Tyfone Sees Its New Patent Advancing NFC on Memory Cards

In the wake of a patent award announced this week, a top Tyfone Inc. executive says the company expects to have what it calls a “scalable” platform built by the middle of next year for a contactless mobile-payments system based on Secure Digital memory cards that fit into handsets. “The patent allows us to accelerate the partnerships that are necessary” with memory-card manufacturers and so-called trusted service managers (TSMs), Siva Narendra, chief technology officer at Portland, Ore.-based Tyfone, tells Digital Transactions News. Narendra says at least some memory-card manufacturing agreements should be in place by March. That will a prerequisite for what he envisions as a platform capable of supporting hundreds of thousands, if not millions, of memory cards and the associated volume of data streams. Tyfone's new U.S. patent, No. 7,581,678, includes a number of fairly technical claims but in essence covers any device that can store financial information securely and transmit it through a card slot via a “time-varying magnetic field” to a point-of-sale reader or communicate with a host to receive the data over the air. An example of such a magnetic field is radio-frequency identification, the technology used in contactless card transactions. Tyfone's memory card design includes a secure element for electronic wallets and a near-field communication (NFC) chip for interactive links with both POS readers and other NFC-enabled devices. Narendra says he's received intelligence that other companies are working on similar designs, so the patent will now allow Tyfone to move aggressively. “The issuance of the patent has been an important coalescing aspect,” he says. Tyfone's technology, he says, will now be “defendable when we go into the market.” So far, Tyfone has run tests of its technology in Taiwan, China, and Singapore, and some 15 in the U.S., with a total of 27 financial institutions. Unlike the NFC model supported by most mobile operators, which depends on a secure element controlled by the phone's SIM card, Tyfone's approach relies on a removable element that is already in common use for storing photos and other tasks. Indeed, the company says about 70% of mobile phones in the U.S. have memory-card slots. And while many users aren't aware their phones have this capability, that number is dwindling, Narendra says. He says the so-called attach rate, the percentage of phones with slots that actually have cards in them, has grown in recent years from 5% to around 40%. Using a memory card, banks, merchants, and carriers could move forward with their own mobile-payments programs, Narendra says, leaving behind the squabbles over rents and fees that have plagued NFC development so far (Digital Transactions News, June 4, 2008). Scores of NFC pilots have been launched around the world, but few have gone commercial because of the standoff between banks and carriers over transaction fees and other issues. “This is a neutral solution,” Narendra says. “It creates a level playing field for financial institutions, merchants, or even carriers to manage their own destiny.” Tyfone's plan is to license its hardware to memory-card manufacturers and its back-end platform to TSMs, the entities that are emerging in mobile payments to manage electronic wallets and risk. As Narendra sees it, TSMs will likely charge so-called event fees for over-the-air downloads of financial details to phones. Banks will collect interchange on each transaction. And carriers will sell more SD cards, an item on which they already earn high margins, Narendra says. “They make more money selling memory cards than selling batteries and chargers,” he says. Some experts are reserving judgment for now. “The proof is not in the patent, but in whether [financial institutions] and others move forward with the technology,” says Bruce Cundiff, research director at Javelin Strategy & Research, Pleasanton, Calif., in an e-mail message. While the Tyfone solution could “break some of the logjam” holding up NFC rollouts, he says, it has “no guaranteed uptake.” It could also trigger what he calls “carrier retrenching,” or a movement among mobile operators to redouble their efforts behind a SIM-controlled NFC solution.