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Friday, September 14, 2012

How to save NFC: Kill the idea of mobile payments & operator involvement

There's been lots of hand-wringing over Apple's decision to exclude NFC support from the iPhone 5. It's not because it can't. It's because it won't. Apple's marketing VP Phil Schiller is quoted as saying It’s not clear that NFC is the solution to any current problem”.

Spot on.

I've been critical of NFC for some considerable time, and it feels pleasing to be vindicated by Apple's doubtless consumer-centric and design-first approach.

I see three main problems with NFC:

1) Focus on mobile payments & other transaction-based use cases
2) Complexities around the secure element stemming from telcos' insistence on being involved in the NFC value chain
3) Ergonomic deficiencies.

The third one is easiest to explain. Simply: tapping a piece of expensive, glass-encased electronics on solid objects is stupid. Furthermore, making people interrupt whatever they're doing on a phone to buy something / get on a train / whatever is equally stupid. We all multitask. Let me use my phone & a card/cash simultaneously.

1) and 2) are linked. The belief that the "killer app" for NFC is paying for things - or other "monetised" apps like ticketing - has led mobile operators to say "we want a slice of that!". This has then led to interminable wrangling over the architecture for security, and in particular the linkage of NFC to SIM cards. This has had numerous side-effects:

  • It's delayed the whole thing through massive bureaucratic & political procrastination
  • It's created a technical structure which means that transactions are actually too slow on many phones (eg turnstiles on London's Tube need to work in 300ms from tap-to-open, so people can walk through without breaking stride. Oyster cards work, phones don't)
  • It's meant that NFC hasn't been properly opened up to developers as a general API to do cool stuff with.
  • It wouldn't be able to work well on non-SIM devices (eg tablets) and would likely have a hard time dealing with dual-SIM devices, or the half the planet which either has 2 phones, or swaps SIMs all the time
  • It's led to ridiculous protracted trials & consortium-forming which has earned a lot for lawyers and PR people and totally messed it up for everyone else.
But the simple fact is that the whole mobile payments thing is a chimera. Yes there are some corner cases (unbanked people in Africa on M-Pesa, specific apps like Starbucks, Square for accepting payments). But the basic notion of "paying for stuff with a mobile phone" is simply flawed. Firstly, cash & cards work perfectly well. I've never had a problem buying a sandwich & thought "what terrible experience taking £3 out of my pocket". I can use cards anywhere on the planet with a pretty good acceptance rate. Chip & pin means it's more secure than before. And I never see anyone bothering to tap their cards on the contactless readers either.

The idea of your purchases "going on your phone bill" completely ignores the fact that most people on the planet use PAYG prepaid and don't get a bill. Average outstanding prepay balance is something like $5, I believe. Most contract users won't want a sandwich or a flight on their phone bill - especially corporate expense managers. It just doesn't fit with our mental model of "phone bill", which many people don't both looking at anyway as they're on a standard plan. Linking purchases to credit cards stored virtually in your phone just seems pointlessly geeky & needs interruptive apps to be useful. I don't buy all this couponing & analytics hype either - it's just putting lipstick on the pig.

The idea of electronically transferring money without so much as a PIN or a signature scares me and most other people. I don't trust any of the parties involved except the card provider and my bank, and adding in the handset-maker and mobile operator just increases the already-too-high perceived risk. Note: this is totally different to my Tube Oyster card as that is stored-value & decoupled from my bak & credit accounts. The most I can lose is the £20 I top it up with. I can also use the card while I'm on the phone - I like to multitask when I'm travelling.

It's notable that the much-vaunted Japanese Felica system is still little-used for actual purchases of goods with phones. And that's despite NTT DoCoMo spending something like a billion dollars buying a bank and a stake in a convenience-store retailer to catalyse the market.

Schiller is right. The "tap-to-pay" thing is a nonsense, a solution looking for a problem. The involvement of a telco adds zero value and lots of friction. At some point I might want to use the phone to make transactions against a loyalty account (hence Starbucks), but that's likely to be very specific to a particular brand or store & I'd like to do it "in the app". QR codes (as used for airline mobile boarding passes) are not a bad option for this, and *maybe* NFC in the much longer term, but even then I still prefer the "visible" code - and no need for physical contact with the device. [I don't believe in phones for *reading* QR codes, but displaying seems OK]

Where the real value of NFC might lie (and I'm still not 100% convinced on these either) is in what I refer to as "interactions", not "transactions". Stuff like a "click to connect to WiFi" pad in a cafe, or a "touch-to-like" Facebook icon in a restaurant. The WiFi example has already been done by Blue Butterfly is much more elegant & sensible than the pointless and wrong-headed "seamless" approach suggested by some carrier-WiFi advocates. I wrote about this 18 months ago - the volume of free non-monetised NFC interactions will outstrip paid ones by orders of magnitude, like free apps in the AppStore. Operators probably won't want to be involved in that loop - and will likely slow down the developer app-creation process anyway.

