The Bankwatch

Tracking the consumer evolution of financial services

Mobile World Congress 2014 | next on the horizon–mobile payments and exponential growth of internet connected devices

The Mobile World Congress is on this week in Barcelona.  The big backstory this year seems to be the fear amongst the telco’s otherwise known as MNO apparently.  (Mobile Network Operators).

There are two seismic shifts going one – one nascent and one well along.

Payments and the disintermediation of MNO’s:

Dave Birch covered every possible acronym in this pitch to MNO’s (Telco’s) that they needn’t worry.  This issue concerns something known as the Secure Element (SE).  This is a piece of hardware in mobile phones that controls the information flow inside your phone between the proximity / vicinity interface such as Near Field Communication (NFC) and the payment processing.  The SE is owned by the MNO and they planned that walled garden would ensure their involvement in phone based payments.

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However Google had other ideas, and their engineers developed the Host Card Emulator (HCE) which also resides in the phone in software.  The HCE means the payment flow no longer requires the SE.  The NFC reader and the phone CPU can talk directly to each other.  This development is sending shock waves through MNO land.

Internet of things:

Next we have the growing excitement of the internet of things and advent of Machine to Machine communication (M2M).  This space will be as large as the imagination.  Milk cartons talking to fridge, talking to you mobile device, automated grocery store orders.  It can be as diverse as items on a manufacturing assembly line talking to the inventory control, to spare parts in a bicycle store.  It could be connected humans.  Here is an older (2011) but excellent piece from Dave Evans at Cisco on this.

There will be no end of ideas once this moves from idea to implementation.  And all this new communication requires air-waves and again MNO’s are anxious to capture their share of that market.  Here is an example from AT&T.  MNO’s have at least figured out roaming is a non-starter in M2M and are laying the groundwork accordingly.

Mobile operators turn to machines for growth

To facilitate this, AT&T has negotiated roaming agreements with operators in more than 150 countries. “Our business customers only need to sign one contract with one carrier to roll out M2M globally.”

Relevance to Bankwatch:

Banks do not have a good reputation for getting ahead of large scale new developments.  This would be the time to start blue-skying on how they can lever both these evolutions.  I have my own reasons that I won’t give up my ideas here yet, but there are ways that banks could be engaged and generate new clients and new revenue streams.

Written by Colin Henderson

February 27, 2014 at 17:21

Posted in Uncategorized

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