Thursday, 22 March 2012

Near field communication: the way forward? - An interview with captains of industry

As the use of near field communication technology – a set of standards for smartphones and similar devices to establish radio communication with each other by touching or bringing then into close proximity - is on the rise around the world, near field communication (NFC) services can be seen more often than ever in daily life. Contactless payment systems are the most obvious examples, and many initiatives are being developed, such as NFC ticketing – using your cell phone to buy and store a ticket -  has, so far, not taken off yet. 

Although Transport for London announced last year it wishes to develop a ‘mobile Oyster card’, Germany, Austria and Latvia have run NFC ticketing system trials for public transport and Indian cinemas NFC based payments have bee implemented for buying box office tickets, NFC ticketing has not taken off on a mass scale yet. 

Michiel Willems speaks to five key players in the European industry. David Snow, Strategic Market & Competitor Intelligence Analyst at Juniper Research, Christoph Koessler, Product Manager at Austria Telekom, Steve Bryant, Head of Product at Orange UK, Simon Wingrove, Head of Ticketing at Everything Everywhere and Dave Busby, Consultant Transport Ticketing and Passenger Information Systems at Transport for Greater Manchester (TfGM) discuss the issues surrounding NFC ticketing and analyse how this concept could be turned into a success.

What’s holding the widespread adoption of NFC ticketing back?
Some say the technology, others a compelling business case for the service”, said Snow. While Koessler thinks it is the “past and current availability of NFC phones”. Bryant adds “handset penetration” to that and Wingrove explains it is because of “device penetration, reader infrastructure, and customer awareness - although 2012 will see significant advances made in these areas. Also the fragmented use of niche, interim, mobile  solutions such as barcodes and screen-based visual ticketing will hamper progress and confuse the customer.” 
“A lack of handsets, the lack of a business model and some inconsistency of standards, current solutions require to be specific per phone, as well as the fact that outside of Transport for London (TfL) the commercial application of smart ticketing is still in its infancy, add to this the customers view, this requires a vanguard project to act as catalyst to pull the market”, said Busby. “The main driver will come from the banking industry and this links in with transport through the EMV transport model.”
What’s the most important factor to allow the eco-system to work together to make NFC ticketing a success?
“In the short term, a single, common, customer experience”, said Wingrove. “In the long run that would be ticket interoperability. In addition, the [UK] Government needs to create the conditions to promote adoption of NFC ticketing so that transport operators are not penalised for investing in tech infrastructure with a mid-term payback profile.” Koessler falls in with Wingrove, adding that “for the customer it must be easy to participate in an NFC ticketing environment, such as handset purchase, subscribing to the service, installation of the NFC ticketing applet, ticket purchase and carrying out the mobile payment”. Snow says “integrating mobile payment services and players is vital”, while Bryant believes that NFC ticketing can only be a success if there is a “standardisation across mobile operators and transport companies to support contactless readers”. Busby agrees with that: “the answer to this question, enough handsets working with a common implementation and a proven business model.”
What’s the real business case for NFC Ticketing?
“This is an interesting one, benefits are ease of access, reduction in barriers”, said Busby. “Financially these are unknown, the potential is that if the phone is there to use a ticketing application cost be cost effective to apply, but it is still unknown what any overhead charges may apply from the phone operator.”
Koessler is convinced this is “the mobile sales channel, together with over-the-air ticker reception that allows for massive cost savings compared to classic sales channels”. Bryant thinks sees opportunities since NFC ticketing should mean “a reduction in costs for the transport operator and the ability to up sale additional services such as accommodation and restaurants. There could also be an opportunity for advertising on the wallet to promote services.” Snow thinks this question is difficult to answer since “this hinges on more than just facilitating ticketing, also on other mobile commerce services”.

 “The business justification for NFC needs to be determined on a case by case basis”, explains Wingrove. “There isn’t a one size fits all case that is appropriate across different types of deployment. What we can say though is that NFC has the ability, with the correct application, to deliver cost efficiencies, such as a reduction in ticket production and distribution costs, cash handling and so on, and revenue generation, such as through utilising the direct channel access to customer to deliver relevant and compelling CRM, promo and engagement.”
What time frame are we looking at for widespread adoption – is 2012 too soon?
“Depends on what is meant by widespread, but 2012 is too soon for widespread NFC-enabled phones”, Snow comments. Wingrove is more optimistic: “2012 will certainly be the year that contactless technology, with NFC forming an important component, becomes more prominent in the public consciousness – this will be driven by significant device marketing and network-based marketing as well as unique events such as the Olympics where contactless is expected to take a prominent position.” Bryant thinks 2012 will merely “be more of an opportunity for first movers and the development of the eco system, 2013 will be more important for wider adoption due to handset penetration”. Koessler comments that it all “depends on NFC handset penetration and the simple inter-working with current chipcards or mobile ticketing solutions. It will differ from market to market.” Busby wonders: “Widespread adoption in the UK? 2013, plus schemes need to deliver first with their contracted deliverables before NFC can be adopted.” 
How do the alternatives compare to NFC?
“Currently very well, barcodes are filling the gap”, said Snow. Koesler, however, is not so convinced: “Mobile alternatives, such as apps and barcodes, are not tamper-proof enough and plain chipcards do not allow for mobile ticket purchase/reception.” Steve Bryant also thinks “alternatives such as bar codes and electronic tickets will not operate in a multi-service environment and not support the migration of services from the physical wallet. EMV will have the limitation of not supporting travel cards such as monthly/weekly passes or season tickets in card emulation mode.”
Wingrove is also not convinced barcodes can compete: “Barcodes are not suitable for high throughput gated environments such as the tube as read times are too slow and unreliable and the customer needs to open an app on their device prior to each use.” He believes “there are multiple alternatives, each of which can perform a part or a single element of the NFC functional capability but none can deliver the complete suite”, Wingrove explains. “For example, NFC payment services have already been launched in the UK using fully certified, banking grade, secure processes and architecture. There have been no barcode services adopted by the major card issuers on account that it is a less secure technology. Each alternative technology may have a niche application but NFC is the only technology capable of providing a service that fits the key criteria across a range of services and providers.
Busby also refers to barcodes: “Alternatives, in the UK could be considered as current ITSO smartcards, disposable smartcards, bluetooth/barcodes and contactless EMV. All can co-reside, NFC will just be another media to use. Of these contactless options, EMV is an easy one because just about everyone with a contactless bankcard will be able to use this facility.”

Many thanks for your time.
The world in 2015?

Michiel Willems © 2012 CP Publishing Ltd. London, UK. Pictures: