MicroSDs: After Two Years of Trials, Questions Remain About Marketability
Bank of America has not yet tipped its hand about how it plans to roll out mobile payment in the U.S., but it is unlikely to use microSD cards–that is, if a recent evaluation of the technology by a bank representative is any guide.
The No. 2 U.S. bank tested contactless microSDs in five U.S. cities in late 2010 and 2011, but in a critique of the project, the bank’s former vice president for mobile application development raised questions about the usability, likely consumer acceptance and costs for rolling out the technology.
Bank of America is one of many banks that have trialed the technology, including four of the top five U.S. banks by assets. (See table below).
Unlike SIM cards or embedded chips in NFC phones, contactless microSDs give banks and other service providers that issue the cards complete ownership of the secure element that holds their applications, as well as control over the wallet or other user interface their mobile customers use.
Yet, while interest appears to remain high in the technology, after nearly two years of trials and at least 18 months after Visa Inc. certified the technology, there are still no commercial rollouts of mobile payment using microSDs.
The flash memory cards come with built-in antennas or, for Apple’s iPhone, fit into sleeves or cases that have a microSD card slot and contactless antenna. The technology is from U.S.-based DeviceFidelity.
While there are some microSDs hitting the market more recently in China and Taiwan that can connect to a built-in NFC chip and antenna via a single-wire protocol connection, they require specially equipped NFC phones.
Among issues raised by Bank of America and another bank that has trialed the technology and publicly evaluated it, Landesbank Berlin of Germany, were problems for employees and consumers to set up the payment applications on their phones for the trials.
Representatives of the two banks, which gave presentations during conferences this spring, also questioned whether consumers could use microSDs for both payment and storage of content and whether the consumers would be willing to pay extra for the microSDs and for the specially equipped contactless cases for the iPhone.
That is leading to deeper questions about the business and issuing models for banks and other service providers, along with telcos that might want to deploy the technology.
The secure microSDs would cost $25 to $50 apiece in small volumes and about $20 in higher volumes, and iPhone cases cost about $50 apiece. It would be the decision of the bank or other issuer whether to subsidize it for customers.
The Bank of America representative, Jeff Griffin, who served as the bank’s vice president of mobile application development before leaving this month for a position with Lowe’s Home Improvement stores, also pointed to difficulties with communication between the microSD and point-of-sale terminal in certain instances.
Deepak Jain, CEO of DeviceFidelity, told NFC Times that any problems Bank of America may have encountered during its trials had nothing to do with the radio communication between the phone and terminal or other fault of the vendor’s In2Pay technology.
He contends the only problem that Bank of America encountered during its trials in late 2010 and 2011 that would have prevented the bank from later rolling out the technology were problems with the downloading and provisioning of the applications onto the phone. This trusted service management function was handled by another vendor, Vivotech, for at least some of the trials.
Jain also pointed to the scarcity of point-of-sale terminals at which bank trial participants could tap to pay as a problem besetting the trials.
Mohammad Khan, president of Vivotech, rejected the idea that there were problems with the TSM service Vivotech provided. He told NFC Times that any difficulties in the trials were caused by poor terminal maintenance by some of the merchants involved.
DeviceFidelity: Banks Wait for More POS Terminals
Jain, in general, said he believes banks and other service providers might be holding back from large rollouts of mobile payment using microSDs as they determine how to price the cards and contactless cases, select mobile wallet software and also decide which types of value-added services to offer, such as couponing.
But perhaps the largest issue facing banks and payment service providers considering rollouts is the insufficient deployment of point-of-sale terminals that can accept the technology, Jain contends.
“The overarching fact (is) that mass deployment requires an installed base of terminals so that consumers can use the service more often than once every two days,” he said.
He added that the industry also has been “stymied by the confusion over terminals.” By that he means the “fragmentation between EMV and NFC initiatives, (and) the fact that couponing technologies are going to cause further fragmentation, Google versus Isis.”
DeviceFidelity, which reportedly netted $6 million in its most recent funding round announced in February, including an investment from card personalization equipment vendor Datacard Group, is expected to announce more trials soon. Jain declined to comment on unannounced projects.
