Even the man who invented QR codes says that they are an interim technology. But some of the payment solutions built using them should translate into an NFC/BLE world pretty well.

Here’s a quick payment quiz. Have a guess before you click on the link! Which of the approximately 10,000 new payment solutions that are under development right now works this way:

The system generates a unique QR code that allows a payment to be made, but no customer information or shopping data is passed onto the merchant, and all transaction receipts are kept on the app.

[From Samsung Favors QR Over NFC | PYMNTS.com]

Well, if you guessed “all of them” you’re nearly right, but actually it’s a new payment system from Samsung (who make the S5, amongst other contactless-capable handsets) in Australia (which has a couple of hundred thousand contactless payment terminals in place and the highest retail use of contactless in the world). Why are they doing this? It’s not because QR codes are the best solution — they aren’t — but because better alternatives (NFC and Bluetooth Low Energy) have not been available. But they are now, which makes the Samsung launch rather surprising to me.

I used to think that I was abnormal because I can’t be bothered to scan QR codes, but it turns out that I’m actually quite mainstream.

In all of the time I’ve had a phone with a camera and an application for reading QR codes, which is quite a long time, I’ve probably used the functionality two, or at a maximum three, times. I wondered if this might be because I am old or because I am lazy or because I am insufficiently inquisitive, but actually it’s because I am normal.

[From A quick response to the problem - Tomorrow's Transactions]

Whereas I can’t be bothered to run a QE application and scan a code, I’m quite prepared to just tap on something or have something auto-open on my iPhone for me to confirm. Having been involved in quite a few NFC trials, pilots and tests I’m confident in saying that most people are the same. Consumers were perfectly happy to tap to get what they wanted and, as far as I can recall, actually rather liked it. It was the supply chain that didn’t work.

In other words, NFC is great but not yet relevant. This, to be honest, seem like a pretty reasonable assessment of the current situation and contains both good and bad news. The bad news is that the money that the payments industry is spending on NFC will have a much longer payback time than had been hoped. The good news is that we (consumers) end up with something that is simple and quick and secure.

[From Tomorrow's Transactions]

So, as has been known for some time, this is generally true. When people are given the option of tapping, for example, over scanning then they greatly prefer it. The barrier to NFC in the mass market was never the consumer.

An analysis conducted by NFC specialist Connecthings has found that NFC phone users account for a disproportionate percentage of interactions with its NFC- and QR code-based marketing and information services platform

[From Firm finds NFC users interact more than QR code users • NFC World+]

For these and other reasons (to do with security), I’ve always seen QR codes as an interim solution, something that will let people try out ideas (e.g., Bitcoin wallets) while we wait for something better to come along, but never the mass-market strange attractor for next-generation payments, no matter how much I like LevelUp. And it turns out that the man who invented QR codes agrees.

QR codes have seen a range of improvements through its 20 years, but Hara mentions that he believes that NFC and better image recognition will supplant the QR codes’ role.

[From QR Codes Will Be Gone in Ten Years Says Its Inventor »]

For those already in the QR code space this isn’t particularly bad news in my opinion. Or, at least it isn’t for those who used the right consultants to help them to architect their solutions in the first place… The QR code is simply the “last millimetre” connection between the merchant and the consumer. Almost all of the systems that people have built are not to do with this: so if the last millimetre replaces the QR code with the more convenient NFC/BLE combination, then their solution will be even better and more convenient than it was before. We will certainly be advising our clients to structure their solutions so that that swapping out the last millimetre can be painless and cost-effective.

These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

The post Never mind the last mile, what about the last millimetre? appeared first on Tomorrow's Transactions.

Just because there isn’t any contactless crime does not mean that we should ignore the fears of consumers (or, for that matter, the police). Time for some mass market education on cuddle cards, as I now call them.

Although we don’t focus on it — by and large because it works and has become business as usual — I think that contactless payment technology is fun. I had an enjoyable couple of days trying out my usual panoply of cards, phones, watches and stickers when I was last in Canada and I have to report that the situation was all systems go (except for one of my UK MasterCards that was inexplicably declined) whereas in the US it remains mixed. Meanwhile, it’s going gangbusters down under, as I discovered on my last trip to Australia. I paid with cards everywhere, and almost everywhere I paid I paid with contactless. Like in this taxi, for example.

Unfortunately, the Aussie rousers are less enthusiastic than I am about the amazing technology, the rapidly-evolving Australian retail payment environment, innovation at point of sale and quick and easy transactions for consumers. They claim, in fact, that there is wave, plague and apocalypse of crime that can be directly attributed to the new technology.

“We’re seeing many, many theft of motor cars, handbags and burglaries where people are looking for these cards, are getting hold of them and within hours of getting them, they’re going into stores and using them.

