MasterCard Sees New Service As a Big Step Toward Commercial NFC

MasterCard Inc. on Thursday announced a service it sees as a major step toward the ultimate commericialization of contactless payments via mobile phones. Intended primarily for the North American and European markets, the MasterCard Over-the-Air Provisioning Service is aimed at allowing any member issuer to readily personalize a handset for a customer much as the bank would personalize a payment card. Armed with card-account data, the phone could then be used to conduct transactions with any contactless reader through an interactive technology called near-field communication (NFC). While the new MasterCard service furthers the technical development of NFC-based payments, it does not address disagreements over transaction revenues and other business issues between payment card networks and wireless carriers that have hobbled the rollout of mobile payments. “We are pushing on that front as well, but [Thursday's announcement] does not address that particular pain point,” says James Anderson, vice president of product development at MasterCard's Mobile Center of Excellence. Also on Thursday, Visa Inc. announced a pilot in Canada involving over-the-air provisioning of Motorola handsets using the Rogers Wireless network and accounts held by Royal Bank of Canada, a Visa issuer. The phones are equipped with NFC chips for contactless payments on Visa's payWave platform. Gemalto NV, a maker of smart cards and SIMs for phones, is acting as the so-called Trusted Service Manager for the pilot, enabling the bank to wirelessly provision mobile phones with contactless software and card-account details. The new MasterCard service follows tests the company has conducted of the concept of downloading contactless applications and card-account data over wireless networks to users' phones. The first North American pilot took place in Dallas in 2006 and 2007 and was meant to lay the foundation for eventual mass issuance of NFC-enabled devices (Digital Transactions News, Nov. 2, 2006). MasterCard followed up with a pilot in Spokane earlier this year involving a service it said had been streamlined for ease of use by consumers (Digital Transactions News, Jan. 28). Anderson says the new service is intended to make it easier for issuing banks to make customers' cell phones behave like payment devices. “Provisioning and personalization [of handsets] are areas where banks are looking for solutions,” he says. At least one Trusted Service Manager, which Anderson won't name, is in the process of integrating its platform into the service to perform the over-the-air downloads through wireless operators. But he says it's too early for any issuers to have begun using the service. “We're talking to a number of issuers about the service and it's being well-received,” he says. “We wanted to get this out, make the issuers aware of it and make it a part of their project planning.” At the same time, though the service is now available to any MasterCard issuer, and though merchants in North America have been installing contactless readers, there are virtually no NFC-enabled handsets on the market yet. “There have been more NFC handsets bought by MasterCard than by anybody for any other purpose,” notes Anderson. Still, the service could represent one key to solving the longstanding puzzle of how to convert NFC into a commercial product. “This is a piece of the puzzle to commercialization, a very important piece,” says Anderson. The reason for that importance stems from the fact that more could be at stake than payment transactions. “[Over-the-air] provisioning of virtual cards will eventually open whole new models of real-time issuance, enabling consumers instant access to new lines of credit directly from mobile marketing solicitations,” says Nick Holland, an analyst at Aite Group, a Boston-based research firm, in an e-mail message to Digital Transactions News. MasterCard will charge a “small” setup fee, Anderson says, and then a fee for each provisioning of card data over the air. Fees, he says, are confidential between MasterCard and its issuers. Downloads will be handled by firms that the card industry has come to designate as Trusted Service Managers. These TSMs work with the wireless operators, Anderson says, freeing up MasterCard to work with card issuers. Downloads will include a user interface, or wallet, plus the MasterCard PayPass contactless application and the cardholder's account details. It's possible, Anderson says, that in the future the wallet and PayPass application could be loaded onto the phone before it's sold to the end user. Downloads will reside in a so-called secure area of the phone, typically either the SIM card, the chip that identifies the phone to the carrier network, or another chip that meets the card network's security standards.