Mobile payments using NFC has been a coming technology for a while, but what are the actual elements needed for success, and what part do operators, technology providers and service providers need to play?
Sophisticated online banking makes it easy to access your bank account from your mobile device.
When it comes to so many mobile services, there seems to be a standard introduction. Service N, it says, has often been tipped as the next big thing, but this year, experts say, we really are on the cusp of something new.
Mobile Europe is not exempt from this, of course. We have run the same formulation most of the last decade for mobile location based services, to say nothing of services such as television, or even mobile broadband itself.
Why should we believe anyone, then, when they tell us that a certain application will take off within a certain timescale? Industry watchers everywhere have earned the right to be sceptical.
With mobile payments, though, and particularly mobile banking, there seems to be signs of movement.
Juniper Research is not claiming that 2009 will be a breakthrough year, but it did say, in a recent study, that the number of mobile phone subscribers that use their phones for mobile banking transactions will exceed 150m globally by 2011. Interestingly for the European market, the figures refer to additive banking – which is focused on developed markets – rather than transformational banking -which is focussed on extending banking services to customers who cannot be reached profitably with traditional branch-based financial services
The Juniper Research report establishes that the mobile banking market is currently most advanced in the Far East, but that growing numbers of mobile banking services are being offered in North America and Western Europe. The developed nations of the Far East, North America and Western Europe are forecast to account for over 70% of the user base by 2011.
Mobile Banking report author Howard Wilcox comments, "Transactional or ‘push' mobile banking is being offered increasingly by banks via downloadable applications or the mobile web, complementing existing SMS messaging services for balance and simple information enquiries. Mobile banking is a key element in banks' distribution channel strategies as they compete to attract and retain customers.'
The Juniper report highlights the extra user convenience as a key benefit. "The mobile phone is the device that people – especially Generation Y – will not leave home without. Mobile banking is an addition to the wide choice of applications and services that they can access through their handsets to make life easier, especially via smart phones such as the iPhone," a report summary says.
Monitise, the company that has had most success in the UK establishing a mobile banking network, says that at the moment, 11% of 35-44 year olds already use their mobile phone to manage their money. And those who have adopted mobile banking are using it even more, with nearly half (49%) of all existing customers claiming to have used the service more during the last year.
Certainly, there are signs that there are those willing to put their money behind this vision. MoBank, a new mobile banking service founded by former First Direct and Egg bankers Steve Townend and Dominic Keen, has successfully raised three-quarters of a million pounds in its second stage of funding.
The funding, secured from private investment companies and individuals, will be used to progress the next stage of design and development of MoBank's financial services product for the smartphone market.
MoBank will launch in February 2009 with a proprietary transactions service that will allow consumers to buy and pay for products from retailers, via a mobile phone. This will be followed by mobile banking and money manager services.
"This latest round of funding will be used to develop the MoBank service," said Steve Townend, Chief Executive of MoBank. "We'll be announcing our initial range of services in February. We will continue developing the service through 2009."
Another player chasing the mobile banking and payments market is Fundamo.
Fundamo's CEO Hannes van Rensburg says that although European banks and mobile operators are rolling out trials, they continue to trail their counterparts in Africa, Asia and the Middle East in terms of achieving scale. He attributes this slight lag to European banks and operators working hard to ensure they get their mobile financial services offering right to attract consumer uptake.
European banks and operators are working hard trying to determine what European subscribers want in terms of a mobile banking offering. The challenge is to solve specific consumer problems – people are already using their phones to solve real-time problems and mobile banking should be no different, van Rensberg says.
"Delivering effective mobile financial services is not about porting an internet banking experience to the mobile handset," van Rensburg says. "They need to be customised to the mobile device so that they leverage the significant benefits of having banking functionality wherever you go."
According to van Rensberg, another issue impacting the roll out of mobile financial services in Europe is the emphasis that is being placed on standards and compliance procedures between the banks, operators and regulatory authorities.
