Nokia this week re-iterated its vision for Near Field Communication handsets in a webcast, on the back of its introduction in April of the 6216 Classic handset, which has the technology built in.
We made the point at the time that the 6216 was a bit of a breakthrough because under its candy bar design, it was a political and technical step forward towards using phones as a credit card or travel ticket and general payment platform.
In answer to questions Nokia executive Gerhard Romen agreed that of the three ways of providing a ‘secure element’ on a phone ‘ as a separate chip, on an SD memory card or in the UICC (SIM) ‘ it now definitely preferred the SIM. ‘If you place it in the SIM, then the cost of the chip goes to the operator and that’s fine with Nokia,’ he quipped.
But underneath that lighthearted banter, there had been panic over the past two years that Nokia might try to strike deals directly with the banking community and bypass operators in providing payment services to handset owners. The market was definitely nervous, and Nokia almost certainly considered the radical move of ostracizing operators but has decided against it.
Two years ago The GSMA put out a paper called ‘Pay Buy Mobile’ and Romen referred to it directly as he said that the GSMA had stated its own preference to how it would like to see NFC systems implemented (NFC is the preferred contactless technology so that phones can swap data with EPOS and other terminals by merely touching).
The GSMA sees the rental of space on the SIM for multiple applications as its main revenue driver as it seeks to complete a five year technical drive towards making handsets both secure and equipping them with the technology for contactless transactions.
So Nokia was being somewhat disingenuous when it made that remark about who takes on the cost of the Secure element. All the phones that it has made available to date, such as the 6212 as recently as last August, had a secure element as a separate chip and it had said nothing to allay fears that this was the route it planned to go down.
NFC has to eventually be available on EVERY device that an operator sells, not just one brand, or services won’t take off. It’s a bit like saying you can have your monthly travel season ticket in your phone, but it has to be a Nokia phone. Not going to go down well with an iPhone owner.
However Nokia genuinely has a lead here and having a phone which implements the recently agreed upon Single Wire Protocol, is something of a feat. The single wire protocol is a security protocol to ensure that information from the NFC chip are not insecurely available to other applications on the phone.
But the fact that Nokia has put this on an ‘affordable’ 3G device which is NOT a smart phone, means that it is aimed fairly and squarely at poorer countries which have a lower smartphone penetration.
Nokia talked a little about the service it is helping to power in Malaysia with Maxis Communications and partners Visa, Maybank and Touch ‘n Go. The service is called FastTap and Nokia said that it now involves payment at 5,000 merchants, as well as ticketing for most forms of public transport. It looks to us that the Nokia 6216 was developed primarily for this and other experimental markets which Nokia has. We asked when it would put it on a top end phone and Romen avoided the question and simply said that the systems were all part of the operating system so could be easily ported to other devices and that the hard work was now done, and then praised the 6216 as a ‘mid-segment, high volume’ device.
It is fair enough we suppose, Nokia has done its bit for NFC and has also made investments in Vivotech, a mobile phone payments and smart poster software house; has a joint venture with Giesecke & Devrient for it to act as a Trusted Services Manager (taking many of the technical issues of over the air SIM set up, away from banks and operators); and made an investment in Inside Contactless a specialist semiconductor in contactless technology as well as taking a stake in Obopay in March this year, a US mobile payments company.
Nokia has every right to stand back and wait for the market to develop and for operators to work out their business models and partnership with the finance community before both putting NFC onto a swathe of the more popular handsets and triggering all of these investments into overdrive and probably snapping up the rest of their equity.
The other thing that Nokia was keen to remind us all is that NFC has more applications than just payments and ticketing. Of course these are the easiest to quantify with a transactional value, because the eventual aim is to take a decent percentage of low end cash transactions and put them through a simple touch and go procedure.
But Nokia sees phone content sharing, probably conducted by Bluetooth, but triggered and authorized by touching two phones together, and information discovery applications such as smart posters, as something that will differentiate its phones and lead it into the broader services market.
Nokia also sees banking applications, which may or may not require NFC at all, helping it to maintain its obscenely high market share in places like India. One application which it touted here was mobile money transfer from urban workers to rural homes, over great physical distances. In a country where only 60 million people out of 1 billion have bank accounts this is seen as a way of moving cash about, although just how to get the cash out of the system at the other end was not clear after the presentation.
Nokia also ripped into innovators that are trying to offer transactions which result in bar codes being issued through handset screens, which some argue would work on all existing phones. ‘There are still technological issues with bar codes, new screens are needed to present them properly, so they would not be available on many existing handsets, and they are only accurately read about 60% of the time. There is a requirement for the read time to be 300 to 400 milliseconds, and you cannot yet do that in bar codes,’ said Romen.
NFC has a long way to go before it is mainstream, but Nokia appears to have come through in support of Pay Buy Mobile, now it is up to rival handset vendors to match Nokia and for operators to convince financial players of the right financial terms for embracing the technology.