In an earlier article, I explain why Japan should NOT be considered the most advanced market for NFC because, although mobile Felica is widespread, this technology only allows the “card emulation” mode, and is missing out the “reader” and “Peer-to-Peer” modes.

Well, its seems that our Japanese friends are coming up with an answer that might well keep NFC away from their domestic playground.  They have indeed recently (and discretely) announced the launch of a new technology allowing the P2P transfer of data at an impressive 375mbps speed with no need to pair devices (which is a main drawback of Bluetooth).

“TransferJet is an extremely simple wireless technology which eliminates the need for complex setup and operation. For example, just touching a TV with a digital camera enables photos to be instantaneously displayed on the TV screen. Alternatively, downloaded music content can be easily enjoyed by touching a mobile phone to a portable audio player. TransferJet can be used as a Universal Interface among a wide variety of consumer electronics devices.”

Source: Sony Transferjet

The transferjet consortium (created on July 17th 2008) is composed of the Japanese electronic heavyweights and some other happy few (Sony, Canon, Eastman Kodak, Hitachi, KDDI, Kenwood, Matsushita (Panasonic), Nikon, Olympus, Pioneer, Samsung, Seiko Epson, Sony, Toshiba, JVC).

Looking at the details, they more or less propose the same usages as NFC (as NXP show in their demos). I guess the main difference, apart from speed (which actually depends on Bluetooth and not so much on NFC), is the fact that the Japanese have decided to totally separate the secure usages of mobile devices (mobile Felica), from the non-secure usages (transferjet) -although in both cases they are products of SONY.

The emergence of this technology is clearly, in my opinion, competing with the emergence of NFC. If it is intended for global commercial expansion, it is not going to help NFC much. Hopefully it is just a trick invented by Japanese companies to keep their domestic market from themselves. The fact that secure and non-secure transactions are using different technologies will probably give birth to different business models.

Direct quote from Eric Schmidt, CEO of Google, transcript from Jim Cramer’s Mad Money show on CNBC, August 13th:

- CRAMER: RIGHT NOW PREDOMINATELY DESKTOP, BUT COUNTRIES LIKE JAPAN, MOBILE COMPUTING. IS THAT GOING TO BE UP TO SNUFF AND CAN YOU MAKE AS MUCH MONEY IN MOBILE COMPUTING BECAUSE OF THE CELL PHONE COMPANIES?

- SCHMIDT: WE CAN MAKE MORE IN MOBILE THAN DESKTOP EVENTUALLY. THE REASON BECAUSE THE MOBILE COMPUTER IS MORE TARGETED. THINK ABOUT IT YOU CARRY YOUR PHONE EVERYWHERE IT KNOWS ALL ABOUT YOU. WE CAN DO A VERY, VERY TARGETED AD.OVER TIME, WE WILL MAKE MORE MONEY FOR MOBILE ADVERTISING.

Yesterday we had the pleasure to welcome in our Taipei office M. Boaz Zilberman, CA & Co-Founder of Fring. Before he left we asked him if we could make a short interview of himself :

Following is an article from Cellular-News.com, it’s very interesting and also very true. All the operators should read this article.

Much has been made of the market for mobile payments and ticketing services using NFC; but is there more to the market for NFC-enabled services than this? IMS Research’s latest reports on NFC ICs and Mobile Wallet Services see good potential for multiple new revenue streams, supported by a long trail of NFC-based applications but they are at risk if the operators are unable to agree a suitable business model with their new financial partners.

Research Director, John Devlin, commented on the situation saying, “Operators, who are under various competitive pressures, such as flat rate tariffs, and external forces such as the EU regulator’s agenda etc. So operators are looking for new revenue streams and see these services as a way of expanding their coverage. This is expected but a degree of perspective has to be maintained. Network operators have to look at the bigger picture, as banks and credit card companies are not going to just hand over a slice of the pie.”

Rightly so, contactless payments and ticketing are seen as the lead-off NFC-based services: they are easily understood by the consumer, have mass market appeal and can be showcased in highly concentrated urban areas. These initial deployments can be achieved without the wider costs of nationwide rollouts. IMS Research’s own forecasts show a combined total of 884 million users and growth of over 600% when combined with mobile banking. However it identified that part of the delay in launching these services is due to the extended negotiations in setting up the business models that must be agreed between the traditional market players such as the banks and credit card companies and the new entrants, i.e. the mobile operators.

Devlin continued, “The operators have to engage their prospective partners, bringing to the table added benefits and making the most of the mobile phone’s interactivity and connectivity. This will give the operators an edge and help them promote these services to their customers.” However, on a cautionary note he warned, “It should not be a case of how much money the operators can make from these initial services. If they try and skim too much off in service fees the market will stall before it gets off the ground, crippled by a lack of input from all stakeholders. Instead the operators should see these lead-off services as their way in, boosting the footprint of NFC handsets and educating their customers about the benefits. They will then be well placed to make money from a wider spread of exclusive applications, such as mobile coupons and mobile marketing using smart posters. These can be offered in partnership with flagship stores, movies, album launches and the tie-ins may be even more lucrative in the long term.”