[From Tap-and-go credit cards contributing to increase in crime stats, Victoria Police says - ABC News (Australian Broadcasting Corporation)]

This is, if true, rather interesting. I say “if true”, of course, because I have been unable to uncover any statistics that back up the Victoria police claim. Nor, it seems, have any of their fellow law enforcement agencies.

Police around the country have differing views on the effect the cards are having on burglaries. The NSW Police said it had “not seen a spike in credit card related fraud since the advent of contactless payment technology”.

[From Banks stare down police over tap-and-go]

Still, this tidal wave of contactless crime must surely have shown up in the bank fraud statistics.

One of the major banks said on Thursday it had 30 per cent more ­contactless cards in the market compared with a year ago but card fraud was flat.

[From Banks stare down police over tap-and-go]

Oh well. Let’s just assume for sake of argument that there is a crime wave, plague and apocalypse but only in Victoria and only amongst issuers who do no collect or report card fraud statistics. That still sounds like a bank problem to me, since issuers will bear the losses. If a mugger demands my contactless card then I will give it to him. I couldn’t care less since it’s not my problem: the UK banks have an unequivocal guarantee to refunds unauthorised transitions. Nevertheless, the Melbourne heat seem most upset about contactless in general and especially miffed that they were not one of the stakeholders consulted in the banks’ roll-out.

he said police were not consulted before tap-and-go credit cards were introduced and that he regretted their introduction… “They are chewing up an enormous amount of police resources.

[From Tap-and-go credit cards contributing to increase in crime stats, Victoria Police says - ABC News (Australian Broadcasting Corporation)]

The crime wave, by the way, does not seem to have affected public confidence, since contactless use continues to soar. It is at very high levels in Australia already, with more than two-third of supermarket transactions already tap and go. Use amongst police chiefs, so far as the statistics presented in the article would indicate, seems particularly high.

Mr Lay did admit he used a tap-and-go card all the time.

[From Tap-and-go credit cards contributing to increase in crime stats, Victoria Police says - ABC News (Australian Broadcasting Corporation)]

Aha. I should point out, by the way, that the Victorian peelers objections to contactless go back some time. They’ve always been uncomfortable with contactless.

Police want to ban banks’ tap and go technology after vowing to take on big business over sloppy work practices. The force said it is sick of “mopping up” for “totally slack” initiatives that it states encourage crime.

[From Police want ban on tap and go technology, saying sloppy practices can promote crime | Herald Sun]

We have to address real issues, of course, but the fact is that public perception around contactless is not always rational. That Australian story was widely reported in the British press, fuelling public concerns (I have made a fascinating podcast with Karen Williams from Spectrum Insight on this topic). The British press have, it seems to me, always been rather keen on these scare stories. See this hilarious comment on a Daily Mail story about contactless.

It is well known that in America, thieves carry tablets and electronic readers in bags, walk around railway stations and shopping malls and scoop up all data automatically from these cards.

[From Customers charged twice for items because contactless cards were activated from their pockets | Mail Online]

Really? “Well-known”? If anyone can point to me a single reputable report of this ever happening, I would be grateful as I would like to link to it and continue the investigation. Far from being “well-known” I frankly doubt that it has ever happened at all. If you jammed an electronic reader up against my arse on the Tube, and kept it there undetected long enough to scan my card (I only have one in London wallet – haven’t you ever heard of card clash) then you would not get my name or the CVV for the card, so it’s not much of master crime. You can’t use the data to make a clone card and you can’t use it to buy online. Neverthess, as the analysis of contactless sentiment I discussed earlier in the week show, just because something doesn’t happen does not mean can ignore it. If consumer believe it, then we must deal with it.

I think we as an industry should probably be reacting to the “fear” area with some pretty clear messaging around how the technology works, how liabilities are distributed and the consumer protection that the combination provides.

[From Contactless sentiment - Tomorrow's Transactions]

The traditional way of educating the mass market in the UK about anything is to pester the BBC to include it as an EastEnders story line. I shall come back with some ideas soon, but since I haven’t watched EastEnders for at least a decade, it may take some research to get a viable narrative.

These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

The post Crime and contactless appeared first on Tomorrow's Transactions.

The US shouldn’t look at Japan as a model for mobile payments, and Europe shouldn’t look at the US.

An interesting discussion about the relationship between age and payment mechanisms in a meeting this week reminded me to look again at Japan to see how the combination of money, technology and an ageing population come together to shape retail payment trends.

The number of prepaid electronic money cards in circulation hit 182.17 million in June, or triple what it was five years ago, a recent Bank of Japan survey said… growing at an annual pace of 15 percent to 20 percent in recent years… The BOJ credited the surge to people in their 30s who were the first to use the technology when it debuted and have since shed their privacy concerns to adopt it.

