NFC is not an easy task, but mobile payments are already here

NFC has long been heralded as the holy grail for mobile. Paying with your phone is something that seems so futuristic and rightly so. The idea of getting rid of your wallet and just carrying a phone is tantalizing indeed, but most movements to kill the wallet have gone nowhere.

Google Wallet has been around for a while now, but it's yet to see much traction around the world, let alone in the USA. There's a few places you can pay, a few compatible handsets and a few different credit card companies that support it, but you have to really want it to actually bother getting it. 

That's where a New Zealand company is trying to change the world. In July 2008, Snapper launched a contactless payment card that allows commuters to "tag on" to their bus and pay almost magically. You just tap your card. There's a few of these payment systems around the world such as the Octopus cards in Hong Kong and Oyster cards in London. Snapper specifically allows you to tag onto the bus or train, pay for a taxi and pay for small goods (like food at a corner store). 

They've built a rich infrastructure that complements the existing credit card and debit card network. It's a great solution, and was impressive for the time, but Snapper have taken that one step further and are now allowing commuters to catch the bus and buy food/other small items with a tap of their phone. It's compatible with a wide range of devices, from the LG Optimus Net (a low-end Android phone) to the Samsung Galaxy SIII. All you need is a compatible SIM.

We sat down with Snapper CEO, Miki Szikszai, and talked about the road to NFC for the company, and it was pretty obvious from the beginning how difficult it actually is to build a payment platform on top of NFC in the mobile space right now. Miki told us that the company had to make a series of decisions that lead to compatibility with a large amount of handsets or risk being ringfenced by a single NFC technology.

A quick search online reveals how messy NFC standards already are. There are a number of different of implementations already in handsets and you might be surprised to learn that just because your phone supports "NFC" it doesn't actually support paying for things. 

Snapper's mobile payment platform requires a specific set of hardware support to work. First off, the user must have a compatible SIM card from a carrier. In New Zealand, these are called "touch2pay" SIM cards, which are modified SIM cards that allow a secure applet to be loaded onto them. Then, the NFC component itself must be present. After that, the Single Wire Protocol (which is still to be finalized by ETSI) allows the applet on the SIM card to communicate with the NFC chipset when payment or topup is requested. Finally, the Open SIM alliance API (Google is yet to support this with Wallet) allows the actual user facing Android application to communicate with the secure component on the SIM card.

It might sound overly complex, but Snapper built their mobile payment solution with security in mind. They didn't want rogue Android malware to be able to exploit their application, so made sure that the only thing that can communicate with the secure SIM is their official application. The problem is, though, a lot of handset manufacturers don't support the official standards still.

An example of this is the HTC One X. It ships with NFC onboard, and even support some standards, but unfortunately HTC chose not to implement both the Single Wire Protocol and the Open SIM alliance. This means that the device will never be able to use Snapper for mobile payments, and likely won't see any adoption on other solutions too. It's a similar story with many handsets in the market, but one that Snapper hopes to see improving soon when everyone finally joins forces. In the mean time, Snapper thought of this situation, and allows phones that don't have the right parts but do have NFC to download their application and top up the actual stored value cards by holding them to the back of the phone.

The iPhone 5 was widely rumored to have NFC, and many -- including Snapper -- had hoped it would, since the adoption of the device would be so huge it could make a huge impact in adoption of the technology around the world. Obviously, it didn't, but Miki told us that they've been pleasantly surprised with how many people have actually jumped on the bandwagon already despite Apple not being behind it. He says adoption is tracking far ahead of what they expected, and that many have been going out of their way to switch to a supported network and phone just to be able to have the convenience of one less card in their wallet. 

Even more so, Snapper has been impressed with how it's changed their users' actual total spend since adoption. They're seeing their mobile users spending 50% extra then they usually would, on goods that other users don't even usually buy. It's a win-win situation for them, and they're planning on expansion into even further areas. Miki labels NFC as a "cash killer" and said that people don't want to buy big items with NFC, it's too scary and insecure since there's no PIN and it's easy access to the users' money, but they're happy to use it to buy small things.

Their ability to pay for busses with a phone is a world first, and since the infrastructure and since there are already 375,000 Snapper cards already in circulation, it's an obvious next step for the company. They don't need to build the infrastructure since it's already there, and the company is piggybacking on Visa/Mastercard's plans to roll out NFC terminals to all stores nationwide so that soon enough, you'll be able to buy anything with your phone.

The fear of having credit cards attached directly to the phone is the big reason NFC hasn't been widely adopted yet, too. Users are scared of people in the street who could bump into them with a mobile terminal and steal money directly without them even knowing, and Miki vouches for how easy that really is. He says that it's a "trivial" task to capture user information from phones, and that the threat will become all too real if Google Wallet ever reaches critical mass. Snapper gets around this by being a stored value service, only storing what the users chooses to top up the card with.

