Filed Under: Markets, Telecoms and Media

My policy has been talking to your policy

Leave a Comment

[Dave Birch] The November 2012 issue of the “Mobile Wallet Report” has an article headlined “Mobile network operators ‘keep calm and carry on with NFC'”. I can tell you that this is unequivocally not the case. Not only are banks, mobile network operators and others canning NFC projects right now, they are not keeping calm at all. They are not calm because they are not sure they have backed the right horse. Or, as more critical persons might say, the right horses: the SIM-centric model for NFC and the EMV-centric model for payments. The UK has, at the time of writing, precisely one NFC-EMV handset on sale (from Orange) and industry observers think it unlikely you will see a torrent of similar handsets reaching the shops in the near term. Events have started to overtake the argument that NFC-EMV made sense because it meant that the existing acquiring infrastructure could be used and it would minimise the retailers’ expenditure on POS equipment. I’m no longer satisfied by using NFC-EMV to pay at the car park ticket machine at Woking station because I’d rather just use the RingGo app on my iPhone and not go near the ticket machine at all. Retailers are abandoning the conventional POS for staff wandering around with iPads and the one mobile wallet that I use all the time is from Starbucks and doesn’t use NFC at all. Now is not the time to simply carry on with the same-old, same-old. Now is the time to stop and re-think the mobile wallet. It’s time for the “hyper wallet”.

A hyper wallet doesn’t try and simulate a physical wallet: it meet the requirements for a wallet in the modern, online world. It doesn’t emulate the leather wallet, it blows the leather wallet away.

[From Wallets, mobile wallets and hyper wallets]

I went along to the excellent Mobile Wallet Summit in London last week and sat through some excellent sessions, in particular the well-informed discussion about mobile acquiring featuring Petter Made and TT pals Stewart Roberts of iZettle and Dan Wagner from mPowa.

Untitled

I spoke about this idea of hyper wallets in an identity-centric context, meaning that is the identity of the consumer that is the source of value in a world where the margin on payments continues to trend down. I also said that the convenience of NFC will put it into consumers’ hands. But the convenience will be used for purposes other than EMV payments. The hyper wallet will do things that physical wallets and digital wallets can’t do, not emulate the things that they can do just fine, like make card payments. The fact that hyper wallets are smart and connected means that they can deliver entirely different kinds of services.

Mobile wallets can use their computing power to instantly resolve these questions and present the user with optimal choice(s).

[From The Digital Wallet Value Proposition (NetBanker)]

Jim is characteristically spot on here. I want my mobile phone to do all the boring stuff that I don’t want to do, like figure out where to get Waitrose cash back or British Airways miles on any particular transaction. As I’ve written before, I can imagine selecting various overall policies from a menu somewhere on my phone and then leaving it up to the device from then on. I certainly don’t want to get involved in any dreary per-transaction decisions. I made another point at the Summit to go with this: hyper wallets should implement functions that simply cannot be implemented in physical wallets (I used the example of cryptographic tokens for review sites, but I’m sure smarter people than me will think of others).

When you pay your hotel bill, your wallet sends a blinded token to the hotel which then signs and returns it. Your wallet unblinds the token. When you log in to Trip Advisor, or whatever, you can send the token to them. The token proves that you stayed at the hotel, but is mathematically unlinkable. Trip Advisor and the hotel and the other viewers can know for sure that you stayed in the hotel but your Trip Advisor account can remain anonymous.

[From Security isn’t the killer app for digital identity]

This all does rather change the nature of competition in our industry, though. If consumers aren’t involved in the decision whether to use Amex or MasterCard at POS, because the computing power and the connectivity of the mobile wallet does it better, then what’s the point of the adverts and direct mail and promotions?

Barclays will have to convince my phone, not me, to use one of their products. This won’t happen, of course, because consumers either won’t be bothered to make these decisions or won’t be capable of making them. What they will do instead is download policy profiles into their wallets: the Money Telegraph Profile or the Suze Orman Profile or the Walmart Profile, so the issuers will be reduced to making deals with the policymakers. If the “Saga” policy is a popular choice for older British persons with their phones, then Barclays will have to do a deal with Saga in order to be part of their policy. It will be my Saga app that decides which payment card to use in the shop, not me. The TV advertisements will be even more of a waste of money than they are now.

If you put all this together, you see an impending shift in wallet strategy. The hyper wallet is getting closer.

These are personal opinions and should not be misunderstood as representing the opinions of 
Consult Hyperion or any of its clients or suppliers

4 thoughts on “My policy has been talking to your policy”

  1. info@chyp.com' Consult Hyperion says:

    Thanks for the clarification and the very kind offer Sarah.

  2. sarah@sjb.co.uk' Sarah Clark says:

    Ouch! The phrase carriers ‘keep calm and carry on with NFC’ was used in The Mobile Wallet Report’s November issue specifically to describe the attitude of the carriers who attended the GSMA’s NFC & Mobile Money Summit in Milan last month.

    As our full article states, we expected to find a conference room full of despondent faces but found instead that the carriers at the event were upbeat about their prospects and intent on continuing with SIM-based NFC.

    Whether they are right to think that way or not is a matter of debate, of course, and carriers who are not part of the GSMA’s NFC programme will have their own point of view. But that is unequivocally what the prevailing attitude was at the event.

    Whether they will carry on with EMV NFC or not is another matter. There are many ways that NFC payments can be delivered and EMV is just one of them – there is no automatic linking of the two technologies at the hip. Our October issue, for instance, covered cloud-based NFC secure elements and advised readers that new ways of securing NFC transactions mean that current business plans should be redrawn without delay.

    I’d be happy to send a copy of our November issue to any readers who’d like to see the full article for themselves smile

  3. sarah@sjb.co.uk' Sarah Clark says:

    Hi Alexander

    Please email me your contact details (I’m .(JavaScript must be enabled to view this email address)) and I’ll be happy to forward a copy to you.

    I agree that embedded SEs have advantages. The problem is that most mobile phones in the world are supplied by MNOs under contract to their customers. And most MNOs don’t want to give their customers access to NFC phones with active embedded SEs – so most are being shipped with the embedded SE switched off.

    MNOs’ confidence, therefore, comes from the belief that they are in control of the NFC phone supply chain and banks and other secure service providers will eventually have to turn to them if they want to offer NFC services to their customers.

    Banks are generally unwilling to do that at the moment, of course – hence all the interest in mobile barcodes and anything else that enables mobile payments without requiring access to a secure element. But the impression we got in Milan was that the MNOs attending the event believe they will come around in the end.

    Regarding cloud-based SEs, we are still some way from having these as a commercial reality and it’s not yet clear who would play what role here. There would still be a need for strong user authentication on the handset, though, and that’s a role which could be open to MNOs. (You can read more about this here: http://www.nfcworld.com/2012/09/25/318059/inside-secure-to-offer-cloud-based-nfc-secure-element-solution/).

  4. AP@tedipay.com' Alexander Peschkoff says:

    Dear Sarah,

    I’d like to have a copy of that November issue, please to better understand your viewpoint.

    I fail to see which prospect MNOs are upbeat about – the mobile payments market is slipping through their (uncoordinated) hands. Embedded SE is the matter of “when”, not “if”. There are other solutions (including OTT ones) which put MNOs firmly out of the picture.

    “SE in the cloud” is an interesting concept, but how real is it? If you can positively identify the party accessing the cloud, why do you need SE there?.. Also, what role can MNOs play in respect of such an approach anyway (apart from being a “dumb pipe”)?

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.