NFC Symposium 2014

On 23-24th of January, NFC Symposium 2014 took place at Sheraton Hotel, Stockholm, Sweden. I was one of the attendants, along with mostly Scandinavian colleagues.

The speakers have been selected from a wide variety of NFC ecosystem, ranging from vendors, to airlines, TSMs to universities.

It was interesting for me to see what kind of NFC projects that the Nordic countries have been working on. Briefly; I must say, it was exactly what I was expecting to see.

NFC ecosystem’s biggest chicken & egg problem has partly been resolved on the device level, but the services on top of the hardware level is still at its early ages. Smartphone penetration is almost complete in Sweden. It was interesting for me to see that even a country like Sweden -where you can pay almost anything with a plastic cards- still does not have a variety of MNO/Bank based mobile wallets. This mostly comes out of the problem that contactless payment is still not an average consumer requirement, so nobody desires a payment card on the mobile phone.

An interesting project came from Mid Sweden University. Dr Johan Sidén presented all kinds of NFC chips embedded with moisture/temperature detection sensors, etc. It was particularly interesting to see the use case of NFC for senior citizen home care projects.

Screen Shot 2014-02-03 at 19.36.23

Valyou was also interesting to see, it is almost exactly like what’s been going on with the MNOs in Turkey, but the main driver of the product is the TSM, not single MNOs or banks. MNO wallets have been in production phase in Turkey almost 3 years now and exactly same workflow (of enrollment and transacting) is being piloted in Norway nowadays.

Valyou

 

Sweden is a great country in all aspect that you can think of -including card payments, however NFC payment is still at early ages and they will a need some time before the mobile payments with NFC to emerge on the mass level.

NFC portal from NXP

NXP, being the co-founder of Near Field Communications Forum and one of the master minds of NFC and one of the largest suppliers of NFC tags, chips and controllers has started a portal on NFC. It is a good start for any developer or company interested in NFC and its ecosystem. Worth to add the RSS feed to keep in touch.

NFC&ContactlessXL@Amsterdam

We are living in the ecosystem and API age. It would be almost impossible for Apple to have this success for its mobile devices if they didn’t provide the APIs to access the capabilities of their hardware components through their SDK. This API environment created the ecosystem that developed all those applications that people are crazy about. Who would use an iPhone on which you could just make phone calls, send text and e-mails only?

It is the ecosystem that boomed around Apple created its huge success. And it is not just for Apple. Google, Blackberry, Facebook, Twitter, Foursquare, you name it. The surrounding ecosystem is the key for the success.

NFC and contactless ecosystem is formed by contactless chips, contactless reader chips, SoCs, mobile operating systems, Windows, Linux, Mac operating systems, embedded terminal environments, etc. Companies developing NFC and contactless applications/solutions are connecting those APIs and services together for a broader use case or a product/services.

NFC and contactless ecosystem is still in its early years. Yet, I’ve bumped into this great mentoring program for startup companies focused on NFC and contactless, which I believe is a great step forward for the ecosystem.

It is program of the Startupbootcamp organisation which provides early seed funding and mentoring to the startups. It is a great organisation for creative and talented people to boot up their companies and projects. Now they are on their way to support NFC and contactless projects.

NFC_ContactlessXL

If you have a project or a product on NFC or contactless space, this program is a great opportunity for you. Use this link to explore the NFC&ContactlessXL program which will take place in Amsterdam starting on October 14th, 2013.

I salute the people who have put efforts on this program, good job! I will try to catch up any companies or products that will emerge by the help of it.

Wallet Wars Episode II : Clone Wars

Mobile wallet wars have started long before NFC. Now it is almost at the Clone Wars stage. Out of the context of contactless and NFC, I would like to share my thoughts on mobile wallet wars.

I strongly believe that digital payments industry has been/is/will be successful depending on how successful the real life payment experience is simulated. The most successful model is the direct one; customer hands over the cash and the merchant provides the product or the service. Simple as that.

When financial institutions got into the picture, they worked as a middle man, who mediates the cash transfer between parties -and takes its cut out of the transaction amount. Still simple.