[From Use of prepaid e-money cards soars | The Japan Times Online]

Edy is by far the most commonly-used e-money service, predominantly on cards although an increasing number of consumers are using it on their phones as well. It remains a fact though — as Dean Bubley observed in a Twitter conversation on such — that most consumers with contactless phones still use their cards rather than the phones. That’s not to say that the use of contactless phones isn’t growing for other purposes. I guess it just means that payments are not as much fun as rice cooking…

Appliance makers in Japan are jumping on the smartphone bandwagon with new appliances that can communicate with smartphones. Panasonic will launch a steam microwave oven and two induction heating rice cookers on 1 June that can communicate with Android-based smartphones. The appliances also use the FeliCa contactless technology.

[From Japan sees rise in smartphone-connected appliances - Telecompaper]

Another little window into the future is the use of NFC to provide a convenient and simple interface between healthcare devices, a crucial segment of the internet of everyone else’s things in an environment evolving to support the elderly.

…healthcare equipment maker Omron has launched the Wellness Link service which allows users with Android and FeliCa-equipped handsets to track their health online with data obtained from the equipment, which includes scales, thermometers and blood pressure gauges…

[From Japan sees rise in smartphone-connected appliances - Telecompaper]

All very interesting. But back to payments. I thought that the most interesting quote in that Japan Times article came at the end.

Yasuhide Yajima, chief economist of NLI Research Institute, said the use of e-money cards will continue to spread because elderly people feel safe using them and they can be handled like cash.

[From Use of prepaid e-money cards soars | The Japan Times Online]

In the UK, we seem to think that the elderly must be supported using cash and cheques because they are incapable of adapting to modern technologies. I suppose that’s just one of the ways that Japanese payments are evolving differently from ours. Another is the central role of the mobile operators in driving interoperability and new services.

Japan’s leading mobile operator and provider of integrated services centered on mobility, and KT Corporation, South Korea’s leading telecom operator, have agreed to develop a cross-border e-money service that would enable DOCOMO customers with compatible smartphones purchased in Japan to use a prepaid e-money service called “Cashbee” in South Korea… Cashbee is available at some 52,000 locations in LOTTE Group department stores, convenience stores and mass transportation facilities such as subways and buses. The service currently has 5 million users.

[From New DoCoMo Fact Book - NFC Deal with KT | Wireless Watch Japan]

DoCoMo are also building interoperability in other directions to make it easy for Japanese consumers to use their phones to pay elsewhere. Telcos in the Europe and the US have not gone down this route because they have adopted the EMV standard that provides interoperability for them, but the DoCoMo route does show how you could use NFC terminals to run non-EMV payment systems.

The collaboration will connect DOCOMO’s domestic payment network to the world, enabling customers using iD mobile credit payments with compatible DOCOMO smartphones to make contactless payments outside of Japan, anywhere MasterCard® PayPass™ is accepted.

[From MasterCard Connects NTT DOCOMO’s Domestic Payment Network to the World | MasterCard Social Media Newsroom]

Now, no-one should imagine that US or European markets are going to evolve mobile contactless like, say, Japanese or Korean markets have done. These are markets with entirely different structures and entirely different market dynamics. As Consult Hyperion has long advised clients, we should look to these markets for inspiration and ideas but not for templates.

So, I think it’s a mistake for anyone really in the U.S. or developed countries to be looking at Japan as a model for mobile payments.

[From The Future of Mobile Payments]

David is right about this. But I’d go even further. Not only is Japan not a model for the US, the US isn’t a model for anywhere else either. Both the US and Japan are special cases. I’m not saying this in hindsight: it’s been part of the Consult Hyperion mobile world view from the earliest days. That’s why the trick in Europe is to look and learn from those markets but not to try and copy them.

These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

The post Japan and the US are special cases for mobile payments appeared first on Tomorrow's Transactions.

I’m a big believer in wearables (not watches). But then I have been for a while.

It seems to me that one of the most interesting of contactless attributes, which is freeing payments from the tyranny of form factor, has yet to properly exploited. But in one area – wearables – we are seeing some developments. Such as this one from down under:

Menswear label M.J. Bale, Heritage Bank and Visa have teamed up to create a suit with a contactless payment chip and antenna woven into the sleeve.

[From Contactless payment SUIT lets you pay with a wave of a sleeve | Mail Online]

It’s a cute idea and I will of course go and buy one, since I feel it is both my blessing and curse that I find new payment toys unbearably fascinating, but I don’t really want another payment account. I’d rather just take one of my contactless credit cards (naturally I have several) and slip it into a convenient hidden pocket in the sleeve of the suit. And if you’re wondering where I got that idea from, it was my Thomas Pink Commuter shirts that I bought back in 2006.

The Commuter has only recently been launched but Pink says it is already flying out of shops faster than a rush-hour train.

