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France-based NFC chip vendor Inside Secure has announced new technology that it says can embed a contactless chip and antenna into SIM cards and communicate with point-of-sale or other contactless readers at a standard 4 centimeters or more.

Inside, which is demonstrating the technology at this week’s Cartes & IDentification trade show in Paris in around three handsets, is looking for SIM card suppliers to adopt the technology to enable non-NFC phones to conduct payment and other transactions in card emulation mode.

That will be a challenge, with many companies already having tried to embed antennas in SIM cards, but failed to bring a workable card to market. They have been thwarted mainly by the fact that a large majority of SIM slots are positioned behind the phone battery, which would block or distort the signals to and from the reader.

Inside claims it has overcome this problem, though declines to reveal the technology behind it. 

“We’ve been able to come up with some ways, instead of fighting surrounding metals and noise, we’ve been able to use it to benefit (the range),” Charlie Walton, Inside’s chief operating officer, told NFC Times.

That is with an antenna of 50 square millimeters, a small fraction of the size of an antenna in a standard contactless smart card. The small antenna would be attached to a contactless chip and this inlay would be embedded in a standard-size SIM card. The contactless chip could communicate with payment or other applications stored on the secure SIM chip.

Walton acknowledges that the prototype is not yet at a stage to be commercialized, yet he says SIMs with embedded antennas could be produced in volume in just a year’s time.

That is an ambitious timeframe. And there are other problems Inside will have to overcome. One major SIM vendor who worked on an aborted project to embed antennas in SIM cards told NFC Times the resulting cards would have cost 20 or perhaps 30 euros apiece, a nonstarter in many of the developing markets Inside appears to be targeting, such as Brazil, India and African countries, though Inside is no doubt shooting for a much lower price point.

There was also a problem with embedding the antenna in a plastic SIM card and ensuring that rough treatment by users wouldn’t break the coil. SIMs are designed to be more flexible than microSD cards, said the SIM vendor. Companies are starting to commercialize microSD cards with small embedded antennas.

Supporting a full NFC chip within the SIM card to read tags or communicate in peer-to-peer mode would also be difficult, since these applications would have a problem drawing enough power through the SIM.

Inside’s Walton said the chip maker is already working on versions of the technology for microSD cards and for full NFC phones. The latter could increase the range of the phones and offer a shorter antenna, he said.

Taking Aim at Contactless microSDs
In weighing competing products to a potential contactless SIM using the Inside technology, Walton clearly takes aim at microSD cards with embedded antennas supplied by U.S.-based DeviceFidelity. DeviceFidelity’s In2Pay microSDs have been trialed by several banks, mainly in the United States.

“Very early on, we were the first ones working with DeviceFidelity; we began to see this was not going to play prime time,” contends Walton. “(Later) we felt the current technology and our competitor’s NFC chips were not going to work in the microSD form factor.”

He predicts that no bank, including Bank of America, which has held the largest trial of contactless microSD cards to date, will roll out the technology, despite the fact it enables banks to launch mobile payment without dealing with cellular carriers.

With microSD slots in different locations in phones and a range of roughly 2 centimeters for most of DeviceFidelity cards, the user experience will suffer, Walton said. Most other NFC bridge technologies and passive stickers and often NFC phones have a sub-4-centimeter range. 

“Studies showed that 4 centimeters was the range at which most users feel comfortable,” he argues. “For read distance and device orientation, a longer range is needed for more consistent performance.”

DeviceFidelity’s microSDs use contactless chips and secure elements from Inside rival NXP Semiconductors.

DeviceFidelity: Contactless microSDs Work
DeviceFidelity CEO Deepak Jain and chief operating officer Amitaabh Malhotra, both co-founders of the startup, counter that they expect at least a few U.S. banks to roll out the microSD cards commercially in 2012. Jain noted that card network Visa Inc. has certified a growing number of smartphones to run the vendor's microSDs with a Visa payWave application onboard.

“There should not be any doubt that it works,” Jain told NFC Times. “You’ve got 15 Visa-certified devices.”

DeviceFidelity also has been chosen by the Isis joint venture to give consumers an option to run the Isis wallet on Apple’s iPhone, noted Jain. DeviceFidelity also provides a special sleeve for the iPhone, which does not yet support NFC and does not come with its own microSD card slot.

The sleeve gives the iPhone a longer range than the vendor’s contactless microSDs running in other smartphones. Without the sleeve, smartphones running the In2Pay microSDs require a “range extender,” which is a sticker containing an additional antenna that is attached to the inside back cover of the phones. This increases the distance the phones can communicate with point-of-sale terminals to an acceptable range for Visa–2 centimeters or a little more.

But that range extender could create problems for consumers who might not know how to affix it. So for many of the trials, DeviceFidelity has shipped the range extender already attached to replacement back covers for certain smartphones. This could add to costs for banks for any rollout, however.

Still, Jain notes that besides being able to bypass mobile operators, banks that roll out mobile payment on the microSDs could personalize the flash-memory cards just as they do conventional bank cards. In addition, the microSDs could provide security for retailed mobile financial services, such as mobile banking and funds transfers.

And banks could develop appealing apps for the user interface for these services on such smartphone platforms as Apple’s iOS, Android and BlackBerry OS, he said.

With applications on contactless SIMs or SIMs connected to flexible antennas that are already on the market, there are no application-programming interfaces that enable banks and other service providers to develop corresponding smartphone apps for handsets. So they must use old-fashioned SIM Toolkit menus, which make for an unappealing user interface, Jain said.