Thursday, December 18, 2008

NFC / Contactless commerce startups surviving the downturn

Withering on the vine is among the most frustrating experiences for entrepreneurs and investors alike. With the economy in a swoon, a lot of startups are on the ropes. NFC-based / contactless commerce has been just around the corner for a while now. Related startups have participated in many a pilots and have been idling waiting for commercial deployments and resulting revenues. Banks have their own set of problems, and do not expect to participate in commercial deployments any time soon.

These startups should not wait anymore for phone vendors to offer NFC-based phones in volume or for merchants to deploy contactless infrastructure. The silver lining among these dark clouds is that merchants are willing to participate in programs that excites their customers and brings them in to their stores. An alternative way for a user to interact with the merchant infrastructure is to go through the cloud. It would seem like a round-about way to get something done while you are only a few inches apart. However, interacting via the internet will get the revenues right now.

SMS-based mobile commerce has been around for a while now. Instead of having the mobile wallet [ID] on the device, move this ID to the service provider's platform. You don't even need the telco to be actively involved in such an offering. Wallet-in-the-sky with SMS-based interactions can be retrofitted with existing NFC platforms with little effort. Some of the implementations I have seen get the messages across 'near' instantaneously. The user experience does not necessarily have to be clunky. The wow effect can still be delivered to the customer. The retailer's expectations can still be met.

This is but one example of what I am proposing. There are quite a few variants of the above architecture. Such an offering is not sexy. For folks who have been living in the magical world of contactless commerce, the above suggestion is a significant let-down. The consolation is that the dream might live on, and could survive to fight another day.

What are your thoughts? How are you improvising to survive this downturn? What are your suggestions on what the contactless commerce startups should do to become cash flow positive in the near-term.?

Monday, December 15, 2008

Role of FeliCa cards in mobile commerce

With ABI Research reporting that commercial NFC deployments expected by 2013, the question is what technologies would people use for mobile commerce until then?

If mobile in mobile commerce implies mobility and not necessarily a mobile phone, then the lowly card form factor comes to mind as a possible option. Coincidentally, I came across a news article about Sony releasing a new version of PaSoRi, their PC/VAIO smart card reader/writer.

PaSoRi, in conjunction with both phones and cards, are being used for online commerce, topping transit tickets, gaming... Having said that, FeliCa cards are still the dominant form factor while mobile FeliCa (phones) is gaining traction and momentum. FeliCa cards and mobile FeliCa have been doing very well in both brick and click commerce.

What are your thoughts of the dominant mobile commerce technology over the next 5 years? What interim role can FeliCa cards play in mobile commerce? On a related note, is PaSoRi and FeliCa cards helping Sony sell more VAIOs and differentiate themselves from the competition?

Thursday, December 4, 2008

Can independent Trusted Services Managers (TSMs) flourish?

The concept of Trusted Services Managers (TSMs) has always intrigued me. The need for industries, as diverse as, telecom, transit and payments, having to work together is a daunting prospect. A neutral third-party, aka TSM, seems like a natural fit to facilitate interactions between these industry players, each of whom have different approaches to the same problem.

As we extend the concept of TSMs to reality, some wrinkles appear.

An observation that is common across NFC trials is about the number of partners (last count there were 6-8 partners) that need to be coordinated with. The complexity resulting from the number of partners is a hurdle, especially as one goes past trials and plans for commercial deployments.

TSMs also provide OTA services. Traditionally, OTA services have been provided by the card issuer, among others. In the telecom world, the telecom service provider (telco) have provided OTA services themselves, using OTA platforms from third-parties, such as, SmartTrust.

Reading between the lines of what telcos are saying and doing (around NFC trials), it appears that in the brave new of world of NFC, the telco will continue to provide OTA services. From a telco's perspective, this reduces the number of interfaces/participants to work with. Additionally, as ETSI has adopted the Single-Wire Protocol (SWP) as the standard, the SIM has become the secure element of choice, and the telco the issuer of the secure element. At the least, the telco would like to paint such a picture. Against this backdrop, the telco has a vested interest and a supporting business model (managing the secure element real-estate) to manage the relationships with third-parties, including banks and transit operators.

Alternatively, the SIM card vendor (G&D, Gemalto...) are better positioned to work with telcos to manage the SIM/secure element real estate, and have good relationships (both business and operational) with payment card issuers.

While TSMs (Venyon, Cassis...) would continue to be in the news for the next 3-5 years as the NFC ecosystem ramps up, it is uncertain whether independent TSMs (TSMs that are not part of SIM card vendors, telcos, financial services providers [e.g., First Data] ) would be able to succeed thereafter.

A question to ponder: What kind of business and usage models would enable independent TSMs to flourish as the NFC ecosystem ramps up and consolidates?

Wednesday, December 3, 2008

Is Online PIN Debit for real this time around?

News of online PIN debit payment products popping up in the news often. ATM Direct/Acculynk and NYCE's SafeDebit are the but the latest examples.

Persistence over the past ten years to make online PIN debit a success is admirable. In an effort to overcome prior industry missteps, Acculynk and SafeDebit are offering software-based solutions. As noted by others as well, a hardware-based module needs to be involved to secure online commerce comprehensively. Additionally, the usual suspects standing in the path of success include lack of ubiquity and changes to the user experience that make users uneasy.

The current interest in online debit payment options are driven by the credit squeeze being felt by consumers. If the current online PIN debit offerings can go commercial in the next 3-6 months with a broad array of merchants offering this payment option, there is a good chance of success.