Will Apple put the F back into NFC

The industry has now been waiting for quite some time to see the handsets that will make the dream of near field communication (NFC) possible. For a long time this was more like a no contest (NC). It is not like we do not see the benefits of tap-and-go. If all handsets were properly designed and NFC was available like blue tooth and WiFi, life would have been a better place.

This is why it was such interesting news when Apple announced the appointment of Benjamin Vigier (a NFC experts and one of the best guys in the industry) (Read here). Benjamin has been working on NFC technology since 2004 and was responsible for the Starbucks NFC project when he was with mFoundry, so he is pretty experienced in this space. It is unlikely that he was hired for anything else. Does this mean that we will now see life change?

Well for a start, let us agree that anything that Apple does, one should take seriously and Apple have a number of good tools in place to make this happen. However, they are still confronted by the two key stumbling blocks in making this real and I would be interested in their strategy in how to overcome this:

• How to cater for the secure element, especially from a personalisation perspective.
• What to do about the basic lack of acquiring infrastructure in most (all?) countries.

If Apple need some thoughts on how to overcome these stumbling blocks and to put the F back into NFC, they have a standing invitation to contact us here at F-undamo.

The time is up for experimentation

Sometimes it seems to me that I live in this unique industry where every-one is just busy with experimenting and prototyping all the time. It is almost as everybody is to scared or unsure of actually deploying something. We hear and read a lot about experiments and pilots whereas very few projects have a primary focus to actually deploy into production.

I suppose it is a symptom of very complex systems and concepts that have not been tried out previously. This uncertainty and the lack of case studies and references do create this environment where money is spent on trying out, testing and evaluating. It is true that it is safer not to go into production, but rather drift in the grey area between concept and reality. But then, is this where we want our industry to get stuck?

I say: No, the time for experimentation is over. We now know how to successfully deploy these type of systems. We now know how to distribute the product to end-consumers and we actually have enough proof-points for the business case. It is possible to pick experienced advisers and proven technologies. For sure, the time for experimentation is over.

New insurance products that would change the world

Insurance products have played a major part in the growth of mature economies. Complex risk products provided peace of mind for individuals and companies alike. Structured savings products assist individuals to prepare for retirement or other important events (like study, birth etc.). The premiums collected by means of these products often provide the capital to fund infrastructure and economic growth through investments.

Unfortunately, these benefits are not available in many emerging economies, primarily because of two reasons:

• Limited statistical information to form the basis for actuarial calculations. Without this data it is impossible to design risks products that can be delivered profitably.
  
• Inadequate payment systems making the collection of monthly or weekly premiums impossible and unpredictable.

Widely embraced mobile payment solutions will largely help solve both these impediments to insurance products. The statistical information available from the transactional behaviour of subscribers can provide much of the data that will enable actuaries to create suitable and profitable products. The payment platform provided by mobile payment systems is ideal to support regular collection of premiums in a cost effective way.

The time is ripe for the emergence of a new generation of insurance products specifically aimed at emerging economies. This will lead to a better life for all, but more importantly, the introduction of these insurance products will also directly lead to growth in the economy and will stimulate many secondary industries.

Will your phone (ever) replace your credit card?

I read a very good article on this recently making the statement that your phone can't really replace your credit card (Read here). Amongst others the article makes the following valid points:
a. Payment mechanisms require systems (and networks) that are way more reliable than what Mobile Operators can provide today.
b. Payment systems must be sufficiently ubiquitous that it can be used at most places where you want to pay
c. Many new schemes have tried, but have failed spectacularly to replace existing credit cards and finally
d. The business model on how to make an alternative work ("split the loot") is just not available.

Game set and match. No go, cards are with us for ever. It is impossible to replace them and in some ways, one must agree. Cards work perfectly, everywhere, every time, without a glitch...

Well, actually not. Cards are vulnerable in one way: it is difficult to use them when they are not present. The biggest flaw that cards have is that they are something physical and a lot of the design and the security is built on the fact that a card must be present when a payment is made. This would be okay if all payments that we make are in the real world, but truth is that this is not the case. More and more payments are made in the virtual world and this is where cards are flawed. Using digital payment instruments (like phones) and all the security that they bring is much more suitable. Phones may just start replacing cards in places where cards are needed, but where cards are not present. (So called card not present (CNP or MOTO) payments).

In the recent eBillme Online Spending Index (Read here), the volume of online payments (read card not present) grew with 8% quarter on quarter. That is a lot. Maybe cards will get replaced by mobile phones when online becomes more popular than actual retailers. Statistics seems to show that this is possible.