When internet boomed, companies like PayPal started to emerge and they provided another layer of a middle man; this time between the financial institution and the customer.

I believe there is no more room left in this game for another middle man regardless of the environment that the transaction is taking place. There is enough amount of parties benefiting from the transaction.

Essentially, what wallet providers are offering is to decide who will be in the wallet -and who won’t. They believe that this is something they can do by providing the wallet itself to customer. There are many types of wallets today; MNOs, MNO unions, payment system companies like Visa/MasterCard, internet companies, software companies, even merchant unions claim to provide digital wallets to customer.

Luckily, none of them has been successful to get the customer attention.

I have a few challenges against wallet providers:

  • In the real life, customer is free to choose a wallet of his/her taste.
  • Everyone has only one wallet.
  • Only the customer him/herself decides what card or cash or anything to put into the wallet. Not the company that he bought the wallet from. The war is still between cards and the cash.
  • At the time of the purchase, customer is free as a bird to choose the payment method, not the one forced by the company that he/she bought the wallet from.

Who would buy a wallet, which you can not put anything into it without the approval of some company? Who would carry more than one wallet?

These are all legitimate questions that any company with a wallet project must consider before making the announcement.

A digital/mobile wallet must be transparent against any customer decision, it should just position itself as a container of payment methods. No party should make money on just being the provider of a wallet. No company must put itself into a decision maker position on behalf of the customer to choose the payment method. It is a fact that it will fail.

The most successful wallet implementation so far is without a doubt; Paypal. It provides the customer the freedom to add/remove any payment card. It is convenient as a real wallet, customer just chooses the payment card. From merchant’s point of view, it is an aggregator of payment types with a single point of contact. The real life experience remains same, that’s why it has been successful -and still alive.

BKM Express, a recent wallet platform (that I have a post about) from Turkey is also quite similar to real life wallet experience.

I believe there will be very few wallets remaining in the near future and the survivors will be the ones that successfully simulate the real life wallet experience.

My article on E-Finance & Payments Law & Policy Journal

I wrote an article for E-Finance & Payments Law & Policy, a monthly journal published in the UK, about Turkey’s payment industry and the mobile payment trends. It was published on the October 2012 issue.

I tried to give an outline of the payments space in Turkey and headed over to mobile payments. Here it is:

Turkey’s payments industry and the inhibitions to m-payments

Turkey is one of the forerunners of innovative payments technology and openly intends to be a ‘cashless society’ by 2023. One of the most advanced countries in Europe in terms of countactless mobile payments, Burak Ilgicioglu, a Card & Payment Systems, Business Analysis Manager at Yapi Kredi Bank, Turkey, discusses Turkey’s successes so far in regards to mobile payments and the factors hindering widespread adoption.

Turkish banks have a very good history of developing successful card based payment products. All banks have installment products which work mostly as a personal finance product. When people are shopping for a high definition TV, they usually check the campaigns from banks to choose the electronics retailer from installment numbers. There is no finance charges or fees for installment transactions when the customer pays on the due date. All the banks have loyalty programs where customers earn bonus points, just like the frequent flyers programs in the US/UK. This even helps the government fight the shadow economy. Card payments are encouraged by the regulating bodies of the economy. The motto of BKM (the interbank card centre founded by Turkish banks) for 2023 is to reach a ‘cashless society’ on the 100th anniversary of the republic. Today, 30% of Turkey’s total GDP is processed by banking cards. Turkish banks started the card payment business back in the 80s.

BKM was founded in 1990 as the national switch, clearing and settlement processor. Turkey started issuing EMV cards in 1999 and by the end of 2011, the migration was complete. All the ATM and POS terminals now support EMV. All credit cards are EMV with the exception of debit cards; almost all the debit cards are still magnetic stripe. Thanks to Chip&PIN migration, which started in 2007, all credit cards are used with offline PIN.

Contactless

Turkey is one of the most advanced countries in Europe in terms of contactless and mobile payments. By the end of Q2 2012, 14 out of 27 banks in the card issuing business have reported that they are issuing contactless cards. More than 6 million contactless cards have already been issued. Turkey is a credit card country, most of these contactless cards are credit cards. There are, a limited number of debit and prepaid contactless cards, the majority are credit cards.

