Sunday, September 6, 2009

When selling shovels is more lucrative - Another look at Trusted Services Managers

It has been a year since I last wrote about TSMs (Sep 14 '08). As you might be aware, TSM is a third-party Trusted Service Manager. This organization would secure manage the card data in a mobile wallet on behalf of a card issuer. In some markets, a TSM is also referred to as a TTP (Trusted Third Party). Since the last I posted about TSMs, some water has flowed under the bridge.
  • No visible signs of progress in deployment of NFC in the US
  • Subtle changes in the go-to-market strategies of TSMs
  • Incumbents are showing their preferences for roles in the post-NFC world
I came across Carol Coye Benson's blog Getting the Garden Ready, in which she speaks with Barry McCarthy, President of Mobile Commerce Solutions for First Data. This conversation provides a glimpse of the changing landscape in the TSM space. When Carol talks about Getting the Garden Ready, I hope we are not talking about yet another walled garden. We seem to have enough of such gardens from telcos!

First Data's interest in being a TSM is understandable. They have been providing card issuing services to banks (to 1500 issuers), and would like to continue to have this business. Allowing a third party TSM (e.g., Venyon) to establish relationships with banks/issuers to provision credit cards to mobile wallets would limit the growth of First Data. For First Data, adding TSM capability provides them the ability to deliver cards thru' another channel. Finally, it does not make sense for First Data to contract out card management services on mobile wallets with a TSM (adds another layer of unsustainable overhead).

As you might already know, the industry has a role called Issuing Processor. First Data is an Issuing Processor. They provide issuing services on behalf of a Card Issuer (e.g., a small bank or Credit Union). Card Issuing services include embossing cards, shipping cards and PIN mailers to consumers, activating cards, being part of the [payment] transaction authorization chain... For these services, a Card Issuer (e.g., Credit Union) would pay a fee to the Issuing Processor (e.g, First Data).

The First Data case study provides a feel of where the TSM road is leading to. Each issuer [or issuing processor] (payment card, loyalty card, coupon) will try to provide TSM services themselves so that they protect the client relationships that they have. This implies that the mobile wallet would be managed by the telco/MNO [as a TSM]. There would be containers inside the mobile wallet which would be managed by issuers (payment, loyalty, transit, coupons...). Each of these issuers would be a TSM managing their containers / sub-wallets.

So, what happens to existing TSMs (e.g., Cassis, Venyon, Vivotech...) who have been participating in the many NFC field trials taking place around the world? These TSMs would try to morph themselves into software / platform vendors (the trend has started). Based on the TSM's relationships, they would sell their platform and professional services to the many issuers (telcos, banks, transit companies...) who need these TSM platforms.

This may actually be good news to existing TSMs. There may be more money in selling shovels than in prospecting for gold, i.e., there might be more money in selling TSM platforms than in being a TSM.

What are your thoughts?

Related Post: Does somebody have an edge?


  1. Good blog post.

    TSMs clearly provide an answer to an issuer wondering how to get their card into an NFC equipped mobile phone.

    But TSMs don't provide the answer to WHY an issuer wold want to get their card into a mobile phone.

    Until that question is answered, the business model will remain fuzzy and issuers will not be excited, whether they are issuers of credit cards, loyalty cards, membership cards, or even worse, coupons and other tokens.

    Another solution in search of a problem, exactly like multi-application card management systems in the 1990s, all of which disappeared even after huge backing by the same companies hoping to do the same thing today as TSMs.

  2. interesting post.

    If I correctly understand the model that you are describing: telcos or independent software vendors would create mobile wallet applications. consumers would install their preferred mobile wallet application onto their phones. These applications would support multiple secure insulated sub-containers. Organisations (such as First Data) seeking to issue credentials to a consumer's phone would utilise the services/software of a company such as Venyon. An individual consumer could have on their mobile phone multiple sets of credentials issued by multiple companies using different TSMs. This all sounds great, but presumes a very well defined set of open standards to enable compatibility between the different mobile wallet applications and the different TSM platforms. Do those standards exist today?

  3. J Lovelock,

    Thanks for reading the post.

    Your observation for the need for standards to enable compatibility is spot on. Till open standards emerge, I'm hoping that card vendors' APIs can act as a de-facto standard. A parallel could be found in the mobile app world before J2ME emerged as the open standard.

    Considering how slowly NFC is evolving, the industry might even have some time to work on and resolve some of these ancillary issues.


  4. Manju

    I am interested in understanding what support there is for the view that an industry group or groups would collaborate to build a TSM for a market? They might buy the technology and expertise from a TSM vendor even, perhaps, as a managed service. The models I am thinking of in the UK are our co-owned ATM service LINK, or VISA, or Mastercard or indeed any of the network infrastructure sharing agreements between Mobile Operators.


  5. Andrew,

    Thanks for your comments and interests in the blog. Yes, I have heard about similar offerings as you have suggested. Additionally, David Birch talks about such an initiative in Spain ( Does this answer your query?

    Have a wonderful 2010,