Analyst Angle: Banks and interoperability delay NFC mass adoption in Brazil


Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.

It is certain that Near Field Communications (NFC) will become the standard for the replacement of credit cards, car keys, cards used in public transport, cards used for access control, and other personal things we carry. However, the deployment of NFC in Brazil faces several challenges to operate in a comprehensive and functional way, thus creating value for the user.

The main challenges are the creation of proper regulations by the Central Bank, Anatel and other government entities; the high cost NFC-enabled mobile devices; the population’s low tech-literacy in terms of electronic devices (which is essential to the uptake of electronic services); and the large number of stakeholders and the lack of interoperability among them.

The most important of these challenges is the large number of stakeholders that need to be involved and aligned in the process of implementing a new mobile payment system, hindering the deployment process, as well as the interoperability among these stakeholders, especially between banks and carriers. Currently, isolated initiatives between banks and carriers limit bank clients to using the mobile carriers that are in a partnership with the bank. This prevents interoperability and thus removes the perceived value of using the mobile payment system for customers, who may find it easier use a normal card instead of NFC.

The next challenge that must be faced is the definition of the NFC technology standard that should be adopted in Brazil: NFC in devices, NFC in batteries, NFC in memory slots and NFC in SIM cards. In relation to this issue, the Global System for Mobile Communications Association (GSMA) is trying to align carriers and the rest of the stakeholders involved toward the SIM card standard (the smartest choice), while the major smart device manufacturersSamsung, Nokia, among othersgenerally prefer the NFC RFID’s embedded into their devices.

So far in Brazil, there is no dominant NFC standard nor are there interoperable services.

However, there have been NFC technology trials, such as the GSMA/Rio card project for public transport in Rio de Janeiro, and the partnership between one of the largest Brazilian banks, Bradesco, and mobile carrier Claro (the Brazilian subsidiary of América Móvil) for mobile payment services.

GSMA is currently advising and assisting in the planning process for NFC implementation in Rio de Janero’s public transportation system and a similar initiative is underway in Santiago-Chile. This model can be applied to other cities in Latin America as well. SP Trans, the public transportation system of São Paulo, is also considering including NFC in its “bilhete único” platform, which integrates metro, train and bus ticket systems.

The joint venture between Bradesco and Claro, called Mobile Payment Operator (MPO) targets the 48 million Brazilians who do not have a bank account (the unbanked population) but who do have mobile phones. The first service that is likely to be launched in 2013 is the mobile prepaid card, which uses a technology based on SMS. This service allows users to pay bills, check account balances, and make transfers and withdrawals through the ATM network. Also, in 2013, MPO intends to offer its customers payment services using NFC.

Besides this initiative, Itaú bank and the mobile carrier TIM plan to implement NFC in 2013. It is worth emphasizing the importance of the involvement of banks in NFC deployment in Brazil. Until now, however, there hasn’t been complete alignment between financial entities and the rest of the stakeholders. Initiatives are being undertaken in a timid and independent way. Even associations, which aggregate the interests of mobile operators, manufacturers and others, could not enter into negotiations with the banks.

In addition to resolving these implementation problems, banks should create strategies for the dissemination of this technology to increase the number of transactions per customer. This is a challenge faced currently by OI Paggo, the leading mobile payment service offered in the Brazilian market. Oi Paggo, a joint venture between the state bank Banco do Brasil, the carrier Oi and the payment processing company Cielo, uses the technology of mobile payment via SMS. Despite having over 400,000 registered customers, service usage is still very low compared to the average usage of debit and credit cards.

For these reasons, it is expected that the full use the NFC, both in public transportation and mobile wallet, will only be widely available to consumers in Brazil after 2014, when the devices become more accessible and growing demand forces stakeholders to work towards interoperability.

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