Convergence of the Mobile Phone and the Wallet
- Is the Market Ready?
Shyam Krishnan, Industry Analyst
Smart Cards Practice
September 30, 2008

Focus Points
Agenda
• M-Commerce Overview
• NFC Overview
• Business Models
• Conclusion
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Mobile Commerce
A brief overview
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Overview – Smart Card Payments and m-Commerce
• Contactless cards are revolutionizing the payment industry.
• MasterCard working on initiatives to migrate to contact-less
readers in retail.
• Concerns over low-value transactions alone being mobile-
phone compatible. Higher values of transactions need to be
approved.
• Contactless smart cards would enable greater numbers of
m-commerce transactions worldwide.
• Tie-ups of online and mobile transactions would further boost
industry – companies like Paypal are working on this.
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Value Chain for Mobile Payment Solutions
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Mobile Payment
• Value chain includes
• Telecommunication sector (mobile operator, device vendors, solution
providers, and others)
• Financial sector (financial institutions such as banks, billing intermediaries)
• Consumers
• SIM/Payment software developers
• Application providers
• Trusted service managers
• Merchants
• Handset manufacturers
• SMS Based, WAP based payments gaining momentum
• Mobile payment is a multi-billion dollar market worldwide
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Near Field Communication
An overview
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NFC
• Simple and powerful communication mode
• Short read range technology
• Typically operates at 13.56 MHz
• Secure transactions for short range communication
• Active and passive modes exist
• Mobile phone compatible
• Apart from P2P transactions, mobile banking and proximity
payment, NFC adoption for marketing purposes is expected to be
widespread
• Integration could vary from –
• Card Emulation
• Reader Mode
• P2P Mode
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NFC Challenges
• Standards – Need to ensure inter-operability between various platforms
• Merchant Adoption for smaller-value transactions
• Co-operation between major participants in the eco-system; fee and
cost splits
• Proving the business case to vendors who prefer standalone-
contactless based payment systems
• Ensuring significant installed base by 2015 – to achieve global NFC
penetration
• Gather momentum from pilot phase to enter roll out phase
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Advantages of NFC – Payment perspective
• Brings simplicity and security across verticals.
• Ensures a higher degree of personalization, with no card swiping
or contactless card interference.
• One phone – for all applications; OTA personalization and
deployment for transit applications are predicted to drive growth.
• Enables tying in preferences with transactions. Ex: Saved
searches and preferred purchases could be brought up from
memory to make next automatic transaction.
• Trials in 2007 and 2008 – Include initiatives from Citi, HSBC,
Nokia, Vivotech, US Bank, Wachovia (now Citi), Wells Fargo,
Master Card – all in different deployment trials across application
areas.
• NFC Marketing is expected to be widely popular by 2015 –
enables marketers to reach consumer directly.
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Audience Poll Question

Business Models
Solution Providers
• Transactional Model – Fixed, per transaction
• Percentage share of merchant transactions
Mobile Operators
• Transaction fee
• Data traffic
• Application management on the handset
Financial Institutions
• Soft-card issuance
P2P Model
Collaborative Model
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Global Handset Forecasts
Global Handset Sales Forecast
Global Handsets Sold (Millions)
2,000
1,599.8
1,391.2
1,500 1209.7
1051.9
914.7
1,000 735 795.4
678
500
-
2004 2005 2006 2007 2008 2009 2010 2011
Handsets
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Conclusion
• Though NFC is popular and is gaining momentum, with many US based
vendors showing interest, the returns on the investment in R&D on NFC
integrated with mobile payment has to be evaluated.
• Currently, the technology has to move beyond the pilot phase to the roll
out phase – the only way to reach more end-users.
• More and more targeted user segments (Ex: teens, young
professionals, etc.) should be brought into focus for spreading
awareness.
• Economic slowdown in the US will affect NFC deployment – however,
the ecosystem’s stakeholders should ensure that a mandate is set for
complete deployment in the next 10 years or so – by 2020.
• The opportunities that NFC presents are immense; but the market is just
not ready yet – going by past evidence, NFC-oriented optimism needs
to translate into tangible market presence.
• Nokia handsets with NFC supporting Google Android is expected to
drive growth.
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