China Takes a Great Leap Forward in Mobile Payments
Posted on August 16, 2007
Filed Under China Business, Mobile, RFID |
According to China Tech News the new Nokia 6131i has gone on sale in Xiamen, Beijing, and Guangzhou. This marks the arrival of the mobile phone industry’s holy grail: the phone as a wallet.
The phone can be seen here.
What’s so special about China in all this?
China is not only the biggest mobile phone market, it’s also a big smartcard market. Most major cities have adopted some form of smartcards for transport payment. In Shanghai, for example, you can pay for parking with your transport card. In Hong Kong (separate system, yes, but one country) their transport card, the Octopus, has been a huge success.
The Chinese government is aggressive in adopting new technology, and is quite willing to work with businesses to make it happen. It’s not surprising to see China at the bleeding edge in this space.
What is it?
The phone is essentially two devices with a single interface bridging them. There is the phone part (based on the S40 platform, not Symbian - so by a really loose definition it’s not really a smartphone) and a wireless smartcard (an RFID chip).
The name for the smartcard/RFID chip technology is Near Field Communication (NFC, see wikipedia here).
The phone interface is capable of using both devices. A common example given are smartposters (smartphones? smartcards? Now smartposters?). You wave or touch your mobile against a contact point on a movie poster. The poster sends movie information to the NFC chip, the phone interface reads the data and then connects to the internet and downloads a trailer or movie times.
While Bluetooth has been around, and the new Nokia will still support it, it’s not well-suited to this kind of technology. Bluetooth is about connecting devices, the NFC technology is about identifying devices and interacting with them.
While you can “beam” information back and forth with Bluetooth, NFC-enabled devices communicate. They perform the same basic function of sending and receiving data, but these actions are just the mechanics of a specific purpose (i.e. paying for a taxi, opening a door, etc.).
Is it secure?
Good question. In looking into this there are certainly security vulnerabilities for mobile phones and smartcards have been hacked and cracked. But this is new, and there’s not a lot of research into this. In the demonstration video below, it shows a PIN code being entered to authorize a Visa transaction. That’s nice, but that doesn’t mean it’s secure. Hackers will look at exploiting the phone’s operating system, the NFC chip, and/or the communications process.
The book is still out, but if this technology spreads you can be sure people will look at ways to hack it.
What’s the point?
Its first major application is integration with Xiamen’s (not sure about BJ & GZ) transport card (E-Tong card). You’ll be able to wave your phone rather than your wallet or purse as you get on the bus or the ferry. Not exactly the most compelling scenario. But that’s just the beginning. Both Mastercard and Visa have participated in demonstrations showing the one of these phones substituting for a credit card.
Remember that NFC is about identity and interaction, it can be used for keys (doors, cars, etc.) and for purchases (transport, credit card), for example. And that’s just the beginning.
What’s the gee whiz?
The gee whiz factor is pretty limited today. Instead of using your travel card for transport you can now use your phone. Superficially this is not a big deal. In Hong Kong you can get cases for your mobile phone that has an Octopus card built into it (the Octopus card is Hong Kong’s transport card and it has been widely adopted for small purchases at shops). But this only physically colocates the devices - there is no bridging of data.
Via intomobile this youtube video captures some of the potential.
What’s the takeaway in all this?
This technology is going to take a while before it becomes widespread. It will require new sales terminals, agreements between retailers, mobile phone manufacturers, and mobile service providers. Not to mention getting people to buy and use the things.
Even at some point in the future where the world runs around buying things with phones, it’s not the kind of technology that transforms a society. It does underscore two things:
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- China is not only the largest market for mobile technology, it is quickly becoming the most innovative
- Nokia (the number 1 vendor for mobile phones in China) is dedicated to making that a reality
Nokia has always been smart about China. They understand that it’s not a single market (they have a tiered sales model, depending on the affluence of the region), they understand that there’s no other place like it (China is defined as its own region, on par with collective markets such as EMEA and North America), and they want to grow with the market, not to monopolize it (they’re one of the sponsors of the NFC Forum - building open standards to ensure interoperability).
Further Reading
Touch is a great source for all sorts of NFC hum-dingery gee-whizzery
The NFC Forum is dedicated to promotion, standards, and implementation of NFC solutions.
Thanks to Gary Sands for the original link.
Sorry for hackneyed post title, sometimes I just can’t resist.
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4 Responses to “China Takes a Great Leap Forward in Mobile Payments”
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That is cool, and scary… so to paraphrase the content and function of the phone above, the Smartcard essentially is linked to a credit account and can be used as a means of payment for myriad of things by physically having the appliance in hand….
I see this as more of a banking Grail than a consumer grail. Should the cash be handled by the phone company, they will have a great deal more to know about us than Bradbury ever imagined… The spending will be just the beginning. Think of the marketing lists they will be able to sell, and combining it with consumer profiling, the direct marketer will now have the ultimate marketing tool.
The video shows the guy interacting with MC and Visa with and without a PIN code. That will probably be configurable. Most credit/debit cards in China require the use of a PIN, so I assume for purchasing something with the phone you would have to do the same.
Good point, much easier to track your purchasing activities and profile you for marketing.
Just another example of the Chinese using Western technology to take away foreigners jobs in China…
Mr. Dobbs - With unemployment at an all time low, and the global economy in full swing… your American factory worker perspective of not wanting to train yourself for something more valuable is dually noted…
China makes what American Companies don’t want to pay for…b/c of a myriad of costs associated with USA manufacturing. Healthcare, Unions, R/D, Unions, Taxes. Its not a Labor issue, as Labor is generally about 3-7% of selling price.