One new project could be launched this fall by a U.S. mobile network operator, with microSD technology expected to be available on three Android models in stores in New York and San Francisco. The telco might be serving only as a distributor for the microSDs and iPhone cases as part of DeviceFidelity’s direct-to-consumer moneto technology, however.
In addition, a bank in the U.S. plans to bundle a microSD with an EMV card for high-value customers who travel internationally. This might launch in November, said a source.
And a payment service provider in Asia also plans a launch soon, a source said.
In addition, the big U.S. telcos that are part of the Isis joint venture plan to offer iPhone-packing consumers a way to use the Isis wallet as part of trials to launch this summer in Salt Lake City, Utah, and Austin, Texas.
Isis is believed to be planning to launch the trials this month. The DeviceFidelity portion of the trial probably won’t begin until September. The project would probably use DeviceFidelity’s new iPhone 4S sleeve, the iCaisse4X NFC, which carries a full NFC chip, along with a slot for a microSD card.
Bank Drops Out of Moneto Service
DeviceFidelity might also introduce its direct-to-consumer moneto wallet and microSD cards in the UK.
The company launched moneto, which uses a prepaid MasterCard PayPass branded account, in the U.S. in January, charging consumers just under $80 for the card and iPhone case.
But the company suspended new applications around July, after the bank handling the prepaid funds and issuance, University National Bank, parted ways with the processor and prepaid program manager for the service, TransCard. Existing moneto accounts were stopped Aug. 16. Jain said DeviceFidelity was relaunching with another bank, along with lower pricing and more phones, though that change apparently has yet to happen.
The vendor hasn’t released any figures on the number of cards issued for the first version of moneto.
Banks also are generally keeping mum on the results of their trials. That includes U.S. Bank, which trialed microSDs in as many as 20 cities in 2010 and 2011. Bank representatives did not respond to repeated requests by NFC Times for trial results.
But Griffin, who served as Bank of America’s vice president of mobile application development for 16 months, presented an evaluation of the technology during a session of the SIMposium USA conference in New Orleans in April, titled “Which secure element should be banked on?”
Bank of America launched its first trial with microSDs in New York City in the fall of 2010 and added trials in four other U.S. cities, Atlanta, San Francisco, Dallas and Charlotte in 2011. The bank tested contactless microSDs in both BlackBerrys and the iPhone. All used technology from DeviceFidelity.
Griffin, who had served in various positions in application management with handset maker Sony Ericsson before joining Bank of America in March of 2011, according to his LinkedIn profile, said the key advantage that microSDs offer to banks is the ability to control the secure element.
BofA Rep: Provisioning Problems
The microSDs contain a secure chip that stores the bank’s application.
That is not the case if the banks participate in mobile wallets anchored to embedded chips or SIM cards in NFC phones.
“If we, say, fit into a Google Wallet or Isis Wallet, we end up not controlling the embedded secure element (or SIM),” said Griffin. “The option that gives us the best chance to control the end-to-end value chain for our consumers are microSD cards or add-ons, given the industry today. But those options aren’t technically feasible because of the limitations of the hardware.”
Griffin said that among the drawbacks for the technology is unreliable readability of microSDs embedded with their own antennas and inserted into handsets.
He also pointed to problems employees participating in some of the Bank of America trials had with downloading and provisioning the bank’s application over the air. And he expressed doubts consumers could use the same secure microSDs for both payment and storing their large personal content, such as music and video files.
Specifically, he indicated there were problems in the trials with users being able to tap their phones and have the point-of-sale terminal read the account details and other transaction data smoothly and reliably.
“If we look at the microSD piece in particular, you’ll find there is a key lack of antenna coverage,” he said. ”You’ll note it’s actually harder to tap the device. So if you’re trying to make a payment or trigger a reader, you have to hold the device a certain way. It’s not okay just to enable the NFC chip and get close; you have to turn it and tilt it because of where the microSD chip is in the device.”