Contactless projects started to emerge in Turkey in 2006, when the Chip&PIN migration was still underway. Unlike the US market, Visa and MasterCard forced banks to use EMV for contactless in Europe. This practically means both offline and online transactions are possible due to the contactless interface. This also led to the fast development of NFC products as the natural extension of contactless cards. Contactless has been gaining momentum in Turkey for the last few years. But just like other countries issuing contactless cards, there are some drawbacks blocking the boom. The main reason is the acceptance infrastructure. There are more than 2 million POS terminals in Turkey and only 60,000 of them have contactless readers installed. It is much lower, when we compare the percentage of contactless cards with the total number of cards, which is 6 million and 51 million respectively. Another obstacle for contactless penetration is that there is not much benefit for both customers and retailers when it comes to contactless. Although some merchants – like Starbucks – are already forwarding customers to the contactless interface to speed up the transaction – there is still a long way to go.

NFC

Despite contactless cards facing issues, which have stalled penetration, NFC products have been rolled out in the last two years. We have seen NFC products in different form factors, from Micro SD cards to antenna SIMs or dongles for iPhone. As for banks, unlike contactless, there is another player on the table, which claims an even bigger share of the customer base: the MNO (mobile network operator). By nature, NFC products work on mobile handsets, especially on SIM cards. As a result, banks and MNOs share the customer. Currently more than five banks already have commercial NFC products available on different phone and SIM cards. There are three MNOs in Turkey and all of them are actively involved in NFC projects. Current regulations in Turkey require all payment transactions to be processed exclusively through banks, so MNOs are working with many banks at the same time. Almost all the pilot or commercial NFC programs throughout the world feature a single bank and MNO, but in Turkey, all the MNOs have wallets involved with more than one bank at the same time. The physical wallet experience has almost become a reality in the Turkish mobile payment products. Each MNO has already invested in their own TSM (trusted service manager) infrastructure and mobile wallet products. Yet there is still no ISIS-like cooperative organization between the MNOs and it seems unlikely it will happen in the future. There are indeed many NFC products commercially available on the market, but the most important player in the game is still missing: the customer. The number of NFC products sold is very low, when compared with traditional card products; there are many reasons for this. We can count the current contactless issues as one. In addition, NFC products require users who have a clear understanding of the personalization process, which is mostly, performed by the customer themselves. Customers are supposed to apply for a card account, install an application to their mobile phone, then authenticate themselves to the payment application on the phone. If everything goes well, then they will surely struggle to find places where contactless cards are accepted. Customer experience has still not been worked out entirely.

Mobile payments

Although the current picture doesn’t seem to be very promising, there are a great deal of good signs that mobile payments will be the next big thing in Turkey. All MNOs have dedicated teams for mobile payment services. MNOs are considering mobile payments as part of the mobile wallet product in which people will be utilizing location based campaigns, transport ticketing, access control, loyalty card aggregators, couponing and smart posters. For MNOs, it is still more like a loyalty tool, rather than a revenue generator. Banks are experimenting with mobile payment products. Banks’ perception of mobile payment products is not just buying a cup of coffee with the mobile phone. Banks consider the mobile payment experience as a step into the mobile world where the future lays. P2P payments are increasing and banks are positioning themselves in the game. Location based campaigns are another big step for the Turkish banks which already run very successful campaigns for card payments. High value payments over mobile devices will enable banks to penetrate new business models. Money transfers between bank accounts and mobile phone numbers are already a reality in Turkey, yet it will gain another perspective when NFC meets the masses with more prepaid products. Turkey is definitely a big country for card payments. It will be bigger when the mobile payment experience is part of the daily life and NFC will be the enabler of this evolution.

 

A not-so-utopic NFC world in a not-so-far future

NFC World Congress took place on September 17-19 at the French Riviera. I was not able to attend but my below article was published in the official publication of the event. I tried to materialize the use cases of NFC beyond payment in a near future.

