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The mobile operators are one step ahead on contactless payments – for now. As with app stores, others are hot on their trail

CTIA 2011: Operators Avoid App Syndrome With NFC

Sarah Reedy
LR Mobile News Analysis
Sarah Reedy, Senior Editor
3/21/2011
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ORLANDO, Fla. -- International CTIA WIRELESS 2011 -- Picture this: Wireless operators, who used to own the applications experience, become disintermediated, and ultimately surpassed, by software giants like Apple Inc. (Nasdaq: AAPL) and Google (Nasdaq: GOOG). Operators are left struggling to find a way back in.

That's the scenario operators hope to avoid with mobile commerce and, more specifically, near field communications (NFC), according to Dave Talach, vice president of global product marketing at VeriFone Holdings Inc.

AT&T Inc. (NYSE: T), Verizon Wireless and T-Mobile US Inc. teamed up in November to form Isis, a joint venture with Barclays and Discover aimed at promoting NFC, which enables transactions over short-range wireless links. Talach says this is the catalyst that kicked off the contactless payments market this year. (See US Carriers Combine Mobile Wallets and Google, Apple Fight Carriers for Mobile Money.)

"They broke the whole chicken-and-egg cycle," he said at a CTIA interview.

VeriFone has been providing retailers with secure electronic payments for more than 10 years, but now it's partnering up with new players including wireless operators and the competitors they're looking to outpace. VeriFone is reportedly working with both Isis and Google on NFC trials. Talach wouldn't confirm either partnership, but hinted at the deals by repeating, "It's safe to assume we're engaged with most major NFC initiatives."

Of course, Talach thinks there is room for several forms of NFC to coexist. But, while he gives the wireless operators a lot of credit for being first movers, there are many followers creeping up fast, including potentially Apple. The challenge for the operators will be to keep the momentum up.

"The carriers are creating structure, but don't rule out an Apple App Store or Android Market phenomenon," Talach said. "To see how NFC will unravel, look at app stores. We need structure from Isis, but we also need more choices."

In this new and competitive market, there are still some topics up for debate and plenty of dissension, something both VeriFone and BlackBerry have experienced lately. (See OS Watch: RIM Battles Carriers for Mobile Money.)

The debates have centered around security and whether the NFC technology should reside in the SIM card or in the phone itself. The answer to this dictates who gets control of the subscriber relationship -- the wireless operator or handset maker/OS vendor. Talach said the market could end up with a neutral secure element in which it doesn’t matter if contactless payments are carried out in the phone or SIM card, or a dual-secure element in which the operators and handset makers share ownership. Either way, there will be more issues around transaction fees and the subscriber relationship to grapple with.

"The battle is not resolved," Talach said. "It will be in flux a lot."

Talach also echoed a sentiment that many have expressed in Monday's Money Over Mobile partner conference at CTIA -- that it's not the payments that make NFC so exciting. It's more about doing payments plus something else, such as receiving a coupon, getting a digital receipt, automatically checking into Foursquare or racking up loyalty points. The first step is getting NFC off the ground, but then it will only get more interesting, Tallach said.

— Sarah Reedy, Senior Reporter, Light Reading Mobile

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