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Driving Mobile Payments and Ticketing with NFC Handsets
ARCchart, May 2008, Pages: 83
Understanding the mobile payment and ticketing markets enabled through the use of NFC handsets, and the opportunities for equipment vendors, mobile operators, retailers and financial institutions
The idea that mobile phones could become an extension of a person’s wallet or purse has now become a reality. The industry has settled on the use of Near Field Communication (NFC) technology as the most suitable way of transforming mobile devices into a payment method. This allows for the development of proximity payment solutions, whereby mobile devices can be used in a similar fashion to other contactless payment methods. Examples of these include PayPass and PayWaves, contactless cards from, respectively, Visa and MasterCard. Transit operators, for example, can use handset-based proximity payments to achieve savings through a reduction in their operating costs. The processing cost of an electronic transaction is around 40% cheaper than that for a paper ticket.
This report examines the emergence of handset proximity payments and ticketing. It discusses the impact this will have on the mobile industry and identifies the ecosystem of players, which includes the financial companies, network operators, handset vendors, technology companies, transit authorities and the various standards bodies. The handset proximity strategies of selected companies are also reviewed. We believe, on the strength of trials and pilots conducted in 2007, that in 2008 device manufacturers will begin to ship NFC-enabled handsets in earnest. We forecast shipments to increase at a CAGR of 338% for the period 2008-2012, culminating in shipment of 504 million devices in 2012.
The author believes that a large proportion of passengers who travel with the major transit operators worldwide will adopt NFC handset-based ticketing services. The report concludes with a schedule for the author’s view of likely timelines for the roll-out of NFC and handset payment systems, as well as providing forward looking recommendations for network operators, handset vendors and financial companies.
Topics of coverage include:
- The organisations behind NFC-enabled mobile payment systems
- Security considerations when protecting user transactions and data during contactless payments and other applications of NFC for mobile
- The prospects for Sony’s FeliCa system, now that NFC devices appear to have won the standards battle for contactless payments
- The design options for integrating the proximity payment functionality into mobile handsets: SIMs, memory cards, or smart cards
- Means for controlling the interaction of proximity payment applications with other applications on the handset, and using the cellular data connection to interact with central payment systems
- Pros and cons and applicability – in terms of target user groups – of the main payment models for UFC-enabled mobile payment systems
- The ecosystem for NFC-enabled mobile payments, including company profiles of some of the leading solution providers, financial institutions, mobile operators, and device manufacturers
- Profiles of some of the leaders in mobile NFC payments, including: solutions providers, NFC chip manufacturers, financial institutions, mobile operators, and device manufacturers
- Recommendations on strategy for different players in the mobile NFC market.
- Revenue projections for mobile NFC-enabled payments from 2008-12, based on optimistic, pessimistic, and realistic scenarios
Answers and opinions are provided with respect to the following essential questions:
- What is the relationship between NFC payment technology and proprietary systems such as FeliCa
- Which two companies currently enjoy a 92% share of the global contactless technologies market
- What is the difference between ‘active’ and ‘passive’ ways in integrating proximity functions into a mobile handset?
- What new capabilities are enabled by allowing NFC applications to interact with other applications resident on the same handset?
- What are the billing options for settling handset-based proximity payment transactions?
- Which NFC solution providers have been most active in trials of NFC-enabled mobile payment technology?
- Who are the main company types in the value chain for NFC-enabled mobile payment systems?
- What are companies such as Nokia and Visa doing to address the emerging market for mobile NFC payments?
- Which mass transit operators are actively trialling NFC-enabled mobile ticketing applications?
- What are the business opportunities for using mobile NFC in the entertainment industry?
A. INTRODUCTION
A.1 Overview and report outline
A.2 Definitions
Mobile payment
Definition of transaction terms
Mobile ticketing
A.3 The cut off value
A.4 Proximity Systems and Technologies
Architecture of proximity systems
System function
NFC technology
A.5 Security considerations
Eavesdropping
Protecting sensitive information
Stolen devices
A.6 Alternative technology
FeliCa warms up to NFC
Sony and NXP combine forces
A.7 Handset proximity payment ecosystems
A.8 Market drivers
Financial institutions understand the potential of mobile banking and payments
Strong support from mobile operators
Solution providers play an essential role as enablers
Mobile Internet on the rise
Growth in the number of mobile users expands addressable market for mobile payments and ticketing
The proximity advantage
Proximity payment systems are cheaper to operate
Greater customer satisfaction
A.9 Other NFC applications
A.10 NFC where is the killer application?
