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Wednesday, September 03, 2008

Plenty of unanswered questions about the O2 NFC Oystercard trial

In general, my view of NFC is that it's interesting, but that it's far from certain to be a success. In some ways, it's a solution looking for a problem. It's not an obvious failure like some suggested future technologies, but neither is it a clear win. It will be more important than DVB-H or other mobile TV standards, but a bit less than WiFi and way lower down the pecking order than Bluetooth, memory cards, GPS and a range of other emerging handset features.

There has been much press ballyhoo about the results of an O2 / Nokia trial in London, which included subsuming the standalone "Oyster" contactless travel payment card used on buses and tubes, plus also the "PayWave" electronic-wallet function.

In some ways, I can buy the Oyster argument - in fact, it doesn't even need integration into the phone, a simple RFID sticker on the back or in the battery compartment could do the trick just as well. I see no advantage to the involvement of an operator in the value chain at all - apart from specifying NFC chips in future handsets. I don't buy the idea that Londoners would want out travel expenses appearing on the same bill as postpaid phone usage, and prepay users would almost certainly prefer two different "buckets" for transport and communications for ease of budgeting. Also, many postpaid mobile phone users are prepay Oyster users (me, for example).

But to be honest, nobody I know views the Oyster card as an encumbrance. It's simple, and it works - although most of us were extorted into using them in the first place by our former tyrannical mayor's policies on fare differentials. Integrating it with the phone gives one less thing to carry, yes - but also raises issues like whether the NFC would work when the phone was out of battery, or whether the thousands of people who lose phones on the Tube/Bus would then have the extra indignity of getting fined for riding without a ticket at their destinations. Roaming users would find it a pain, transferring balances to new phones/operators would be a pain, it would need to work seamlessly while phone was in mid-call, and so forth.

I see no upside, but it could probably work OK up to a point. Yes, the "survey" showed positive results but I've yet to see a clear breakdown of the triallists (are the representative of "average" Londoners or mobile users?), and the questions mentioned in the press release all seem a bit woolly. (I'd love to have a copy of the full questionnaire & results and see what didn't make it into the press release).

"87% said that availability of the service would be likely to influence their purchase of a new mobile phone" - I suspect that this was probably one of those questions that had options like "A critical influence", "A major influence", "A little influence" and "No influence". (And possibly "A negative influence"). And adding everything except "No influence" could yield 87%, but then with nothing to compare it to, it's meaningless - adding a flashlight or toaster function to a phone might yield the same result. It screams "PR soundbite" to me.

The mobile wallet function I am a lot more negative about. I've heard this mantra of "the mobile phone can subsume your wallet" more times than I can remember. I've been to numerous conferences & briefings, all of which are conspicuous by their failure to mention benefits to the end user. I can see why operators might want this (a slice of lots of payments), I can see why phone manufacturers might want it (more stuff to put into phones to keep up ASPs), and I can certainly just about guess why the army of consultants and integrators might be in favour.

Anecdotal feedback I've had from some PayWave merchants in London has been that it's been a dismal failure. Nobody uses it. It's not used for the card-based version that's being pitched, let alone the phone-based option. Transport for London has let BarclayCard/Visa have free sales pitches in various stations to tout the thing, and the people manning them have looked like the loneliest people I've ever seen.

Then there's a huge raft of issues about usability, security, theft, loss, financial regulations, ability to churn and so forth. It's a complete non-starter - even the Japanese use of Felica has been lacklustre. I don't buy the hype about this type of m-payment at all - although I have no problems with other forms like SMS-based for certain groups (eg people without bank accounts).

I think there is more chance of your wallet subsuming your phone, than your phone subsuming your wallet. NFC might eventually get some applications that are useful. Advertising hoardings and other information services - yes, although probably quite niche. Electronic keys (for doors etc) - hmm, maybe, but not anything really critical (imagine "divorcing" your operator when you churn, and having to change the locks....). Travelcard - possibly, as long as the operators can be distintermediated.

But payments and credit cards? I'm going to stick my neck out and say no.

NFC? Meh.


raddedas said...

All participants were given free phones (because obviously no operator-subsidised phones in the UK have NFC) and also allegedly 200 pounds in free credit and some other incentives - I say allegedly because I can't track down the source for that any more.

That's the sort of thing which could positively influence a survey's results, one might think.

The only reason the RFID sticker wouldn't work as well as handset integration is that the handset can, optionally, enable a bunch of secondary functions like balance checks. But if you balance that against the involvement of the operator and their desire to be paid back for that NFC chip subsidy, suddenly a balance check is not so attractive...

Anonymous said...

Well, NFC is quite a few things. It is also a really simple way to use new and old services by touching them. It also allows phone-to-phone communication (e.g. cashless, immediate person-to-person payments, BT pairing, transferring of pictures, etc).

The RFID sticker wouldn't work. The advantage of NFC over regular cards is the fact that you can do all sorts of things with the card now that it is connected to the network - top up, install new credit cards with a phone call, connect to merchant services, etc.

The battery-down functionality is required by operators. In the future, the balance will be on your SIM card, so you can switch it from phone to phone. It is separate from the phone CPU, so it does work while in the middle of the call.

User benefits? The fact that you can turn off your card or protect it with a PIN code (which you can't with a regular Oyster card), which gives an extra feeling of security. Not that important on public transport - a lot more important on payments. Also, the user gets on-the-go access to his account data. Contactless payment also means that the payment instrument never needs to leave the users hands, and therefore is less susceptible to theft. Also, the entire chain from the user to the CC company will become more secure (which means less losses to the CC company => cheaper transactions to merchants => better availability of contactless CC payment).

Not to mention that all the other functionality, like discovering smart posters & P2P are rather hackable (in a good sense), which means that there are plenty of applications out there to be discovered...

In Austria, the NFC infra is based completely on the touching-of-tags part. People are paying parking fees, playing lotto, and doing all sorts of other things with NFC as well. UK seems to have chosen to grab Oyster as the first app. It remains to be seen what the real killer app is, but it probably is a different thing for different people.

(Yeah, and I agree, the press release is a bit fluffy. But in general, users *do* like NFC - it is rather intuitive for a mobile phone technology. But liking something is not the same thing as finding it so useful that you want to shell out cash for it... I like to go out and stand in the rain, but I wouldn't pay for someone to shower me with a garden hose. ;-)