Here is my article:

NFC : Beyond payment

Overview

Over the last few years, we’ve seen NFC being discussed in all major platforms within the payments, mobile and transportation industry, even sometimes in mainstream media. Each player in the NFC ecosystem has its own version of the NFC story based on the perspective of its core business and market. I am a member of the bank frontier, but in this article, I will try to reflect my personal NFC perspective which is beyond payment.

First, a brief outline of the latest status on the NFC world. Payment system schemes like Visa and MasterCard have already ported their contactless payment applications into the UICC platforms. Banks are trying to drive the mobile payment infrastructure based on these secure payment applications. MNOs have fought hard to win the battle to host the secure element on their UICC, yet this battle seems to be won. However, almost all the latest NFC handsets,which are still not many, now come with both embedded and UICC secure element type designs. The transportation industry played with NFC for a long time, some implementations appeared but no success story has been written yet. In the GSM world, major MNOs now has their own mobile wallets running on different mobile platforms using the cards installed on UICC running mobile payment application instances of Visa and MasterCard. These cards are personalized by banks over the air via TSMs through various working conditions. Google, and recently Microsoft announced their own mobile wallets with a similar approach and similar intentions with MNOs. Google also recently announced its first tablet Nexus 7 with NFC support. With all the patents on NFC, Apple is still being expected to join the game but the latest iPhone 4/S did not had the NFC chip.

With all these in mind, the NFC ecosystem is yet, still in its toddler years. All those major companies have put their efforts into a new game but one component that matters most has still not joined the arena; the user!

NFC was initially designed as internet of things; a device level communication standard that will enable consumer electronic devices like refrigerator, mobile phone, TV, camera,  locks -you name it, to transmit data over the existing contactless standards. This is supposed to enable easy and convenient use cases, bringing on a new era in where devices act differently than what they were originally designed for.

From the banking perspective, one of the main barriers preventing NFC from reaching critical mass is exactly this, the nonexistence of use cases for NFC other than payment. Otherwise for mobile payments, as TechCrunch correctly pointed out recently, we are getting into a position to solve a problem which does not yet exist.

So as of today, what should be the next step for NFC world to reach critical mass? The answer is simple; definitely more and more use cases for NFC. Banks or MNOs will not be the the main drivers here, but the rest of the ecosystem, especially consumer electronics segment will be in charge of this task. Of course the mobile phone – the single most important device in the consumer’s daily life – still remains the core of the  NFC ecosystem but the transacting devices against the handset are even more important than the phone. It is still a chicken and egg problem since there are no enough NFC handsets, but let’s hope that all those shining predictions become reality and growth rate in devices and transactions become real in the near future.

In the rest of my article, I am going to exaggerate the use cases of NFC in daily life assuming that most of the devices have NFC chips. I, as an average person will have all the required devices, hardware, software, services and apps ready to use NFC. I will dream that all the components have been implemented and are being used by ordinary people -like me.

A not-so-utopic NFC world in a not-so-far future

When I return home, I run the Key application on my phone. I enter the PIN and the application tells me to wave my phone to lock of the door which has an integrated contactless reader instead of a key lock. My door authenticates my identity over RSA signature which was generated randomly based on date and time. It takes less than 300 milliseconds after I wave my phone to open the door.

I get in the house. My notification bar in my phone tells me that I need to go shopping. My food stock is running low. I go to the fridge and wave my phone against the touch screen user interface of the fridge. My fridge is a smart one, each time I put or get something, I wave the product to the contactless reader inside the fridge, which manages my food stock. I define the thresholds of my own taste, for example; I always must have at least 5 bottles of beer, 3 ice creams, 10 bottles of diet coke, etc. I tap the touchscreen interface of my fridge and it tells me to wave my phone to download the shopping list to my phone. I wave it and it transmits the shopping list to my shopping list app on my phone.

I get to my car, again I open my Key application and enter my PIN on the car tab. Same thing with the house lock happens and I am now in my car. I place my phone in its holder and it asks me if I would like to go to supermarket -since a new shopping list have been downloaded. When I confirm this, it automatically transmits the route to my favorite supermarket to the GPS navigation on my car. (My favorite supermarket option on my phone was set by the loyalty app of the supermarket!) I begin driving in an old fashioned way; by myself!

