lunch and then having to pay the mobile operator and the banks for handling it could be too hard to swallow for many.
My conclusion? I'm glad I've focused my own business on mobile marketing and not payments! Seriously though, there's still a long way to go before we can start to see mobile transactions replacing card and then cash. The parties have to come together for the good of the consumer, otherwise it will remain a niche service until the next technology comes along (I'm betting on telepathic payments!)...
Well, this was the latest move in a complex chess game between the mobile operators, the banks, card issuers such as VISA, Mastercard, Amex and Barclaycard an a number of independents such as BT. All want to control the secure element of the transaction so that they can consequently control how much each party gets in terms of transaction revenues, more importantly how much they get specifically... The operators want the secure element to be on the SIM card because they own that. The banks and issuers see this as a potential threat as, traditionally, the secure element has been on the credit/charge card. BT and other independents believe they can act as mediators and provide the control that's needed independently, together with a range of support services such as auditing and MIS - the role of Trusted Service Manager (TSM). Personally, I always believed TSM was the best way forward to ensure cross-compatibility across all mobile devices and cards, ending the practice of having to hoard different secure transaction devices (credit cards) in our wallets and avoiding only your O2 phone, for example, being able to undertake transactions in certain retail outlets that partnered with O2 to provide O2 NFC readers. The latest move by the US operators, weakens the TSM's role somewhat as, by getting their heads together they remove some of the uncertainty about compatibility. Not entirely, because it's not clear what you would do if visiting the US as a UK citizen, would your NFC mobile work for payments over there?
The card issuers and, to some degree the banks, are also impacted by the operator's latest stratagem. If the operators can sort out their conflicts and competitive streaks, then they can essentially establish the phone as a complete secure transaction device which could eventually replace the card. 4bn phones worldwide and only 1.6bn bank accounts speaks volumes on the potential of the phone as a secure device. Who wants a plastic card with a chip in it when you can simply put the chip in your phone and play games whilst queuing to pay at the checkout?
VISA are hitting back though as they sit with elbows on knees contemplating the chequered board, carefully analysing their next move. At the moment it appears their Queen is staying where it is and instead they're scoffing at the previous moves made by the operators. In a recent blog post. VISA hit back at critics who claim they are behind the technology curve. They point out the intricacies of the behind-the-scenes processing that needs to be undertaken to facilitate a simple NFC transaction such as paying for a colleague's lunch when they are caught a little short at the canteen checkout. I was recently at a conference where someone put up a network diagram slide of the systems involved in a simple credit card transaction. 3,000 different systems were impacted for each and every transaction, some of these systems have been around since valve computers hit the shelves. This is why the banks feel they are crucial, because they are the only ones who can understand the end to end process. I'd query this though, as although the back end is highly complex, the front-end isn't and if regulators force the banks and card issuers to open up their interfaces, then the operators might find they have a simple, one interface route into the spaghetti that the banks then have to manage. The pain without the gain perhaps? Or maybe the banks will simply charge a transaction fee to the operators, which starts to impact the attractiveness of the mobile payment transaction for the consumer. Paying £2.50 for lunch and then having to pay the mobile operator and the banks for handling it could be too hard to swallow for many.
My conclusion? I'm glad I've focused my own business on mobile marketing and not payments! Seriously though, there's still a long way to go before we can start to see mobile transactions replacing card and then cash. The parties have to come together for the good of the consumer, otherwise it will remain a niche service until the next technology comes along (I'm betting on telepathic payments!)...
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