MOBILITY CONSULTING WHITE PAPER

MOBILE COMMERCE AND NEAR FIELD COMMUNICATIONS (NFC)Verizon Mobility and M2M Consulting

NFC is the Rising Star of mCommerce Offering a Highly Visual, Convenient and Customer Centric Experience, Leading to Higher Transaction Efficiency, Volumes and RevenueIn numerous territories, especially North America, Western Europe, and various parts of Asia, the word mobile or cell phone is now practically synonymous with smartphone. The proliferation in smartphones worldwide has been driven by their ever increasing performance and utility, and such capabilities have also been a key driver in the emergence of mCommerce. In its most basic form, the mobile device supports transactions conducted online by the customer submitting the details from a payment card at the merchant’s website or where the merchant holds the card’s details.

Taking this concept further has been the emergence of the mobile wallet (mWallet) which has begun to gain traction in the mainstream. In this scenario, mobile applications securely hold the credentials of multiple payment cards making transactions more convenient and faster while being, most importantly, secure as the owner does not need to enter the card details each time to make a payment or the merchant securely retains the details.

Typically mWallet and mCommerce applications are linked via a wireless network to cloud computing servers where the user information is backed up so it will not be lost. In the cloud, sophisticated convergent technologies including data mining and location based services are employed allowing customers to opt in to meaningful targeted benefits based on their purchasing patterns and preferences. Near Field Communications (NFC) is a leading candidate short range contactless technology which can facilitate many mCommerce related solutions for mobile handsets.

This paper will set out to show how NFC can offer a highly visual, convenient and more customer centric experience, which can lead to higher transaction efficiency, volumes and revenue.

NEW OPPORTUNITIES WITH NFCThe availability of NFC-enabled mobile phones, accessories and services has seen significant growth and heightened publicity in recent years stimulated by device launches from RIM, Samsung, LG and Nokia as well as various types of plugin NFC accessories from for example DeviceFidelity and iCarte. Moreover, NFC based services and solutions have emerged from Google, Microsoft, Visa, MasterCard, Gemalto, eBay and PayPal among others. The roadmaps of the device, SIM card, OS and chipset vendors confirms that this trend will continue and should motivate the entry of new players.

NFC can benefit businesses by introducing new business models and help and delight their customers at the same time.

Some of the most ambitious NFC investment initiatives come from mobile network operators including Isis, a joint partnership between Verizon Wireless, AT&T Mobility and T-Mobile USA who combined have the ability to reach over 200 million potential mCommerce consumers. This promises to offer opportunities to deliver new value propositions that go beyond payments to merchants and reach a vast customer base.

With the adoption of these technologies mobile phones have the potential to impact the payments and advertising industries as they have on content and communications with all the opportunities to generate revenue that this presents.

NFC DEPLOYMENTNFC operates in a number of modes. For example, in card emulation, the handset can behave like a debit or credit card to make physical payments, whereas in peer-to-peer, two handsets in close proximately share information with each another. Smart tags allow a handset to share information with NFC-enabled stickers, labels or cards, while in access control a handset behaves like a travel card or security keycard.

Naturally security and privacy are key concerns for mobile payments whether conducted on the Internet or physically using NFC. NFC-enabled mobile phones have these considerations taken care of by a secure element (SE) within the SIM or SD card, or a chip embedded in the handset itself. The SE is equivalent to the integrated circuit found in regular chip and PIN smart payment cards (usually referred to as EMV ). The purpose of the SE is to take care of secure data storage, encryption, authentication and application processing, effectively securing payment handling at the customer end.

Over The Air (OTA) updates can be utilized to transfer applications and personalization data, security management, and mobile services to the SE. Security is also applied through to the cloud where a Trusted Service Manger (TSM) remotely manages the device SE and handles the financial transaction between the wireless network and the service providers systems.

RECOGNIZING NFC BENEFITSThere are a number of key advantages which can be realized from NFC and mCommerce. These include:

Convenience. Higher transaction efficiency, volumes and revenue. Quick and convenient methods of payment. Checkout lines move faster.

