Infrastructure and Device Availability are Key Driving Factors for NFC Take-off in Asia

(Business News & Technology News, 4 Aug 2008)

By Stephen Las Marias, Editor


In an interview with Wireless Design and Development Asia, Ng Fook Seng, Asia Senior Vice-President, Telecom Business Unit, Gemalto, discusses the current developments in the near-field communications (NFC) technology segment, as well as its opportunities and challenges. Excerpt:

How was the NFC business for Gemalto last year?
Gemalto was involved in a number of key trials in 2007. A lot of progress in terms of technical, user behavior and business model has been made during these trials, which seek to define a common global approach to using NFC technology to link mobile devices with payment and contactless systems. This is also in line with GSM Association's "Pay-Buy-Mobile" initiative, which aims to incorporate mobile contactless services into the SIM card.

What were the major technological and business developments that have occurred in the NFC/contactless market during the past 12 months, and where are we now, in terms of NFC?
SIM-based secure element has been endorsed by the GSMA. Major technology components such as Single Wire Protocol (SWP) and Host Controller Interface (HCI) have been standardized in February 2008. This standardization shall allow for more NFC handsets to be made available. Progress has also been made to define the role of Trusted Service Manager, Service Providers and Mobile Network Operators. Although a general description has been agreed by different parties, the exact definition would be different in each country and region.

South Korea and Japan already have their NFC/contactless payment business put up in place. What do you think will drive the demand and deployment of contactless for the rest of Asia?
In South Korea and Japan, the main driver for NFC/contactless payment business is the availability of contactless infrastructure and wide range of mobile devices. We believe that similar factors will drive the demand and deployment in the rest of Asia.

At present, what continues to be the biggest challenges NFC technology and Gemalto face? What are the strategies being put up in place by Gemalto to address these?
The biggest challenge for NFC today is the availability of a good supply of mobile NFC devices. As the standards are finalized in early 2008, we expect, based on our knowledge of new product introduction by handset makers, that a relevant range of phones will hit the market in next year.

STMicroelectronics recently came out with a fully integrated NFC system-on-chip targeted at the advanced silicon technology for the NFC market. INSIDE Contactless, meanwhile, launched its third generation of NFC chips. How does Gemalto look at these developments in the industry? And in your opinion, what does this indicate as regards the NFC market?
This development verifies the industry acceptance and show long term commercial feasibility of NFC technology. This development is definitely positive for the NFC ecosystem. With more players contributing to the ecosystem, we hope to see more innovation, in term of features, and speed up the availability of different NFC-capable devices including handsets and SIM.

What are the latest developments in Gemalto's NFC segment? What do you consider are its key advantages as compared with other devices today targeted at the NFC market?
Gemalto provides a solution, which is designed to remotely manage the lifecycle of any contactless service within a mobile phone environment, especially payment applications that mandate high security level. It will allow mobile operators to register, issue, manage and terminate mobile NFC services Over-The-Air (OTA).

This technology is both standardized according to telecom and banking standards. This is important as adherence to telecom standards shall help in getting compliance handsets, while adherence to banking standards shall provide guarantee to banks and other third parties the confidentiality and integrity of their services.

According to ABI Research, one of the key drivers for the NFC will be the mobile handsets. What can users expect from mobile phones, and what are the different business aspects that might slow down the adoption of these handsets?
Today, users are already using their handsets in a variety of ways; not only making voice calls and sending SMSes. Advance features on 3G have become a mandatory requirement, as demonstrated by the demand of the 3G iPhone. We think NFC has a good chance to become a default feature, like 3G, that is demanded by the end user because it introduces lifestyle oriented applications. Similar to 3G, it would require industry-wide initiative, long term commitment to the technology and services rolled out based on NFC technology. That's why GSMA's Pay-Buy-Mobile initiative plays such an important role in speeding up the adoption of these handsets.

What key issues specific to the handset industry are yet to be tackled in seeing NFC integrated into mobile phones?
In June, GSMA has taken the initiative to release a preliminary set of minimum requirements for handsets containing NFC chipsets. The requirements were developed by mobile operators supporting the GSMA's Pay-Buy-Mobile initiative. The requirements will help handset manufacturers to develop NFC-enabled phones that are compatible with operators' planned mobile NFC services and quickly realize economies of scale. Forty-four mobile operators from across the world are currently involved in this initiative.

The requirements will build upon the standardization work completed by ETSI, which has selected the Single Wire Protocol to provide the interface between the Universal Integrated Circuit Card (UICC), recommended by the GSMA as the Secure Element for NFC applications, and the embedded NFC chipset within the handset.

The GSMA will ask handset manufacturers to give their feedback on the preliminary requirements, which will cover the handset's user-interface, operation in low battery power mode and other aspects of the contact less functionality, so that the requirements can be finalized by the autumn.

What other major markets will greatly drive the adoption of NFC/contactless payment industry?
Outside Japan and Korea, Taiwan and Malaysia have a fast adoption rate. These countries have already contactless infrastructures for payment (Visa PayWave and MasterCard PayPass) and contactless tickets for transportation. As such, consumers are well-versed with contactless technology, and mobile contactless is easily endorsed as an extension of a familiar service.

What are your views on multi-application or convergence of applications on contactless cards?
The introduction of multi-application contactless cards helps to educate consumers to use these applications. Users will recognize the convenience and ease of use, and this in turn will encourage them to accept similar types of services when they are available in the mobile phones.

Finally, how important is Asia in Gemalto's business plans? Please give some light on Gemalto's activities planned in Asia this year.
Asian consumers are definitely well-versed with contactless technology, in particular, payment and transport. As such, we will see a faster uptake of NFC technology in this region.

Gemalto believes that the NFC ecosystem in many Asian countries will be easier to set up than in equivalent European or American markets. All these factors will contribute to the faster adoption of NFC in Asia, as already proven in Japan and Korea who have been pioneering this technology.

NFC trials with a number of our customers in this region are already under way. In Taiwan, Gemalto has been chosen by Taiwan Mobile to provide the world’s first commercial NFC SIM-based mobile contactless system. The project is currently being implemented. You can certainly expect more commercial deployments in the coming year.

Click here for more information on Gemalto