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21 July 2009
Many of our readers are aware that I am increasing my research of the mobile banking & payments space. Although I haven't had the chance to look at this area in over a year, the mobile NFC payments space (at least in the U.S.) remains in a state of limbo. Of course, during the last 15 months there have been technological advances, standards agreements and a spate of pilots. However, the real culprit behind the lack of progress is the same problem that I witnessed over a year ago; the business model among the ecosystem players (banks, payment brands, merchants, mobile operators, handset/chip manufacturers, OTA provisioners) has yet to be sorted out. To boil things down quite a bit, the central issue is how the additional costs of mobile NFC payment technology (mainly the cost of the NFC chip) will be shared or recouped by ecosystem players, particularly the mobile carriers. The mobile carrier business models in discusssion have been and continue to be 1) "virtual" card activation fees, 2) "rent" on the mobile device or 3) a share of the "virtual" card interchange fees. What has changed since I last investigated this space is that the loud and clear message from the banking community to the mobile carrier community is that model 3 (sharing of interchange) is completely off the table. This is because the justification simply isn't there (this business model is analogous to card plastics manufacturers asking for a share of interchange). Furthermore, given the dire straits of the banking industry and the unproven long-term prospects for mobile NFC payments, the negotiation leverage pendulum has swung toward the banking community -- in other words, banks aren't exactly chomping at the bit. From where I sit, if mobile carriers want to gain any sort of additional revenue stream from mobile NFC payments, they're going to need to be flexible with their business model expectations.

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