By Greg Coogan
Morpho Cards USA
A long time ago, when analog phones roamed the earth, there was a troubling problem called cloning. Cloning occurred when a hacker captured a phone's unique identifiers and programmed them into a second phone that then impersonated the first phone to the network. That allowed the phone to place free calls.
Mobile network operators hated cloning, of course, because they ended up eating those charges. The answer was the SIM card — a small chip that contained the network identifiers. It was much more difficult to replicate and was an example of a secure element in the network, combining encryption and limited access to the information.
The SIM card functioned as a kind of castle that required keys to use, and it was protected from outside intrusion. With a combination of hardware and software, the cloning problem was solved.
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The secure element via SIM remains at the heart of most phones today, and it is about to be at the heart of mobile payments via near field communications. NFC uses a special radio in conjunction with a secure element to create a quick and effective way to pay.
But which secure element will be the one that dominates?
Here are the contenders:
- SD card — A memory card that can be inserted in some phones, complete with its own SE/NFC capabilities.
- External device — In this case, a sticker or a phone sleeve provides the SE/NFC.
- Embedded device — Phones such as the Samsung Galaxy, in which the SE/NFC is built into the device.
- Cloud — A software-only approach that takes the SE completely off of the device. Using a phone's camera and QR codes, the authentication and authorization take place off the phone.
- SIM — A combination of the already popular form factor with the added functionality of NFC.
Each of these methods for storing the secure element have their champions, and it is likely that all of them will find their way into the market in some form, as the entire mobile payments world is still quite fragmented and likely to remain so in the near term.
Here is what I think will happen as these form factors battle for dominance.
- Bridge solutions (SD card, external devices) — These will play a part in the early NFC deployments, but gradually disappear as legacy devices are replaced with devices designed to support mobile payments.
- Cloud solutions — While a software-only approach seems to be the fastest and cheapest method to get mobile payments moving now, it's not practical in transportation scenarios, and won't work with a dead battery, something that customers will expect. So it won't be the dominant way to pay with mobile.
- Hardware-based solutions (SIM, embedded device) — These will be the approaches that win the day. Specialized NFC chips like those found in a few phones today will be replaced by SIM-based solutions as mobile network operators look to maintain control over payments and avoid the dumb-pipe trap.
As it stands today, SIMs and embedded devices are different things, which can lead to the puzzling scenario of having two NFC devices in a single phone. But one school of thought would like to make this distinction disappear and move toward embedded SIMs, which would be built into the phone. The embedded SIMs will be updated securely when phones are provisioned, which offers simplicity from a logistics perspective.
The other camp has the removable SIM retain its place of prominence, taking on additional tasks beyond just identifying customers to the mobile network, including payment, identification and more. This approach offers end users more control of their electronic identification, as it is portable.
It is unclear which approach will win, but it is clear that there are compelling arguments for both approaches.
Many people are working to make this future a reality today, as standard institutions, MNOs, issuers and others look to stake their claims in the future of payments. Trials will help all of them adopt best practices and assure that the solutions are ready as mobile payments evolve into the preferred way to pay.
Greg Coogan is the Field Marketing Lead for Morpho Cards USA, a provider of secure identity solutions. He has worked on mobile payments since 2005.
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