When I park my car in the parking lot, I wave my phone to the parking spot’s sign and download the exact location of my car to my phone. Then I walk to the entrance and take a shopping cart. I start the touch interface on the cart and tap my phone for downloading the shopping list to the cart. My supermarket’s loyalty card details are also retrieved by the cart’s interface and I get some personalized recommendations on the screen. Then I start browsing the aisles. Each time I place a product in the cart, I wave it to reader of the cart and it updates my shopping list. I can also view the status of my list from the screen. When I am done, I go to the check-out. The touch screen interface tells me the amount I must pay for the items in my shopping list. I open my mobile wallet on my phone, enter my card PIN and wave it to the screen. My bank authorizes my transaction. Of course the loyalty program of the super market also downloaded my bonus points that I earned during this shopping trip to the loyalty app on my phone.

I walk  to my car, and if I cannot remember where I parked my car, I just wave my phone to a sign and it shows me the way to my car on my phone.

On the way home, I stop by at the mall to visit my favorite coffee shop for a latte. I get inside the store and touch my phone to the check in tag near the door. I see that a friend on my list was here 10 minutes ago and he must be still in the mall. Maybe I call him, let’s see. I open the coffee shop app and order my latte inside my app. I wave my phone to the ordering terminal and the cashier confirms my order. She asks me if I want use my bonus points for payment, which she can view from the terminal that was sent from my app when I waved my phone. I skip it and pay with my credit card through my wallet on the phone. At the same time, I receive a text message from the coffee shop that I earned a free movie with my purchase which is available now on my set top box. I tap my phone to the terminal and download my ticket to my phone.

I return back home and put everything in the fridge. It automatically updates my food stock in my fridge. I am done with shopping until next time I get a notification on my phone.

I sit back and open my smart TV. I bump into a commercial of the supermarket which tells me that I can get %20 percent off next week on select products if I spend a certain amount of money this week -which luckily I just did!  It tells me to touch my phone to the set top box through which I am receiving the broadcast over satellite. It checks my transaction amount and downloads the %20 off to my loyalty card app on my phone. It will be available next time I go shopping. Good. I will buy the expensive Belgian beer with the %20 off I have.

Then I remember that I am entitled for a new movie that I earned from the coffee shop loyalty card. I wave my phone to the set top box and I see the message on the TV that I can view it whenever I want to.

I am now in the mood for the movie and I choose to watch it immediately. While watching it, I see a lovely watch in the movie which will be a perfect gift for my wedding anniversary. I pause the movie, open the merchandising menu. I find the watch among many other items appeared in the movie and place an order. I choose the remote payment option and type my phone number from the remote. I immediately receive a notification on my phone that the broadcasting company is requesting me to enter my PIN for the transaction. I tap on it and my mobile wallet runs for me to choose my credit card and key in the PIN. I see on the transaction screen that I have the option to pay it in 3 installments, I go for it. I receive confirmation on my TV and my phone that the payment was successfully processed and I will receive the watch in two days. Great!

Final words

How does this 2 hours of my imaginary future life sound to you? Science fiction or likely to happen? I am up for the second!

NFC promises huge opportunities for a more connected world. We already have the connectivity on 3G/4G mobile networks; NFC provides a new layer that brings the convenience over interactivity and transactions for physical coexistence between people and devices. Devices are limited only to sky when it comes to work with NFC.

I am hoping for an NFC world driven by the ecosystem as a whole which includes many players yet do not exist in the game yet.

Google Wallet, the American way of NFC

Google has been working on Google Wallet for a long time. We’ve seen the first NFC payment experience via Google Wallet when it was released with a Citi prepaid card on Nexus. The first version came with a pre-installed Citi prepaid account and a 10 dollars. It was a big step for NFC world. Google made a huge step for popularizing the mobile payments. There was a minor setback when it was hacked but Google immediately fixed it.

Now Google Wallet 2.0 has been released and this time there is really an innovation that you’d expect from Google. Google is a cloud company, every Google service gets you to cloud, so why wouldn’t its wallet do the same thing? There is a great idea behind the new wallet, it keeps your card data on the cloud and uses a prepaid card on phone, which works as a frontend processor, or let’s say a contactless/NFC interface to your credit card in the cloud. This way, you can use any of your cards without actually enrolling it on your NFC phone – Nexus, in our case. What a brilliant idea, just as clear as I’d expect from any new Google service.

