A website dedicated to contactless payment systems

Not so long, about 10 years ago, if someone had told you that you could process a payment transaction with your watch, you’d probably laugh. But things have changed in an enormous speed and since last few years, this definitely possible and there are people actually doing this now.

This has been possible by a company -Laks, whose vision is beyond most of the people in both card payments and watch industry. Laks is a Vienna based company developing very cool watches that have a dual interface chip slot and the watch has an antenna inside the watch. The antenna plugs into a specific type of SIM sized dual interface chip produced specifically to fit in this environment. There is the possibility of running many applications on the chip. Actually there is the possibility of requesting any kind of chip in this form, which means that sky is the limit for implementing a chip application inside a watch. Laks also has native mifare chip embedded into the watch. Although I’ve never asked, I am sure that they can fit any kind of chip inside a watch.

Watches come with the antenna, while the dual interface chips do not necessarily. If so, personalization process must be processed while the chip is in the watch, which is something hard to do when personalizing huge volumes.

In Turkey, Garanti Bank launched a product based on Laks watches a few years ago. It was a little bit early, however it was still a very innovative product. In Turkey, there were efforts to develop a payment product based on Laks’ watches, which some of them had already passed the proof of concept phase, unfortunately they were never launched.

Maybe, the commercialization did not happen due to the fact that watch is a personal thing (like a mobile phone in the NFC case) and a payment product bundled in a personal stuff might not sound good to people. But I am sure there will be some contactless projects based on watches and Laks will definitely have a big role in this picture. There are more interesting watches other than having a contactless capability in Laks’ web site, worth to visit.

Think of a country where most of the people don’t have basic bank accounts. Most of the population live in outskirts or villages far away from city life. Robbery is the second name of the capital city -Nairobi. Yes, I am talking about Kenya, one of the most beautiful countries in Africa.

Around 2 years ago, the biggest mobile network operator Safaricom started a mobile money transfer system called M-Pesa which now became the most innovative mobile payment system throughout the world. It was created for responding the underbanked population for their basic money transfer needs. There was no legal infrastructure to regulate the system, government could do it after 6 months of the launch. Now it’s projected that almost one third of every Kenyan has an active M-Pesa account.

So, what is M-Pesa, how do people use it? M-Pesa is a money transfer program managed via cell phones. All the cell phones are compatible since the application was developed on the SIM card. All Safaricom SIM cards have the M-Pesa application pre-installed, so all you need to do is to register the service. Even I was -as a foreigner- able to register it within hours by using my passport only.

What really great is that there are no hardware terminals installed, both users and distribution network use the same SIM-centric approach. For registering, you simply need to apply to an M-Pesa agent. Agent keys in the typical personal information to his/her cell phone and you receive the notification in hours. The application is protected by a PIN, which is created during the registration, so it is secure enough.

With an M-Pesa account, you can send and receive money, withdraw cash from ATMs, shop at certain points and now the latest news is that you can even link your account to a bank account. What would an average Kenyan want more from a mobile network operator?

I personally consider M-Pesa as one of the most creative product based on a smart card platform. The SIM application alone enables the whole service as the heart of the system. Safaricom manages a pool account for all the money loaded in to M-Pesa accounts. Safaricom is not a bank, but now with the introduction of M-Kesho, people can open a bank account at Equity Bank and use the basic banking instruments through the M-Pesa application just by linking the M-Pesa account with the Equity Bank account. Another innovative step!

M-Pesa was a huge success, so Vodafone, the owner of Safaricom launched the same product in Tanzania, Afghanistan and is planning in India, Eygpt and South Africa.

It’s a true success of a smart card/SIM technology, yet I can consider as a contactless system since everything happens out of the contact interface!

When we talk about transport ticketing, Calypso is the technology we must discuss first. Calypso is a transport ticketing system built by the transport operators. It was designated to match the transport ticketing requirements from functional flow to security mechanisms. The main identifier of Calypso is that it requires a micro processor card. This enables all the security required by complex transportation environment.

