While European credit card vendors push for chip and PIN technologies and American credit card companies push for ‘proximity payment’ solutions, mobile manufacturers, network operators and software companies can’t wait to unleash the gold that SIM cards in phones represent. The aim is to make mobile devices the new credit cards.
At a Wireless Wednesday meeting this week in Dublin, Gerry Looby, chief technology officer at CardBase Technologies, described the movement towards SIMplicity of credit card payments. “The high fraud rates of magnetic strip credit cards have pushed banks in this direction. However, both the US and Europe are going in different directions and this could undermine universal accessibility currently enjoyed by most credit card holders,” he said.
“But there is a movement towards convergence using mobile devices that might bridge this divergence. The Mobey Forum is a global, financial industry-driven forum, whose mission is to encourage the use of mobile technology in financial services,” Looby explained. The membership encompasses leading financial institutions such as Visa and MasterCard and mobile terminal manufacturers including Ericsson and Nokia as well as other companies that want to be actively involved in creating the future of mobile financial services.
Looby continued: “The biggest issue is translating this into local transactions, creating a platform that merchants can trust and that customers can trust. It’s basically a clash between the physical and virtual worlds.”
At present, when most people make a purchase on a credit card, often they hand it over to a complete stranger who often disappears into another room to swipe the card. A recent phenomenon known as “skimming” enables a fraudster to copy the unique identifying information from the card’s magnetic strip and email it to a colleague on the other side of the city, country or world, who would then proceed to manufacture a replica card or use the information on the card for illicit internet purchases. This has left banks, merchants and customers red-faced and many a disputed bill unpaid. It is also costing the markets millions.
In Europe, Europay, MasterCard and Visa (EMV) have joined forced to stem the tide of fraud and restore customer trust by implementing chip and PIN solutions, whereby smart cards with SIM (subscriber identity module) technology would replace the existing magnetic strip cards and require card holders to input a personal identification number (PIN) at the point of sale. The deadline for the complete implementation of chip and PIN technology within Europe is 1 January 2005. In Ireland chip and PIN credit cards are already available from Ulster Bank and MBNA.
However, in the US the credit card companies are going in a different direction, opting instead for proximity payment technology, or contactless payment, whereby the proximity of the credit card to the point-of-sale system is enough to secure a payment without allowing a store clerk any contact with the credit card. Analysts fear that this disparity might result in a world where US or European credit card systems might not work together, creating a crisis for business travellers and tourists, not to mention merchants and banks.
Taking advantage of this potential confusion are the mobile application developers, handset manufacturers and mobile networks who believe that the SIM card that occupies every mobile phone, identifies every unique user and is capable of securely storing private information, could effectively marry seamlessly with chip and PIN technologies. This in effect could mean that mobile devices could be used to carry credit card payments in both chip and PIN transactions as well as proximity payments. In Japan, SIM cards contained in mobile phones with infrared technology are being used to scan into a point-of-sale reader and a credit card slip is generated and signed.
Tim Cawsey, marketing and communications manager at Gemplus said that while the SIM card has been pretty much the enabler of the mobile rollout of recent years for mobile network operators, these operators are facing ARPU (average revenue per user) erosion as voice gives way to data. “They are looking to making the SIM card the enabler for the unique experience that a user gets once they put card into the phone, in that way it will control the look and feel of the device when they switch it on,” he said.
“However, this has created a conflict with the handset manufacturers, particularly Nokia with 53pc of the world handset market, who want users to know their own look and feel. By making greater use of the SIM, by such things as mobile payments, operators will get a better control of the customer. The only thing that stands in the way is the device manufacturers,” Cawsey explained.
Dr John Whelan of Irish mobile software firm Alatto, which develops software for mobile gambling and ringtone downloads, described the mobile triangle between network operators, handset makers and application developers. “In the UK ringtones have begun to outsell the sales of CD singles, with some €365m being spent a year. To say that the SIM card within phones cannot be used as a mechanism for these kind of virtual purchases would be wrong. SIM cards are fundamental, but right now they sit between the phone owner and the mobile network operators.
“SIM cards will prove important for eventual physical purchases using mobile phones at the point of sale and that’s why mobile operators are falling over themselves to get a piece of the action. Unfortunately, the device manufacturers, while they want to see better uses for their phones, are unwilling to allow the mobile network operator to control the user interface on their devices and this is something that may hold up the move towards credit card payments in stores over mobile devices,” Whelan concluded.
By John Kennedy