Near Field Communication (NFC) is a new, short-range wireless connectivity technology that essentially puts a wallet into your SIM card.
This mobile wallet is expected to revolutionize the way consumers make purchases. It is already seeing a strong pick-up in tech savvy markets such as Hong Kong and Japan where city dwellers use their mobile phones to ride the subway, pay for movies and even meals.
SDA Asia chats with Ng Fook Seng, Asia Senior Vice-President Telecom Business Unit of Gemalto to learn more about this up and coming technology, how he expects it to fare in Asia, what obstacles it might meet along the way and if the world is ready for such a technology. |
Market research has revealed that the global market for NFC solutions will reach million in revenues by 2012, growing at a compound annual growth rate of 143%. Which elements of NFC have been effective at driving this success?
Ng Fook Seng (FS)The success of NFC takes root in the fact that this is a lifestyle oriented application. All field studies and trials have shown wide end-user acceptance of the concept. It is therefore predictable that telecom operators, banks, transport companies will want to secure this new channel to the end-users. This will drive a strong market demand for NFC in the next five years.
How would you describe the adoption of Near Field Communication (NFC) technology in Asia today?
FS:Asian consumers are definitely well-versed with contactless technology (payment and transport). As such, we will see a faster uptake of NFC technology in this region.
Gemalto believes that the NFC ecosystem in many Asian countries will be easier to set up than in equivalent European or American markets. All these factors will contribute to the faster adoption of NFC in Asia, as already proven in Japan and Korea who have been pioneering this technology.
NFC trials with a number of our customers in this region are already under way. In Taiwan, Gemalto has been chosen by Taiwan Mobile, to provide the worlds first commercial NFC SIM-based mobile contactless system. The project is currently being implemented. You can certainly expect more commercial deployments in the coming year.
Which countries in the region do you expect to adopt NFC faster than others? What is the reason behind this trend?
FS:Outside Japan and Korea, Taiwan and Malaysia have a faster adoption rate. These countries have already contactless infrastructures for payment (Visa Paywave and Mastercard Paypass) and contactless tickets for transportation. As such, consumers are well-versed with contactless technology, and mobile contactless is easily endorsed as an extension of a familiar service.
Could you tell us a bit about your recent NFC deployments in Asia?
FS:Gemalto won two major commercial projects in Taiwan, currently in the implementation stage. Gemalto provides a solution which is designed to remotely manage the life-cycle of any type of contactless service within a mobile phone environment, especially payment applications that mandate high security levels. It will allow Mobile Network Operators to register, issue, manage and terminate mobile NFC services over-the-air (OTA). This technology is both standardized according to telecom requirements, which will help getting compliant handsets. This is in line with banking standards that guarantees to banks and other third parties the confidentiality and integrity of their service.
What have your early pilots and trials revealed about this technology?
FS:The earlier pilots and trials have resulted in very positive feedback from the end users. End users agreed that it will improve their lifestyle (fast, ease of use and convenience). Gemalto has also validated the technology, especially with regards to Single Wire Protocol which has been ratified as a standard. Standards and specifications are finalized in ETSI to encourage interoperability. The interest of such standards is to provide a cost-effective way to spread the compliance through a large number of handsets at low cost. It also provides key end-user features such as allowing a transaction to take place even if your phone battery ran off.
NFC is essentially seen as mobile wallet today. In what other ways do you think we can commercialize on this technology?
FS:With the smart poster feature, NFC is not only a mobile wallet. Users are able to tap the phone against a poster for a movie or music preview, check the lottery results, etc. It is the combination of a suite of services from payment to entertainment thatfs going to make NFC successful. The key is to make mobile NFC a lifestyle service, not just a means of payment.
A recent Unisys Security Index report has revealed that consumers are still very hesitant to begin using their mobile devices for financial transactions. What are the Security and privacy issues that arise from this technology and how should organisations deal with them?
FS:Itfs a matter of perception. NFC deployments can leverage existing infrastructures from banks and telcos. This means that consumers will have the same level of security and privacy as they do today. This is especially important when it comes to financial transactions. Our Gemalto approach is to continue using the existing infrastructure, for example for banking data preparation, which has been proven. Contrary to mobile payment via SMS for instance, proximity transaction, involving the physical presence of the seller and buyer are usually better received by the end-users.
Tackling the security issues is only half the battle won. How do you think we should go about changing the mind set of consumers?
FS:In Asia, consumers are already quite well informed about contactless technology. That said, there will be an education phase to let consumers better understand what they can expect of NFC. Services such as smart poster and peer-2-peer features will likely be a hit with consumers. As these consumers get accustomed to NFC and such innovative services, their mindset will change with regards to security.
It has been said that adoption of NFC technology is slow today because of a host of challenges one of which is NFC device end users are limited as to where they can use it. Do you see this as a challenge? How do you intend to tackle this issue?
FS:With the adoption of contactless card technologies (Visa Paywave, Mastercard Paypass, contactless transport tickets), a host of contactless terminals are being deployed (different rates for each country). This is a combined effort from all the parties involved from different industries.
Clear definition of roles and responsibilities is needed when a new technology is pushed. For devices, we have already cleared the first hurdle by finalizing the standards for Single Wire Protocol and Human Computer Interface, now handset manufacturers and chipset makers can start producing devices.
On the business side, we work with many banks and telco providers so we can help by acting as mediator between these parties.
What are the key challenges that might stunt the adoption of NFC in Asia?
FS:With the huge variety of handsets and devices out there, Asian consumers tend to change handsets more quickly than their counterparts from other regions. ` good supply of gsexyh NFC handsets will definitely boost the uptake of NFC. As the standard was finalized early 2008, we expect, based on our knowledge of new product introduction cycles by handset makers, that a relevant panel of phones will hit the market in 2009.
There is a great deal of uncertainty as to how globally-accepted NFC business models will be defined and implemented seeing that it is a relatively new concept. What in your opinion would be the ideal business model for this technology?
FS:The most interwoven type of co-operation between all the parties will be the winning model. In some countries in Europe, we are seeing the emergence of consortium between banks and operators, in some cases involving a dedicated co-funded entity. Japan is also an interesting example of how telecom operators and financial institutions merge to operate the scheme. Definitely schemes that are too biased towards one category of actor may at the end dampen the introduction of the service compared to countries where a co-operative approach is found.
When do you eventually mass adoption of NFC to take off
FS:One of the main drivers of the eventual mass adoption of NFC will come from making payments and transportation. The other is the constant innovation and implementation of new applications that makes full use of this technology, as developers begin to enrich the application space and come up with new and creative uses for NFC. |
