Friday, September 19, 2008

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

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

  • 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

  • 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
  • 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

  • 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)

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

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

1 comment:

  1. HI there, I am a founder of Rabo Mobiel in The Netherlands and wanted to mention a couople of things after reading your blog. Banks can hire in, or start-up, MVNO side-businesses - which is what Rabo Mobiel has done, so getting MVNO competencies in-house is not that difficult - and quite cost effective in Europe, as most mobile operators are offering MVNE services of MVNO platforms, and there are so many MVNOs, that the knowledge and systems are relatively easy to find. Secondly, we have been far more successful in offering standard, market-conform and normally more expensive phones. If we only offered SIM-only or cheap phones, we'd not really be able to compete in the Northern European mobile marketplace. One final thought, the changes in NFC ecosystems on a national basis now, and certainly in 2009, will probably construct a whole lot of other opportunities in some countries. Especially when it comes to strong retail brands, cooperative mobile operator initiatives, and public transportation.