There was a lively panel session at the Transport Card Forum meeting in London recently, which I had the pleasure of moderating.  I won’t name names but the panel members represented the mobile industry (an operator and the GSMA), a digital money expert, the DfT, and a consumer champion.  The session was entitled: Public transport ticketing & payment on mobiles – To what extent will mobiles be used in the entire journey process, from initiation through to ticketing and payment?  What will the future hold and how might it work?  The audience asking the questions were largely from the Transport industry.

The central question I was trying to get the panel to address was: If I am a UK Transport operator, and I want to accept NFC phones for payment or ticketing in my network, what do I do?  In other words what are the steps, who do I talk to?  This is not academic – I have been talking to Transport operators which are in precisely this situation.  The very fact that they are asking the question rather sets them apart, and tells me they are fairly clued up.  They think it will be easy – yet they have no idea of the hurdles and stumbling blocks in front of them.  They don’t know what they don’t know.

 As soon as you start to drill into the detail, questions pop up.  Let’s start with what kind of product an Operator might want to accept on passengers’ NFC phones.  In the UK, this could be:

1. An existing proprietary fare product
2. ITSO Stored Travel Rights (STR)
3. An ITSO ticket product
4. A Contactless Payment Card (CPC) app

 Taking these one by one, to offer a proprietary fare product, the Operator needs to have a suitable app developed, which passengers can download to their phones.  To do this securely, and then to load value onto it over the air, it is necessary to have access to the “Secure Element” (SE) on the passenger’s phone.  In most phones currently the SE is the SIM card, and is owned and controlled by the passenger’s Mobile Network Operator (MNO).  So – the Operator has to get the agreement – on some commercial basis to be determined – to be given this access.  In the UK there are five MNOs, so if the Operator wants to have his fare product on all his passengers’ phones, irrespective of which MNO they subscribe to, he will have to do a separate deal with each of them.

 Next, ITSO STR is like an electronic purse – you add value to your phone and then spend it on any compliant ITSO reader.  There are almost no such schemes in the UK currently, but this might change in the future.  In any case this, and the third option of an ITSO ticket product, should be the responsibility of ITSO to present a solution.  In fairness to ITSO, I believe they are stepping up to the plate on this one, but it’s still early days.

 Then, if the Operator wants to accept a CPC app on a passenger’s phone, first of all the app has to get there.  Currently in the UK this is only available from Barclaycard on a Samsung Tocco Lite phone on the Orange network (known as “Quick Tap”).  So even though I have a long standing Barclaycard account, it’s not available to me on my beautiful Samsung Galaxy Nexus NFC phone running on O2.  Expansion by Barclaycard to other phones will be measured in months and to other networks in years – and Barclaycard is the market leader!

 So what is our Transport Operator to do?  Say to passengers, “You can have this really cool way of paying for your bus ride – but only if you have this credit card on this phone and this network?”  What kind of message does this send to his other customers, and why would he bother?  No solutions to this were offered at the TCF, and I wasn’t surprised.

 What there needs to be is an engagement by the mobile industry with Transport.  There’s no doubt they want this, because they see Transport as the “low hanging fruit” – the “killer app” that will drive transaction volumes and get subscribers using their phones for more new functions.  The GSMA has kick started this, but so far their efforts are necessarily very global.  They have some way to go before they have practical advice and support on a roadmap to implementation for Transport Operators in individual countries.

 The consumer champion at the TCF capped it all by questioning why any passenger would want any of this.  The jury’s out…

 Fenbrook Consulting advises businesses about the commercial opportunities and technical requirements of Near Field Communications and Smart Ticketing

 Michael Koployof Software Advice in Austin, Texas recently posted a blog about the adoption of mobile payments by retailers.  The blog is at http://blog.softwareadvice.com/articles/retail/mobile-payments-faqs-1012512/.  In it, Michael talks about the basics, the ecosystem, and the merchant opportunity.  This is an interesting take on the subject and here are my thoughts.

