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NFC & Mobile Payment - Payment and Transport: Vectors of Development for Mobile NFC?
IDATE, October 2012, Pages: 86
This study presents the current situation of the mobile payment and mobile NFC technology markets.
It analyzes the prospects for the market from a technical and economic point of view, by looking at challenges facing the economic models in key areas, including: automation, commerce, advertising, public services and transport.
Report's key questions:
- How can mobile NFC technology revolutionize payment, transportation and mobile applications?
- Can it generate revenue for the various stakeholders?
- What are some of the issues around NFC technology business models?
- What technical challenges exist that might have a direct impact on mobile NFC business models?
- Could NFC mobile payment be deployed on a large scale?
- What strategies are the major players adopting for implementing mobile NFC technology?
> Julien GAUDEMER, Consultant
Julien Gaudemer joined lDATE in September 2011, working as an Internet Services Consultant. His assignments primarily involve technical examination of the Internet services and infrastructures. He notably works on studies dealing with Cloud computing and mobile and online advertising. Before coming to IDATE, Julien worked in the Network Division at the French operator Bouygues Telecom as a project manager intern, in Paris. Mr. Gaudemer holds an Engineer Master degree in telecommunications at the Institut Supérieur d’Electronique de Paris (2011), and studied Management of Innovation at the Chalmers University of Technology in Gothenburg, Sweden.
> Soichi NAKAJIMA, Senior Consultant
1. Executive Summary
3. NFC technology
3.2. NFC equipments
3.3. How it works
3.4. General hardware architecture
3.4.1. NFC tags and cards architecture
3.4.2. Architecture and operation of NFC devices
3.5. Norms and standards
3.6. The Secure Element (SE)
3.6.1. The Cardlet
3.6.2. Trusted Service Manager (TSM) and personalization
3.6.3. The different types of Secure Element
3.7. Overall functioning of a secure application
3.7.1. Contactless mobile payment (bank card system)
3.7.2. Electronic wallets
3.7.3. Transport and ticketing applications
3.8. Overall functioning of a non-secure application
3.8.1. Between an NFC mobile device and an NFC tag
3.8.2. Between two NFC mobile devices
4. Market structure
4.1. Market evaluation
4.1.1. Initiatives around mobile NFC
4.1.2. Mobile NFC
4.2. The main applications and uses for mobile NFC
4.2.1. Mobile payments and micro-payments
4.2.2. Non-NFC mobile payments
4.2.4. Other applications
4.3. Business models and added value of mobile NFC
4.3.3. Commerce and payments
4.3.5. Public services
4.4. Key statistics
4.4.1. Mobile payments
4.4.3. NFC equipment
5. Strategies from key players
5.1. Value chain
5.1.1. NFC mobile payment strategy
5.1.2. Transport strategy
5.1.3. Roles of the various players
5.2. Profiles of key players
Mobile services providers
- NTT Docomo
Mobile device manufacturers
NFC chips, SIM or microSD cards
- Inside Secure
6. Strategic analysis
6.1. The technical maturity of NFC
6.1.1. Norms and standards
6.1.2. NFC mobile devices
6.2. Advanced deployments
6.3. Challenges around usage
6.4. Business/ecosystem models
6.4.1. Complexity of business models
6.4.2. An overcrowded ecosystem
6.4.3. Competing technical architectures
Table 1: Comparison of different near-field wireless communication technologies
Table 2: Summary of the major, recent initiatives around NFC
Table 3: Worldwide data for the volume of transactions made on mobile devices
Table 4: Number of users using mobile devices as a payment method, by region
Table 5 : List of main card reader mobile plug-in solution providers
Table 6: Business model comparison between transportation and commerce/payments
Table 7: Individual ticket price comparison in London between NFC and non-NFC
Table 8: Percentage of the population who have used mobile payments during the year, for various countries in Africa
Table 9: Service provider involvement
Table 10: Payment systems and NFC involvement
Table 11: Mobile operators’ involvement
Table 12: Involvement of mobile device manufacturers
Table 13: Involvement of manufacturers of NFC chips, SIM cards and microSD cards
Figure 1: Contents of the ISIS contactless mobile wallet
Figure 2: NFC operation in P2P mode