Although Griffin didn’t mention the devices or cities, or even the vendor, he was no doubt talking about trials the bank held with BlackBerrys, including in New York. In BlackBerrys, as well as Android devices, DeviceFidelity’s In2Pay technology uses microSDs with an embedded antenna in the cards and, at present, a separate antenna in a sticker that is placed in the inside rear cover of the phones to extend the range.
Griffin didn’t reveal any post-trial user survey data or figures on how often the technology failed to work. And he didn’t say the bank has outright rejected the technology.
But he said that, in general, the bank does a lot of trialing, and for users, “if it fails when they (consumers) try to touch it, they won’t try it again. So the lack of antenna coverage is pretty key for us.”
He said there was also a problem for employees who participated in the trial to set up the bank’s application on the microSDs. This likely included the bank’s tests with microSDs inserted into a contactless sleeve for the iPhone. More than half of the employees couldn’t get their phones provisioned for one reason or another.
“These are people who understand technology, aren’t afraid of it; can plug things in; can load software and can configure the software,” he said. “We get less than 50% take-up with our own internal technologists when we try to run trials, based on microSD or hardware add-ons. There just are too many steps involved in trying to get everything configured to use. And I think that’s a pretty telling number. These are people who understand, want to play and try and fail and don’t get in.”
Jain: ‘We Absolutely Deny (the) Claims’
DeviceFidelity is disputing that critique and notes that it is not the official stance of Bank of America.
DeviceFidelity’s Jain said he hadn’t heard of most of the problems Griffin mentioned from staffers working directly on the trial or executives overseeing it for Bank of America.
“We absolutely deny claims made by Jeff Griffin,” Jain told NFC Times in a statement. “Obviously, the bank officially has not confirmed them, either. We maintain that (in) the trial results shared with us by the bank, there were negligible issues related to RF (radio frequency) performance. All issues reported were related to consumer education, lack of POS terminals, TSM download failures and general software glitches.”
He said moneto, the direct-to-consumer microSD offer hasn’t had a single complaint because of poor RF communication.
And Jain countered that on the contrary, the Bank of America trials were “very successful” in demonstrating sign-up and retention rates similar to conventional cards.
Marc Warshawsky, the bank’s senior vice president and mobile channel executive, in an interview with NFC Times in June declined to address specific findings from the bank’s microSD trials or to say whether the bank has rejected the technology or not.
BofA Exec: No Technology Silver Bullet
“Overall we think it’s too early to make a call which technology is a silver bullet,” he said.
A Bank of America spokeswoman followed up with a statement on the bank’s official view, saying that it has “conducted multiple trials and found that participants really enjoyed making mobile payments–they find the service more engaging than a standard card.”
Warshawsky in the interview chose his words carefully, not wanting to give away the bank’s strategy on any forthcoming mobile-payment launches.
The bank, one of the three largest in the U.S., has yet to announce any launch plans for mobile payment, unlike rivals Citigroup and JPMorgan Chase, which are participating in the high-profile NFC-based Google Wallet and Isis Wallet, respectively–though neither is an exclusive relationship, and the Isis launch planned for this summer is only a trial.
Bank of America is expected to announce more specifics before the end of the year on its mobile-payments direction.
German Bank: Cost Issues for MicroSDs
Landesbank Berlin, which launched a 50-person employee trial in December, used DeviceFidelity’s iPhone case, iCaisse, and microSDs storing a Visa payWave application.
Like Bank of America’s Griffin, Tilo Schürer, head of direct marketing at Landesbank Berlin, said the key advantage of the microSD technology is that the bank controls the secure element.
And with the iPhone case, there were no problems with readability, since it has a full-sized antenna.
But also, as with Griffin, he agreed that if consumers used the microSDs for payment, it probably wouldn’t be practical for them to use the cards to store large personal content, such as music and photos.
“So there are some hurdles for the consumer,” said Schürer, speaking at the NFC Payments Europe conference in London in June. “And one thing you should never forget is that this is a costly issue. The microSD card itself, the iCaisse for the iPhone, that is very costly. And I doubt if the customer is willing to pay for this as much as you would have to make this profitable.”