[From A passion for pockets with a difference - FT.com]

The Commuter shirt had two features that I really liked. It had a channel running up the inside to carry earphone cables tucked away out of sight. These connected through a hole in a side pocket so that you could keep your iPod snug and out of the way. And it had that second pocket for a contactless card in the cuff. It was designed really for Oyster cards, but we put Visa cards in the pocket to make purchases using standard POS terminals with contactless interfaces. In memory serves, we also bought of few of them a presents for some of our favourite customers at the time! Anyway, I just went upstairs and got one to model for you:

The point I used to make was that contactless was about more than the interface, it was about form factors and that it would lead to innovation and I used the shirt to show an example of innovation beyond the card itself. Although the shirt was fun and helped to make an interesting demo about contactless payments in conference presentations, I thought it had two design flaws.

First of all, the pocket was behind the cuff on the top of the wrist. This meant you had to lay the back of your forearm across the contactless POS terminal or Oyster card reader. The pocket really should have been on the underneath of the forearm near the wrist to make paying a more natural action.

The second problem was that if you were wearing a suit and coat, it was hard to get the card close enough for the reader. I remember thinking at the time that I wished that the pocket was in my suit rather than in my shirt.

Naturally, being a consultant rather than a business wizard my thoughts went no further. Now only eight years later some entrepreneurial Aussies have gone and put the payment in the suit. I know it’s really just a publicity stunt but good for them – it’s a bonza idea and may stimulate some further innovation in a country where half of all Visa transactions are already contactless. What’s more, it will add some fun to payments, so I hope my consumer feedback from 2006 will prove useful to them.

These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

The post Contactless innovation in wearables (nothing new!) appeared first on Tomorrow's Transactions.

NFC is an interface, it’s not a business model. So when commentators said NFC was finished, they meant the telco-centric NFC business model was dead.

The rocky road to the mass market use of Near-Field Communication (NFC) technology has plenty of twists and turns. In the US, where it has an entirely different context at retail point-of-sale (POS) because no-signature stripe payments are so quick and convenient (contactless payments are no quicker, but when the US moves to PIN at POS then they will be) it has been a source of tension between stakeholders.

Adding to the turf battle now building over mobile payments, a few national retailers who are MCX members have begun turning off the ability of recently-upgraded payment terminals to recognize NFC payments or read smart credit and debit cards embedded with a chip

[From Isis CTO accuses retailers of turning off NFC and smartcard payment tech - Computerworld]

I don’t doubt this is part of the ongoing battle between merchants and banks in the US but if you think about it, it’s the business models and not the technologies that are competing. MCX could perfectly well use NFC (in fact, it would surely be quicker and more convenient if it did) and banks could perfectly well use QR codes. What’s happened here is that the products have become bound up with the interfaces, and that’s why strategies have become confused.

MCX plans to sidestep any requirement that customers load up a Visa or MasterCard card to a smartphone, and will instead require them to make purchases with phones and barcodes directly from their bank accounts — a significant departure

[From Isis CTO accuses retailers of turning off NFC and smartcard payment tech - Computerworld]

Look at how Target Red (the decoupled debit proposition) has taken off — as I understand it, Target Red is something like a fifth of the volume in early adopting stores and the analyst Gill Luria said (at BAI Payments Connect) that if this performance scales across MCX members it will take something like three or four percent of scheme volume in the USA — and was energised because it wasn’t subject to the same problems that credit and debit cards suffered in the Target breach. Now, taking an NFC handset and downloading a Target app that includes a Red card that runs over the NFC interface sounds (I’m sure) much more appealing to Target than simply adding NFC at POS for scheme payments. When you look at things from this point of view (seeing HCE, tokenisation, contactless POS, APIs and so on as components of a revolution at POS), NFC looks far from dead.

McKee expects Google’s HCE innovation to lead to an NFC renaissance in 2014,

[From Isis CTO accuses retailers of turning off NFC and smartcard payment tech - Computerworld]

I’m sure this is true – in fact, it’s what we at Consult Hyperion told our clients some time ago – and it has been reinforced in the last couple of days because of remarks from David Marcus, the head of PayPal.

“I’m moving from being a massive skeptic of NFC, to being cautiously optimistic on NFC HCE take-up in very specific shopping use cases,”

[From PayPal takes another look at NFC • NFC World]

I’m sure David would agree that what he was (rightly) sceptical about in the past was that NFC business model built around mobile network operator (MNO) infrastructure, not a quick and simple means to transfer data over a short range!

These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

The post NFC isn’t a business model appeared first on Tomorrow's Transactions.

Contactless is not only quicker and easier than chip and PIN, it’s quicker and easier than notes and coins. It’s taking us one step closer to cashlessness. Hurrah!

There are currently more than 38 million contactless cards in circulation across the UK, making up a quarter of all the credit, and debit and charge cards out there.

Take up of contactless has been greatest in London with one in five (17%) using contactless cards, closely followed by Manchester and Leeds (12%). However, in Bristol contactless has failed to catch on with only 4% people using it.

