Subscribe

NFC back on local cards?

Bonnie Tubbs
By Bonnie Tubbs, ITWeb telecoms editor.
Johannesburg, 23 Jul 2014
Inclusion of NFC in the new iPhone may drive the adoption of the technology, and SA will be well on its way to seeing tap and pay transactions being part of daily life.
Inclusion of NFC in the new iPhone may drive the adoption of the technology, and SA will be well on its way to seeing tap and pay transactions being part of daily life.

The first near-field communication (NFC) trial in SA got under way about two-and-a-half years ago - an advent followed by short-lived hype and speculation around the contactless technology as a mobile payment method. This option looks set to be back on the cards.

Although the hype and hope has been dormant for some time, the industry is seeing rumblings again, with activity in the mobile payments space hotting up and indications that one of the biggest high-end smartphone players, Apple, will finally include NFC when it launches its latest generation iPhone, in September.

Net1 Mobile Solutions (N1MS) says the local market was not entirely ready to embrace new payment technology three years ago, but there have been "massive changes" since.

"You have to wait for the wave to hit sometimes - and we believe it is about to," says Philip Belamant, the company's MD.

Most of the major smartphones on the local market have already had NFC capability for some time, and N1MS says if Apple fills in the missing piece, SA will be a step closer to seeing NFC implementation by retailers - and uptake by consumers.

Chicken and egg

Belamant says while there are a number of elements that would have to fall in place first, an NFC move by Apple would create impetus.

"One would need to see a few things happen [for NFC to take hold]," he notes.

1. Mobile devices need to support NFC.
2. Devices' operating system manufacturers need to provide an open application programming interface (API) to allow developers to integrate.
3. An app on devices needs to be able to communicate securely through NFC (using the open API) using protocols that are accepted by MasterCard and/or Visa, such as PayPass and/or PayWave.
4. The said app needs to be funded somehow, and in SA this would mean the owner would need to FICA-certify (Financial Intelligence Centre Act) users - or at least GN6-certify them.
5. An acquiring point-of-sale (POS) device that supports NFC would be needed, and the acquiring banks would need to upgrade all of their POS systems to support the same.

In short, says Belamant, SA may not be ready for NFC right now, predominantly due to missing factors on the acquiring side, but it is no longer a distant reality. "Right now, we are perhaps missing both the chicken and the egg. If Apple supports NFC with its new device, we have at least solved the chicken issue (as all major handset players will support the tech).

What is NFC?

NFC is a set of standards for inductive coupled devices to establish radio communication with each other by touching them together or bringing them into proximity, usually no more than a few centimetres.

"We then need to work on POS infrastructure to allow acceptance of NFC - [after which] it will be up to whomever can provide a wallet application (in line with SA's banking rules and regulations) with NFC capability to make the magic happen."

As it stands, Net1's VCPay application has PayPass approval and would be able to integrate into an NFC ecosystem, he says.

"The moral of this story is we believe Apple's support for NFC will definitely make acquiring banks stand up and listen, and may help drive the adoption of NFC into their POS devices. If this happens, then we are well on our way to seeing tap and pay transactions become part of day-to-day life."

Not so clear

However, MD of World Wide Worx Arthur Goldstuck says new technology in Apple phones at this stage have a relatively minor impact on the local market, and it cannot be assumed that enthusiasm for it will translate into activity in SA.

"World Wide Worx has argued for a number of years that NFC is not a golden bullet for mobile payments, characterising it as a Captain Picard-style 'make-it-so' solution that the mobile industry has tried to impose on the payments industry.

"The reasons it hasn't happened were obvious back then, and they remain obvious: it is not a seamless solution, and there isn't a standard implementation. NFC was designed as a communications solution, not a payment solution, and the industry is trying to shoehorn it into a payments role."

Derek Colfer, head of mobile innovation at Visa, previously said 2014 would see the rise of mobile payments - and competition between plastic and smartphones.

Earlier this year, Visa launched the first commercial tap and pay network in Canada, allowing retailers and consumers to conduct in-store transactions via mobile devices. Derick Roberts, CEO of mobile communications specialist, TruTeq Devices, says that, with 63% of Canadians already owning smartphones in 2013, 80% will be able to take part in NFC communications by 2016.

Fragmentation

Ed Carrell, chief innovation officer at Barclays Africa says Absa sees "great opportunity" for NFC in SA's future.

Absa - SA's largest bank by customer number - currently provides contactless NFC acquiring services (tap points) to two transport networks in SA, namely ReaVaya (City of Johannesburg) and MyCiti (City of Cape Town). The bank is also in the early stages of building the contactless acquiring network for the City of Tshwane's public transport network plan, Areyeng.

Carrell notes, however, that the current fragmentation between stakeholders causes some discomfort about NFC on mobile phones as an immediate reliable tool for customers. "There are still no guarantees that mobile phone manufacturers will maintain the contactless standards that are required to make secure payments possible."

Regardless, he says, Absa is hopeful that this will change.

Share