There is a quite extended metro system in Barcelona, so I was expecting to see people swipe their contactless card to check-in/out. I was surprised to discover that you still need to buy paper tickets, with all the inconveniencies that it supposes (cost, visual pollution, long queues, mechanical problems of readers, etc.). I wonder what keeps them from switching to contactless, really. The metro system is 75 years old, so they are probably finishing the amortization cycle for machine-readable paper tickets. I however found a quite interesting contactless scheme in Barcelona: Bicing!

The idea of re-introducing bikes in European cities is making its way and outdoor advertising companies like JC Decaux (in Paris) or Clear Channel (in Barcelona) are surfing the wave, proposing instant bike rental services in exchange of advertising in the city (their usual business model). This was already the case in France in the city of Lyon and Toulouse, then, that I know of, came Barcelona and Paris (Velib). It is popular, it works and it uses a contactless card to check the bike out and check it back in when you’re done. To lend a bike one simply swipes the contactless RFID-card at a service station to be personally identified by the system, which then unlocks a bike from the support frame.

The service was launched in Barcelona in March 2007 and there are already 3,000 bikes available at 200 service points. The website is in Catalan and Spanish which means that it is not meant for tourists, but for the citizens of Barcelona. It is quite well done, with an always updated map of available bikes. The problem is that you do not always carry a portable PC with 3G access with you to check where you can get a bike…

This is yet one more example of the reason why NFC is bound for success. Imagine putting the bicing contactless cardlet on the secure element of your mobile. Just tap your mobile on the reader to identify yourself and free the bike. The best part comes with the online services: check availability map from your mobile, know the closest service station from your destination, meet with friends at a service station, etc. There are endless applications to imagine linked to Bicing on mobile. Can’t wait until Telefonica puts NFC phones on the market. Barcelona is definitely a city for Toro.

Observers keep scrutinizing the Japanese market to discover new mobile user behaviors, and they praise Mobile Felica as THE example to follow for the (future) expansion of NFC (Near-Field Communication). Indeed, figures of the penetration of the Osaifu-Keitai (Felica mobile wallet) are quite impressive with about 25 million phones equipped with the application. More impressive even when you look at the ecosystem that NTT-DoCoMo has been able to bring together around the Osaifu-Keitai. Virtually any corporation with a cash card (Edy, Quicpay, iD), a transportation card (Suica), or a loyalty card (JAL, ANA, etc.) is today using the Felica Networks. Truly a big success, and growing…

So, why this apparently provocative title? It technically works, the 3 MNOs (DoCoMo, Softbank and Au) have agreed to work together on it, users like it, merchants and banks have joined it (310,000 acceptance points!), and the business model seems juicy. Yet this system that Japan has put together is unlikely to create NFC copycats in other countries.

The main reason is that Mobile Felica has very limited functions compared with NFC. Indeed Mobile Felica is only using one communication mode called “card emulation mode” (the mobile phone acts as a contactless card). NFC, on the other hand can work on 3 different modes: “card emulation”, “reader mode” and “Peer-to-Peer mode”. Mobile Felica is nice, but the fact that it can only emulate cards has 2 implications: (1) the back end system is huge, and centralized at Felica Networks; (2) the possibilities for new types of services are very limited.

On the contrary, NFC allows all kinds of new services because the technology allows the user to interact with reality in multiple ways. Tons of games, social network applications, viral marketing campaigns, coupons, lottery, etc. can be imagined thanks to the other 2 modes (reader and Peer-to-Peer). Moreover, all kinds of non-secure applications (as opposed to payment, transportation or loyalty applications that require security) can be developed by anyone. No need to be a payment system or a large organization. And no need to necessarily pay the OTA services of Trusted Service Managers (TSM) to make use of this technology. TSMs will exist of course for secure application, but many other types of downloads will be possible.

NFC, as opposed to Mobile Felica, is a great opportunity to link the Internet to the real world. As a matter of fact, this technology should be considered as an extension of the Internet into reality, made possible thanks to the convergence of Mobile and Internet. Osaifu-Keitai is the first good implementation of mobile wallet, but NFC has the potential to be really much more than that. Observers are right to monitor user acceptance of the mobile wallet, because it will also be the first usage of NFC. But NFC will go much, much further than that.

We are happy to note that Toro with recently made its appearance in TechCrunch’s CrunchBase. CrunchBase is the free directory of technology companies, people, and investors that anyone can edit.

So Gemalto just announced their “payez mobile” initiative with five major French banks. In other words, Gemalto is becoming the de facto single TSM (Trusted Service Manager) for financial institutions in France (these five banks probably represent 90% of the retail banking market in France). This is good news for Gemalto, but also for the whole NFC ecosystem. And this, for two reasons.

The first reason is that banks need one centralized TSM to ensure that their NFC services can reach 100% of their customers, regardless of the mobile carrier, and in exactly the same conditions. If a bank has to rely on one mobile carrier to activate their services on mobile phones, they potentially cut themselves out of 2/3 of their customers. Moreover, by signing-up to a mobile banking service, the user would reduce his freedom to switch to another mobile operator as easily as today. In the case of one single centralized TSM, the portability of phone numbers and banking applications should be made possible and easy.