The bank encountered its own problems getting the iPhone case to work consistently, with 10 out of the 50 having problems getting the technology to work, Schürer said. “We plugged it in and sometimes it worked and sometimes it didn’t work,” he said.
And like Griffin, Schürer during his presentation expressed doubts that consumers would want to alter the exterior of their iPhones with a payment device. Griffin said that by using the iPhone case or sleeve, they couldn’t use covers to display their favorite sports team logo, for example. This could also be a problem for iPhone add-ons with embedded secure elements, such as the iCarte from Canada-based Wireless Dynamics.
“Many of my colleagues do have an iPhone, and they hate to do anything with it,” Schürer said. “They find it smart and fancy and cool. Now with this little iCaisse around it, they hate that. Maybe we’re not representative. We think this is a hurdle for many customers. (And) we think we will have high customer support costs.”
He added that microSD technology for Android phones that would enable users to merely pop in an NFC-enabled microSD storing a payment application into the appropriate slot and download a corresponding Android app could work.
But at present, the booster antenna contained in a sticker in the back cover–requiring users to line up the sticker with the microSD card slot–would be too difficult for typical consumers.
A spokeswoman for ING Bank Slaski of Poland, which launched a trial with DeviceFidelity microSDs in July with the iPhone and BlackBerry 9780, indicated the bank has also experienced some problems with the microSDs working with the booster antenna.
“This is the very beginning of our trial, but we see fewer problems with iPhones than with BlackBerry,” the spokeswoman said.
Jain: Buying is Better than Renting
Jain hinted of a new product that DeviceFidelity has in the prototype stage that would do away with the booster antenna, that DeviceFidelity calls the Range Extender, for Android phones and BlackBerrys that have their own microSD card slots.
The microSDs would have an amplification chip in addition to the tiny antenna within the card. The range could be even longer than that provided by the booster antenna.
Of course, as with the present In2Pay technology for Android and BlackBerry phones, the new microSD would not work in full NFC phones if both the contactless microSD and NFC interface are active at the same time.
Jain said DeviceFidelity’s application programming interface would automatically shut off the NFC phone interface if the microSD card were being used for payment or other contactless wallet applications. If consumers want to use another wallet, directly tied to the NFC phone, they would have to manually disable the microSD interface.
But with most of the big Android phone makers, along with BlackBerry maker Research In Motion, putting NFC in most or all their new models, the potential conflict between the phone and microSD antenna is yet another issue for DeviceFidelity to deal with.
Jain defended the cost of the microSDs, contending that the main reason a user would pay for the 4-Gigabyte NFC microSD is still for the storage, not the payment. But nonsecure 4GB microSD flash-memory cards can be purchased for much less.
Still, Jain contends the price is comparable or even cheaper to the bank than renting space on SIM cards or secure elements embedded in handsets that the bank doesn’t own, when taking into account rental fees charged by the secure element owner and fees charged by the trusted service manager.
“We estimate that if a bank offers two accounts on the SE (secure element), the rental fees charged by MNOs (mobile network operators) would start to be more expensive, as compared to issuing microSD, if the bank stays on the SE for any more than nine to 12 months,” Jain said.
Mobile operators were proposing to charge about $5 per account per year in rental fees, NFC Times reported in June. TSM fees for a bank to provision its application are additional.
“Obviously, renting is lower risk if you don't know how long you are going to stay in the space, but buying is definitely cheaper in the long run if you feel that you are going to stay for a reasonable period of time,” Jain said.
“Also, by renting, the bank has no control on what is actually being offered to the consumer. If the bank rents space in a building that is not constructed properly or is in a bad neighborhood or does not have the right amenities, he cannot hope to get the consumers he wants.”
DeviceFidelity could catch a break if Apple does not incorporate NFC in its next iPhone, as sources are telling NFC Times is the case.
If Apple does indeed pass on NFC technology yet again this year, it could greatly boost demand for DeviceFidelity’s iPhone case, especially its fully NFC-enabled version, the iCaisse4X.
Nonetheless, with two years of trials and no real commercial rollouts yet–and questions raised by at least a couple of banks about usability and cost–DeviceFidelity still has much to prove with its In2Pay microSD technology. NT