Just as Square invented a plug-in device to bypass the gatekeepers of the payments industry, banks may be able to turn the tables with a plug-in device designed to bypass the gatekeepers of the mobile industry.

On Track Innovations Ltd. has created a Near Field Communication add-on that plugs into the headphone jack of a mobile device. But unlike devices from Square, PayPal and Groupon, the OTI Wave doesn't accept payments – it makes payments. The OTI Wave lets any device with a headphone jack become an NFC-enabled device that can make wireless payments at the point of sale.

The product allows "the ownership of the payment portion to be transferred to the banks or whoever issues the device…not necessarily the manufacturer or mobile network operator," says Galit Mendelson, spokeswoman at OTI. 

OTI "is trying to bridge the gap between the infrastructure that might be lacking and the program that banks and transit operators want to start implementing right away," she says. OTI's device was recently certified by MasterCard.

These hardware makers are depending on companies like Isis, a venture of the major mobile carriers, to spark demand, says industry analyst Todd Ablowitz, president of Centennial, Colo.-based Double Diamond Group, LLC. If NFC-based systems like the Isis wallet take off, OTI is positioned to capture iPhone user marketshare, since Apple hasn't ever added an NFC capability to its mobile devices.

While Apple's new iOS7 supports Bluetooth Low Energy (BLE), a wireless technology some consider a longer-range alternative to NFC, several Apple patent applications, including one for a digital content gifting feature, show the handset maker has a longstanding interest in NFC. Plus many analysts say Apple's omission of NFC works with its overall strategy of releasing products only when they will be broadly consumed – meaning Apple is waiting for someone else to prove there is a market for NFC payments.

"Finding innovative ways to get NFC to be usable on the iPhone is important to the extent NFC takes off around the world," Ablowitz says. Companies like OTI "are leveraging a clever technology others have used for magstripe and EMV."

Isis typically requires handsets to have a special SIM card installed to support NFC payments. With the iPhone, Isis also supports products such as the Cashwrap sleeve, which adds an NFC capability to certain iPhone models.

OTI's approach of using a device that plugs into the headphone jack could be more readily adopted, Ablowitz says. Some consumers may be hesitant to open up their phones to install a special SIM card, and payment sleeves and stickers take away from the ergonomic and aesthetic decision of consumers purchasing cases for their devices, he says.

OTI's technology will also work on every form factor including pre-smartphones. During Isis' launch, some consumers without NFC-capable phones voiced frustration in not having technology to enable them to use the wallet.

OTI, which is based in Israel, is marketing the Wave device first in the U.S. and some areas of Asia. The company sees financial institutions sending the Wave device to consumers as an addition to a credit card product, Mendelson says. 

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