[From News & updates from WorldPay, the fast & secure credit card payment system]

I can’t think of any obvious reason why the natives in my old stomping ground of the West Country should be so suspicious of the apparent witchcraft evident in a “tap and go” transactions, but on my next visit I will ask and see what we can do to reach out to them. Meanwhile, while the spread of contactless in the UK has yet to reach Australian levels, the usage levels show steady increase,

Contactless card payments grew more than three-fold during 2013 thanks to accelerated rollout by retailers and growing acceptance on public transport, according to Visa Europe.

[From Visa: UK contactless payments more than triple in last 12 months - ComputerworldUK.com]

My experience,s based our involvement in a wide variety of contactless experiments, pilots, trials and roll-outs going back several years, is that once you can get people to use contactless, then they really like it. And this, I think, has an interesting knock-on effect on how people see the relationship between cash and cards. Contactless is not just better than chip and PIN, it’s better than notes and coins, and I speculate that this is causing a shift in opinion.

Eighteen percent of U.K. Internet users say they would prefer to be able to stop using cash altogether. Support for a cashless society is strongest in London, with 30 percent prepared to stop using cash.

[From UK non-bank payments more trusted than contactless and mobile card payments | MobilePaymentsToday.com]

Now, of course, I pay no attention what the public say they do or do no want, since they haven’t got a clue, but I do think that if you glance around Gibson-style you will begin to see some weak signals for change. Indeed, I saw one at Woking station recently…

Last week I went to the coffee chap and asked for a latte and a raisin danish and sleepily handed over a contactless Visa card. He tapped it on his contactless terminal and gave it back to me.

[From Retailers could exploit contactless payments more effectively]

My colleague Gary Munro relates a similar tale, again using the prosaic benchmark of South West Trains to illustrate the magnitude of the change underway!

I ordered my coffee & shortbread from the trolley service, and sheepishly handed over my £20, apologising profusely. The bloke on the trolley looked at me and asked if I had a contactless card. Brilliant, I handed my card over, he pulled a contactless terminal out of his cash drawer hey presto payment made, and no pocket full of coins to boot. Can’t believe I had a nice experience on South West Trains. Someone out there is bucking the trend and training their staff (no pun intended).

No pun intended? It jolly well should have been, since it was an excellent one.

These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

The post Contactless and one step closer to cashless appeared first on Tomorrow's Transactions.

The MNOs first thoughts are HCE might have been negative, but they need to rethink. It’s a great opportunity for them if they decide to take it.

The GSMA were kind enough to ask me to give one of the breakfast briefings at the Mobile World Congress in Barcelona this year, so I gave a briefing on HCE. I thought this rather a brave choice, because the MNO’s first reaction to HCE was one of horror, but I decided that as it’s a really hot topic it would be great to tackle it head on and look for ways for MNOs to find new opportunities.

I was trying to encourage operators to see HCE (and to some extent BLE, which I spoke about in the Digital Commerce conference session in the afternoon) as opportunities and not threat. So I used my time to explore three points building on our framework for the five key wallet technologies for 2014 that went into in more detail in that afternoon session..

First, the mobile wallet is being energised by a set of new technologies including proximity and vicinity Interfaces, identification and authentication and APIs. These interfaces enhance the user experience when using the mobile wallet, by providing new ways to link to the local environment. For example, a consumer can walk in to a store, the wallet will recognise the store using its vicinity (e.g., BLE) interfaces and up will pop in store information. The wallet will help the user navigate round the store, allowing them to tap on offers and initiate transactions using proximity (e.g., NFC) interfaces.

Secondly, when it comes to proximity interfaces, HCE is a wallet accelerator that supports business flows that are complementary to the MNO Secure Element (SE). It will accelerate the development of NFC services which will expand the number of services available to the consumer (eg, Small Data) and service providers (eg, Tokenisation), educate the consumer as to NFC’s potential and eventually bring innovative applications to customer’s handsets.

Finally, the core elements in the MNO SE proposition for payment, ticketing and other applications in wallets (including HCE) are the secure services that MNOs are perfectly positioned to provide through common APIs using industry-standard frameworks, supporting not only payment services but also identity. The MNO UICC provides an SE managed on the customers’ behalf, ideally suited to provide secure services to these applications. Service Provides and MNOs can also use the UICC for storage or supplementary services such as Customer Recognition, thereby enhancing the user experience.

In the discussion that followed there were some comments about the extent to which these building blocks are already in place. I tended to the optimistic: I think the operators have many of these blocks already, the GSMA are co-ordinating them through their digital commerce initiatives and there seem to be commercial imperatives for moving forward. This week has in fact already seen a key announcement in just this space.

The Mobile Connect service will simplify consumers’ lives, offering a single, trusted, mobile phone number-based authentication solution that fully respects their online privacy.

