Payments-mobile comms convergence - the real-estate model

Last week, as Visa USA president and CEO John Coghlan called for closer collaboration between the payment card and mobile industries (see Finextra article here), how this collaboration might work in practice was being discussed at the Digital Money Forum event in London.

O2 is one of the network operators currently investigating near-field communication (NFC) technology and its potential applications in payments, ticketing and marketing. NFC technology provides for contactless 'wave and beep' transactions or information sharing, and NFC chips can act both as a card, similar to the contactless transport cards being used in many cities, and as a reader of other cards and devices.

O2 is investigating business models for making SIM-card real-estate available to other parties. It uses an analogy of itself as the owner of an apartment building. There is a master key to the building  -- in this case the SIM card --  and there are also separate keys for each apartment -- in this case the application slots available on the SIM. 

02 says that while it will maintain control over the master keys, once it has given keys to other 'apartment owners', such as transport organisations, banks or card schemes, what they do within their own apartment is up to them.

It sounds simple enough in theory, but there are still a few things that need working out. How much rent will organisations be happy to pay to mobile operators for SIM card real-estate? And how much control over the arrangement and customer access will they be willing to cede?

There are also a few technical pieces of the puzzle missing. The NFC Forum is currently working out the standardisation necessary for handset manufacturers to incorporate the NFC chips in their devices and integrate them with the SIM -- the preferred option to get the best customer experience and portability of applications and data.

There also needs to be a trusted third party that the network operators and application owners can rely on to handle over-the-air updates to applications. 

While it's still relatively early days, there seems to be a willingness in the industry to move mobile and payments convergence forward -- and, depending on the testing of business models and use cases -- it won't be long before the first customers start seeing it in action.

For more on the latest developments in this area, see this video interview with David Birch, organiser of the Digital Money Forum.