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Alexander Peschkoff

Beyond TEDIPAY

Alexander Peschkoff - TEDIPAY

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Innovation in Financial Services

Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.

Why NFC on iPhone doesn't matter. At all.

17 July 2013  |  8095 views  |  4

The rumours about iPhone and NFC are being circulated again. That caused a new wave of excitement within the NFC community where NFC-enabled iPhone is seen as the white knight. Yet, if (IF!) Apple introduces NFC on iPhone that won't change much, if anything at all. Here's why.

The largest and the most compelling use case for NFC on a mobile phone is transit (70% of the mobile payments industry agrees on that). However, just a very small fraction of transit ticketing deployments is based on contactless EMV. The bulk of transit worldwide is based on proprietary standards and protocols, e.g. ITSO in the UK, Calypso in France and some other countries, etc. All those standards and protocols have zero interoperability

But that's not all. Within the UK alone, every transit operator and every local authority that implemented ITSO-based smart ticketing uses proprietary security keys...

Hence, for NFC-enabled iPhone to be used for transit in the UK, the following needs to happen:

ITSO must certify iPhone's secure element to insure full compliance with applicable standards. Will Apple be even applying for such certifications in every country where smart ticketing is implemented in transit? You can guess the answer... Even if ITSO unilaterally declares NFC iPhone to be ITSO-compliant (why would they do that?!), the issue of security keys remains.

Will Apple knock on the door of every transit operator round the world to offer them free access to iPhone's secure element? Silly question. Can Muhammad go to the mountain? Sure. Will Apple talk to West Yorkshire Ticketing Company (no disrespect, M-Card, just being realistic here)? I start sounding like a stand-up comedian...

Let's say the miracle happened, and the big mighty Apple agreed to rent some space on its secure element so that West Yorkshire's M-Card can reside on NFC-enabled iPhone. And Apple asked just for a small fee or transaction percentage (say 0.3% compared to 30% they get from app developers). And suppose West Yorkshire Ticketing Company is willing to pay the price. Guess what! They cannot do so without going through the tendering/procurement process... 

Multiply the above by the number of major handset manufacturers worldwide and have one more laugh.

Transit aside, there are almost twenty thousand financial institutions in the US who issue payment cards. Can they realistically make a deal with Apple, Samsung et al?..

Where does all that bring us to? Two key conclusions.

Cards are here to stay. You cannot stick a mobile phone into millions of ATMs and ubiquitous card terminals which are present everywhere you want to pay. Add the explosive mPOS revolution to the equation and sprinkle with the fact that 90% of those mPOS devices do not have contactless interface...

Mobile transit ticketing needs a focused and dedicated effort by a company determined to make it work. The one which can talk to every operator out there, including West Yorkshires of this world. The one which is willing to bend backwards to stitch together all those isolated standards, protocols and hundreds of security keys, and integrate them all via a single form factor. That won't be Apple or Samsung. And that form factor won't be a mobile phone...

TagsMobile & onlinePayments

Comments: (7)

Daniel Smith
Daniel Smith - CHOICE Financial Solutions - New York | 18 July, 2013, 16:39

Always enjoy your posts - detailed, practical and with humor - thanks..!

Sounds like a good job that Moven was forced / obligated by US regulators to issue their customers with a card as well as their phone..!

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Miles Quitmann
Miles Quitmann - Proxama - London | 18 July, 2013, 16:44

I think NFC would be very useful on iPhone - forget payments, it's all about consumer engagement...that could lead to sales and therefore payments. It's opt-in, so much more usable that QR codes and it allows brands/retailers to have a one-to-one connection with the consumer. It also drives m-commerce transactions. Retailers are having a tough enough time at the moment. NFC-enabling the high street, posters, beer fonts, bus shelters turns all this infrastructure into another (digital) shop front for physical retailers...they might even be able to compete with their digital competitors! 

Tap-to-pay by iTunes - bring it on!

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Alexander Peschkoff
Alexander Peschkoff - TEDIPAY - London | 18 July, 2013, 16:47

Thank you for your kind comments, Daniel. Much appreciated!

Well, I told Brett King a year ago that cards are not going to disappear any time soon. He disagreed, of course, at that time... Most of the VCs in the mobile payments space are scared of the cards too. What can I say...

In most cases, mobile payments are solving a non-existant problem. There is (almost) nothing wrong with the cards - they do their intended job well. Having said that, if someone offered me an uber-card to replace all other cards I carry, that would be (very) interesting...

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Daniel Smith
Daniel Smith - CHOICE Financial Solutions - New York | 18 July, 2013, 16:50

Alex - I couldn't agree more.

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Alexander Peschkoff
Alexander Peschkoff - TEDIPAY - London | 18 July, 2013, 16:53

NFC could indeed be a useful tool, Miles, I agree.

Paying via iTunes will not work (for Apple) unless they can charge enough to (a) cover their acquiring fees (the money is often coming from the consumer's bank card) and (b) make it financially viable for them. Dropping down from 30% would be - mentally - tough for Apple. And merchants won't pay much more for the privilege either - not a single retailer lost a sale because he/she didn't accept iTunes...

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Miles Quitmann
Miles Quitmann - Proxama - London | 19 July, 2013, 09:27

Well OK - then Amazon, tap-to-buy a CD from a bus shelter in the street. This launches the Amazon app on tap and takes the user to the Amazon one click buy function. This will not work with QR codes, awful consumer journey; but with NFC gives a digital retailer a physical presence.

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Alexander Peschkoff
Alexander Peschkoff - TEDIPAY - London | 19 July, 2013, 09:37

Unless a fraudster overlay that RFID tag with another one which takes consumer to the "Amazonz" porno site... Or better still, to a spoof Amazon site where the user would provide his login credentials... How many times would that need to happen for the consumers to ignore tags?..

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I am the co-founder and CEO of TEDIPAY, the company that is bringing to the market a game-changing platform for secure mobile transactions.

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