[From LEADING MOBILE OPERATORS UNVEIL MOBILE CONNECT INITIATIVE TO PROVIDE CONSISTENT AND INTEROPERABLE APPROACH TO MANAGING DIGITAL IDENTITY | Newsroom]

Look, we all understand that HCE bypasses the SE. But that’s a good thing: it simplifies and enables to deployment of transactional applications through mobile phones. That does not mean that the operators are totally bypassed if they get their acts together. The operators had, in retrospect unwisely, decided to found their NFC framework on the SE. HCE doesn’t mean the SE is toast: it means that operators should use the SE for something that banks and other services providers want to use, and identity may well be it.

The afternoon session that I spoke at was in the Digital Commerce stream. I presented on the five technologies that will change the wallet in 2014 and then took part in an interesting panel discussion with my fellow presenters from Weve, Telecom Italia, BCC Card (Korea), Etisalat and SITA to discuss different aspects of the mobile’s role in digital commerce.

At the end of the day, I feel that overall my prejudices were reinforced. I’m not sure if MNOs should be providing wallets, but there seems to be an opportunity for them to provide wallet infrastructure for other people to use to build wallets. The sky hasn’t fallen in – there is a role for the SE if the telcos decide to make strategic choices around infrastructure and focus on interoperable identification and authentication.

These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

The post HCE for MNOs appeared first on Tomorrow's Transactions.

HCE and BLE are going to make Barcelona fun this year, and they are opening up an important new role for mobile operators.

The subject of Host Card Emulation (HCE: see “Why all the fuss about HCE“) seems to wander across almost every client meeting I’m in at the moment. And I’m thinking about it again this morning because we’re now only a week away from the mobile industry’s biggest annual jamboree, the Mobile World Congress in Barcelona. And last year, from a retail transaction perspective, HCE was probably the most interesting change to the landscape.

Well, the most interesting case study from Mobile World Congress last year was, as I have said before, BankInter in Spain.

[From Organisations are looking at NFC again]

A year on from that announcement, with HCE now part of the Android mainstream, BankInter have announced the commercial launch of their “Mobile Virtual Card” (MVC) product. They have had a detailed risk analysis carried out by the Fraunhofer AISEC in Germany — who concluded that the security of the HCE solution is “adequate for EMV online” (that is, where the POS goes online for authorisation) transactions — and are launching the service their customers and hoping to licence the service to other issuers. I thought it was interesting that their press release about this mentions that the technology…

…also allows the bank to autonomously define its own business model and brand image in mobile payment media, without entering into an agreement with third parties

Now, when they say “third parties” we all know that this is code for “mobile operators”. The version of mobile contactless EMV that uses a Secure Element (SE) in the (operator-controlled) UICC depends on card issuers and mobile operators developing not only some complex technology (difficult to start with, but gets easier over time, especially when you have the right consultants on board) and complex business relationships (difficult to start with, but gets harder over time, even if you have the right consultants on board). As a consequence, the early promise of mobile contactless at retail POS has not been realised. There are few suitable handsets, few suitable apps, few transactions and operator consortia (such as ISIS in the USA and Weve in the UK) have had a slow start.

You would think, then, that mobile operators should be utterly downcast at the prospect of HCE and its supposed “competitor” Bluetooth Low Energy (BLE) in the mobile mainstream this year. So with HCE and BLE all the rage, and undoubtedly the subject of countless announcements at MWC, what should they expect? Well, I think you might be surprised. With HCE as an accelerator for NFC-centric proximity apps and BLE as a complementary channel to deliver vicinity apps, I’m actually rather looking forward to MWC and the opportunity to take part in the re-energising of the contactless mobile world. I think that contactless delivers a better customer experience and will give retailers to ability to deliver some great new apps.

But what would be the operator role in all this be? If the merchants and banks and transit companies can just build their apps and get going without having to rent space in an operator SIM? Well, as I will be discussing at the GSMA’s Digital Commerce Breakfast Workshop in Barcelona on Wednesday 26th February, they will have to deliver something of genuine value to stay involved: the service providers won’t have to use operator services, so the operators will have to deliver services that the service providers will want to use. Going back to the days of (and here’s one for the teenagers) Genie Passport at what was then Cellnet, I’ve always argued for the mobile operators central role in digital identity. The Secure Element (SE) is the obvious place to store these digital identities. And by storing digital identities that the app developers can access via standard APIs, the mobile operators can provide something of genuine value to the rest of the stakeholders, an identity infrastructure that both NFC (whether HCE or not) and BLE can use.

Unfortunately, my GSMA Breakfast Briefing on the subject is sold out, so I’m afraid if you don’t have a ticket already you won’t be able to come along, but the GSMA are organising a Twitter channel for comments and questions so I hope you’ll be able to join in all the same.

These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

The post HCE is launching appeared first on Tomorrow's Transactions.

There are some things that Woking station can do better than anyone else in the world. It’s a shame they are nothing to do with trains but, hey, you can’t have everything.

