Mobile Payments: Creative Chaos or Just Chaos?
"Everybody likes the smartphone," says Jerome Svigals , author of a number of books predicting the future of banking and a former IBMer. "Every major bank in the world has announced a smartphone effort," he says, adding that it appears likely that the wireless "contactless" technology known as near-field communication (NFC) will be a foundation in the new age of mobile payments in the U.S.
But not so fast, say others. While mobile payments in other parts of the world, including Japan and Europe, appear to be taking shape though coordination among major wireless carriers selling smartphones, the banks and local retailers, the U.S. sometimes resembles more of a behind-the-scenes brawl.
"The business model has been an active debate," says James Anderson, vice president of mobile-product development at MasterCard, whose constituency is the banks that use its payment-processing services as well as merchants accepting MasterCard. The technology, he says, is not the issue. NFC, which uses the shared 13.56 MHz band, is an ISO standard that MasterCard, among many others, has backed since about 2005 for mobile-payment use.
"In the U.S., the debate is between the banks and the telcos, and it's an adversarial debate," says Anderson.
The wireless carriers and banks are fighting over transaction revenues and the sense of who "owns" the customer.
The wireless carriers argued "they were bringing tremendous value to the new transaction," whereas the banks argued this is already their payment customer. "And they couldn't find a middle ground," which is slowing innovation, Anderson says.
Part of the fight centers on the Subscriber Identity Module (SIM) card in the smartphone, "a secure element" expected to play a role in managing NFC-based contactless payments, he says. The banks and telcos are at loggerheads, which is why the carriers went off late last year to form their own mobile commerce network called Isis.
Under the Isis banner, T-Mobile USA, AT&T Mobility and Verizon Wireless joined forces late last year to work with Discover Financial Services and Barclays PLC to create a national payment infrastructure for mobile payments based on NFC technology.
NFC is supported today in the Android -based Samsung Nexus S smartphone and is expected to be added to at least some Nokia Symbian and RIM Blackberry phones. Apple is still leaving everyone guessing about its plans for NFC.
"They want that transaction revenue," says Yankee group analyst Nick Holland about Isis and its NFC-based mobile-payment network plans. "They are currently working on getting merchants to sign up, but they'll have a hard time.
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