By Jean-Noel Georges, Frost & Sullivan
 
Visa Europe and two major French banks (Banque Populaire and Credit Agicole) will perform a trial in two French cities, Nice and Strasbourg, this autumn. The trial will involve 500 customers, who will be able to make payments with their smartphones, thanks to a microSD card from DeviceFidelity.
 
Indeed, Visa is testing new ways for people to pay using mobile phones, so it does not miss new business opportunities.
 
Attractive solution
NFC is probably the most attractive payment solution on the horizon for coming years. According to Frost and Sullivan study, Decision Support Database – Electronics Industry, there will be 4,385.3 million mobile subscribers worldwide by the end of 2011. Therefore, a majority of financial institutions are trying to find a way to use the mobile phones as a payment device.
 
But as many new IT solutions, the value chain and business models are not well defined. New entrants, historical partners and players, as well as alliances are not able, at the moment, to find a correct revenue split for each of them.
 
In this context Visa will propose a MicroSD solution to allow customers to pay with their mobile by using a NFC application. Frost & Sullivan believes that this new offering is a positive signal for the NFC market.
 
Check it out
The selected customers will have the opportunity to experience the benefits of a mobile contactless payment application. One of the attractive points of this solution is that the Visa NFC application will allow users to have experience banking account management, to be able to follow their expenses and to check their balance.
 
According to Frost & Sullivan’s last NFC industry report, NFC – When Will Be the Real Start?, the total payment value for NFC will reach 111.19 € billions worldwide in 2015. The payment value is strongly linked with the smartphone penetration.

A few problems 
However, we see that NFC payment solutions that rely on microSD cards have several issues, which are related to customer experience. The fact to have to request a dedicated MicroSD card (with a possible extra cost?), an add-on for the iPhone, to have to install and activate the NFC application is a long and complex task for a majority of clients.
 
However, from a business standpoint, microSD cards make a lot of sense for banks and financial institutions, as they can avoid sharing revenue with mobile operators by using an external secure element.
 
The fact to not use a SIM centric solution will probably “pollute” the easy and clear payment message for clients. Without an embedded solution directly in the handset mobile, the pure NFC value added will not be reached.
 
Frost & Sullivan considers that until NFC-enabled handset mobile will be available massively, the NFC adoption will be very low. Customers need an easy to use solution, which means no add-on, no complex installations and no extra costs.
 
As for now, contactless payment cards are gaining a strong foothold in the payment industry. But in the long term, the potential of the NFC services market is huge and the payment industry will definitively push for that solution to capture low value transactions.
 
Jean-Noel Georges is a Global Program Director for ICT – Smart Card group at Frost & Sullivan.