"Fundamo is a complete advocate of having the relevant standards in place but the relevant parties must learn to be more flexible to ensure these services build critical mass," he says.
"European banks and operators should not be scared of each other – services resulting from close collaboration between the two parties will be the most compelling in the long-term."
Dr. Nav Bains, Senior Projects Director, GSMA, says that the organisation is working to achieve this goal – specifically within its Pay-Buy-Mobile initiative, and believes that "most of the services emerging from the Pay-Buy-Mobile programme will be offered by banks, facilitated by trusted services managers and mobile operators".
Bains says, "The GSMA is working with its members to ensure interoperability across networks and across handsets. The aim of the GSMA's Pay-Buy-Mobile programme is to offer multiple payment applications from multiple banks across multiple operators and with a variety of handsets."
Bains adds that 46 mobile operators are currently participating in the Pay-Buy-Mobile programme with pilots under way in 10 different counties.
"We recently published our GSMA Requirements for Single Wire Protocol NFC Handsets, which will facilitate mobile operators to place orders for such devices," Bains says.
And here lies an issue. Beyond mobile banking, and into the realms of mobile payments, NFC becomes the enabling technology.
But there are disagreements within the industry as to how to proceed in implementing the technology.
For any service to work, the market needs a sufficient variety of compliant phones in the market.
Juniper Research's latest analysis forecasts that 700 million mobile subscribers globally will have phones equipped with NFC contactless technology by 2013, as the market reaches its tipping point over the 2011 to 2013 period.
Although that sounds like a healthy number, the analyst issued a caveat, saying that there were still issues around "the availability of NFC phones; and the speed of installation of NFC readers by merchants".
"The NFC ecosystem needs to deliver: it needs to ensure that the ever growing number of trials around the globe is translated into full service offerings," it concludes.
Although Bains presents a positive picture, the GSMA was itself recently moved to issue one of its calls to action – pressing the handset vendors to produce more phones to its specifications.
As Mobile Europe reported in our December 08/ January 09 issue, the GSMA wants handsets available by the middle of 2009 that include SIM control of the secure element, using the ETSI Single Wire Protocol to interface between the SIM and the NFC chip in the phone. This interface is called the Host Controller Interface. It can also be used to control other secure chips, and applications processors, on the phone.
Michael O'Hara, CMO of the GSMA, told Mobile Europe that by signing up to the GSMA "Pay-Buy-Mobile" approach, handset makers would avoid fragmenting the market. They would also benefit from introducing an attractive service for users onto handsets, potentially boosting sales at a time when forecasts of device sales are looking "significantly down".
The issue for the industry is how far to allow the SIM, and by extension the mobile operators, to control the secure element of the process. Gartner Group has produced research which details the level of unease. One issue with hosting the secure application on the SIM, is that the graphical experience is reduced for the user, despite SIM card manufacturers seeking ways round this.
More strategically, Gartner says that the mobile operators and SIM manufacturers are keen for the SIM to have a say in all communication that the NFC chip has with all other chips in the phone, to the point of giving the SIM the authority to reject an application unless it is stored on the SIM or controlled by it, and are pushing for ETSI's SIM committee to have this model adopted.
For mobile banking, of course, all this is less of an issue. Technology providers and banks can work together to provide a downloadable application to the mobile phone that will allow users to carry out transactions securely. There is no need for them to sign up to an industry-wide model on how to design the NFC interfaces.
Therefore it is still banking that many see as the gateway to other forms of m-payment becoming widely accepted.
John Milliken, managing director of Monilink, the joint service Monitise and ATM operator VocaLink, says, "We are seeing mobile banking now becoming habit forming with many people.
"Now that consumers can use the service to move money between accounts or even transfer money abroad, I think more and more consumers will be checking their money on their mobile as part of their daily routine. All the signs are that mobile will become the most used self-service banking channel over the next few years."