A.11 Challenges
Gaining consumers confidence
Revenue sharing
Customer education
B. MOBILE PHONE PROXIMITY PAYMENT AND TICKETING
B.1 Overview.
Passive and Active integration
The handset as a carrier
The advantages of active integration
Network connectivity
Interaction of payment applications
B.2 Application authentication/signing
The network operators
The handset manufacturers
Third-party check
B.3 Secure interactions between applications
Overview
Secure micro environment
The SIM
Removable media cards
Built-in micro environment
Micro-environment operating system.
B.4 User interfacing
B.5 Payment methods
Direct link to financial institutions
Mobile billing
Mobilians International
Target market
B.6 Mobile markets – fertile ground for NFC
Handset shipments continue to grow.
Mobile subscribers
Handsets become a necessity
Market opportunities
C. MOBILE PAYMENTS: MARKETS, TRIALS & BUSINESS MODELS
C.1 Market Overview
Geographical markets
C.2 Payments solution designs
Financial institution reservations
C.3 Mobile operators
C.4 Mobile payment business models
Hosting model
Transactional model
Percentage based model
C.5 Mobile payments value-chain
Payer
Payee
Mobile operators
Solution Providers.
Financial institutions
C.6 NFC Trials
GSMA's Pay-Buy-Mobile
Regional trials
C.7 Market evolution
NFC devices
Relatively speaking
NFC mobile subscribers
Regional distribution of NFC devices
Mobile operators’ revenue
Mobile operators revenue - alternative model.
D. MOBILE TICKETING
D.1 Mass transit
Regional mass transit markets
Mass transit ticketing
Fare collection
The business case for mobile NFC ticketing
Mobile phone NFC ticketing forecast
Geographical distribution of passengers
D.2 Value-added services
Information
Bypass electronic ticketing
Widening travelling range
Duality of functions
D.3 Transit and mobile operators
Concerns
OTA
Business model
D.4 Deployment and trials in APAC.
China
Japan
Taiwan
D.5 Deployment and trials in Europe.
Austria.
Germany.
United Kingdom
D.6 Other ticketing options
Sport and cultural events
Parking
Top Tunniste
Finnish parking pilot
Air Transportation
E. SELECTED INDUSTRY PARTICIPANTS
E.1 Overview
E.2 Solution providers
Consult Hyperion
NFC Projects
The O2 Wireless Festival
Barclays and Transport for London
Consortium participation
ViVOtech
Company overview
Products
Mobile specific products
End-to-End solution
ViVOtech’s Mobile trials
Australian trial
BART transit operator
Cellular South
NETS
Taiwan
HSBC Credit Card Services
Philips Arena in Atlanta
New York trial
Strategy
E.3 NFC chip manufacturers
INSIDE Contactless
Solutions
Strategy
NXP
Company overview.
NXP in mobile contactless
Strategy
E.4 Financial institutions
Visa
Company overview
payWave
Visa payWave Contactless Deployment Status
Asia Pacific
Europe
Latin America and the Caribbean.
United States
Visa’s Vision
Enablers
Visa Mobile Activities
Visa Mobile Platform
OTA
Visa payWave
Security
Deployment
Mobile trials
Visa’s strategy
E.5 Mobile operators
Vodafone
Company overview
NFC Trial
Vodafone strategic objectives
E.6 Device manufacturers
Nokia
Company overview
Mobile phones
Nokia and NFC standard
Nokia in the NFC market
Nokia NFC Device
Nokia and NFC trial
Nokia NFC strategy
F. STRATEGIES AND RECOMMENDATIONS
F.1 Overview
F.2 Mobile operators
Proactive approach
F.3 Transit operators
Seeking partners
F.4 Device manufacturers
Creating the market
Drive the replacement cycle
F.5 Solution providers
Keeping things simple
Mobile phone as wallet
Looking to the future
F.6 Financial institutions and ticketing companies
Nurture relations with operators
Family matters
F.7 Merchants
List of Figures
Figure A-1: Structure of the mobile payment and ticketing markets
Figure A-2: User accessing information from a smart poster
Figure A-3: Schematic of NFC within the handset environment
Figure B-1: Visa proximity payment terminal
Figure B-2: NFC in mass transit systems
Figure C-1: The mobile payments value-chain
Figure D-1: NFC parking scheme in Oulu, Finland
Figure E-1: ViVOpay 5000m
Figure E-2: ViVOpay 4500m
Figure E-3: ViVOpay Dine
Figure E-4: Nokia 6131 NFC-enabled handset
Figure F-1: User interface example from mShift
List of Tables
Table B-1: Mobile phone shipments – 2007-12
Table B-2: Mobile subscribers – 2007-12
Table B-3: Mobile subscribers by region – 2007
Table B-4: Mobile subscribers by region – 2007-12.