Hockey stick or horseback of mobile wallet take-up

I have been thinking about this for some time now and have touched on it in previous posts. Based on our experience to date, what does a typical growth curve for mobile wallets look like? To put it in another way: Would the graph look like a hockey stick graph: slowly picking up speed over time and then gathering momentum to ultimately get a life of its own? Or would it look like a horseback graph: Quickly getting up to speed with a significant penetration and then pick up the rest over time?

Our immediate logic says: hockey stick. This thing is foreign and it is going to take time for the masses to actually start using it. It is up to the early adopters to first try it out and to get to grips with it so that the rest can get onto it in time. But this is where we make a massive mistake, I believe. This thing is different. This is about a network effect: the fax machine problem. Even if the early adopters take it up, but do not quickly have enough reasons to use it, they would also discard it.

This is my view now: the only possible success for mobile wallet deployments is if the initial (first) penetration is quickly (and fast) enough to create a community that can sustain itself. The first launch is critical and must be decisive and swift. Consumers must immediately buy in to the value proposition and start using it immediately with positive feedback - only then will the product stick.

It is also my impression that this theory is supported by what we observe in practice. The really successful deployments made a quick start and established a critical mass within eighteen months. Others that started out tentatively usually do not meet expectations and get caught in the valley of desperation where they are not bad enough to close down, but also not good enough to get anyone excited.

What will smartphone dominance do to mobile banking?

Of course I have a smartphone. As a matter of fact I have a few. I also believe that smartphones will dominate and that mobile banking should take cognisance of it. It is just a matter of time. I decided to investigate how long it will take. (I got most of my research here).

According to Gartner 14% of phones sold (not used) could be classified as smartphones in 2009. (That is 170 million compared to 1210 million). In 1Q2010 this rose to 17% (54 million, compared to 320 million). Not that a spectacular growth, especially considering that Nielsen estimates that 25% of phones sold in the US in 2Q will be Smartphones. For an average of 17%, this means that the percentage must be much lower in other countries (especially in emerging economies).

So, then what is a Smartphone? According to Gartner, 45% of the smartphones sold in 1Q was Nokia (did Nokia even make a smartphone?), 20% Blackberry, 15% iPhone and Android 10%. Windows and the other average operating systems made up the rest. This means (if I do my calculations correctly), that 2.5% of phones sold in the world in 1Q were iPhones. (15% of 17%). Not that much.

Next question is, are people actually using the "smart" part of smartphones, or do they just use it as a phone? This is where AdMod did some interesting research recently. This is what they found: Of the web-surfing traffic coming from smartphones, 42% of that, comes from iPhones. It turns out that people don't really use their Blackberry's to surf the web. (At least according to AdMob - I know, they got their research wrong. This cannot be...). But let us just assume that they got it right, then according to my calculations, then 3.75% of phones are being used today in the world to surf the web via Smartphones.

Domination, what domination? We better ensure that mobile banking still run on other mobile phones if we want to stay relevant in the world. Sure, on the other hand, if your customers represent the top 3% of the world's pyramid, then do not worry about other phones.

My penny's worth on the Citi App "disaster".

Judging from the number of tweets and the volume of articles about the Citibank iPhone application recall, this was the news-item of the month. I think that it got more attention than the floods in Pakistan where people were killed. It should therefore be classified as a "disaster". (Read here, here, here and here, for a small sample). "

"..be careful about the applications you install, even if they come from trusted sources.." one "expert" is quoted as saying. Life has just become seriously complex, when you can't even trust, trusted sources on your mobile. I made quite an effort to attempt to get to the bottom of this "massive" security breach, but was unable to understand the issue. Even if some of the transactional data were stored on hidden files on the device, how accessible is it, and how easily can it be used maliciously? This was not clear. Just to make the point, lets assume that the invoice-numbers of the bills that you have paid was stored on your phone. If some-one were to get his hands on these numbers, this would enable them to... pay your bills? Great! Anyhow, many of these numbers are much more in the clear in other formats: for instance in the mail (stored underneath a flimsy piece of envelope paper).

I am sure that the Citibank security officer is very good and diligent, but we must be careful that his/her paranoia does not effect a whole industry. While I am absolutely in support of a save industry and many of my postings on this blog support this, one should also guard against over-reactions of things that are non-events.

It seemed to me that one should be more worried about the fact that banks print one's credit card number on a plastic card that could also be lost. This critical information is stored in clear, unencrypted data for all to see....