Google's New Mobile Wallet Nexus S Phone

Google is announcing tomorrow its new mobile phone wallet for the Nexus S NFC enabled phone. Google has paid for readers from Verifone to be installed in a number of merchant locations in New York City and San Francisco including Macy's, Subway and American Eagle Outfitters. Google has made agreements with Citi and MasterCard to handle the transactions. Only Google will have the key to the secure element in the NFC chip set.

This is exciting news for the few of us in the NFC universe. But it is time for a reality check.

The Samsung/Google Nexus S phone has gotten some pretty bad reviews so far and is not selling well. One of the major complaints has been that the software in the Nexus S requires that you connect to Google's Cloud services for many essential operations. This is problematic for many people including me. Lest we forget, it must be a good phone first, then a good smartphone second. The NFC part is irrelevant for most users. So there are not many Nexus S phones in use in New York or San Francisco. How is Google going to provide for a real trial of NFC without a mass adoption of their NFC phone?

Maybe the mobile division engineers at Google believe the hype from Forrester researchers claiming that 40 - 50 million NFC enabled phones will be sold in 2011. For anyone who believes that figure I have a great piece of land in Siberia for a summer cottage.

Yes, RIM will probably come out with an NFC phone at the end of this year. But how many people will buy it immediately? Maybe Google engineers think that RIM will give them access to the secure element as well in Blackberry phones. Probably not. Whoever has the key to the secure element in an NFC chip set controls the wallet. This will always limit the adoption and usage of NFC phones. If the NFC tag and secure element are in the SIM card then the mobile operator is going to control it. But NFC SIM cards and microSD cards are very problematic for numerous reasons as discussed in previous posts.

The turnover of mobile phones is about every 2 years in the US and Europe. Penetration of NFC enabled phones will take between 2-4 years for critical mass if there are at least 12 NFC phones available. By that time the Nexus S will be an antique. If companies keep creating unrealistic hype about NFC then it will lose all credibility by the time the technology is mature and ready for mass adoption and NFC chips could then become vintage as well.

As I have said so often, NFC as a transaction medium is coming and will do great things if rolled out properly without all the ridiculous hype and propaganda.

NFC, Step by Step Progress

VISA has announced their new electronic wallet will be rolled out this autumn. http://corporate.visa.com/media-center/press-releases/press1124.jsp

For some reason the press has taken hold of a very small part of this electronic wallet announcement, the NFC at the POS part, as the only important point of the press release. A Wired News writer added his own embellishments to reality in his article as well stating that one merely waves a phone near a point of sale terminal to conduct a transaction and that there are only a few phones available with NFC so far.

NFC does not work well if you only wave the device near a point of sale terminal, especially if it is embedded in a phone. You must tap the NFC reader, sometimes for a second or two. In the US there is only one NFC phone available, not a few. Google announced yesterday that their engineers were having a difficult time getting their Nexus S, NFC phone working with the NFC readers that they are planning to pay for and roll out in New York City and San Francisco. Apple also announced yesterday that they would not be incorporating NFC in the iPhone 5. (A smart move).

So, time for another reality check.

I suggest reading the VISA press release if this is an interesting topic for you. Then when you read all the flowery and over the top articles in the trade publications you will have a more realistic perspective on what is really being planned by VISA. I suggest going to the source as often as possible. Press releases are usually flowery enough without embellishment.

NFC as a transaction data transport medium is coming. But it is not coming as fast as the mobile operators or other invested parties would like you to believe. That is hype and propaganda. ISIS is backing down from its grandiose claims and blaming the Dodd Act. The fact is that NFC is not an easy technology to implement on a large scale and, especially, in mobile phones. Open loop systems also have their own problems for NFC as well. Trials will come and go. Some will be successful and some will not. NFC phone trials will be costly because end users in a trial will need to be supplied with NFC enabled mobile phones and merchants will need to be supplied with NFC readers. NFC microSD card trials are also problematic since the microSD cards are very picky about where they are placed in a phone and how they are tapped to the reader. They also do not provide the added value services necessary for a real and profitable NFC experience.

NFC will proliferate step by step. All divergent flavors of NFC will finally merge into one standard in the next year. More phones will become available in 2012 and 2013. Other NFC devices will make their appearance in the next 2 years as well. Users will start upgrading their phones to NFC phones in 2012 to 2015. Issues between banks, credit card companies, mobile operators, payment processors, handset manufacturers and others will be worked out. First in Asia, then in Europe and then in the US. Press releases, hype and propaganda will be replaced by real paid advertising by the major players in 2012 and 2013. One or two companies will roll out real NFC installations with all the great added values NFC brings to the market in 2012. But this will not be with SD cards, SIM cards or NFC phones. These genuine NFC installations will be the real motivator for NFC adoption. Hype is just propaganda and will not move the market in the long term. Reality will eventually settle in and the press will express their disillusionment as quickly and as strongly as they expressed their excitement.

Watch for those companies that are based on good solid understanding of the markets rather than those who try to surf every new wave of hype that appears.

Mainstream Media Jumps Onto the NFC Hype Wagon

I love this headline from Britain's Daily Mail:

"End of the credit card? With one swipe of an iPhone you'll be able to pay for your shopping"
(There is the rumor that the iPhone 5 will have NFC. That may be true, but that was also the rumor about the iPhone 4. Whether it is true or not does not seem to matter to this writer.)

