Abstract – This is the upgraded version of my previous Article written on 26-June-2014 , “Proximity Payments – Contact-less“. A high level overview of Near Field Communication – NFC based mobile financial services & mobile payments is the objective of this article. NFC or technology in this article is neither new nor a revolutionary innovation its there on this planet since decades, but not all of us have been aware of it. Mobile payment using NFC has been around for a long time but banks and retailers are hesitant to participate due to fear of low adoption rate, since the lack of participating banks and retailers is the precise reason for the low adoption rate. NFC is easy and simple concept but some time it gets over simplify along with same reasons for payments under mobile or simplified version as mobile payments about which every single company on this earth is talking about these days and its true every single company. Assumption taken here are reader is fully well versed of mobile payment through mobile wallet or mobile money which is a solution that lets people conduct banking transactions with ease, directly from their mobile device, in a secure and convenient manner. Having full understanding of the business & technologies can now get some Idea how to marry both of these to gain some cost & speed effectiveness. In case needs detailed information or deliberation is needed on any part please feel free get in touch directly.
Introduction – NFC (near-field communication) that allows two devices placed within a few centi-meters of each other to exchange data, both have to be equipped with an NFC chip. This is major contributor to reduce time to pay for the services/goods and give feeling like touch and run. If we have of Ministry of Innovation for regulation and control on global level would have made todays work and innovation may be impossible or must have stopped it long back. Apple (As per news 10 Million handsets were sold in first 3 days of launch ) launched Apple Pay (NFC Solution) from a technology prospective was neither new offering nor a game changer which is now followed by almost every big player in the industry. Without a doubt, that launch was to set a trend for NBFTC (Non Banking Financial & Technology companies) on how to enter into payments and did its job well, so-called banking domain and eat the share. When Apple decided to jump on board (Sept-2014), the game changes because all of a sudden it’s like an indication of guaranteed massive user base for this type of technology and service. Unlike most of the MNOs which keep on focusing and growing the mobile network in positive way to penetrate this or can isolated areas, millions of people are now able to connect via a mobile phone.
Main Story – Rapid advancements in mobile technology are changing the way we live; from the way we connect with others to the way we manage our finances. Technological innovations have made certain aspects of our daily live that much easier. The advent of mobile money has awarded those who were previously unable to conduct monetary transactions an easy and affordable alternative to traditional bank accounts. Mobile Payment services do not necessarily need to be connected/linked directly to your bank account. Security is first thing when it comes to mobile payments and the way apple handles it, its very commendable it approach to the secure element is a physical chip, which is only available in the iPhone 6 and 6 Plus. Each time a user initiates a transaction, the SE assists in generating a random, one-time use code in lieu of transmitting the user’s debit or credit card number. After hearing about Apple Pay, it slowly penetrated people brain/mind and I also thought I might be able to do the same thing with my Note 3. I don’t know what’s the magic behind Apple’s appeal, but it sure does draw and retain a significant user base, and apparently very loyal ones too. There seems to be a lack of advertising this feature; I’m not sure why. Maybe now that Apple, Android & Samsung is going to bring it to billions.
Previously, recharging a prepaid mobile number meant adding more airtime but now we are able to add money to it, keep our credit cards, loyalty point coupons, access our bank accounts and use it like our ordinary wallet for payments. NFC is one of special instrument to play mobile payment tune or a ticket to the cash less future and will be a good solution that finally shields wallets from theft and fraud. Many retailers – already have NFC-based contactless pay terminals in place, making the transition to mobile payments easy. Phones compatible with Google,Apple, Samsung & Android can use these terminals. I just like plain old consumer electronic devices all with pros and cons and assume in this industry, image plays a big role and BIG players marketing and product design teams own the playing field. It’s too bad that useful technologies such as NFC payment didn’t catch on earlier due to other companies failing to market them correctly or lacking the type of user base as few BIG players.
The concern around security in nfc based mobile payments are little less as in the process of payment after launching the payment application, the handset is touched on the POS/MPOS terminal and a connection is made using NFC. At this point, customer may be asked to scan finger or enter a passcode to approve the transaction. The transaction is then validated with a separate chip called the secure element (SE), which relays that authorisation back to the NFC modem. From there, the payment finishes processing the same way it would in a traditional credit card swipe transaction. Innovations in mobile money have made a drastic change in the way people pay for goods and services.