The latest figures show a steady rise in the use of contactless payments in the UK. Slowly and surely, consumers are starting to tap. Contactless is becoming mainstream. As a benchmark, note that now you can use your contactless bank card to ride the bus in London, TfL have decided to give up on cash altogether.

Transport for London (TfL) has today announced that it is to stop accepting cash fares on London buses from summer this year.

[From London buses to go cashless from mid 2014 | Transport for London]

But as yet we are nowhere near, say, Australia. Down under, they have 175,000+ contactless POS terminals and the contactless limit is already $100 (it’s still £20 back in Blighty). The biggest mobile operator (Telstra) already has more than a million NFC handsets on its network and the numbers are still going up. So we’re not at Oz levels yet, or possibly even Canadian levels, where the contactless “no PIN” limit has also been raised to $100 without apparent ill effect and there are contactless terminals in all of the main retailers.

In Australia, six in ten Visa and MasterCard supermarket transactions is contactless. Some retailers there want to install contactless-only terminals (this is currently against scheme rules AFAIK). We are nowhere near that in the UK. Visa’s top contactless market in Europe is Poland. I’m convinced that one of the reasons that our contactless take up has been slower is that retailers don’t really seem to know what to do with it. It baffles me that some retailers ban you from paying with cards for transactions below £10 when it would be more logical for them to say that transactions below £10 must be contactless.

At least Subway have a sign which allows you to pay by contactless for any value but has a minimum spend for [chip and PIN] credit and debit.

[From You searched for greggs - Tomorrow's Transactions]

This came up again when I went to Brighton recently. I went to a very trendy coffee shop with a guest and ordered a couple of coffees and a cake. It came to a fiver or so. Naturally, I didn’t have any cash so I opened my no.2 wallet (the domestic travel wallet) and took out a contactless payment card. The lady behind the counter took the card from me, told me it was an extra 60p for card payments (if it had said that on the door I would have gone somewhere else) and put it in the slot, but I could see that the terminal she was using had a contactless interface. So I explained to her that the coincidence of my having one of the 36+ million contactless cards in the UK and her having one of the 164,000+ contactless terminals meant that it would save her money by using contactless. So I got her to cancel the transaction and then rekey it so that I could tap. Which I did. And having made my contactless payment with a theatrical flourish and tap, I told her that one of the additional advantages of contactless was that it saves time. She fixed me with a steely glare and said “it hasn’t so far”. I am stranger in a strange land.

Ian Cranna, VP Marketing and Category at Starbucks UK… “The introduction of contactless has had a real benefit for all our customers, whether they pay with contactless or not, as it cuts waiting time in the line.

[From Saving time with contactless | /review - Gemalto]

Contrast this experience with the Platform 2 coffee chap at Woking station. Most days, I have a coffee at home before I amble off to catch the 7.59 Flying Glacier to Waterloo via all points beyond mobile coverage between West Byfleet and Vauxhall. But maybe once a week I’ll be doing stuff or be running late and I’ll grab a coffee at the station. When I do, I prefer to go to the Platform 2 coffee chap as I think his coffee is slightly nicer than the Starbucks on Platform 1 or the store on Platform 2. But I also love the raisin danish that he does. But I never have any money. So in the old days, that meant no sale because I would go to Starbucks and use my mobile app instead (and not get the raisin danish that I want). Then they got a POS terminal so you could pay with chip and PIN, which works fine, but obviously there can be a bit of a line at peak times. Last week I went to the coffee chap and asked for a latte and a raisin danish and sleepily handed over a contactless Visa card. He tapped it on his contactless terminal and gave it back to me.

Wow. Better for him, better for me and better for everyone else in the queue behind me. The only thing that would make it even better would be to take the contactless antenna off of his POS terminal and put it on the counter so that I don’t have to hand him my card or my phone or my watch in order to pay. Nevertheless, I thought this excellent payment experience could not go unremarked.

I was so shocked I didn’t recover until the trackside fire at Wandsworth.

These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

The post Retailers could take more advantage of contactless appeared first on Tomorrow's Transactions.

As we head back to Barcelona for Mobile World Congress again, there’s more talk about NFC and this time it’s not only coming from the operators.

In her state of the industry address at the GSMA NFC & Mobile Money Summit last fall in New York, GSMA Director General Anne Bouverot said that NFC is gaining traction globally, and it is certainly true the the number of handsets sold with NFC capabilities is steadily rising, even if most consumers neither know nor care that they have NFC. But it’s not just in phones: NFC is springing up in TVs, printers, cameras and all sorts of other consumer electronics. In our corner of the transaction treehouse, however, NFC means making contactless payments in retail environments. This hasn’t been going so well. As I said at the time, consumers can’t use NFC to ride the bus, which was my throwaway and prosaic benchmark of mass-market acceptability. But they might soon.