We need to get rid of cellular operators from the NFC value chain, except as just another class of app developer. There won't be many transactions for them to take a cut from anyway, and their involvement in "interactions" just adds extra complexity and bureaucracy without providing any value. We also need to bin the idea of NFC being transactions-first entirely, as it has perverted the entire development course of the technology. It *might* come later, once normal uses of contactless have crossed the barrier of public acceptance - along with trust that it's OK to tap your precious device on things.

Apple has not "killed" NFC with iPhone 5. It's just merely pointed out that it's on its deathbed already, dying from a virulent payments & telco-involvement disease. It might be resuscitated, but I doubt it - and Apple has cleverly avoided contamination from its corpse.

One last thing: If a miracle happens & NFC does start to recover from its debilitating case of payments, then tablets will make great NFC *readers* for many applications. Apple, Google, MS, Samsung & co. should be embedding that functionality, before Square takes even more of the merchant market away from them.

Thursday, September 06, 2012

Nokia's wireless charging proposition - very clever indeed

Yesterday I watched Nokia's launch of its new Lumia 920. Apart from making me want to throttle whoever came up with the hideous canary yellow colour, it seemed fairly impressive. I've been playing with a Lumia 900 for a while now as a secondary data-only device, and I like it and the Windows 7.5 OS quite a lot. The 920 takes it further - the PureView technology, in less-bulky/Symbian-inhibited form than the 808 - is an obvious winner.

One other thing that  has taken a few hours to sink in has been the wireless charging idea. Now this isn't new -  I've been shown demos of mats and pads for about five years, I think (Powermat was founded in 2007). Various companies have tried either selling it themselves or partnering (eg Duracell) but it's remained resolutely unsuccessful and over-geeky.

My initial reaction to Nokia's inclusion of it was "gimmick".

But on reflection, I'm no longer so sure. Smartphones with big batteries still go flat quite quickly, especially if used "in anger". We shouldn't really be surprised about this - if you use something as a miniature version of a laptop & perform similar tasks on a high-res screen with lots of processing, the energy still has to come from somewhere. Even a big 1500-2000MAh phone battery is a fraction of a typical notebook's.

So. We all complain about battery life. Yes, there's some stuff the network vendors & operators can do to improve the radio's consumption, but that's only part of the story - the screen & chips still drain a lot of power even when offline or via WiFi. (Incidentally - remember that WiFi use to be a "battery killer" on phones? Now it's a saviour compared to 3G/4G).

Yes, we can charge most phones from our PCs' USB sockets these days, but while we might sometimes carry the cable, we probably don't carry about the main standalone phone charger in our bags (if we have a bag). I've been in cars or on planes with USB sockets to charge things, but that's pretty rare - and also a bit inconvenient with the wires anyway.

Nokia has come up with two clever options with its wireless charging that make me think the idea could have legs:
 
  • Integration with other bits of hardware / accessories (the JBL speaker / charger thing)
  • Establishment of public wireless charging hotspots with its deals with Coffee Bean Cafes and Virgin Atlantic lounges (I'm going to call them "Powerspots" and see if I get to claim coining rights in a few years' time)
The interesting this is that this is all standards-based using something called Qi, proposed by the  Wireless Power Consortium. So Qi-enabled phones and chargers should be able to interoperate in future.

One Nokia exec is quoted as saying "The Virgin deal is a first step in our plan to make wireless charging as ubiquitous as Wi-Fi is today."

It's an obvious link to make (hence "Powerspots" - see you like it already, don't you?).

But what's really interesting is how today's WiFi models came about. Initially used for industrial applications and driven by companies like Symbol, WiFi spread in the early 2000's to enterprise offices, and then consumers' homes and public hotspots.
  
But do you know which company first "consumerised" WiFi and ultimately catalysed its adoption in laptops and homes? No, not Intel with the Centrino chip in 2003, although that was a "crossing the chasm" moment. Four years earlier, in 1999, a certain Mr Steve Jobs of Apple introduced the AirPort card and base station, based - perhaps unusually for Apple - on the standardised 802.11 technology.

While other people already thought about public hotspots, the home use of WiFi was still very new - unsurprising as ADSL and cable modems were only just starting to emerge. Importantly, the timing meant that third-party WiFi became popular enough - and usable enough - that telecom operators were not able to exert much power over it, especially as it operates in licence-exempt spectrum.

Now clearly, there's no obvious telco business model for wireless charging anyway. But what Nokia has (perhaps) catalysed here is a separate trend towards places offering - and maybe in some cases charging for - power for phones, or offering it as a value-add to gain loyalty, much like WiFi today.

(Sidenote: there are already various phone-charging-for-money business models, eg with assorted safe-boxes in hotels/bars or even whole shops in developing countries, which just act as power-points for people without electricity at home).
 
So, I think Nokia's been quite smart here. Whether it can directly monetise Qi and wireless charging is yet to be seen (I can't see it setting up a big PowerSpot network itself) but it might just buy it a couple of points of market share at a critical period. It's been sensible going down the standards route because it catalyses the public-powerspot market and therefore (maybe) spiked Apple's or Samsung's guns if they had anything proprietary in development.

One last thought-experiment for network operators though:

What happens to your network if all your customers had fully-charged phones, all the time? What's the incremental use, and is it "more of the same" or fundamentally different in character?