Differentiation. Opportunity for device and service providers to differentiate products and offer a whole new range of financial and value-added services.

Marketing. Highly efficient advertising and promotional tool. Effective targeted offers, coupon issuance and redemption. Tailored and personalized product and service information dissemination.

Customer Relationship. Very customer oriented solutions leveraging handset user interfaces and capabilities which help improve customer acquisition, loyalty, retention and growth.

Management Costs. Life-cycle cost of operation potentially less than traditional methods in the long term.

Leverage. Opportunity to utilize the installed contactless payment infrastructure for additional revenues and traffic.

Security. Credit and debit cards held in mobile phones are considered secure, [see Security Considerations] and can be deactivated if the device is lost or stolen over the mobile network. Goods on sale that are tagged with NFC can be protected as per RFID

Applications. Space on the NFC secure elements can be leased to banks and other service providers

With the adoption of NFC technologies, mobile phones have the potential to impact the payments and advertising industries as much as they have with content and communications and with a similar ability to generate revenue.

FACING CHALLENGES FOR NFCNFC and mCommerce bring with them certain barriers to adoption both technical and commercial in nature. Typical obstacles that NFC early adopters face include confusion that exists due to the different or competing solutions, standards and profiles. These can complicate matters, delaying the decisions and commitment from potential suppliers and their customers. In addition to needing to be familiar with NFC and know of its benefits to them, adopters, service providers and their customers need to be confident that mobile payments are secure and do not expose them to additional risks compared with traditional payment methods.

There needs to be a critical mass of devices and service infrastructure established, including NFC-enabled handsets, SIMs, ePOS terminals, smart tags and supporting enterprise services, etc. Also given that NFC is an emerging technology, the availability of staff with the requisite skills and experience across industries segments is currently scarce.

It could also be the case that NFC is a victim of its own popularity. To serve this volume of transactions the appropriate payments infrastructure must be installed at retail and other sites. This could see a need to make widespread uncoordinated deployments of NFC-enabled POS terminals so that consumers can pay with either an NFC phone or chip and PIN card.

VERTICAL SEGMENTS THAT CAN BENEFIT MOST FROM NFC AND mCOMMERCE

Financial Banks, card issuers, service providers, store cards

Transportation Subways, buses, trains, air travel, highways, parking

Automotive Cars, vans, rental, leasing, fleets

Marketing Posters, signage, advertising, media

Entertainment Music, sports, in car, home entertainment

Retail Stores, vending, warehousing, online, food and beverage

Public/Private Sector Healthcare, schools, colleges, universities, government

Consumer Electronics Handset accessories, computer peripherals, AV

Telecommunications Mobile carriers, cable, satellite, Wi-Fi

NFC-enabled mobile phones have security and privacy considerations taken care of by a secure element within the SIM or SD card, or a chip embedded in the handset itself.

ILLUSTRATING NFC USE CASESHere we present a number of example customer journeys illustrating how NFC and mobile wallets can combine to offer compelling mCommerce and customer value.

Card Emulation The deployment of NFC infrastructure at retail locations including smart tags on shelves, goods, and ePOS terminals at checkouts and vending machines can bring more efficient logistics and asset management to retailers. Shoppers armed with NFC-enabled phones can make contactless payments and are able to experience a new level of service and convenience.

Retail ShoppingWhilst at the local supermarket the shopper simply holds their phone next to goods on the shelf that they are interested in to instantly receive the latest facts on the product. Also the shopper receives exclusive special offers and can redeem coupons they brought with them in the mWallet.

Furthermore, goods in the shopping cart are automatically removed from the mWallet’s shopping list, which adapts to changes during the visit. With the shop over there is no need to wait in line to pay, the shopper is privileged to have use of express checkouts (queue busting) where ePOS terminals detect the cart’s contents and take payment from the mWallet without lengthy barcode scanning, card swiping and receipt printing.

An electronic receipt appears in the shopper’s wallet, and their electronic loyalty card is credited and coupons are issued too. A wealth of useful data can be gathered by the retailer, card issuer and the customer’s bank.

