Unlocking the mobile wallet

Birch: letting telcos control the secure element was a bad idea

Speakers at the Digital Services Conference hosted by Informa in London on Tuesday expressed frustration at the lack of progress made by mobile wallets in the UK and called for more innovative solutions to bypass the impasse.

“After seven years and millions of pounds of investment, you still can’t buy a mobile handset anywhere in the UK that will let you ride a London bus using NFC,” said David Birch, director at IT consultancy Consult Hyperion. “That is evidence of a structural flaw. Something isn’t working right.”

While 60% of people in the UK currently have a smartphone (and 80% in the 16-24 age bracket), only 20% use their smartphones to make payments, according to research published by VocaLink in May. NFC in particular has stumbled, as the relative lack of progress towards adoption on the high street has given rise to a growing public perception that the technology is struggling to gain mainstream acceptance.

UK consumers are able to carry out some tasks using a mobile device today but the phenomenon is far from widespread. Bus operator Arriva runs a mobile ticketing scheme that allows passengers to buy their ticket via mobile, but they have to show the confirmation on the device’s screen. While in London, it is also possible to purchase coffee in Starbucks using Orange Quick Tap, an NFC mobile payment service that works on Samsung Galaxy S III phones. Quick Tap was developed in collaboration with Barclaycard.

However, other much-heralded NFC propositions such as Google Wallet are still not available in the UK despite years of promotion. A host of other alternatives such as MasterPass, Apple Passbook, Wanda (a Latin American collaboration between Telefonica and MasterCard) and V. me by Visa are now emerging to fill the gap – but none have yet seriously threatened the dominance of cash and card payments in the UK.

According to Birch, the main problem is that handset manufacturers have allowed the telecoms operators to take control of the secure element – a development that he characterises as a major blunder that has effectively held back progress since the mid-2000s.

“On the Nokia 3360 [released in August 2001] you could access the secure element,” he said. “You can’t do that now. If you have a great idea for NFC and you want to write an app for NFC, you’ll have to phone Orange (for example), get the secure key and then get them to provide a code so that you can use it. Try it right now – everybody knows it’s just not going to happen.”

The solution, he argued, could be to use EMV transactions outside the secure element. At this he was supported by Jon White, head of marketing and mobile strategic alliances at Visa Europe, who called for greater cross-industry collaboration as the best means to make NFC a success.

Visa operates its own digital wallet, V.me by Visa, which attempts to bring together all a customer’s cards and place them in the cloud. Users click the V. me button, enter a password, and then tell the service how they want to pay, using what card, and set shipping preferences and addresses. The security runs on the verified by Visa technology, which shields cardholder details from the merchant. The aim of the service is to enable a shopper to checkout in a few clicks on their smartphone.

“There’s no one party that can make mobile payments work,” he said. “It’s an ecosystem of retailers, issuing banks, card providers, tech vendors and other businesses. By 2020, we estimate one in every two transactions on Visa will be done via a mobile device, and even by the end of this year, 80 different mobile devices will support NFC. It is a tough challenge and we need partnerships, but deals are being done. Its not insurmountable.”

The rise of a diversity of contending mobile payment tools that attempt to bridge the gap between long-held dreams and the reality on the high street inspired Ingo Schneider, head of m-commerce and mobile advertising at Telefonica Digital to argue that instead of removing players from the mobile payments jigsaw, solutions must be drawn up that are to the benefit of all interested parties.

“A large amount of players need to work together to deliver a seamless shopping experience,” he said. “That’s a big challenge. You have to develop five or six value propositions, and that’s why mobile payments probably work best at a national level. At the same time though, you need some standardisation as if you have too many different wallets using different standards, you create a spaghetti soup that makes it slow to scale up consumer adoption.”

Elsewhere in Europe, other initiatives are pushing to bring mobile payments into the mainstream. In Spain, which has a strong history of contactless payments, Spanish banks La Caixa and Santander have partnered with telecoms firm Telefónica to create a joint venture offering mobile payment services and a digital wallet designed to relegate conventional payment methods to the history books.

Users of the new service will be able to gather all their credit cards into the new digital wallet; they will also be able to send and receive funds via their mobile phone. Bank account details will not be necessary; all the sender needs is the recipient’s phone number.