Miki says he sees the technology as replacing cash at Coke dispensing machines, parking meters and even on arcade machines and they're working as fast as they can to revolutionize that space. It'll be the end of loose change, as far as they're concerned, and it makes sense for consumers. They're moving to support every single device they can, and are constantly looking to support new platforms too. The team has even chased Microsoft for Windows Phone 8, since both HTC and Nokia's offerings include both the standards  that are required, but has met refusal from the company to provide the SDK before public availability.


Image Credit: 3news.co.nz

I borrowed a Samsung Galaxy SIII from Snapper for a week to trial actually using NFC in the real world, and it's actually a strange feeling. Holding your phone against a reader on the bus to pay almost feels like something out of Minority Report. You just hold it against it and... it's paid. It's as simple as the card equivalent, and I can see the appeal immediately. As I catch the bus every day, I'll be switching to a compatible handset as soon as I can.

The merits are obvious, and Snapper is keen to bring their technology to as many people as they can. Paying with your phone might feel futuristic, and a little out of reach, but in some parts of the world it's already a reality. We're hopeful that mobile device manufacturers will begin working together on a common set of standards so that it's a more consistent experience and there's no need to worry about what handset you end up buying, but right now the landscape is messy.

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From what I can remember Oyster Cards don't use NFC, they are technically a contactless smart card which is why there isn't a smartphone app to replace the cards.

neo158 said,
From what I can remember Oyster Cards don't use NFC, they are technically a contactless smart card which is why there isn't a smartphone app to replace the cards.

They use an NFC style technology, it's just quicker than the kind of NFC in phones. If you've got a NFC capable phone, download NFC Tag Reader from the play store and tap your oyster card, it will read it (and show some encrypted data)

neo158 said,
From what I can remember Oyster Cards don't use NFC, they are technically a contactless smart card which is why there isn't a smartphone app to replace the cards.

The speed differences are very minor. in the order of 100 ms. The issue with Oyster is that the contactless technology used is based on proprietary technology called MiFare. SIM cards do not support MiFare out of the box. Snapper selected Java Card technology which is used on a few billion SIM cards issued around the world along with billions of bank cards. It is very much proven in the mobile and financial sectors so it was easy for us to build on.

Oyster won't be in smartphones until either new SIM cards are released or Oyster port the application onto Java. Porting is by far the fastest way. We know Oyster well - Charlie Monheim, previously Head of Oyster, was Snapper's first CEO and it was that experience with Oyster that led to some of our early decisions that got us to where we are today.

Miki
CEO
Snapper

9point6 said,

They use an NFC style technology, it's just quicker than the kind of NFC in phones. If you've got a NFC capable phone, download NFC Tag Reader from the play store and tap your oyster card, it will read it (and show some encrypted data)

Yeah I tried that, you can also read your ePassport with that same app and the passport image addon. Also works for my Uni ID Card.

mikiszikszai said,

The speed differences are very minor. in the order of 100 ms. The issue with Oyster is that the contactless technology used is based on proprietary technology called MiFare. SIM cards do not support MiFare out of the box. Snapper selected Java Card technology which is used on a few billion SIM cards issued around the world along with billions of bank cards. It is very much proven in the mobile and financial sectors so it was easy for us to build on.

Oyster won't be in smartphones until either new SIM cards are released or Oyster port the application onto Java. Porting is by far the fastest way. We know Oyster well - Charlie Monheim, previously Head of Oyster, was Snapper's first CEO and it was that experience with Oyster that led to some of our early decisions that got us to where we are today.

Miki
CEO
Snapper

Thanks for that, I know have more of an insight. What would be the chances of you guys creating an official Oyster app in conjunction with TfL?

neo158 said,

Thanks for that, I know have more of an insight. What would be the chances of you guys creating an official Oyster app in conjunction with TfL?

We'd love to help them out with that - probably time I dropped them a line to see what we can do here.

Nope. This kind of thing is too insecure for my liking. I would prefer to have some kind of pin verification option. Something that lets you tap it to start the transaction, and then have a num key pad come up on your phone. Enter the pin and tap it again to authorize the payment.

Edited by Ad Man Gamer, Oct 14 2012, 11:18am :

Ad Man Gamer said,
Nope. This kind of thing is too insecure for my liking. I would prefer to have some kind of pin verification option. Something that lets you tap it to start the transaction, and then have a num key pad come up on your phone. Enter the pin and tap it again to authorize the payment.

Which defeats the point of NFC being a convenient payment system, you might just as well put a card into a chip and pin reader and enter your pin.

Ad Man Gamer said,
Nope. This kind of thing is too insecure for my liking. I would prefer to have some kind of pin verification option. Something that lets you tap it to start the transaction, and then have a num key pad come up on your phone. Enter the pin and tap it again to authorize the payment.

Snapper is designed to replace cash, not your credit card. So it needs to be as fast as cash. It's why we have designed this as a stored value system as opposed to a credit based system. What we've found is that customers love the speed - in public transport situations speed is crucial. Your suggestion of a pin based system makes more sense in a credit card replacement scenario.

Miki
CEO
Snapper

The woman playing the guitar at the end. Oh the irony.. with no cash on hand she's not going to make any money unless she has an NFC powered guitar case

Here in Estonia we use our mobile to pay for stuff for quite many years. Simple stuff like paying for parking your car in X areas of the city, paying for bus tickets and so on. Not sure how safe that snapper thing would be though.
Also it seems like they are just another link in the chain collecting money for the service..

Touchless payments are already quite popular (restricted to $30-100 max payments, depending on provider) ... before I moved to the US anyway. People love to swipe.

I can't wait until people start hiding out in stores to catch the signal going through the air. These kind of things are hilarious and totally not safe. If it goes through the Air, people, it can be caught and decoded.

Enjoy the $15,000 worth of shoes you didn't buy.

Mike Frett said,
I can't wait until people start hiding out in stores to catch the signal going through the air. These kind of things are hilarious and totally not safe. If it goes through the Air, people, it can be caught and decoded.

Enjoy the $15,000 worth of shoes you didn't buy.

You missed the point of what N means in NFC... NEAR

Mike Frett said,
I can't wait until people start hiding out in stores to catch the signal going through the air. These kind of things are hilarious and totally not safe. If it goes through the Air, people, it can be caught and decoded.

Enjoy the $15,000 worth of shoes you didn't buy.

dotslash said,

You missed the point of what N means in NFC... NEAR

And don't these services usually limit the amount a transaction can use? Maximum of £/$/€ 20-30 ?

Mike Frett said,
I can't wait until people start hiding out in stores to catch the signal going through the air. These kind of things are hilarious and totally not safe. If it goes through the Air, people, it can be caught and decoded.

Enjoy the $15,000 worth of shoes you didn't buy.

From what I've read, NFC is limited to a distance of about 2cm. Signal interception shouldn't be an issue unless they hold a scanner over your phone while you make a transaction

Also, as Pow said, NFC payments are limited to ~20GBP in the UK, and I assume a similar limit elsewhere too, to prevent exactly this kind of problem. There's also (IIRC) a limit on how many times you can use it before you have to do a proper Chip+PIN transaction.

Majesticmerc said,
From what I've read, NFC is limited to a distance of about 2cm. Signal interception shouldn't be an issue unless they hold a scanner over your phone while you make a transaction .

All they have to do is pass a device across your pockets, just like a pickpocket slipping your wallet out without you even knowing. Even if they get £20 per swipe, it adds up with a few swipes.

Voice of Buddy Christ said,

All they have to do is pass a device across your pockets, just like a pickpocket slipping your wallet out without you even knowing. Even if they get £20 per swipe, it adds up with a few swipes.

Only if I'm dumb enough to leave NFC and the app running at the same time.

Voice of Buddy Christ said,

All they have to do is pass a device across your pockets, just like a pickpocket slipping your wallet out without you even knowing. Even if they get £20 per swipe, it adds up with a few swipes.

You realise that (at least on android), your phone has to be unlocked before an NFC interaction can occur. I don't know for sure, but I expect there is a confirmation button on the pay screen of these e-wallet solutions, too.

Mike Frett said,
I can't wait until people start hiding out in stores to catch the signal going through the air. These kind of things are hilarious and totally not safe. If it goes through the Air, people, it can be caught and decoded.

Enjoy the $15,000 worth of shoes you didn't buy.

Mike and others -

Snapper is very safe

1. It's a stored value card - a customer's exposure is limited to the amount they have loaded on the card. This is very different to a contactless credit card. Contactless credit cards, once stolen, can be used multiple times up to the per-transaction and daily limits.

2. Transactions are fully encrypted between a Snapper mobile and a Snapper reader uniquely for each transaction. You can't take a value from a Snapper card unless you have been provided with authorised hardware from Snapper.

We've proven this at scale in NZ and we inherit the extensive work undertaken on this system in Korea.

Miki
CEO
Snapper

People in Korea and Japan have been using the mobile phone to pay for public transportation, taxi fare, and at shopping malls and restaurants for more than 5 years without any issues. It is no different than carrying a credit card.

doh said,
People in Korea and Japan have been using the mobile phone to pay for public transportation, taxi fare, and at shopping malls and restaurants for more than 5 years without any issues. It is no different than carrying a credit card.

It's actually not quite the same thing!

francescob said,
Sliding the phone like that is basically begging for it to fall and break into a centillion of pieces

Sliding? You just place it against the thing.

francescob said,

I meant in the picture: look at how the fingers are positioned.

You hold the phone like that and tap your phone onto the reader just like Google Wallet. Go to YouTube and search for Google Wallet... the video explains to you more.

shozilla said,

You hold the phone like that and tap your phone onto the reader just like Google Wallet. Go to YouTube and search for Google Wallet... the video explains to you more.

I know that, what I meant is that you don't hold your phone like that to place it: look at the grip, it was slided into position. People who hold their phones like that shouldn't be allowed to have one