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John Dring


John Dring - Intel Network Services

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Does NFC equal mobile payments?

21 May 2011  |  4338 views  |  2

OK, I have not initiated a Finextra blog for a while.  Time to at least put an alternate perspective on the raft of NFC spawned mobile payment announcements.  NFC is being embedded in devices.  POS terminals are being cycled to include NFC readers.  The public are being groomed to go ‘contactless’.  All well and good.

But I have a problem calling this ‘mobile payments’.  Yes there are many definitions for mobile payments and certainly waving your mobile in front of a NFC reader is payment involving your mobile.  But do any of these announcements involve you actually paying with your mobile, and I mean does the transaction get added to your mobile bill.  I think not.

The banks and card issuers are running the show and the marketers are doing a grand job telling the public that ‘mobile’ payments are here.  The mobile operators are tagging along and playing catchup (again) doing deals with these innovators.  For the moment it drives Operator brand awareness and some NFC mobile device sales.  The mobile wallet though is, as far as I can tell, always a bank/card based prepay account.  Your NFC on the mobile is simply identifying which prepay card account you are registered with and debiting that ‘wallet’.

What are the details about topping up the wallet.  Where can you transfer funds from – a bank account probably, but as a minimum you should be able to top-up the bank wallet from your mobile account – that would show more of a partnership between bank and operator.

Maybe the mobile operators have plans in the future to have their own mobile operator based ‘wallet’.  This of course doesn’t even need NFC or the NFC POS terminal because the operator can use the radio network, and be online … they just need to enable the physical merchant.  I can think of a few ways to do it.

The key though will be in the Apps that are released to support the use of the schemes being marketed.  I expect most of these to be glorified App-banking clients which centre on the provisioning of the NFC and administration of the bank based wallet.  But they could also be the way that the Mobile Operators launch their next gen m-commerce which is what I call ‘mobile payments’ and will offer an alternative to 'tap and hold' payments.


NFC enabled phone? TagsMobile & onlinePayments

Comments: (3)

Nick Green
Nick Green - ISD Consultants - Northampton | 23 May, 2011, 17:54

John, Ever since people began shouting about mobile payments and m-commerce I have been waiting for someone to satisfactorily explain what they were. Surely if your mobile phone contains a link to one or more existing payment cards (credit or debit) then tapping your phone is just a "contactless" payment. And if you buy something from a website using the browser on your phone and a payment card or PayPal then that's e-commerce. So what does the "M" stand for - Oh I know Marketing!

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Killian Clifford
Killian Clifford - Mobile Money Consulting - London | 03 June, 2011, 16:55

Hi John

Mobile payments in the sense that you talk about here - payments directly from a balance on the phone - are really only happening in developing countries (such as MPESA in Kenya). And that is because of necessity - usually the sender or the recipient or both don't have access to bank accounts. You are unlikely to see this scenario being repeated in devloped economies where people are already banked and don't necessarily want to have another payment mechanism not linked to an existing account. So here we will continue to see mobile payments as an additive product as you describe.

Killian Clifford

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John Dring
John Dring - Intel Network Services - Swindon | 04 June, 2011, 22:22

Hi Killian,

I assume you are ignoring the obvious?  Up until the Apple AppStore, every piece of mobile content, mainly ringtones but also games, music and apps, was typically consumed via Premium SMS - indirectly placing the charge on your mobile account (pre or post paid).  Games and Voting services added to that. SMS and PSMS aggregation is huge business as a result.  Then along came Apple with a parallel (credit card backed) iTunes payment channel and then Google Android Market did the same.  Only Nokia Ovi tackled Carrier Billing, but then messaging based billing still dominates. 

Don't forget that in our own UK, all the Mobile Operators agreed on Payforit as the payment framework for off portal content payments.  Initially based on the side-line PSMS billing, they now have payments APIs which allow granular price points and crediting as well as payment by mobile from Web storefronts (you supply your phone number and verify it).

So, whereas MPESA focuses on P2P payments (a need which I agree does not exist greatly in developed markets) the infrastructure to support much slicker mobile payments is there.  My point about the NFC wave of initiatives is that none of them are so far are leveraging that capability.  The reason, I believe, is that the banks have the upper hand in the pillots, holding the transaction capture at the POS and will (for now) be processing those transactions via the traditional card payment networks.  But look at players like the Square - turning an iPAD into a POS terminal no less and leveraging NFC that way.  This sums it up nicely:   http://finextra.com/community/fullblog.aspx?blogid=5349 

Then you have the anticipated Google Wallet.  Not what I was thinking it would look like, but I think they are managing to drive that invividual MNO brands could not - getting the Banks to participate and open up access to the POS/payments capabilities but injecting their wallet. http://www.finextra.com/news/fullstory.aspx?newsitemid=22597


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Digital Commerce - Service Provider Mobile/Web/TV, Commerce, Security, Content, API Monetisation - Scoping, selling and enabling interesting digital applications.

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