NFC-enabled Handsets: Now Everything's Tap-n-Go

( 1 May 2008 )

By Stephen Las Marias, Editor


STMicroelectronics' recent release of a complete, fully integrated SoC solution for the near field communication (NFC) market is a statement, which in a way could give assurance to those who are still unsure of or unconvinced whether or not to jump on the bandwagon that the technology has to offer. For those chip makers, NFC is already here.

NFC, a short-range wireless connectivity standard that significantly simplifies the interaction of consumer devices in a range of applications, provides advanced wireless or "contactless" services for users, such as electronic payment via mobile phone. The technology can be implemented in various devices, such as in a mobile phone, to enable secure electronic payments. Market analyst ABI Research forecasts that by 2012, about 292 million handsets—or just a little over 20 percent of the global mobile handset market—will ship with built-in NFC capabilities.

From the user's perspective, having an NFC-enabled phone allows the user to have a wallet in their mobile phone for transportation, mobile payments, and even to collect loyalty points, for that matter. Of course, these kinds of transactions can be done with a collection of plastic cards. But, one of the key advantages of using a mobile phone is the richness of application that comes with it. A mobile phone, with its screen keypad, and connection to the back-end servers, allows a user to get a lot more information such as account details, balances, etc.

In my recent interview with Jeroen Keunen, Senior Director, Automotive & Identification, NXP Semiconductors, he said that an NFC-enabled phone can be used for card emulation, which is securely replacing cards by having information stored in the phone; and peer-to-peer communications, which will allow two NFC phones to exchange information quickly and easily. "It will also have an NFC reader functionality, which allows the phone to 'discover' services while on the move, such as a smart poster with discount coupons, timetable information, a link to a movie trailer, and others," he added.

Late last year, NXP Semiconductors and Sony Corp. formed a joint venture, which is aimed at driving the global adoption of contactless smart card applications in mobile phones using NFC. The new company—Moversa—will develop and manufacture the Universal Secure Access Module (U-SAM), which incorporates both MIFARE (owned by NXP Semiconductors) and FeliCa (owned by Sony) operating systems and applications. The U-SAM will provide mobile device makers with the technology to design global products compatible with different contactless protocols and operating systems deployed in different countries.

According to Keunen, the aim is to provide a global platform allowing handset makers and mobile operators to provide phones with global appeal. One example is a businessman on a business trip, which uses his phone to tap-and-go in a subway in London, and buys a meal at a McDonald's in the U.S.

GETTING AROUND THE ISSUES
Despite positive market outlook, however, ABI Research forecasts that there will be longer than anticipated delays to NFC deployments, leading the market analyst to adjust its latest quarter and next annual figures accordingly. The revised forecast now stands at 650,000 for 2007 and 6.52 million units for 2008, from 1.1 million and 9.81 million, respectively.

I think among the major issues that continue to offer difficulties in bringing the technology to the consumer market are security, interoperability, and the revenues that will come from the services. Just imagine having multiple services converge into a single device—banking, automated fare collection in transport systems, retail, credit card schemes, not to mention mobile phone operators' services—not only in each country but for global interoperability. Add to that, the revenue sharing between these companies and organizations across many industries.

Keunen said that the key challenge remaining is the development of viable business models. "For example, in the case of a mobile phone, the main customer interface belong to the mobile phone operator, so there are a lot of discussions at present about how the others can maintain the relationship and loyalty with their customers," he explained. As for the security issues, he said that the SAM are based upon the SmartMX platform, which has consistently achieved the highest ratings possible in many independent security evaluations, including the Common Criteria EAL5+.

THE MAIN DRIVERS
One of the main drivers of the growth of contactless deployment will come from the uptake of contactless payments from cards (but the bulk of that growth, of course will come from the integration into mobile phones). For instance, one example is the "ez-link Card", which I use here in Singapore, or the "Octopus Card" in Hong Kong, both based on Sony's FeliCa, and both being used in transportation systems. The cards also enable retail, leisure facilities and vending machine transactions, to name a few.

Another example is the Citibank SMRT card here, which integrates the ezlink Card functionality into the Citibank credit card. I could say that it has given me greater convenience in that aside from being a credit card per se, in terms of transit applications, I can use it either in MRTs or buses, without having the need to queue in ticketing offices at rush hours to reload whenever the credit runs out.

I think that approach, the integration of transport payment in a credit card, is one way of gradually promoting the technology to the public, who most of the time really doesn't care about the technology behind everything, but only about the convenience and services that they will get. For NFC-enabled mobile phones, given the services they will enable once they have been deployed, I believe widespread consumer adoption will not take that long. And it will only be a matter of time before we see consumers buying things—tapping their mobile phones at reader terminals, and then going on their way. Or people looking at a map or billboard, tapping their mobile devices on the reader terminal and then downloading that map instantly to find out where to eat or discover new places and things within their vicinity.

Although I have yet to see an NFC-enabled phone, I think I will immediately recognize one if I see someone putting on hold his conversation on a mobile phone, tapping that phone into the payment reader at a transit station, and then going on his way and resuming his conversation.


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