Near field near, but mobeam now

When John Coghlan, president and CEO of Visa USA, starts a speech meant to rally support for a new initiative with some revisionist history about his company's humble beginnings as bold as this — “Visa started as a pilot program to free people from cash and checks” — it's hard to accept the rest of the speech as genuine. But there is nothing disingenuous about the potential of the mobile commerce market — nor about Visa's desire to drive it.

At the heart of this potentially huge market is the lowly cell phone, now the primary appendage to the human hand and ultimate accessory to the Coach purse. There is much more that happens behind the scenes in a mobile commerce application than the messaging exchanges going to and from the end device, but it is the device that brings the customer into the process.

So in January at the Consumer Electronic Show, Visa International announced its mobile platform initiative to lay the foundation for an end-to-end mobile payment solution and accelerate the broad adoption of it by enabling faster, easier pilot programs while establishing an ecosystem of partners.

To this latter end, Visa announced last month at CTIA Wireless 2007 that Ecrio and VeriSign would be two of its primary partners in developing the platform. Visa went so far as to make a strategic investment in Ecrio to help it develop its near field communications (NFC) technology, as well as its MoBeam mobile barcode redemption technology. Ecrio's MoBeam technology enables instant transmission of any bar code sequence from a handset directly to a scanner. The company's overall mission is to build the software platforms on mobile devices that support all kinds of applications, of which NFC could be one of the biggest.

“These new partnerships are just the beginning for us. We all sense that the opportunity in mobile payments is enormous, but it will take enormous collaboration,” Coghlan said.

Visa envisions a seamless service as good as, or perhaps better than, credit card payments. That's a tall order considering $3.2 trillion in goods and services were bought with Visa cards last year. Coghlan said two-thirds of all payment transactions are handled by Visa.

Although mobile payments have been around for a couple of years using infrared and other technologies, the new mobile payment infrastructure will have two new primary technologies. The first is NFC, which is a short-range wireless connectivity technology that enables simple and safe two-way interactions among electronic devices, according to the NFC Forum. The other comprises electronic coupon redemption and bar code transfer capabilities, technologies that have already taken off in Asia primarily in a proprietary way thanks to DoCoMo.

“They see the light in Japan and Korea,” said Nagesh Challa, founder and CEO of Ecrio. “It is already happening there. And the notion of an NFC-based mobile wallet will be one of the new things widely deployed in the next few years.”

The U.S. market may be more stubborn, given its propensity for standards. That why Visa said its platform will focus on creating one for the industry. “If our goal is to re-create the [success of] card payments, we will need a global standard to make sure using your mobile phone is as secure as your credit card,” Coghlan said.

While the NFC market awaits further development from companies such as Ecrio and point-of-sale equipment manufacturers, coupon redemption will pave the way. Challa said his company drew the interest of Visa because of its work developing platforms that would enable NFC, but after seeing its MoBeam technology, Visa decided it would make a good adjunct technology that could work today.

“MoBeam deals with bar codes, and almost anything can be captured as a bar code,” Challa said. He added that using mobile technology and bar code scanning techniques allows operators to attract the coveted 18- to 34-year-old demographic. Why? That demographic doesn't clip coupons, but the bet is they will use coupons from their mobile phones.

Besides, network operators are not that interested in NFC — at least not until they see a better business model. As it looks today, the operator could get cut out of the revenue sharing because the mobile device communicates directly with the point of sale or other mobile device. Not only are there no messages traversing the network, in a typical scenario, the operator is expected to subsidize the new technology developed in the handset.

“Operators aren't going to be willing to accept the cost of putting near field communications technology in the handset,” said John Keane, product manager of mobile commerce for VeriSign. “They will push back on the financial institutions for that.”

Whoever pays for it, ABI Research said this month that by 2012, some 292 million handsets — more 20% of the global mobile handset market — will ship with NFC capabilities.

It may be difficult to keep consumers from demanding the technology, however, because according to VeriSign's Keane, convenience counts. “To pull out a debit card and make a payment takes twenty-two seconds; using a mobile device takes three,” he said. He added that while it takes people 24 hours on average to notice they've lost their wallet or debit card, it only takes 17 minutes before someone recognizes their mobile device is missing.

And losing the mobile device is not as much of a hassle, either. The user simply calls his or her operator to have all the data deleted from the phone and re-imaged later when it is found or put onto a new device.

For now, VeriSign is sticking with coupons. It will be VeriSign's job to control the payments that cross the platform and combine secure payments with value-added promotions such as electronic coupons. Keane said VeriSign will also host fraud detection services, behavioral analysis around purchases and PIN management.

He said different world regions are at different places in the life cycle of mobile commerce, with Asia being in a growth phase and the U.S. in early adoption. Juniper Research said the technology will start taking off in 2009 and 2010 when it could be a $1 billion market.

VeriSign and the early partners in this initiative will likely gear up sooner. “There are 200 million mobile messages sent daily even without the proliferation on mobile payment technology,” Keane said.

These companies demonstrated their capabilities at CTIA Wireless 2007 and will be announcing trials worldwide during the year.

However, Keane cautioned that things must be handled delicately. “The last thing users want is a bunch of spam,” he said. “And the last thing companies want is to be shooting out tons of coupons.”