Or from CNN:

"You can already use your iPhone, Droid or BlackBerry to buy a hotdog at the ballgame, buy your Starbucks latté, or give a friend a few bucks by bumping phones. But by the end of the year you may not even think twice about reaching for your phone to pay at the register instead of fumbling for your credit card."

My goodness. You would think that NFC was already in all the phones and POS terminals and that we are weeks away from paying at the POS with NFC enabled phones. I also enjoy the American writers that claim that all of this fantastic technology is already being used in here in Europe on a daily basis. I can tell you, as a European resident, it is not. Most Europeans are as clueless about contactless or NFC as are most Americans. What we do see here are Mifare cards for mass transit. There are only 2 phones available that have NFC. One is the new Google Nexus S and the other is a Nokia that is not very popular. And the NFC chip in the Nokia is not capable of working with NFC payment terminals.

It is very exciting to see the mobile operators and banks pushing this hype into the media. It means that they are serious about their commitment to mobile NFC payment. It is coming and it will change the way many people conduct transactions. But as I so often write, it is very important for those in the industry and investors interested in this industry to be discerning about hype vs reality.

But the dumbest comment I have read so far is this one:

"Ewan over at Mobile Industry Review says that “once Apple integrates NFC into their devices, it will be game over for every other provider in the marketplace.” He points out that it doesn’t matter if there are a good few billion people in the world who will never be able to afford an iPhone — they are outside the United States."

I do not need to repeat again my view of mobile payment reality. But I would like to add this footnote that came from a response I sent to someone just the other day.

There are a lot of companies jumping into this space.  There is a lot of money out there. There are a lot of potential customers and users out there. It is a big world. No one, two or even 50 companies are going to swallow the whole market. No one technology is going to be, ‘The One’. This is not The Highlander. There will be many winners in this market. There are golden opportunities for different technologies, different markets and different countries. Smart entrepreneurs and investors will have many opportunities to profit.

Electronic Transactions & Authentication: Google To Introduce New Android Phone with NFC

Electronic Transactions & Authentication: Google To Introduce New Android Phone with NFC: "Google CEO Eric Schmidt announced that the next Nexus One Android OS phone would include an NFC chip so that it could make mobile payments. ..."

Google CEO Announces New Android Phone With NFC

Google CEO Eric Schmidt announced that the next Nexus One Android OS phone would include an NFC chip so that it could make mobile payments. No details about the phone were announced.

This is exciting news for the NFC payment world and for Sentegra. At the same time, let's look at this realistically.

How many people will upgrade their phones to be able to make payments with them?
Will this NFC chip be peer to peer/read write or just a tag?
What will the phone look like and what will it's other killer functions be?
Will Google offer a new payment alternative to Visa, MasterCard and American Express?
Will this be a compelling reason for merchants to upgrade their terminals?
How could this be incorporated into a closed loop system?

These and other questions will be asked for months to come and then the realities will reveal themselves after the phone is released. You can be sure that Google will do a super job of marketing this phone. You can also be certain that Google is beating up the credit card organizations, banks and processors to get great rates on fees. But if they cannot get merchants onboard with this then it will fail.

Payment has always been the 'next' step for Google. They started with Google Check Out and now will add the mobile payment feature to this. Their strongest competitor in this play will be PayPal who is already working on getting PayPal into the physical point of sale.

If the phone is a secure payment device then you can be certain that Sentegra will add it to our hardware offerings.

It will be a very interesting play to see unfold.

Sentegra's Winning Formula

Sentegra develops and markets technology and services for Ultra-Secure™ mobile NFC/Contactless/RFID physical point of sale & online payment, identity authentication & electronic ticketing. The mobile payment space is crowded and noisy. Hundreds of players are offering dozens of solutions. There must be compelling reasons, including financial incentives, for each of the necessary participants in this market to make a new mobile transaction system successful. Sentegra’s mobile electronic wallet, meWallet™ System, has been designed and built to provide the reasons and incentives. What makes Sentegra different? Why will Sentegra succeed where others fail? Here are just a few of the reasons:

       Real Interactivity at the POS, (Point of Sale); two way communication with existing RFID (Radio Frequency Identification) readers, more than a vision, hype, creative video or nice graphic

       Biometric Security; fingerprint sensors on every meWallet™ device & fingerprint data stored only on the device

       Complete Ecosystem; Ultra-Secure™ cloud based software, handheld devices with embedded apps, api’s and services

       Patent pending technology; broad based patent applications filed in early 2000 on all Sentegra technologies  complement “first and best" to market strategy

       Cost Effective; the meWallet™ System is designed to generate more in revenues than in costs to implement and maintain

       Ten years of in depth market research and partner/customer relationship acquisition; throughout North America and Europe

       Merchant Buy-in; the compelling reason for merchants to upgrade their POS terminals to contactless payment

       Mobile Handsets; idGadget™devices, meWallet™ enabled mobile phones coming

       Works with or without mobile phones; avoids the problematic issues around mobile phone operators vs banks and lack of existing NFC enabled phones

       Simplicity; Nothing leaves our labs unless it is simple enough for Grandma to use

Watch the Sentegra website for news about roll-outs in 2011.