Handset Proximity Payments

Publication Date	March 2006
Publisher	ARCchart
Product Type	Report
Pages	131
ISBN Number	not applicable
Product Code	ARC00031

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Summary

With proximity technology embedded, swiping a mobile phone across a reader turns it into a transactional tool: whether the transaction is a purchase of a newspaper or a cappuccino, or the debit of a single-journey on the metro. In this report, ARCchart examines the market emerging around handset proximity payments and the impact it will have on industry players. There are still technical and industry hurdles which must be overcome before handset proximity payments become a mass market reality. While network operators stand the most to gain, they risk ceding control to the handset vendors, or even the financial companies, if they do not engage the industry more proactively. By positioning themselves as the gatekeeper of the proximity applications resident on a handset, subscribers moving to a competing operator would be forced to obtain a new set of payment applications - switching operators would be like losing a wallet, and this would have a significant impact on churn. This report provides an extensive analysis on handset proximity payments: the technologies, players, the market movements and the trends which are emerging. Topics of coverage include:

Discussion of credit, debit and stored-value payment systems
Security techniques used in card systems
Consumer attitudes to proximity payments
The handset proximity payment ecosystem - technology companies and standards bodies
The architecture of a proximity payment system
Issues with proximity security
Review of technologies capable of deliver proximity functionality on a handset
The structure of an NFC payment system
Case studies of commercial and trial mobile phone proximity payment systems
Innovative applications made possible with handset payments
Effective deployment strategies
Threats facing the deployment of handset proximity payment systems
Forecast timelines for the deployment NFC and handset payment systems going forward

Answers and opinions are provided with respect to the following essential questions:

Who are the technology and financial companies driving this market forward?
What strategies are the financial companies adopting to drive handset payments?
What is FeliCa, and how is it related to the EDY payment system?
Why is NTT DoCoMo aggressively pushing forward FeliCa, and why have competing operators (KDDI and Vodafone) also decided to use FeliCa?
What are the issues which must be resolved before NFC is ready to support proximity payment functionality on handsets?
Are there roles for the SIM and/or removable media?
Is there a revenue position for handset vendors, and what strategies should they adopt?
What are the direct and indirect revenue opportunities for operators?
What should operators be doing in order to control this market?
Can operators' prepaid system be leveraged for proximity payments?

