Could banks take the lead in ushering in NFC phones?

Innovative and aggressive banks are trying different approaches in the marketplace to break the deadlock that has stalled NFC mobile devices getting to market. Banks with strong acquiring/merchant and card issuing business have an incentive to deploy NFC mobile devices, while not waiting for the MNOs to show up. These approaches include:

1. Bank sets up MVNO. e.g., Rabo Mobiel
2. Bank issues / distributes NFC phones, might start off this journey by distributing NFC tags. E.g., Garanti Bank, Turkey. The user retains their MNO
   
3. Bank subsidizes phones with separate secure element
   

Bank sets up MVNO and offers cutting edge financial services, including NFC phones. Example: Rabo Mobiel. Rabo Bank is a Dutch-based bank. Rabo Mobiel is a MVNO which offers value-added retail and financial products and services, in addition, to traditional telco services

Advantages:

• Bank can offer subsidized phone with optimized features (e.g., SIM but no separate secure element)
  

Disadvantages:

• To keep costs down, the phones offered by the MVNO would be basic no-frill devices. This may not appeal to early adopters or to niche audience
• Bank may not have core competence in being a MVNO
  

Where could this work: Europe

Why:

• MVNOs have been more successful in Europe
• Smaller markets with reasonably homogeneous demographics
• Aggressive banks could use this tactic to challenge incumbents
  
• MVNOs have had a tough record in the US, as it is difficult to appeal to a broad enough range of audience to reach critical mass. After the events of this week, I do not see any US bank having an appetite for such risk
  

Bank offers bank-branded NFC phone (separate secure element), with the user retaining their existing MNO/service provider. An early variation of such an offering could be Garanti Bank, Turkey providing NFC tags to its customers

Advantages:

• Bank has access to secure element on phone to provision cards...
• Bank does not have to get into a MVNO business, which typically is not the bank's core competency
• Bank can optimize the mobile device to suit its requirements
  

Disadvantages:

• Phones offered by the bank could be basic no-frill devices, which may be rejected by the larger audience
• Users not anxious to give up their existing phone as this is a personal device /statement
• Bank issued phone may not be a good enough phone (neither fish nor fowl)
  

Where could this work: Asia

Why:

• Users in Asia typically buy their own phones. This offering might appeal to the burgeoning value-conscious middle-class in China and India
  
• A weak MNO in the US could work with a strong Bank and an open phone (did somebody say Android) to help MNO's sales and perception in the marketplace.
  

Bank works with device vendor (e.g., Nokia) to offer co-branded phone: Bank partners with device vendor to subsidize NFC phones (with separate secure element)

Advantages:

• Consumers get choice of phone. No compromise in device features
  
• Cost of separate secure element not passed on to the consumer

Disadvantages:

• Would not work where consumers typically get their phones from their MNO (tied to a contract) as the MNO controls the BOM/configuration of the phone. E.g., US
  

Where could this work: Asia

Why

• Consumers buy their own phones.
  
• Device vendor has better brand presence and distribution channels

Trusted Services Manager (TSM): Does somebody have an edge

Gridlock in the NFC ecosystem is about the telco/MNO (e.g., Verizon) and the issuer/bank (e.g., BofA) jostling for control over 'their' customer. On the mobile device, the two verticals (telco and banks) clash. Until the control issue is resolved, NFC deployments will not make progress past the many well-publicized trials. Trusted Service Managers (TSMs) are seen as a way past this impasse. Much has already been written about this issue.

The usual suspects in any TSM discussion are Cassis, Venyon and Vivotech (in alphabetical order). There are others in this space as well. The question for today is, is there any one vendor or approach that has an obvious edge, and why?

Cassis comes from a SIM / OTA background, with a lot of their management coming from Gemalto and the like. Venyon is a JV between Nokia and G&D. Vivotech seems to have a more POS / retail merchant proclivity given their presence in the contactless reader space. From this 50K foot view of the landscape, there seem to be at least two approaches to address this space. One is to approach this from the mobile operator space. Given Cassis's and Venyon's background, they seem to be establishing the telcos as their beachhead. Given Vivotech's background and investors, acquiring banks (POS vendors) and retail merchants seems to be Vivotech's beachhead. It appears that the above divide seems to be extending into the TSM space as well.

In deployments where the telco drives the business case, folks like Venyon and Cassis might win the day. In deployments where the acquirers/merchants are pushing the business case, folks like Vivotech might win the day.

Not withstanding a simplistic two variable view of the world, what are your thoughts? Are there any other factors that will influence the TSM space? Which other vendor/industry might enter the TSM space?

Related Post: When selling shovels is more lucrative: Another look at TSMs 1 year later

Ike in Houston and 9/11

I lived in Houston for about a dozen years, and have many friends there. My thoughts and prayers are with them and others, as Ike threatens the Greater Houston area. The news of Ike heading to Houston, and today being 9/11, was a sobering reminder that there are bigger and more important things in life than work and mobile commerce thoughts. My pardners in Texas, hope you stay safe and dry.

NFC POS Terminal deployments in the US

You can find a list of NFC/Contactless readers:

List of MasterCard Paypass readers near you
List of Visa PayWave readers near you

This will be a good resource for all of us to refer to.

PS: I have edited this blog as MasterCard and Visa are maintaining a comprehensive list of merchants accepting contactless cards.

Merchant deployment of Contactless POS terminals in the US

What is the merchant motivation to deploy contactless payments in the US?

The oft cited reasons for merchants to deploy contactless payments are speed and convenience associated with total transaction time. Cash replacement is also cited as a reason.

Consequently, QSR (Quick Serve Restaurants) space, gas stations, convenience stores... seem to be the obvious targets.

What is the motivation for Office Depot, Best Buy... to deploy contactless POS terminals? What would the reasons be for grocery stores to upgrade their infrastructure to contactless? Is the standard equipment (POS terminal) upgrade cycle is sufficient reason for merchant to swap out for the new terminals?

Look forward to hearing your thoughts.

Books I am reading

• Security Engineering by Ross Anderson, Wiley
  
• Millionaire by Janet Gleeson, Simon & Schuster
  

Quote from Warren Buffett

If history books were keys to riches, the Forbes 400 would consist of librarians (excerpt from the Millionaire, Janet Gleeson, Simon & Schuster