Table B-5: Mobile operators by region – 2007
Table C-1: NFC-enabled phone shipments -2007-2012
Table C-2: NFC-enabled phones as percentage of total market - 2007-2012
Table C-3: NFC subscribers - 2007-2012
Table C-4: NFC phone distribution by region - 2007-2012
Table C-5: Mobile operators' NFC revenue - 2008-12
Table D-1: Transit passengers – 2007-12.
Table D-2: Passengers per day in major world cities – 2008
Table D-3: NFC transit passengers – 2007-12
Table D-4: Transit passengers using NFC devices as a percentage by region – 2007-12
Table E-1: Visa core data
Companies mentioned, discussed or reviewed include:
- 7-Eleven
- Al Rajhi Bank
- Alloy Ventures
- American Express
- Association of German Transport Operators
- Atron
- Banca Popolare di Vicenza
- Bank of Atlantic
- Bank of Hawaii
- Barclaycard
- Barclays
- BART
- Bebo
- bitWallet
- BP
- Carrefour
- Cellular South
- Chase
- China Fujian Mobile Communication
- China Mobile
- Chinatrust Commercial Bank
- Chop'd
- Chunghwa Telecom
- Cingular Wireless
- Cingular Wireless (part of AT&T)
- Citigroup
- Coffee Republic
- Commonwealth Bank of Australia
- Consorzio Triveneto
- Consult Hyperion
- Costco
- CVS
- Deloitte
- Denizbank
- Deutsche Bahn
- Draper Fisher Juvertson
- Duane Reade
- East Japan Railway
- EMVCo
- Facebook
- Far East Tone
- Fidelity National
- First Data Corporation
- Gemalto
- Giesecke & Devrient
- GlobalPlatform
- GSM Association
- HBOS
- HSBC
- HSBC Credit Card Services
- INSIDE Contactless
- Jack in the Box
- JPMorgan Chase
- KALL
- KDDI
- Krispy Kreme
- KTF
- Kyocera Wireless
- La Caixa
- Lloyds TSB
- Loblaw
- London Underground
- MasterCard
- Maxis
- Maybank
- McDonalds
- MCI
- mFoundry
- Microsoft
- Mobile Payment Forum
- Mobilians International
- Mobilkom
- Motorola
- Mshift
- MTA New York City Transit
- MTN
- National City
- NETS
- NFC Forum
- Nokia
- Nokia Growth Ventures
- NTT DoCoMo
- NXP
- O2
- ÖBB (Austrian Federal Railways)
- Open Mobile Alliance
- Philips
- Prada
- PSCU Financial Services
- Qualcomm
- RBS
- Regal Entertainment Group
- RMV
- Rogers Wireless
- Royal Bank of Canada
- SafePay Systems
- Samsung
- Sheetz
- Singapore Telecommunications (SingTel)
- Smart Card Alliance
- Smart Communications
- Société Générale
- Sony
- Spirit
- Sprint
- SunTrust
- Symbian
- Taipei Fubon Bank
- Taiwan Mobile
- Telecom Italia
- Telenor
- TeliaSonera
- Tesco
- Top Tunniste
- Transport for London
- Transude
- TranSys
- T-Systems
- Turkcell
- United Overseas Bank
- US Bank
- Venyon
- Vimpelcom
- Visa
- Visa USA
- ViVOtech
- Vodafone
- Washington Mutual
- Wells Fargo Bank
- Western Union Payment Services
- Wiener Linien
- Xiamen E-Tong Card Company
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