While the big players in mobile have arrivedApple, Samsung and Google, the result has been a trade of one form of complexity for another.
Gone, seemingly, are the days where service providers must grapple with the mobile network operator (MNO) and SIM secure element (SE) business model. Instead, they must now contend with a bewildering array of go to market options, from Apple and Samsungs embedded SE (eSE) approach, to a variety of host card emulation (HCE) and tokenization hybrid models, each offering varying degrees of control, risk and benefits for service providers like banks.
After so many years of inertia, it is encouraging to see the NFC industry finally moving but for banks and service providers, the planning and decision making process is no less convoluted than before. Its just different. Ecosystem complexity has replaced deployment and integration complexity and each service provider will now need more guidance than ever if they are to tailor a solution that appropriately supports their individual business.
With Apple controlling its own ecosystem and HCE putting power in the hands of service providers, MNOs have been unceremoniously ousted from the top table. Drawn out negotiations and complex pricing side-lined the SIM-SE model and the various combinations of eSE, tokenisation and HCE have dealt the final blow. Holding firm was logical when the MNOs were in control, but now that the eSE approach is up and running and technologies like LoopPay, HCE and tokenization are enabling service providers to choose their channel, MNOs are in freefall. Banks need to take note and act now to ensure they dont suffer a similar fate.
The payment schemes have positioned themselves well since HCE and tokenization came to the fore. They announced work to standardize both technologies and have driven market education through events and workshops. In tokenization specifically they also hold a very strong position; they are the only authorized token service providers for Apple Pay. This may change, but it is clear that, for now at least, the schemes remain at the top of the mobile payments food chain.
Banks need more support from the payment schemes. One example is Visas release of its mobile wallet software development kit (SDK). A welcome move, but banks dont fully understand it. The whole industry needs more education on technologies like HCE, tokenisation and the role of token service providers. Banks want to make their move, but they just dont know which option to take and where to find sound information.
Now is the time for banks to be bold. Unfortunately, this is not what we are seeing. If the financial industry is to avoid becoming a back-end player, confined to a bit-part in the value chain, banks need to be brave. In March, some have raised their heads above the parapet. Norways EIKA Group and OP Financial Group in Finland both launched wallets and Barclays opened up Twitter payments. This is good progress, but more is needed. The over the top players are starting to get comfortable, so the banking industry must galvanise itself or risk being pushed out into the cold.
Sirpa Nordlund is Executive Director of the Mobey Forum.