NFC Technology and Contactless Payment Issues, Opportunities

( 1 Sep 2007 )

By Stephen Las Marias, Editor


Trials and initial deployments of contactless payment technology have already shown much of its potential for the key players in the transaction value chain, according to market research firm ABI Research. However, the success of the open system contactless payment depends on the eagerness of all parties in the ecosystems to jump in to the bandwagon.

In an interview by Wireless Design and Development Asia, Goh Say Yeow, Executive Vice President of Sales and Managing Director of the Asia Pacific Region at INSIDE Contactless, shares his opinion on the opportunities and issues regarding contactless payment and NFC technology. Excerpts:

What is the value proposition of adding NFC to mobile phones when they already have wireless connectivity such as Bluetooth or infrared?
NFC is not the same as Bluetooth, but could be complemented to Bluetooth. For example, many find that it is cumbersome with the Bluetooth pairing process. With NFC, two Bluetooth devices could be easily paired by a simple tap. With NFC integrated in mobile phones, the phones could become payment cards; for example as contactless credit cards or as a contactless tickets. The NFC phones could also become a portable contactless reader, that is, to read information from smart tags, etc. Furthermore, more value added services could be provided to consumer with the use of LCD display and the key boards in the handsets.

What key issues are yet to be tackled in seeing NFC integrated into mobile handsets?
Currently, carriers are the one who subsidize the cost of the handsets. As such, the carriers must first request for NFC functionality, before the handset makers will integrate the NFC chip into the mobile handsets. The on-going NFC initiative by the Association of French Mobile Operators (AFOM) and the GSM Association (GSMA) NFC project team, will certainly help to define the framework required for the commercial roll out of the NFC services.

What can you say about security and application management?
The security and application management is an important element for the commercial roll-out. The NFC solution needs to be compatible with the existing contactless infrastructure. There is also a need to balance the level of security, the customer convenience and the potential risk exposure. Eventually, it is the business agreement between the carriers and the various service providers that will decide the adequacy of security and application management.

Why should operators be confident of the NFC integration into their latest handsets?
NFC standards are designed to be compatible with the existing contactless standards. It is a technology that is mature and well tested in various NFC pilots and trials. There are many positive feedbacks from the NFC field tests and there is no reason to doubt the success of NFC. With the integration of NFC in the handsets, it opens up great business potential for carriers—by moving from voice, mobility to new service enabler. NFC will generate new revenue streams for the carriers to combat the falling voice revenue.

NFC adoption requires a high level of standardization, interoperability, and security across multiple applications in many industries. How does the company address this, and how do you think this will affect the growth of NFC adoption?
Inside Contactless believes strongly in open standards and interoperability. We are an active member of the NFC forum. Furthermore, in collaboration with Gemalto, we are driving the standardization of Single Wire Protocol (SWP) and Host Control Interface (HCI) to the ETSI for the NFC interface between the SIM and the NFC chip. We also participate in major NFC pilots aim at working out the processes for NFC deployment. Standardization and interoperability are the ones that we always advocate, and we want to have that. This is a long process, and I think we are getting there. SWP has been recognized for the standardization of linking the NFC with the USIM. That is something that we have been haggling for a year or so, but it has been finalized last year.

What is the shape of the emerging ecosystem that will support NFC adoption?
Many of the major cities are already equipped with contactless infrastructure, particularly in the transit systems, such as subways, trains, buses etc. The contactless transit cards are being used as loyalty cards. They are also widely accepted in retail stores for payment too. Furthermore, Visa and Master Card are deploying contactless credit card payment in many cities. These existing contactless infrastructures in place, it will support the NFC adoption.

In how many years will we see mass-adoption of NFC?
I hope to see it tomorrow, but it will not happen just that. But as I see it, next year will be a more commercial roll out year, although the volume might not be very big. But it will be commercially launched. We see this year will be more of a pilot year, where we test out a lot about interoperability, the standardization, as well as the ecosystems around it. Security issues come into play as well—how, in which applications, what security and who's holding that security and key—and that is actually in the testing phase.

But the next three to five years will be similar with what Bluetooth is today in a phone. Most of the high-end phones will come with an NFC chip in it, a kind of a standard. That is the kind of approach that we want to have. We are on the right footing. But on and off there will be some kind of upheavals—which standards should we adopt, and then there will be debates here and there—but at the end of the day we will come to some finalization that this is good to go, let's all do it. Our aim is to move NFC into the world where it gives convenience, not complications.

Do you know how much is the additional cost of incorporating NFC in a mobile phone?
The full cost is not coming from us, because we are only basically on the chip portion of it. But I would say that as compared to a smart phone, the cost will be negligible. The add-on is very negligible.


You can reach Stephen Las Marias at stephen.lasmarias@rbi-asia.com.