Madrid-based non-public bus operator Jiménez constellation is to introduce a brand new cloud-based NFC ticketing resolution that allows Nexus five NFC phones to be used as contactless ticketing readers at a “fraction of the value of ancient contactless reader infrastructures”. Ticktrack, developed by Spanish startup Aditium, uses host card emulation (HCE)…

[From Spanish bus drivers to check tickets using NFC host card emulation - NFC Business Cards]

Interesting. Something has changed. There were handsets out there. There were announcements all the time about pilots, trials and even live services. But somehow the technology was (and is, to be honest) struggling to gain traction, and every time that Apple announce a new phone without NFC there are a plethora of articles about the death of NFC. If you do have a handset with NFC in it, let’s say one of the super new Samsung S4s, you can’t use it for much interesting. I can’t log in to my bank and load my credit card onto it, for example. All I can do with the NFC on my Android phone is use it as a slightly more convenient version of a QR code. Except in Canada, where I could download my Tim Horton app and buy coffee with a tap.

Something has definitely changed. What? Well, here’s a framing of problem that I often hear. The GSMA (and others) opted for an architecture that put the mobile operators in control. And there’s nothing wrong with that. The GSMA is the mobile operators. But — and let’s be frank, to move the sector forward — the banks and operators have found it difficult to work together. I don’t want to cause trouble, especially since Consult Hyperion advises both banks and operators, but I think we have to be honest and open up the discussions that everyone knows are going on behind closed doors.

These MNOs operate a TSM service and establish the trust. Technically perfect, but this is also the problem that get things stuck. It has no technical issues, it is political. The banks just do not want the MNOs in their food chain.

[From EMV compliant NFC transaction from a mobile phone | The Abrantix Blog]

Maybe. And there is certainly evidence from the marketplace that banks will go to some lengths in order to avoid having to deal with the MNOs. This is despite countless attempts to work together. Personally, I suspect that some of this is down to the sheer hassle of it as much as it is to deep-seated strategic aversion to the Single-Wire Protocol (SWP), but it is nonetheless an observable phenomenon.

Bank of China (Hong Kong) is to introduce a microSD card based NFC payments service before the end of the year… BOC e-Wallet will initially be available for the Samsung Galaxy S4 LTE, Galaxy S III LTE, Galaxy Note II LTE, Galaxy S4, Galaxy Note II, Galaxy S III and LG Optimus G Pro smartphones.

[From Bank of China launches NFC payments in Hong Kong • NFC World]

Phones such as the S4, as noted, already have NFC. So, you might wonder, why bother putting a microSD NFC card into a phone that already has it if not to go around the MNO? This is the nub of the problem. In the complicated (but, let’s be clear, very secure) SIM-based SE model, the MNO calls the shots. And that has turned out to be a significant barrier to progress. It’s not impermeable: in some places (Canada and Australia spring to mind) where there are highly concentrated industries (ie, a small number of big banks and a couple of dominant MNOs) and a determination to work together despite thin margins there are now multiple handsets and multiple banks with functioning implementations in the market.

So what has changed? Why are the Canadian coffee chain and the Spanish bus company investing in NFC ? Well, the most interesting case study from Mobile World Congress last year was, as I have said before, BankInter in Spain. They launched what we called at the time a “NOSE” (NO Secure Element) payment service that uses tokenization to shift the risk analysis balance away from SE levels of security. The reason why this was such an interesting case study was that Bank Inter own an MNO. When you own an MNO, and still find it too much hassle to launch a SIM-based NFC payment service, that has to tell you something about the chosen model. Last year I called it an earthquake, and I stand by that.

Technically, what they did was to use a version of Android that had Host Card Emulation (HCE). At high level, this means that handset can pretend to be a payment card rather than having to have the SIM involved. When last year Google announced that HCE would become part of Android and that there would be no need to patch any more, a lot of people suddenly regained interested in the technology. The responses to this technology change have been very interesting indeed, as they seem to indicate considerable latent demand for a technology that we were being told was finished.

“With the entry of HCE we are free”

[From Spanish bus drivers to check tickets using NFC host card emulation • NFC World]

It wasn’t the technology that was the problem, it was the business model. Having previously criticised the SIM-centric model (with genuine integrity and, I think experience has shown, real cause), I stand in testament to the GSMA’s commitment to explore different views on this important topic and I am delighted to be able confirm that I will be giving part of the breakfast briefing on “HCE: NFC Threat or Opportunity” at the Mobile World Congress in Barcleona on Wednesday 26th February at 8.30am. I am genuinely looking forward to this as I personally think that there is an opportunity for mobile operators to use HCE to revitalise NFC in the mass market and, along with BLE, find new and more flexible business models that will make sense to financial services and other sectors. I expect to learn a lot from my fellow panelists and I look forward to seeing you all there.

These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

The post Yep, people are interested in NFC again appeared first on Tomorrow's Transactions.