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In a move that could herald a time when card issuers will be able to mass produce specialized cards equipped with near-field communication (NFC) technology, Datacard Group on Monday announced it has taken an equity stake in DeviceFidelity Inc., a Richardson, Texas-based startup that makes micro Secure Digital (SD) cards that fit into mobile devices and enable NFC transactions.
DeviceFidelity has been working with Datacard for some time to make sure its technology works on the Minnetonka, Minn.-based company’s machines, which are used by a wide range of financial institutions and are capable of churning out high volumes of payment cards. Now, according to Amitaabh Malhotra, chief operating officer at DeviceFidelit, the startup and Datacard are looking at the ability to churn out add-on features such as personalization, branding, and packaging.
“It’s a natural extension” of what banks and other card issuers do now in producing conventional plastic cards, Malhotra says.
Neither party will disclose the extent of Datacard’s investment, which came as part of a funding round that included Dallas Venture Partners, a venture-capital firm that specializes in high tech. But Datacard clearly sees substantial potential in micro SD cards for NFC, and particularly in DeviceFidelity. “The micro SD solution is a very good fit for what Datacard is doing,” says Matt Stern, vice president of corporate development at Datacard.
Stern adds, though, that the DeviceFidelity move is just one part of an overarching mobile-payment strategy at Datacard. “This is our belief that micro SD has a role to play,” he says. “It’s not our intention to only work with this technology.”
DeviceFidelity garnered headlines in 2010 when it introduced a special sleeve that allows the Apple Inc. iPhone to accept a micro SD card, giving what was then the world’s most popular smart phone the potential to run NFC. The company has also participated in a handful of major bank trials and has expanded its support to the Android and BlackBerry operating systems. Last month, the company and Spring Card Systems LLC launched moneto, a mobile wallet based on micro SD technology.
Meanwhile, Datacard in September 2010 acquired Englewood, Colo.-based Dynamic Card Solutions, which had developed software that allows branches to personalize instant, one-off copies of micro SD cards for financial transactions. Its technology was an extension of its CardWizard software for instant-issuance of debit cards. With DCS in its fold, Datacard laid the ground work for both mass production and instant issuance of NFC-capable tokens, including micro SD cards. Meanwhile, headlines about Google Inc.’s Google Wallet, which launched in September, and Isis, an NFC-based joint venture backed by the major U.S. carriers and set for launch later this year, have raised NFC’s profile. “There’s beginning to some consumer awareness [of NFC], and large numbers of banks big and small are starting to explore how they’ll play in this space,” says Stern. “They have come to ask us about our capabilities.”
SD cards, which fit into a slot in most smart phones, are familiar to most consumers as a way to store digital media such as photos. But the technology can also incorporate the secure element and antenna inlay necessary to store card credentials and to run NFC-based contactless transactions. Both DeviceFidelity and a rival startup, Portland, Ore.-based Tyfone Inc., have promoted the technology as a fast way for banks to launch NFC, since, unlike embedded or SIM card-based NFC, it’s not confined to a limited range of handset models.
Neither Datacard nor DeviceFidelity will project demand for micro SD-based NFC, but Malhotra says the new collaboration positions his company for explosive growth. “The demand is huge,” he says.