Peer-to-Peer NFC Peer-to-Peer (P2P) allows two individuals to quickly and effortlessly transfer money and information between each other’s mobile phones, reducing the need to carry cash, small change, checks and business cards. The P2P mode payment experience is simplified as there is no need for bank account details, routing codes, ePOS terminals or ATMs. P2P is well suited for initiating mobile phone pairing via Bluetooth or Wi-Fi where NFC is used to exchange configuration details.

One development in P2P usage with clear commercial prospects is in retail, whereby shop floor staff members are issued with NFC-enabled Mobile Point of Sale (mPOS) smartphones and tablets that are capable of accepting P2P payments anywhere in the store. A customer with an NFC smartphone could then pay for their goods and during the interaction with the sales person could be made aware of related products such as matching accessories or relevant special offers. This reduces investments in cash registers and ePOS terminals, whilst delivering a more customer centric experience that opens up opportunities to cross-sell.

Shoppers armed with NFC-enabled phones can make contactless payments and are able to experience a new level of service and convenience.

Smart Tags Smart tags can be fixed to or embedded in various places such as goods on sale, supermarket shelves, advertising posters, street signs, transit stations, wireless products, mobile phone accessories, in car systems and computer peripherals.

Smart posters enabled by NFC smart tags offer interactive proximity marketing opportunities. For example, a passing member of the public may notice the NFC symbol on a poster and uses their smartphone to tap on it, then receiving an offer to purchase exclusive seat tickets with a chance to win prizes. The tickets can be bought using an mWallet, into which the eTickets appear almost instantly along with some material about the concert and offers for music downloads and merchandise. At the concert the eTickets allow contactless access to a VIP area and by tapping on a poster there the smartphone could also be setup and signed into a network operator’s free Wi-Fi hotspots which are funded by targeted advertisements.

Physical Access Control NFC-enabled mobile phones can be used as electronic keys, personal identification and tickets providing access to locations such as banks ATM rooms, turnstiles, office buildings, car parks, electric vehicle charging points, public transport, vehicles, road tolls, venues, hotels, hospitals, schools and apartments.

For example, in public transport scenarios an NFC-enabled handset can replace plastic travel cards and paper tickets for greater convenience with additional services. Electronic tickets or travel cards can be purchased and topped-up by tapping the smartphone at any of the ticket machines in subway stations. The payments can be made using a card held in the mWallet where the NFC handset operates in the card emulation mode with the ticket machine reader. The newly issued eTicket or travel card appears in the mWallet as does the payment receipt.

The smartphone now allows the traveler to gain access to subway stations by tapping the contactless card readers at the entry gates and the mWallet shows how much credit is left for future trips or the travel card expiry date, depending on which method they prefer to use.

Since the traveler may have a typical travel pattern, they receive up to date subway and bus time tables which they can add to their handset’s calendar. Also text message alerts can be setup to warn of travel delays and provide alternate travel options.

SUMMARYFundamentally, NFC can benefit businesses by introducing new business models and help and delight their customers at the same time. Following on from the example of technologies such as GPS, Bluetooth and Wi-Fi, it can be seen that NFC will become a powerful enabler of mobile solutions, applications and services. The use that NFC can be put to is ever expanding. It may be that your business can’t afford to ignore what it has to opportunity.

NFC-enabled mobile phones can be used as electronic keys, personal identification and tickets providing access to locations such as banks, ATM rooms.

NEXT STEPSVerizon Mobility and M2M Consulting are well positioned to meet your needs in this area, helping you gain advantage from the numerous opportunities unlocked by these evolving mobile technologies.

The Mobility and M2M Consulting practice at Verizon Enterprise Solutions delivers comprehensive industry expertise which is invaluable for any scale of project throughout the lifecycle and irrespective of the level of maturity. It brings a balanced enterprise approach that can provide you with the ability to extend the value of your investment while developing your own mobile strategy and architecture to support enterprise and machine-to-machine applications and services.

To find out more about Mobility Consulting and for more information about how Verizon can help you take a business process approach to M2M, contact a Verizon account representative or visit us online at verizonbusiness.com/products/mobility/mobility/.

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