Now most of the operators across the industry especially in Africa progressing on a service that provides a global money clearing house / international remittance hub for mobile payment services, offering interoperability between mobile money services providers networks. A very interesting fact in the mobile financial industry is we usually receive funds once or twice a month as part of salary or fee but spending is done at least thrice a day, sometimes over 5 times. This method of spending is known as micro-payment/micro-spending. Putting in numbers, this can go into billions of dollars; an easy example: if we start charging 1 cent per transaction as commission for micro-payments through NFC (the stored value card technology) for food, drinks, snacks, petrol, tolls, souvenirs or any similar purchase each one of us spend minimum $5 a day (assumed at 40% of world population) then the total commission earnings will be to the tune of $4.3 billion per month. This market has clearly not been explored that well and this also goes straight into Mobile Money Market as potential plug.
The main drivers behind the success of mobile money are the explosive growth in the number of mobile devices and the fall in the cost of computing power, which have lowered the barriers to new entrants in this field. The most important step in the mobile payment transaction is the secure element, which holds all the authorisation power. Whether it’s a chip in the phone, or functions virtually in the cloud, the secure element is tamper-proof and protected by a unique digital signature. Mobile money (m-money) is quite versatile and can support a variety of services, in particular, person to person (P2P) money transfers, which are of significant value for emerging economies. The other key driver for this is the inaccessibility of banking services to the general populace mainly due to poor infrastructure and lack of trust in local banks by country fellowmen and companies.
Mobile Payments will be 3-4 trillion euros USD market by 2020 as World is running to get their bite of share from Payment cake including Apple, Microsoft, Facebook and many many other BIG players. So manufactures needs to ensure very high security for users to gain their trust and secure their transactions with secure element chips, the architecture of the secure element should be designed to be hardened against attacks on the phone.Why cant you and me get some small dust out of it. NFC is use since ages but never gorton attraction and attention we all know technically NFC is a wireless communication technology that permits data transfer over distances of up to 10 cm based on the ISO/IEC 18092 standard. Based on Radio Frequency Identification (RFID) technology, it has been used in various industries including retail, automobile, medical, transportation and manufacturing.
The primary uses of NFC are
- Connect electronic devices, such as wireless components in a home office system or a headset with a mobile phone.
- Access digital content, using a wireless device such as a cell phone to read a “smart” poster embedded with an RFID tag.
- 2 devices read and write to each other using NFC, touching two handsets together to transfer data like contacts or photos normally called as two-way communication.
- Device reads and writes to an NFC chip. Touch and go concept like in apple case where touching apple NFC device on NFC reader or NFC POS to debit wallet or card for mobile payment balance written to the card normally.
- Make contactless transactions, including those for payment, access and ticketing.
Banks will certainly have to judge whether the massive investment they could make, in order to challenge the spreading popularity of payment systems such as PayPal, will be worthwhile, given that PayPal has gained ‘first mover’ advantage and that as highly-regulated financial service companies with duties to both national and continental authorities, they have to abide by stricter rules and security protocols. They must also judge whether their customers will move with them into a new more agile, flexible and electronic future, or whether a majority of people actively prefer the new, low cost (or free) services that have sprung up as part of the digital revolution. Banks, for their part, will continue to work hard to convince customers that they have their interests at heart and are introducing new payment systems in order to make their lives easier and save them money, while maintaining their security.
The main drivers behind the success of mobile money are the explosive growth in the number of mobile devices and the fall in the cost of computing power, which have lowered the barriers to new entrants in this field. Mobile money (m-money) is quite versatile and can support a variety of services, in particular, person to person (P2P) money transfers, which are of significant value for emerging economies. Broadly speaking, m-money refers to financial transactions and services that can be carried out using a mobile device such as a mobile phone or tablet. These financial transactions and services are sometimes referred to as mobile financial services and may or may not be linked directly to a bank account. The year 2012 was turned out to be a very busy year for mobile money, with a number of articles in the news and companies like Starbucks announcing their mobile money plans each week. The terms “m-money”, “mobile financial services” and “e-money” are used quite often in technical reports and in the media.
Conclusions: What are the implications of NFC based Mobile Payments solution? Is it going to change the world, be a significant “win”, be a nice hack. NFC based mobile payments can support globally and will give financial institutions and partners greater choice in offering consumers secure ways to pay with smartphones. Time has now come for banks and other entities with an interest in financial service provision, to step up as one single team, exploit technology and leverage on existing MNO infrastructure to acquire customers, enrich use cases, lower costs and increase revenue especially in markets where regulators (such as reserve banks) play a dominant role. As a result, mobile payment has become a viable alternative to traditional payment methods such as paper, plastic, online or even bank accounts payments.
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