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Painful first steps for BNZ, Vodafone mobile wallet trial

I’m all for technology that lets you use your mobile phone as a wallet, allowing contactless payments that take just seconds in-store.

I long for it. So should anyone who’s stood in line waiting for others to fumble through Eftpos payments, then bumble back into their wallet to search for a loyalty card. (One of the joys of the World Cup was the MasterCard sponsorship and the attendant Eftops-at-the-counter ban, which saw all-cash tranactions quickly whittling down queues).

Help is on the way. BNZ, Vodafone, Visa and Paymark have combined for a mobile wallet trial in Auckland and Wellington.

In theory, it’s simple. The shopkeeper rings up the transaction as they would ahead of an old-school payment. Then you tap an icon on your phone’s mobile wallet app and hold the handset within 5cm of a reader for a couple of seconds. The transaction is approved in another couple of seconds, then you’re immediately txted a receipt (you can also get a usual printout). The mobile wallet software on your phone also keeps tabs on transactions. Any loyalty scheme, from supermarket points to airpoints or any tiny shop’s coffee card, could be loaded into the system too (in this café trial, it’s not).

In reality, the law of demos saw things go wrong.

On Thursday, NBR’s demo was cancelled because the technology was misbehaving. On Friday, several false starts saw a transaction (see clip above) take more than a minute.

A second attempt a while later (above) worked more-or-less as advertised.

The tech gremlins don’t particularly faze me. None of the technology here is particularly new, and the trial is, after all, for ironing things out. I’ve no doubt it will come together, and be fast and user-friendly.

And good on BNZ and Vodafone for moving things along. Someone’s got to make the early running.

But boy are there hard yards ahead

The technology may be relatively straight forward, but there’s a morass of commercial and political issues. They include:

1) No NFC phones
There's a near total lack of cellphones in NZ (and most countries) that support the near-field communications (NFC) wireless technology used in the local trial (and almost all mobile wallet schemes).

NFC boosters had been hoping Apple’s new iPhone 4S would support the technology; it didn’t.

Some more expensive Google Android-based phones do. Nevertheless, special NFC versions of Samsung’s Galaxy SII have had to be flown in for the 44 BNZ and Vodafone staff on the trial.

2) Few payment terminals that support contact-less payments
The BNZ-Vodafone trial involves just two retail outlets (a café beside Vodafone’s corporate headquarters in Auckland, and one beside BNZ in Wellington).

Looking ahead, contactless terminal deployment will be helped by the fact credit card companies have just begun a renewed push for contactless cards (though that seems quite a trial phase too. My Visa was recently reissued by I didn’t get offered the Paywave option). I’m told that through a software upgrade, the contactless terminals rolled out with credit cards in mind will be able to support mobile wallets – so that will help.

By Vodafone’s estimate, NFC won’t go mainstream in cellphones until around 2014, and retailers can’t be expected to support mobile wallets en masse any time before that.

3) No trusted service manager

In a related problem, New Zealand has no trusted service manager (TSM) for mobile payments, by Vodafone and BNZ's reckoning. Software from Italian provider Movenda is being used for the trial.

Lack of retail support is a worldwide problem, and it's something of a chicken-and-egg situation. Retailers won't support NFC payment systems until there are more NFC-compatible phones, and handset makers won't make more NFC-compatible mobiles until more retailers support the technology.

4) Security
In reality, this isn’t a biggie. In the BNZ-Vodafone trial, there’s a $80 limit on pure contactless transactions. Beyond that, you have to enter a PIN number as well.

And regardless, if you’re worried about your phone being nicked, you can set a PIN on its start-up/standby screen (as you should anyway if you have your email or company data on your handset). But psychologically, it’s a different story. Whenever I mention mobile payments, people have a knee-jerk reaction that combining everything on one device is inherently insecure, allowing a thief to grab your identity by grabbing your phone.

5) Who controls mobile payments?
Now this is a biggie. Historically, everyone from credit card companies, to electronic payment networks, banks, phone companies, handset makers and (more recently) online players have seen themselves as the one who clips the ticket on a mobile wallet transaction. Some say a completely neutral system should be set up.

A BNZ-Vodafone presentation to media dished out on Friday outlines adds that the Secure Element (SE, the mobile wallet equivalent of the chip on a credit card) is another mobile payment “battleground.” Again, handset makers, banks, phone companies and others are (in the words of the Vodafone-BNZ presentation) “competing for control”.

One issue is whether the SE should sit on a cellphone’s SIM card (as it does in the BNZ-Vodafone trial) or on a separate chip embedded in a phone, a handset sleeve, or even a sticker.

What’s in for Vodafone NZ? Mobile marketing innovations manager Bridget Gallen said nothing, in terms of immediate financial benefit from transactions. Vodafone’s angle was that it wanted payments to become mobile-centric.

6) Balkanisation
To go mainstream, a mobile payment system has to be all-inclusive. The technology faces enough barriers (as outlined above) without retailers, and punters, being put off further because a mobile wallet is restricted to a specific phone company, credit card company or bank.

In the US, the slow-off-the-blocks, technically fraught Google Wallet pilot scheme is restricted to MasterCard, a single phone network Sprint, and a single species of phone (Android, but of course).

Here, happily, there’s precedent for Vodafone, Telecom and 2degrees to work on mobile payments, in the form of the recently-announced, online-centric payforit (for the time being restricted to $10 payments).

And in the Netherlands, three banks and three telcos have joined forces for a mainstream NFC offering.

Here, Vodafone sees a possible commercial launch some time around 2013.

I hope it gets there.

More by Chris Keall

Comments and questions
4

Having been involved in the periphery of the launch of EFTPOS in New Zealand, I've been dissapointed that we haven't had mobile payments in NZ for years, but still believe that with the small number of banks we have in NZ (the main reason we were able to be the first country in the world with high per capita use of EFTPO at POS) we could show some leadership. We have companies like mCommerce who have been around for years, Ericsson had a TXT payment proof of concept Coke vending machine in the office at least 15 years ago and have demonstrated international payment gateways in NZ a number of times. We have a community that is happy to not have cash and (except for very small purchases) and we average more than 1 mobile per person. As you said Chris, NFC is a long way from being readily available and I wouldn't be surprised if it ends up not being the adopted technology.
Like yourself, I'm ready with my ubiquitous mobile, to throw my cash and cards to the wind.
How about a subdermal chip with a digital tattoo display on the inside of our wrists? http://www.youtube.com/watch?v=NM1VuN5Iouc

When EFTPOS was set up, we had a much less proscriptive set of banking regulations and less attention to 'collusive activity' from the Commerce Commission - this made it easier for the banks to work together on a common system than would be possible now. See Mike Wilkinson on 'Payments, Participants and Network Supply' - http://www.iscr.org.nz/f654,18503/18503_ISCR_Wgtn_Presentation_15-6-11.pdf . Its also somewhat inevitable that mobile payments will get embroiled in Telecommunications regulation too - worldwide, regulators are getting interested in the 'content' carried by telco networks (e.g. moving into content regulation) so would likely make a play to take on elements of banking regulation too if cellphones entered into use as payment instruments

Funny that 2degrees are announcing NFC this week.

I was under the impression that the NFC capability of the Galaxy Nexus S will still work with the phone off...

Thought that the whole idea of the TPM circuitry, was that is was secure by nature of being separate from the other circuitry in the mobe... And "bus powered", just like all the "old school" NFC implementations...