The big news last month that Discover and Barclays would partner with AT&T, Verizon and T-Mobile to create a mobile proximity payments platform was the worst-kept secret in payments in the months before it was revealed. Bringing the hardware and software to the venture are little-known mobile wallet maker C-SAM, based in Chicago with strong ties to India, and France-based Gemalto, which acts as a Trusted Service Manager in a number of other similar ventures, according to sources with knowledge of the arrangement who declined to be named.
The outlines of the plan are barely sketches at this point, but analysts are evenly divided as to whether the yet-to-be-named joint venture will be a revolution in mobile NFC payments in the U.S., or fall flat in the face of too many competing interests and too little demand.
"I think the key element of this rumored deal is it involves both financial institutions and telecom, which in the U.S. market are both required," says Aaron McPherson of IDC Financial Insights. "Having both sides involved is really key, and probably what makes this most interesting."
"It presents one of the clearest paths to mobile proximity payments in the U.S.," says Red Gillen, noting, "if everything were to work, Discover's status rises massively."
The mainstream press hyped the joint venture as a threat to Mastercard and Visa's dominance of the credit card space, and their never-ending small scale pilots in the mobile and proximity payments market. Another read of the situation predicts that the players real competitive target in mobile payments may be Apple, and doesn't rule out the possibility that Mastercard and Visa could eventually become parties to the joint venture to create a platform with enough scale and reach to make mobile NFC payments a reality in the next few years.
"I think there's a general race in the industry to create a mobile commerce platform to compete with iTunes," McPherson says, noting that Nokia, Microsoft, Google and PayPal are all interested in the space. "I think we're going to see a lot more of this kind of maneuvering as people try to line up agreements and partnerships."
Of the many missing pieces to be played in the joint venture puzzle is how Barclays and Discover fit in. Clearly Discover is valuable for its merchant network, as well as its five million credit card customers. In the U.S. Barclaycard is a credit card, but low-value proximity payments tend to be more normally associated with pre-paid or debit transactions.
Filling out the picture somewhat is the news that C-SAM will create the mobile wallet application for the JV. The company has been working on mobile payments since the 1990s and holds more than 30 patents in this area, says company founder Sam Petroda, who declined to comment as to whether his company had any relationship to the joint venture. C-SAM's technology has been used in mobile commerce deployments around the world, including India-where Petroda is a special advisor to the Indian president-China, Singapore and Mexico.
For its part, Gemalto is said to be acting as the Trusted Service Manager, with its UICC chips providing the security services for the transactions, and allowing the user's card details to be securely loaded and stored on the phone's chip. Gemalto pitches portability as the value of its UICC chips. "When you have a credit card tied to your UICC, it really helps that you don't have to change credit cards every time you change your phone," says Jean-Louis Carrara, vp of business development for Gemalto's North American Telecommunications division.
Gemalto is also marketing nFlex, a bridge technology that uses stickers to add an antennae and contactless modem to phones that don't have an NFC chip built in. (Which is most phones these days.) "It's a bridge technolog, until the phones have caught up," he says.
A similar example to the kind of joint venture created by AT&T, Verizon, T-Mobile, Discover and Barclays can be found in France in PayezMobile, where seven banks and four operators, and Gemalto, rolled out an NFC payments platform in 2008.
Discover, Barclays, Visa, Mastercard, C-SAM and Gemalto all declined to comment on the joint venture or its components.
The big news last month was that Discover and Barclays would partner with AT&T, Verizon and T-Mobile to create a mobile proximity payments platform-code-named "Mercury"-and set for trials in Texas, Minnesota and Utah next year, according to reports by Bloomberg. The enabling software and hardware are rumored to come from little-known mobile wallet maker C-SAM, based in Chicago with ties to India, and France-based Gemalto, which acts as a Trusted Service Manager in a number of other similar ventures, according to sources with knowledge of the arrangement.
The outlines of the plan are sketches at this point, but analysts are divided as to whether the joint venture will launch a revolution in mobile NFC payments in the U.S., or fall flat in the face of too many competing interests and too little demand. "The key element of this rumored deal is it involves both financial institutions and telecom, which in the U.S. market are both required," says Aaron McPherson of IDC Financial Insights. Thus far, "It presents one of the clearest paths to mobile proximity payments in the U.S.," says Red Gillen, senior banking analyst at Celent, adding "if everything were to work, Discover's status rises massively."
The mainstream press hyped the venture as a threat to Mastercard and Visa's dominance, and indeed both responded with affirmations of their many mobile commerce pilots. But the joint venture's real target in mobile payments may be Apple-and some analysts don't rule out the possibility that Mastercard and Visa could eventually join the deal. "There's a general race in the industry to create a mobile commerce platform to compete with iTunes," McPherson says, noting that Nokia, Microsoft, Google and PayPal are interested in the space.
Of the missing pieces in the JV puzzle is how Barclays and Discover fit in. Discover is valuable for its merchant network, as well as its five million credit card customers. In the U.S. Barclaycard is a credit card, but low-value proximity payments tend to be associated with pre-paid or debit transactions.
Filling out the picture is the unconfirmed detail that C-SAM will create the mobile wallet application. The company has been working on mobile payments globally since the 1990s and holds more than 30 patents in this area, says company founder Sam Petroda. For its part, Gemalto is said to be acting as the Trusted Service Manager, with its UICC chips providing the security services for the transactions, and allowing the user's card details to be securely loaded and stored on the phone. Gemalto pitches portability as the value of UICC chips. "When you have a credit card tied to your UICC, it really helps that you don't have to change credit cards every time you change your phone," says Jean-Louis Carrara, vp of business development for Gemalto's North American Telecommunications division. Barclays, Discover, C-SAM, Gemalto and all the telecom players declined to comment on the existence, or terms, of the joint venture. Stay tuned.
