Despite mobile network operators’
assertions that a SIM card-based solution is the best option for
delivering near field communication payments services, there is
increasing discussion of alternatives such as embedding the payment
application in the handset or placing it on a micro SD card. Paul
Golden reports
Go deeper with GlobalData
The Mobile
Contactless SEPA (single euro payments area) Card Payments
Interoperability Implementation Guidelines document issued by the
European Payments Council (EPC) at the end of April details the
various service models and processes involved in the provisioning
and the lifecycle management of a mobile contactless payment
application residing in a mobile phone secure element – the place
where the payment application is stored.
Having previously focused on the SIM card,
the latest document also covers embedded secure elements and micro
secure digital (SD) cards. The final version is expected to be
published in October.
While remaining supportive of the SIM-based
option, the EPC suggests that the solution that can be deployed
most rapidly is a secure element embedded in a micro SD card. This
allows the issuing bank to own the secure element and if the card
includes an NFC antenna and radio stack, no other integration is
required. But one of the reasons why the council is so keen to
promote debate on NFC is that there is as yet no standard for
secure communication between a micro SD card secure element and the
handset screen or keypad.
Franco Bernabe, chairman of mobile operators
representative group GSMA, claims the adoption of different
approaches to NFC “will only serve to fragment the market” and that
the operator community is focused on driving the standardised
deployment of mobile NFC via the SIM. To achieve this, the
organisation will “develop the necessary certification and testing
standards to ensure global interoperability of NFC services.”
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By GlobalDataThe head of the GSMA’s near field
communication programme, Nav Bains, says the SIM is the best option
because it is a standards based memory card that also meets the
security standards the banks insist on. “The cards are produced to
the same standards as [credit and debit] cards produced for the
banks. They can be provisioned over the air, so new applications
can be downloaded remotely and if the device is lost, all the
applications running on the SIM can be blocked (and unblocked)
instantly.”
The Micro SD vs SIM
Micro SD cards are
typically mono-band – that is, they support a single application –
so users would potentially require multiple cards from different
banks, he adds. In contrast, the SIM card can be ‘segmented’ into a
number of secure compartments or security domains. “An embedded
solution makes it very difficult to transfer applications to a new
handset and if there was a technical fault with the device that
required repair, the secure element would effectively be in someone
else’s hands,” Bains concludes.
It is tempting to describe the NFC payments
market as a straight fight between handset vendors – who would
naturally favour a secure element embedded in the handset – and
network operators extolling the virtues of their SIM-based
solution. But according to Mohammad Khan, founder and president of
ViVOtech, the micro SD card is a viable alternative.
NFC software and systems developer ViVOtech
has supplied more than 800,000 near field communication readers to
merchants in 35 countries, with about three quarters of those being
deployed in the US. The company is a Google Wallet partner and has
worked with merchants and point of sale software vendors to provide
integration between NFC readers and current point of sale
software.
While acknowledging that SIM-enabled NFC
handsets will gain traction this year, Khan is convinced that micro
SD has considerable potential. “Over the next few years it will be
vital to enable near field communication for people who don’t want
to change their existing handset, so we are working on a micro SD
solution with Bank of America where the user plugs the card into
their phone, which enables them to download a payment
application.”
He also predicts significant growth in
embedded secure elements. “I am seeing the embedded option growing
very strongly because the payment platform providers [such as
Google] don’t want all the power to be in the hands of the
operators (who control the SIM cards).”
According to Khan, consumers will have the
final say on which delivery mechanism becomes most widely used.
“The handsets launched to date have been designed with a secure
embedded element and are also capable of accepting a SIM-based
wallet, but consumers will decide which option is best. Handsets
purchased via a contract with the mobile service operator may not
support the embedded element, but this will be driven by consumer
demand.”
Beth Robertson, director of payments research
at Javelin Strategy & Research says the absence of a standard
model for contactless payment is hurting the market. “There are few
mobile devices on the market with embedded NFC technology, so
consumers need access to devices such as stickers or chips to
enable their phones for NFC transactions. The presence of competing
providers, wallets and other, non-NFC mobile technologies – such as
2D barcodes – means there is currently no single, standard market
model for either consumers or merchants to adopt.”
Healthy predictions
Javelin published a report in April
(Contactless Near Field Communication (NFC) Mobile Payments:
Framing Mobile Payments on the Foundation of Mobile Banking),
which identified mobile banking as the catalyst for mobile point of
sale payments. The firm predicts that consumer comfort with
contactless payments will increase with growing use of mobile
devices for data communication and found that mobile banking – the
function closest to mobile point of sales payments – has been
adopted by more than 20% of mobile phone owners over the past 12
months.
“Mobile bankers are the most active and
interested users of mobile contactless payments at the point of
sale,” notes Robertson. “Forty per cent indicated they would be
very likely or likely to use their mobile phone to complete mobile
contactless payments, compared to only 14% of all consumers.”
Javelin recommends that financial institutions
and vendors focus on integrating mobile point of sale payments into
mobile banking, which could provide a considerable boost to the
micro SD card as the secure element. The challenge of integrating
NFC into existing mobile banking platforms is not so much technical
as the fact that mobile banking platforms have not generally been
designed to support point of sale transactions, suggests
Robertson.
“Lack of standards is also an issue,” she
continues. “No standards exist for wallet interaction – custom
solutions correspond to the type of service that each provider is
offering. Furthermore, terminal devices that are currently deployed
may not be compatible with smart phones in the future and will
therefore require software certification every year.”
Sirpa Nordlund, executive director of the
Mobey Forum (a financial industry forum established to encourage
the use of mobile technology in financial services) confirms that
most of its members are “looking for opportunities” to roll out
NFC. However, many are taking a ‘wait and see approach’ to rolling
out the technology because they don’t necessarily consider the SIM
card to be the best delivery option.
“The secure element of near field
communication has been tested and piloted so our members are
confident about the application. The focus now is on post-issuance
of the card, which needs to be issued and managed ‘over the air’.
The SIM card has been widely talked about and is a good option, but
now we are hearing that payment platform providers are looking at
embedded secure elements.”
The main concern around the embedded option is
what happens if the handset is damaged, says Nordlund, who agrees
with Robertson that the requirement to upgrade merchants’ payment
terminals represents a major barrier to contactless point of sale
transactions.
In April, GlobalPlatform (a not-for-profit
association that identifies, develops and publishes specifications
to facilitate the secure and interoperable deployment and
management of multiple embedded applications on secure chip
technology, including secure elements) released a standard language
that uses web services to facilitate secure and interoperable
communication between trusted service managers and the rest of the
NFC ecosystem.
Trusted service managers or TSMs are
independent and trusted third parties that facilitate the
provisioning and secure management of mobile contactless services.
Examples of communication include a TSM request on behalf of a bank
to a mobile network operator to deploy a payment application, or on
behalf of a mobile network operator to notify all parties involved
in the delivery of a NFC service that a mobile device has been lost
and services to the handset must be terminated.
Gil Bernabeu, technical director
GlobalPlatform says the organisation supports all form factors on
the same level. “SIM chip technology is very mature. We are working
on micro SD because banks would appreciate the same level of
maturity in that technology. The advantage of the micro SD card is
that you are not tied to either the operator or the handset
manufacturer, although some devices do not have the appropriate
slot. It would be the obvious choice of secure element for the
banks, although they will need to share the cost of card deployment
with network operators.”
He went on to refer to the need to attract
as wide a range of service providers as possible. “It will be
difficult for a single delivery platform to emerge. In order to
encourage service providers to develop applications we need to
reduce the complexity of the delivery models.”
