In the Financial Times article on Enabling Mobile Payments published on 11th January, Keith expresses his concern over security issues with NFC and suggests that cloud-based payments are the way forward.

“Even NFC is not seen as particularly secure, says Keith Brown, chief executive of paythru, which enables people to transfer funds via the cloud for applications such as parking charges.

The maximum budget limit of £100 for NFC transactions has not been increased in the three years since it was introduced.  This suggests not much progress has been made on security, says Mr Brown.

“By using the cloud, nothing is stored on the phone, making the system much more safe and secure. “People with authenticate themselves with biometrics such as fingerprint or voice identification, he says”

The full article is below. Alternatively click on this link to view the article in the FT. http://www.ft.com/cms/s/0/befd3b54-3bd6-11e1-bb39-00144feabdc0.html#axzz1j98fCqhL

Financial Times – Enabling mobile payments – 11/1/2012

Enabling mobile payments

By Jane Bird

Since mobile phones first became popular, technologists have been looking for ways to turn them into electronic wallets. The aim is to let customers leave cash and plastic cards at home by enabling them to use their handsets to buy anything from a cup of coffee to a new car.

Several technologies have emerged to facilitate payment, including simple text messaging, infra red, and radio frequency systems such as Bluetooth and near field communication (NFC).

The problem is uncertainty over which will predominate. As with video recording in the 1980s, the myriad companies keen to participate in mobile payments are worried about making the wrong technical choice. They don’t want to be a Betamax equivalent in a world of VHS.

“It is still early days, and the lack of services using existing standards is making mobile payments relatively slow to take off,” says Ted Bissell, managing consultant at PA Consulting in New York.

NFC, the most technically advanced option, stores relevant information on a chip and has been installed on some Android handsets for three years. Yet relatively few customers have used it because most service providers have not yet activated the chip for financial products.

Meanwhile, Apple’s iPhone does not include NFC, and the company remains publicly uncommitted as to whether it will be built into iPhones in future.

There has been some progress. Last year saw: the launch of Google’s Android-based eWallet and MasterCard’s PayPass in the US, while in the UK Starbucks trialled the Quick Tap PayPass service, and in France BNP Paribas and Orange introduced NFC mobile payments.

But with industry practices not yet established, it is unclear whether customers would easily be able to switch between services and suppliers. “The operators are still bickering about who will control the mobile wallet,” says Mr Bissell.

“Many customers may not want to be ‘locked in’ to one company or consortium. Legislators are looking at it, to the discomfort of participants such as mobile operators,” he adds.

One mobile payment technology based on well established standards is M-PESA, which is has proved hugely popular in Kenya and Tanzania. It enables people without bank accounts to settle bills and transfer funds via text message.

The funds are held in accounts managed by the mobile operator Safaricom. “Some 80 per cent of the population adopted M-PESA within five years of launch, and similar uptake is expected in Bangladesh, Pakistan and South America,” Mr Bissell says.

In these regions, there is a lack of banking infrastructure and text-based payments work well because they are more secure than cash. However, they are unlikely to be approved by regulators in more developed regions.

Even NFC is not seen as particularly secure, says Keith Brown, chief executive of Paythru, which enables people to transfer funds via the cloud for applications such as parking charges.

The maximum budget limit of £100 for NFC transactions has not been increased in the three years since it was introduced. This suggests not much progress has been made on security, says Mr Brown.

“By using the cloud, nothing is stored on the phone, making the system much more safe and secure.” People will authenticate themselves with biometrics such as fingerprint or voice identification, he says.

One reason why mobile payment has not taken off in the developed world is that there is no compelling reason to use it, says Benjamin Ensor, a director at Forrester Research. “There are no payments that you can only use mobile for. It lacks the sort of trigger that PayPal had on eBay.

The fact that there are always alternatives means people will use the system they are familiar with, Mr Ensor says.

He believes one of the biggest opportunities could be creating an easy way to pay small traders such as taxi drivers, music teachers or sports clubs, for which cheques are typically used. Companies focused on this market include US-based Square, and iZettle, headquartered in Sweden.

As for establishing a standard, Mr Ensor says there is no reason why only one technology should dominate or be the winner; there could be several approaches.

“The danger of financial institutions focusing too much on standards is in missing the boat. It increases the likelihood of an outsider such as Apple, Google or PayPal coming in and catalysing the business, leaving the banks flat-footed behind.”

Another impetus could be the ability to offer real time vouchers and coupons relevant to people’s location.

Technology is accelerating and unleashing creativity, Mr Ensor says. “In the past two years, we have seen a lot of change and we think there is quite a big chance for a disrupter to come in, perhaps using existing processes and networks in a new way that is faster, cheaper and better.”

The list of companies competing for a slice of what most believe will be a huge market, is formidable. It includes mobile operators, banks, handset manufacturers, operating system suppliers, e-commerce companies, retailers and social networks.

There need to be standards, says Mr Ensor. The last thing anybody wants is systems that are not interoperable.

“But whereas we only needed one way to record TV, VHS or Betamax, there is no reason why we shouldn’t have several standards to make mobile payments depending, for example, on whether we are buying petrol at the pump, paying a utilities bill, or shopping online.”