The second reason why we welcome this initiative is that it makes it much easier for the rest of the NFC ecosystem (especially on the service side) to move in one single direction. Coordination and “standards” are always good to develop a market.

The “payez mobile” initiative in France can actually be linked to the “NeuCom” initiative in Taiwan (see 2 posts below), where the Taiwanese government decided to allow/promote the emergence of one single “neutral” TSM for whole retail banking market (note: the efficiency of such a neutral TSM still needs to be proven). So whether it is a private initiative like in France, or a government initiative like in Taiwan, we are seeing that some mature markets are opting for centralizing the OTA secure activation of financial services in the hands of one single TSM. If “payez mobile” and “NeuCom” were to set best practices for TSM, we might well see the TSM market turn into a national bidding market (like e-passport for example).

NFC is still a geek thing, when it should definitely be triggering the imagination of thousands service companies and other small businesses: hotels, real estate companies, airlines, classified ads companies, rental companies, social networks, etc. It is a user thing! Not a geek thing! It is technology made transparent, peer-to-peer, a link between the Internet and reality, etc.

The situation is actually like that: no NFC market = no NFC phones. But the problem today is that: no NFC phones = no NFC market. So we are trapped in a chicken & egg situation. So the geeks are pushing the NFC technology, doing trials to show that NFC technically works, etc., but the Bottom-Up approach has reached its deadlock: the NFC phone.

The chicken & egg situation also exists for a Top-Down approach. Airlines, retailers, advertisers, hotel chains, game publishers, social networks, etc. do not see NFC phones available. As a consequence, when entrepreneurs pitch their great ideas for NFC services, they just don’t see it because they cannot see that this technology is a “user” thing, that the potential is just huge for them! They think: no NFC phones = no NFC market. And this is a real problem for the whole ecosystem to move on. NFC startups are stuck because there are no NFC phones on the market. Creativity and imagination are left dry.

So the deadlock is the availability of NFC phones… Which actually depends on the good will of handset makers (the Tier-1s, who can spend money on R&D) to develop and commercialize NFC phones. Among these handset makers is Nokia (40% market share globally), which are working on their 3rd generation of NFC phones (3220 NFC>6131 NFC>6212 NFC). But they keep delaying the launch of the phone, they are playing hard-to-get for engineering samples, and they are proposing a version that the market does not really want (the market (MNOs) wants a SIM centric NFC phone).

So, if we lay everything on the table, what do we have?
- Bottom-Up approach stopped by availability of
NCF phones;
- Top-Down approached stopped by the availability of NFC phones;
- Tier-1 handset manufacturers (e.g. Nokia) reluctant to release NFC phones in a timely manner, and with the good features.

So the question we could legitimately ask is: Are Handset manufacturers voluntarily slowing down the NFC market to better prepare to propose NFC services? Nokia for example is definitely switching its business model to providing services. Maybe they see in NFC the next big thing for them, and they want to make sure they’ll get a big chunk of it. That would make sense, wouldn’t it? Or maybe I am just being too imaginative…

So the NFC & International Micropayment Forum met for the second time in Taipei on June 24th 2008. Toro went there because, as a Taiwan-based company, it was kind of our duty to attend the event. Moreover, Collis was sponsoring the event and since they are one of our shareholders, we wanted to support them. So we dropped by to say “hi!” to the people we actually meet once or twice a month already. Nothing to be expected, really, from this NFC Forum. Or so we thought.

The 1st half of the day was boring as expected, because we already knew the viewpoints of everyone in the ecosystem. We however heard formally what we already knew non-formally: everyone, from SIM card makers, mobile operators, banks, chipset providers, etc. wants to become a TSM (Trusted Service Manager). Because that is where they think the money is for now. Big mess in perspective, indeed. But that’s Taiwan…

The 2nd half of the event, after a better-not-to-mention-it lunch buffet, started just like the 1st half, with a boring and conventional speech from the national carrier, Chunghwa Telecom. But, then, when the topic moved from “TSM” to “Certification and interoperability”, we discovered a new face, a new company in the ecosystem. These guys seem concerned about interoperability issues, and for that matter their value proposal to the market is to be… a “neutral” TSM that centralizes all the secure OTA downloads in the country! People started laughing until they realized these guys have government backing.

NeuCom is the name they coined in February 2008, when they setup the company in Taiwan. It seems that one of the well-known TSM, Venyon Oy, which had little if any market in Taiwan, decided to go directly to the Taiwanese regulator to change things big time. So in 10 minutes, we have passed from a situation where everyone wants to become a TSM and is investing in expensive OTA platforms, to a situation where the regulator is likely to kill the market by proposing a neutral government backed system (which means: cheaper than the private TSMs), and centralized to allow better interoperability.

So this NFC Forum was finally “the place to be” if you work in NFC services in Taiwan. I believe things will never be the same around here after this June 24th 2008. As a matter of fact, one of the largest bank in Taiwan, TaiShin, already announced that they would probably go with NeuCom. Congratulations to Greg Pote, Chairman of APSCA, who organized this event like a Shakespearian tragedy.