“Since the beginning of a barter economy on our planet, personal Wallet seems to have remained stuck in the leather and bone ages, literally. I believe: Wallet is the next frontier for Enterprise and the next killer App for Mobile. Digitization of wallet is inevitable. Since Near Field Communication (NFC) radio offers unique properties that are apt for tap-to-something gestures, NFC holds the potential to emerge as defacto interface where ever device-to-device transactions will be involved… it has happened in Japan through an NFC precursor called “Felica”, and it could surely happen in US…”
Earlier this week, I was invited to speak on the “Role of NFC in the Future of Digital Wallet” at the IEEE Consumer Electronics Society, Santa Clara. Co-incidentally throughout the week, Intel colleagues & Industry experts attending Mobile World Congress (MWC) in Barcelona also reported how NFC and Digital Wallet surfaced as a key theme this year. Cross Intel opinions on this topic will help in an inclusive analysis, hence this post.
The problem statement that a modern wallet posits was beautifully captured in Seinfeld (hilarious clip, runs about 3.5 Mins).
Japanese looked at the wallet differently - truly user experience based approach (good animation, runs about 3.5mins); fairly good success story within Japan, but debatable outside of Japan.
Common daily life affairs that require one to reach out for one’s wallet and transactions that involve some notion of data security, authentication and privacy, are digitized in Japanese phones. The digital wallet App is called “Osaifu-Keitai”. >65Million Japanese regularly use Osaifu-Keitai provisioned phones for variety of services such as ticketing/reservations/shopping in transit, credit/debit/purchases/returns at retail counters, loyalty/rewards/mileage at clubs, coupons/deals/eCash at vending, contactless Access/ID to buildings and machines, and online shopping, income tax returns, eSignatures, etc. Not many incidences of hacking or fraud have been reported in Japan, but that does not truly reflect on the robustness of this technology. Despite a very successful run since 2004 with >600 Million plastic Felica cards issued so far and >150 Million Phones provisioned with variety of Osaifu-Keitai services, once Felica started reaching to the western world, security turned out to be a hole in this technology! Probably an interesting testimonial to how modern societies think and live even today!
Major global players such as EMVCo, Google, ISIS, Merchant Customer Exchange, Paypal etc. are now trying to figure out how to replicate the Osaifu-Keitai success at a global scale. This is where Intel has a very important role to play, because through our bits processing Silicon, we are the suppliers of one of the most important horizontal ingredients in the continuum of inter-transacting devices.
Technically, a digital wallet is basically a secured logical container (akin to the leather pouch in one’s pocket), filled with bits that represent money, cards, IDs and coupons etc. Wallet can reside in battery-less plastic smartcards, or in battery powered handsets or in PC/Tablets or in the cloud. Intel is building a scalable architecture to keep the user experience consistent across devices. Points of Sale or Service (POS), reading/writing to the digital wallet can also be of several types: A) Retail POS - you go it, e.g. Fry’s Cash Counter, or a vending machine, or a cinema ticket window. B) Mobile POS – it comes to you, e.g. the old credit card imprinter in Taxi, or a skymall cart in the airplane, or a sales person with a phone or tablet in their hands in an Apple Store. C) Virtual POS – it appears on your screen, on behalf of the merchant, e.g. when you shop online at Amazon.com, or file an electronic Tax Return, or move money online in your Bank accounts. Whenever a POS device needs to exchange data with a device provisioned with digital wallet, NFC (now a globally standardized derivative of Felica like technologies) comes handy. It is estimated that by 2015, worldwide POS to Wallet transactions will exceed >500 Billion, and being available in >150M phones by then, NFC could be a transport of choice in many of those transactions.
Done right, Digital Wallet has the potential to disrupt the legacy payment networks and role of traditional banking in commerce. It’s already started to happen. I find it almost amusing to extrapolate how democratization of wallet to a peer-to-peer level could potentially lead our society full circle back to the days of simple barter – probably with no-man-in-the middle! And this time perhaps with better standardized measures. Writing is on the wall, Wallet is the next killer App for mobile, it’s technically ripe to profoundly impact our lives, but ‘man-in-the-middle’ is the hurdle!