Figure 3: NFC operation in read/write mode
Figure 4: NFC operation in card emulation mode
Figure 5: Overhead view of an NFC NXP tag
Figure 6: Exploded view of an NFC card, showing its different elements
Figure 7: Hardware architecture of an NFC mobile device
Figure 8: Example of cardlet organization in an NFC SIM card
Figure 9: NFC mobile device architecture with an integrated SE
Figure 10: NFC mobile device architecture with the SE in the SIM card
Figure 11: NFC mobile device and traditional mobile device architecture with the SE in the SIM card
Figure 12: Personalization of the payment application on the user's mobile device
Figure 13: Payment amount displayed on the EPT and the user's mobile device during a transaction
Figure 14: Simplfied NFC mobile payment process, with an authorization request
Figure 15: Simplified process for transfer of funds from customer to merchant
Figure 16: Different ways of purchasing a transport ticket for use with NFC mobile devices
Figure 17: Different ways of downloading a transport ticket for use with NFC mobile devices
Figure 18: Possible data exchange initiated by NFC between two NFC mobile devices
Figure 19: Number of NFC mobile products offered by brand
Figure 20: Microsoft Wallet on Windows Phone 8
Figure 21: Visa's NFC mobile payment app for the London 2012 Summer Olympics
Figure 22: The ISIS Wallet app
Figure 23: The Cityzi app and BNP Paribas (KIX) payment services
Figure 24: The Cityzi app and transport service in Nice
Figure 25: The Google Wallet NFC app
Figure 26: Signing for a card payment directly on the device
Figure 27: The Square Register card reader in use with an iPad
Figure 30 : Segmentation of mobile payment systems
Figure 31 : Example of a virtual currency model (Facebook Credits) involving four player types
Figure 32 : Buying FarmCash, the virtual currency used in FarmVille, with Facebook Credits
Figure 33: Poster for the film X-Men First Class with an NFC tag that lets users view the trailer with their mobile devices
Figure 34: Overview of Groupe Casino's NFC solution
Figure 35: Audioguide on a Samsung Smartphone at the Cité de l'Architecture in Paris, controlled by tapping an NFC tag with an NFC mobile device
Figure 36: Posters designed for restaurants by Atuch, allowing customers to download menus
directly by tapping an NFC tag or scanning a QR code
Figure 37: Sony Ericsson's Xperia programmable tags, which can trigger an action on a Sony mobile device
Figure 38: Nokia's NFC-compatible wireless speaker for pairing with a Nokia NFC mobile phone via Bluetooth
Figure 39: Exchanging business cards between two Nokia NFC mobile phones
Figure 40: Passing security and boarding gates at Toulouse airport, France, using a boarding pass stored in an NFC mobile device
Figure 41: An NFC parking ticket service by Skidata
Figure 42: Yale's NFC solution for unlocking hotel doors
Figure 43: Percentage of the population in different countries worldwide with an account at a financial institution
Figure 44: Growth in the number of non-cash payments by inhabitants for different countries in
Europe and the United States, from 2001 to 2009
Figure 45: The NFC mobile and mobile payments value chain
Figure 46: NFC apps to become Facebook friends with someone or to like a Facebook page
Figure 47: Paypal's mobile app for NFC payment between two mobile devices
Figure 48: NTT docomo’s Osaifu Keitai (mobile wallet) concept
Figure 49: NTT docomo’s iD credit payment service in use
Figure 50: NTT docomo’s DCMX credit service
Figure 51: Nokia’s range of NFC handsets
Figure 52: BlackBerry handsets hosting NFC technology
Figure 53: a Samsung Galaxy SII being used to make a purchase via the Visa PayWave app
Figure 54: WatchData’s NFC solutions
Figure 55: NXP’s NFC chips built into Google and Samsung mobile devices. Without a Secure Element on the left and with an SE on the right
Figure 56: Features of the Sony Xperia S promoted by Orange
Figure 57: Snapshot of different NFC mobile initiatives around the world
Figure 58: Starbucks Coffee non-NFC mobile payment application using bar codes
"NFC & mobile payment" presents the current situation of the mobile payment and mobile NFC technology markets. It analyzes the prospects for the market from a technical and economic point of view, by looking at challenges facing the economic models in key areas, including: automation, commerce, advertising, public services and transport.
"One of the major problems for NFC on mobile devices is how to define viable business models for a particular type of application in which the different stakeholders can find some level of financial balance", comments Julien Gaudemer, project manager for the NFC study. He insists:"In numerous initiatives, obstacles often lie in the difficulties local stakeholders encounter in defining a stable cooperation framework for offering services to users."
Complex business models
A different business model often exists based on application type (essentially payment and transport) and geographical region. Relations between stakeholders can vary from region to region. The types of stakeholders may also vary (different operators from one country to the next, for instance).
- For transport applications, the business model seems relatively balanced between the costs incurred by NFC on mobile devices and the direct revenues that carriers can generate from NFC. These revenues are first used to cover the costs of NFC for mobile usage. Since the different transport networks do not all have standardized NFC infrastructures, each carrier must, in principle, develop its own NFC mobile transport application.
- For payment applications, the business model may be more complex since, unlike the transport ecosystem which is relatively closed (a single entity manages the various transport activities), payment applications require many different players who must cooperate in order to offer an NFC payment service. While most already maintain relations to offer traditional card payment services, NFC incurs new costs, particularly for banks (application, TSM, operators where necessary). These costs may then be passed on to customers (particularly private users), although this may be dissuasive. However, other strategies can be adopted to cover the technology cost, such as advertising on mobile
- For other applications, the business model is simple, in which service providers invest in a mobile application and tags, and then recover the revenues, usually indirectly.
An overcrowded ecosystem
Compared with traditional payment methods and transport ticketing (credit/debit cards or NFC travel cards), the business model for NFC applications is different. More stakeholders are present in the ecosystem. This is explained by the fact that mobile usage requires the presence of certain players: manufacturers of mobile devices, mobile operators and SIM card manufacturers, primarily. Alongside these are other stakeholders, such as TSMs, most of which were previously smart card manufacturers who converted the value of a physical product into an intangible service. This ecosystem mainly differs from non-NFC mobile payment in that there are fewer technical issues and the conflict between stakeholders is not as fierce. Some players, such as chip or mobile device manufacturers, do not even enter the arena.
The NFC mobile ecosystem therefore comprises a multitude of stakeholders, each jostling to get ahead in a particular application. This is mainly the case with payment applications which can generate substantial revenues and consequently attract many businesses. Some stakeholders in this ecosystem have invested fully in NFC technology and in rolling out initiatives, while others seem more cautious, particularly Web giants such as Apple, Facebook and Amazon.
Competing technical architectures
The fact that the ecosystem comprises a multitude of stakeholders, and since some have some clearly chosen a technical architecture (SE type) that is most financially viable for them, conflicts arise between them. These technical architectures only affect so-called “secure” applications such as payment and transport.
Operators fully support SEs in the SIM card since it enables them to generate revenues from renting secure space on the SIM card. Service providers are more opposed to this architecture since they are seeking to minimize costs and have as few intermediaries as possible. This is the case for Google, which bases its Google Wallet on an SE built into the mobile device.
Manufacturers of mobile devices are caught in the middle:
- on the one hand, they want the built-in SE they have inserted in their devices to be promoted via applications (and initiatives);
- on the other hand, they must satisfy the demands of operators who prefer the SIM card and are mostly responsible for selling the mobile devices of manufacturers.
The same is true for manufacturers of NFC chips and SIM cards who are looking to please all of their potential customers, and who must therefore support initiatives based on the SIM-card, as well as on other types of SE to avoid focusing on a single market segment.
- Inside Secure
- NTT Docomo
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