So, what is Calypso?

Calypso is a ticketing application developed and maintained by Calypso Association. Calypso Association, based in Brussels, Belgium, was established by RATP and technology provider Innovatron in 1993. Later on, group of European transport operators from Belgium, Germany, France, Italy and Portugal joined the association. Calypso ticketing application is currently being used by various European public transport systems.

In the Calypso world, you can define various players into a single card (now the term “portable object” is used though, rather than “the card”) and they can share the same balance. The technical design of the application supports multi-application by nature. Different contracts can be installed on to a single card which are protected by different key sets. Each Calypso chip has a set of derived keys from master keys. DES and DESX (an implementation of DES against brute force attacks) can be used for authentication. Calypso requires its own SAM card for authentication which is a pre-requisite of modifying the data in the chip.

Unlike typical mifare designs, you are restricted by the boundaries and transaction flow developed by Calypso, but it covers almost anything that can be expected in a transport ticketing environment. Calypso applet runs on micro processor chips, so authentication is quite strong (and fast)

Calypso Association plays an innovative role towards the NFC era and they seem to be ready for the NFC evolution. (I wish I could say revolution, by the way) Calypso applet runs on various card operating systems varying from Infineon to Watchdata chips, including NXP’s JCOP family. Of course this includes any secure element in the NFC world.

Based on my personal experience, I can say that Calypso is an equivalent of EMV in the banking payment world. Both of the applications are quite well designed, already running on millions of chips and getting ready for the future.

In my perspective, NFC was the rising star of the Mobile World Congress 2010. In the first day of the event, the agenda of the session was mobile money. A balanced selection of speakers from carriers to technology companies provided a mind opening content.

The first outcome of the day for me was that NFC is something that you can not expect a single task, but there is a need for companions. I mean, a simple mobile wallet application will not be enough for people to make it a killer application. Mobile coupon style add-ons as well as making the content accesible to user through the handset is crucial. People already have credit cards, debit cards, transportation cards, etc for making the payment. Why would the user have switch it to a handset instead of a card?

Secondly, all the parties are ready to jump on the band wagon but it still needs some time for the boom. We’ve already seen many pilots and even a commercial roll out in Japan, but there’s still some more time ahead.

Mobile World Congress 2010 had also an NFC event for platinum pass holders with a Samsung handset.

It was interesting to see that SIM cards are having more and more abilities for mobile payment applications. Gemalto announced a new SIM card which is able to run a DESFire ticketing application. I also had a product presentation of a SIM platform with NFC support from Giesecke&Devrient.

Finally, BarclayCard announced an iPhone application which can accept contact EMV chip cards with the PIN support. Just like the US version running from magnetic stripe interface, Barclay’s one has a contact chip card reader attached to the iPhone and the terminal software runs on the iPhone OS.

China is a huge country. When you have the population of that much, it’s not logical to pay license fees, but better to develop your own standards. They did it on blueray equivalent media and on payment card applications. China has a payment system of its own, called CUP and NFC World’s latest article says that they will do the NFC on their own way too.

There’s also an interesting card manufacturer company in China, Watchdata. I have personally been following the products of Watchdata for a few years and they are really coming. When I first met with Watchdata dual interface cards, they did not had the EMV, so I was unable to use it. In time, they got the EMV certification and much more. I have seen their chip products replacing many competitors around the world. I saw Watchdata presenting their products around Europe in many respectable events.

Sim Pass is especially an interesting product of Watchdata. Instead of waiting for handset manufacturers to release NFC complaint devices, they developed a SIM card with an embedded antenna. This way, people have a handset which is capable of contactless payment transactions regardless of the handset they have. It’s a very innovative product of its kind, but I don’t think it will reach Europe, since it’s not the European way. But it’s quite a successful implementation step for the mobile contactless payments, that’s for sure.