This is a kind of implementation you’d never see in Europe. Here in Europe, we are using EMV for NFC and it works in a more complex way. Of course it is possible with EMV but it would be far more complex than charging a transaction to a card stored in the cloud via an EMV transaction flow -and with current implementations of NFC in the MNO dominated ecosystem.

It seems we will be in wallet wars for some time more and let’s keep our thumbs up for Google for the smart move. Another big step for the NFC World.

Take a look at Google Wallet in action below:

BKM Express, a new approach to wallet world

BKM is the national switch, clearing and settlement processor and the regulating body for the card payments space in Turkey. BKM was founded by the Turkish banks in 1990 and since then, BKM played a huge role in the development of card payment systems in Turkey.

I have personally involved many part of the story and yet I am again part of another innovative project of BKM. It’s called BKM Express and it sure will play an express role in card payments of Turkey. Online payments in Turkey is on the rise and BKM is playing an invaluable part in this game. The online payments ecosystem, banks, customers, merchants, service providers, solution providers will utilize this product eventually and all players will win.

Basically it is an online wallet where people can store credit and debit cards securely for making payments on online merchant without the need of entering card details each time. This prevents sharing the card numbers with merchants which still many people are not comfortable with. Enrollment is also very user friendly, authentication is processed via text message via the issuer bank which is the very same user experience with the online banking logon. (mandatory for online banking)

From the merchants’ perspective it means integrating once and avoiding all the hassle of technical problems with each bank’s online POS software services. BKM Express also supports the trademark Turkish concept “installment payments” with credit cards. Not just installments, but loyalty program of each bank is supported during checkouts. There is even the option of submitting delivery and invoice addresses to merchant without the need of keying in each time by the customer. Turkish card holders are already familiar with the 3D Secure context and now this is the perfect complimentary for the online payments.

Sure it seems quite similar to Paypal, but this is the first national online wallet initiative in the world -as fas as I know. There are some enhancements over Paypal; it is a product of banks’ platform and it supports installments of each merchant’s offering (includes more than one in most cases) You can add both credit and debit cards, but you will be forced to use a 3D Secure payment which is the national regulation for debit cards.

Currently 9 banks have been certified but this covers almost %80 of the total card market. Pretty good start! It is now under presentation phase with limited number of merchants but BKM is working hard to integrate with more merchants everyday.

Of course mobile application will be coming and it will be a complete solution for the Turkish card holders for an online payment experience.

Contactless & NFC Ecosystem in Turkey

On 20-21st of June, I attended an event from SMi Group in London on contactless and NFC. I presented the Turkish market and Yapi Kredi’s products and services. It was a great opportunity to keep updated about the contactless & NFC space throughout Europe. I met colleagues from the industry and discussed hot topics on contactless & NFC.

You can view my presentation below.

 

OSPT Alliance

For long years, Mifare has been the king of public transportation as the ticketing platform. As I already mentioned few times, Mifare has been insanely successful, yet it was proved to be not secure any more. However it still works for may transit operators and NXP made its move to secure it with more products.

Competition against Mifare has been with mainly by Calypso and Felica and now yet there’s another player in the game.

To combat with Mifare, Gisecke&Devrient, Infineon, Inside Secure and Oberthur formed the Open Standart for Public Transport Alliance. (OSPT) What OPST is providing is basically a standards based, cost effective and secure chip platform called CIPURSE for contactless ticketing. Mifare is proprietary, you need to license it from NXP. OSPT suggests that being open and standards based is more secure and cost effective. Unlike Mifare’s cracked proprietary security algorithm, the security layer of the OSPT is AES 128 bit, which is the ultimate security you can get for now.

OSPT has been around for some time and now the SDK has been released. That means ticketing implementations can now officially be started for a new platform. Of course it is not an easy job to start a new platform from scratch but the companies in the alliance already have many customers and connections in the ticketing space and I am sure we will hear an announcement soon with the CIPURSE.