Content

CHAPTER A: INTRODUCTION
- A.1 The rise of the currency
  - Types of currencies
  - Book tokens
  - Air miles
  - Gift tokens
  - Forgery
  - Overview
- A.2 Payment mechanisms
  - Credit
  - Debit
  - Prepaid
- A.3 The rise of plastic
  - Credit card usage
  - Card fraud and forgery
  - Smart Cards
- A.4 The basic payment architecture
  - Online Authorisation
  - Off-Line Authorisation
- A.5 The handset as a proximity payment platform
  - Handset proximity payment ecosystem
- A.6 Report outline
  - Definition of transaction terms
CHAPTER B: PROXIMITY PAYMENT SYSTEMS AND TECHNOLOGIES
- B.1 Architecture of proximity payment systems
  - Basic System
  - Two-way communications
  - Authentication and encryption
  - Enhancing security (proximity EMV)
- B.2 The proximity advantage
  - More transactions at greater speed
  - Greater customer satisfaction
- B.3 New charging models
  - Mobiqa
  - Other Applications
  - Company-backed currencies
- B.4 Security considerations
  - Good enough security
  - Enhanced security procedures
- B.5 Proximity technology: General architecture
  - The architecture stack
  - EDY mapped to the OSI 7-layer model
  - Handset architecture
- B.6 Proximity technology: Wireless/radio component
  - Infrared
  - Usage Scenarios
  - Current deployments and outlook
  - Bluetooth
  - Usage Scenarios
  - Current deployments and outlook
  - ZigBee
  - Usage Scenarios
  - Current deployments and outlook
  - RFID
  - Usage Scenarios
  - Current deployments and outlook
  - Bar Codes
  - Usage Scenarios
  - Current deployments and outlook
- B.7 Proximity technology: Interface and application environment
  - NFC
  - Usage Scenarios
  - Current deployments and outlook
  - Case study: FeliCa
  - Usage Scenarios
  - Current deployments and outlook
- B.8 Currently deployed proximity payment systems
  - MOPASS
  - Usage Scenarios
  - Current deployments and outlook
  - MiFare
  - Usage Scenarios
  - Current deployments and outlook
  - SpeedPass
  - Form Factors
  - PayPass
  - Form Factors
  - Octopus
  - Form Factors
- B.9 Standards bodies
  - The Smart Card Alliance
  - ISO (7810, 7816 & 14443)
  - ISO7810
  - ISO7816
  - ISO14443
  - ISO15693
  - ISO8583
  - NFC
  - RFID Forum
  - EPC Global
  - Mobile Payments Forum
  - GlobalPlatform
CHAPTER C: MOBILE PHONE PROXIMITY PAYMENT
- Active and passive integration
- C.1 The handset as a carrier
- C.2 The advantages of active integration
  - Network connectivity
  - Peer-to-peer transactions
  - Interaction of payment applications
- C.3 Active integration challenges
  - Secure application deployment and ownership
  - The network operators
  - The handset manufacturers
  - Third-parties
  - Granular security
  - Secure micro environment
  - The SIM
  - Removable media cards
  - Built-in micro environment
  - Micro-environment operating system
  - User interfacing
- C.4 Case Study: EDY payment system
  - Customer Experience
  - Technology
  - Development plans
  - Funding & Profit
- C.5 Case Study: Caen NFC Trial
  - Customer Experience
  - Technology
  - Development plans
  - Funding and profit
CHAPTER D: THREATS AND DEPLOYMENT STRATEGIES
- D.1 Threats to proximity payments
  - Network-based payment systems
  - Operator resistance
  - Technology issues
  - NFC handset forecast
  - Competing technologies
  - Lack of killer application
  - Regional restrictions
- D.2 Successful deployment strategies
  - Killer applications
  - Stealth deployment
  - Geographical and/or merchant focus
- D.3 Effective handset integration
- D.4 Managing the customer experience
  - Brand and trust
  - Balanced security
- D.5 Appropriate technology selection
  - The secure micro-environment
CHAPTER E: HANDSET PROXIMITY PAYMENT OPPORTUNITIES
- E.1 Network operators
  - The technology gatekeepers
  - Challenges driving revenue
  - The application authority
  - Fostering brand loyalty
  - O2 Blue Zone
  - Branded payment systems
  - Billing and fees opportunities
- E.2 Operator business case: The revenue proposition of a handset proximity payment service
  - Overview
  - Technology
  - Assumptions
  - Deployment
  - Service take-up
  - Costs
  - Revenue
  - Analysis
  - Indirect revenue opportunity
  - Conclusion
- E.3 Handset vendors
  - Vendor opportunity
  - The secure micro-environment dilemma
  - The ultimate arbiter
- E.4 Financial service companies
- E.5 Technology providers
- E.6 Technologies and companies
  - Nokia
  - DoCoMo
  - Sony
  - Visa
  - MasterCard
  - Dexit
  - Motorola
  - Samsung
CHAPTER F: RECOMMENDATIONS AND CONCLUSIONS
- F.1 Recommendations
  - Operators: Seize the day
  - Handset vendors: Drive the replacement cycle
  - Finance and ticketing companies: The operators are key
- F.2 Timescales and likely roll-out scenarios
- F.3 Simplicity through complexity
  - Mobile phone as wallet
- F.4 The future is wireless

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Product features / use

Scope	Comprehensive Overview
Level	General Industry Strategies
Data	Broad Market Predictions
Profiles	Profiles of Key Companies
Features	Primary Research Data
Extra Info	Consumer Trends Highlighted