Michael is correct in saying that for retailers upgrading their PoS terminals, it’s a relatively simple matter to incorporate contactless functionality.  This has already begun, especially in the fast food sector, with companies such as Subway and McDonalds adopting contactless, and seeing steadily growing transaction volumes.  The terminals are pretty much indifferent to whether what is being presented is a card or a mobile phone.

However, in my view, contactless payment on mobiles is being held up by the turf war between banks, handset manufacturers and mobile network operators.  This is severely (and, to the consumer, arbitrarily) restricting the choices available.  For instance, I have a Samsung Galaxy Nexus NFC mobile phone, which I love.  I also have a Barclaycard, and my UK MNO is O2.  Barclaycard is available on mobile in the UK – but if I want it I can only get it by switching to a Samsung Tocco handset and MNO Orange, neither of which I wish to do.  This is because of a fight to control the Secure Element within the phone.  But I don’t think many people will change their handset or mobile provider just to get a payment application.

So I think this is going to mean mobile payments are going to roll out more slowly than they could.  So what do retailers do in the meantime?  I think the answer lies in the last section of Michael’s blog.  It will lie in locating shoppers and presenting them with attractive offers – that are time, location, and consumer specific.  Mobile phones offer retailers the opportunity to learn much more about their customers – where they go, what they like, what they buy.  And social media networking has shown large numbers of phone users are only too happy to share this information.  Michael mentions some applications which retailers can use – I would also bring in Location Based Marketing schemes such as Foursquare and Facebook Places.

The beauty about these applications is that, unlike payment, they don’t require a complex infrastructure to implement.  Merchants can start small, experiment to find out what works, and expand at whatever rate they are comfortable with.  Then, when payment by mobile is finally allowed, this will naturally complement the coupon/discount applications, and deepen the relationship between the merchant and the consumer.

I’m quite sure the early adopter retailers in this space “get it”.  I think we’re witnessing a profound shift from mass advertising, relatively untargeted, towards highly personalised messaging and offers, tailored to the known preferences of customers.  Michael’s advice – to have a vision in place and stay alert – is spot on.

Fenbrook Consulting advises businesses about the commercial opportunities and technical requirements of Near Field Communications

Fenbrook Consulting helped design the cashless payment and access control solution implemented by partners IVS at the UK’s Isle of Wight festival in June.

The access control system worked very smoothly, allowing the 65,000 visitors to the festival to proceed quickly through the entrances without having to wait in long queues.  Special wristbands were supplied to festival goers, depending on their status and the privileges they had each paid for.  The networked readers, updated in near real time, enabled any unauthorised wristbands to be immediately detected and appropriate action taken promptly by security personnel.

The cashless payment scheme, used by festival guests in the VIP tent, was also enabled by special wristbands, fitted with MasterCard PayPass^TM chips.  Terminals at the bar and VIP food outlet were equipped to read the contactless chips, which worked in a similar manner to Oyster cards on London’s transport infrastructure.  Transactions were fast and the guests were very pleased with the experience.

Perhaps the most successful element of the occasion was the network infrastructure.  Everyone uses mobile phones at festivals, from locating friends, to sending videos of bands they’re watching.  This uses up GPRS bandwidth.  This means that payment terminals using GPRS may have to wait for a long time to make a connection, if the transaction requires online authorisation.  At the IoW, a completely separate high frequency network was used.  This worked flawlessly, and was they key to the user experience being so good.

Having proved the viability of this combination of access and contactless payment, the scene is set for expansion – more, larger events, other venues such as theme parks, and to locations outside the UK.  Festival organisers like the idea because they can speed up the throughput of customers, allowing them to sell more, and revenue at the end of a festival doesn’t depend on visitors still having cash in their pockets.  It also means they can track users, understand their preferences and make offers which are relevant to their tastes and location.

Fenbrook Consulting and its partners deliver cashless payment and event ticketing solutions to the festival, event, and theme park sectors