U.S. Banks and Telcos are Keen for the Arrival of MicroSDs

Two makers of newly developed contactless microSD cards are moving their products toward market trials, as their big U.S. payments patrons–Visa Inc. and First Data Corp.–seek to capitalize on growing demand from banks, as well as from mobile operators.

The companies, DeviceFidelity Inc. and Tyfone Inc.–which have the respective backing of two of the largest payments players in the U.S.–Visa and First Data, say consumers could be tapping phones inserted with their tiny contactless flash-memory cards as early as the second quarter in trials. The consumers will be able to make purchases in stores equipped with contactless point-of-sales terminals.

“You are going to see several trials coming onboard in the second quarter and more in the second half–trials with real users, real phones, real terminals in the field,” DeviceFidelity CEO Deepak Jain told NFC Times. “Everything will be real.”

The modified microSDs, which are embedded with minuscule contactless antennas and secure chips for applications, could potentially turn hundreds of millions of handsets into payment devices. The cards could also support transit ticketing, couponing and other loyalty programs. All the applications could communicate with the mobile network, unlike most contactless stickers. And the cards could offer gigabytes of storage space for music, videos and photos, just like standard microSD cards.

According to Tyfone CTO Siva Narendra, the contactless microSD cards might be ready for a rollout before the end of the year. “A soft launch or hard launch is the target for second half,” he said.
 
Mobile Carriers Interested
Before that, Tyfone, DeviceFidelity and other companies building contactless microSDs have to prove the technology works as promised in more intensive field trials. But the companies say they are already seeing strong demand from banks and other potential payment card issuers. Those potential issuers include mobile operators, confirmed DeviceFidelity CEO Deepak Jain.

Under DeviceFidelity’s agreement with Visa, payment applications on the company’s SD cards must support Visa’s contactless application, payWave. Visa will certify the cards to carry the application.

“At least financial institutions and wireless carriers will have one approved payment product to deploy,” Jain said. “Both financial institutions and wireless carriers can deploy it freely with peace of mind. Also, there is a plan to open up the technology to a lot of ecosystem players: card vendors, transit authorities, application developers and chip vendors.”

Tyfone’s Narendra confirmed his company has also talked to mobile operators, adding that “it remains to be seen how the market evolves.”

As NFC Times reported Feb. 11, the largest U.S. mobile operators, including Verizon and AT&T, are considering launching mobile payment services or even their own payment scheme, using Near Field Communication phones or other contactless technologies, including microSD cards. They are building a platform that could support standard payment applications and are hiring a trusted service manager to deliver and manage the applications on phones.

The telcos are not talking about their plans, but sources speculate that if they do launch mobile payment, they would go after interchange revenue, in competition with large banks and the big card networks, such as Visa and MasterCard Worldwide.

“They have an infrastructure as powerful or more powerful than Visa and MasterCard put together,” consultant Waqar Qureshi, who served as head of EMV migration for Visa International until late 2004, told NFC Times. “Their mobile phone infrastructure is faster, better and cheaper and always, online. It has everything that Visa and MasterCard had to build over the last 21 years.”

U.S. mobile operators are among the biggest distributors of flash memory cards, through their stores. With NFC phones scarce, the telcos might decide to use microSD cards to carry payment applications, among other services, if they decide to launch mobile payment.

First Data Connection
And speculation has fallen on First Data as a potential partner for the telcos. First Data has relationships with millions of merchants in the U.S. and could also support a closed-loop payment scheme. And it plans to launch a trusted service management unit to deliver and manage payment applications on contactless media, including Tyfone microSDs.

NFC Times
has reported that First Data has signed an agreement with Tyfone that would develop Tyfone’s microSDs for payment applications. As with Visa’s tie-up with DeviceFidelity, First Data’s deal with Tyfone calls for a period of exclusivity binding the technology company. For Tyfone, that would extend only to North America.

Neither First Data nor Tyfone would confirm the agreement, although an announcement is expected within a few weeks.

But Tyfone’s Narendra noted that its “TSM partner” could enable Tyfone’s cards to support any payment application, including those of the four U.S. card networks, or closed-loop applications. That would describe First Data.

“They don’t pick between payment issuers and mobile network operators or payment networks,” he said. “Their business is neutral. They work with pretty much the whole ecosystem.”

Contactless microSD are also attracting keen interest from banks because the cards would enable banks to introduce mobile payment with limited involvement from mobile operators.

Visa said it would conduct trials with banks of payWave on DeviceFidelity’s In2Pay microSD during the second quarter. That will include trials with banks outside of the U.S.

Competing Cards
Both Tyfone and DeviceFidelity are making announcements this week about their products. Tyfone, which had earlier produced standard-sized contactless SD cards, today announced its SideTap contactless microSD card was ready. The card’s secure chip, supplied by NXP Semiconductors, can support industry standard payment applications along with NXP’s Mifare transit-ticketing applications.

Narendra said the Tyfone microSD has a smaller antenna than competing cards, so it could support more flash storage. It was also the only card that could enable service providers and trusted service managers to manage applications on the cards over the air, he said.

But DeviceFidelity’s Jain said the company would issue a press release tomorrow or Wednesday announcing a second version of its In2Pay contactless microSD that unlike the first version would support over-the-air management of applications. But it would not require the trusted service manager to incorporate software from DeviceFidelity, unlike the Tyfone software necessary to manage Tyfone’s cards. And the In2Pay card would also support industry standard payment and Mifare. The Tyfone and DeviceFidelity cards would require software running on the handset, though Jain said that is only necessary to manage the In2Pay cards over the air.

Both companies and others working on contactless microSDs say their cards would work on the majority of handsets with slots for microSDs. That takes in hundreds of millions of phones, they say, although contactless microSDs won’t work in microSD card slots situated underneath the battery, which would block the transmissions. And owners of phones without microSD slots, most notably the iPhone, as well as certain models of Palm, could not use the cards.

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