After three years of trial and error, Visa is ready to go with near field communication (NFC) mobile phones running on 3G networks as an alternative to the traditional plastic card as a method of payment. This paves the way for mobile phones to become smart wallets, with the credit card as an integral part of the ecosystem.

There have been many attempts to create a mobile phone-based payment system. Naturally, the credit card players were not just going to sit idly by and watch getting eaten by some upstarts. The NFC strategy is Visa’s attempt to ensure it remains a player in the mobile payment space.
However,  it will take a while before the new service reaches critical mass, says Gordon Cooper, Visa Worldwide Pte Ltd regional head for mobile payment, innovations and new technology.

“It is a turning point for us. After three years of intensive trials, we’ve now reached a point where we can offer this as a wholly commercial service. However, does that mean that tomorrow we are going to have critical mass? The answer is no. It is going to take some time for that to happen because among other things, the world’s first commercially available 3G NFC phone, offered by Maxis via a partnership between Visa, Touch n’Go and Maybank Bhd, is also the only one at the moment,” he says.
Cooper adds that various parties, such as mobile phone manufacturers and merchants, need to work together to build a NFC ecosystem to ensure the service is widely accepted.

“We need more handset manufacturers to build NFC into their R&D roadmap. There is also a need to continue to expand payment channels,” he says.
He does not see cost as a deterrent to handset makers in making mobile phones NFC-enabled. “The incremental cost of including a NFC, which is a chip that serves as an antenna or modem, is believed to be as low as US$5.”

NFC is a short-range wireless technology that allows communication between devices at close range. As an open platform technology, NFC offers high levels of interoperability between devices and readers and is now the global standard for contactless mobile payments. It is already in use in Japan.
Each Visa payWave-enabled transaction uses a tiny computer chip that sends payment information to a contactless card reader via short-range radio frequency (RF) waves. The information includes an encrypted security code that is unique to each transaction.

There are two elements to NFC technology — a tag, which is inside the phone and can store data and transmit it wirelessly, and a reader, which can access the information stored on the tag. The appeal of contactless mobile payments for consumers is especially apparent in high-speed transaction environments like car parks, toll gates, bus and train terminals, cafés and fast-food outlets, newsagents, supermarkets and petrol stations.
Last month, Visa launched the world’s first commercial Visa mobile payments service for point-of-sale transactions using NFC technology. The service marks the first time consumers can purchase an NFC-enabled mobile device off the shelf and use that device to make Visa payWave-enabled transactions at the point-of-sale instead of using their payment card. With the service, Maybank Visa account holders just need to wave their NFC-enabled Nokia 6212 classic handset in front of a contactless reader to complete a secure Visa transaction in a matter of seconds.

Maybank Visa account holders can download their Visa payWave credit account details directly to their Nokia 6212 classic handset over the Maxis wireless network. Once the account has been personalised on the phone, account holders can then begin to make purchases at any one of the 1,800 merchant outlets that currently accept Visa payWave in Malaysia.
The contactless chip embedded in the device will also power a number of additional functions, including a contactless transit application that enables Malaysian commuters to pay for charges while using metropolitan transit systems, bus terminals, highway toll gates and car park facilities at more than 3,000 contactless payment touch points throughout Malaysia. Maxis has branded these mobile payment services under the name Maxis FastTap.

Visa says it is driving the convergence of two of the world’s most ubiquitous consumer products — 1.7 billion Visa cards and four billion mobile phones — by bringing its expertise in payments to the mobile industry. Over the past two years, Visa has worked closely with mobile network operators, handset manufacturers and financial institutions, merchants and technology provider to develop and commercialise mobile payments and related services.

“What we set out to do right from the beginning of this development is, we don’t want to just take the functionality of the plastic card and stick it on the phone. So we set ourselves a challenge to build a better mousetrap. There are four to five things that we did to build a better mousetrap,” says Cooper.

First, is the over-the-air issuance where customers can download card details onto the phone with just a click. “Another example of building a better mousetrap is user control. We want it to be quick and easy because we are competing with cash. In less than one second, the terminal and the phone will authenticate with one another and transaction is done in a matter of seconds,” Cooper explains.
He says consumers will also have the flexibility to lock their accounts on their phones with a passcode to give them peace of mind. In general, consumers rank security as the most important criterion when it involves payment via the Internet or other non-cash method. Although the communication range of NFC is limited to a few centimetres, NFC alone does not ensure secure communications. There are different possible types of attacks, such as eavesdropping, where the RF signal for the wireless data transfer can be picked up with an antenna by an attacker.

However, Cooper gives the assurance that in addition to the same consumer and merchant protections offered on all Visa transactions, Visa payWave-enabled products are designed to be read when in close proximity (two to six centimetres) to a contactless point-of-sale reader, and the card or device stays in the customer’s possession when used in a contactless transaction.

This article appeared in netv@lue2.0, the technology section of The Edge Malaysia, Issue 755, May 17 - 23 2009