Apple will change the fate of NFC or will be dominated by global mobile payments

Users who just got the iPhone 6 will find that the NFC module has not been enabled yet. Apple announced the launch of "Pay" on September 9th so that it can be consumed and traded through devices such as the iPhone 6, iPhone 6 Plus, and Watch. Related mobile payment products will be available in October.

By upgrading to the iOS8 system, U.S. consumers can start using Apple payments from October. Users can pay in the merchant's application, as well as contactless payment points such as stores, restaurants, transportation providers, gas stations, convenience stores, and all Apple stores. In the store, consumers can use the iPhone to touch the non-contact terminal and press their finger on the TouchID to perform transaction authorization to complete the payment.

According to the relevant person in charge of MasterCard, Apple users can use the bank issued credit cards and debit cards through the Apple Payment APP. For the payment in the application (APP), the consumer only needs to click on the payment and use the fingerprint or password to authorize, and the payment can be completed without entering the card number or leaving the current application.

The backing behind Apple Payments is NFC payment technology and Apple's TouchID technology. The so-called NFC payment refers to when consumers purchase goods or services, they use NFC technology (NearField Communication) to pay through handheld devices such as mobile phones. The processing of payments is carried out on-site, without the aid of the Internet, but using NFC radio channels to achieve local communications with devices such as POS machines or vending machines.

According to experts from China UnionPay's product department, Apple's NFC payment experience is ahead of the world and its chip technology has the highest safety threshold.

Apple Payments will make NFC payments "return to life." People in the industry believe that NFC will not only become a strong competitor for mobile payment technologies such as QR codes, but will even become the only integrator and leader in the global mobile payment industry. Market confidence on the one hand comes from Apple's payment, which combines the advanced technologies and risk control capabilities of Apple, chip companies and several card organizations. On the other hand, Apple also has the ability to control the entire NFC industry chain and terminal equipment.

In addition, Gong Liang, deputy general manager of VISA China and general manager of innovative products, believes that the NFC rejuvenation is due to the emergence of smart phones to diversify the NFC technology carrier. The NFC development has been limited by carriers, usage scenarios, and the number of POS machines.

NFC has been developing in China for nearly a decade, but it has not been implemented because of the game of interests between mobile operators, card organizations, and handset manufacturers. The inconsistency of interests leads to the inability of NFC technology standards to be unified, and there is no way to centralize the promotion of firepower among merchants and users.

The payment companies that have partnered with Apple Inc. include VISA, MasterCard, and American Express. The three card organizations cover 83% of the credit card transactions in the United States.

Apple Inc. had previously rejected the NFC payment technology. This time, it was "brilliantly turned." The industry believes that Apple does not exclude the technology. Instead, it does not want to introduce devices when there is no application market. Now technology and applications are launched together. .

On the day of the iPhone 6 launch, McDonald's announced that all McDonald's restaurants in the United States will be deployed to flash POS machines, and will use training for employees to fully support NFC payments. In addition, mainstream American merchants such as Starbucks, Macy's, Subway and Target can support Apple's payment. Internet companies such as Uber and Groupon also accepted Apple's payment for the first time.

The fees paid by Apple are divided into existing fee structures that are established on credit cards and debit cards in the United States. According to foreign media reports, it is expected that the transaction will be drawn from the transaction amount, which is approximately 0.15%, which is much lower than the current credit card transaction fees. In the United States, merchants usually pay about 2% of the transaction price for credit card processing fees.

According to the research results of Forrester Research, a research institution, the Bank of America’s credit card transaction fees in 2013 accounted for approximately US$40 billion in revenue, and maintained an annual growth rate of more than 30%. Therefore, Apple Payments is expected to become Apple’s new profit growth point.

The aforementioned UnionPay experts believe that Apple may promote other mobile phone manufacturers to use NFC as a standard to drive the overall mobile payment industry. In the future, a large number of bank card payment transactions will be transferred to mobile phone payments. "The full development of NFC payment may take five to ten years."

Apple Pay

Once NFC payment is popular, the overall payment cost may be lowered in the future due to the low mobile payment rate, and the bank’s credit card fee income will also be lowered as a whole.

According to Caixin reporters from various sources, China UnionPay began brewing cooperation with Apple from the beginning of this year and is expected to be officially launched before March next year. UnionPay cards can then be loaded into the iPhone and can be used in any POS machine in China.

According to the Caixin reporter, WeChat is also currently developing NFC payments. In March of this year, Tencent made an equity stake in JD. Jingdong and ZTE have a strategic partnership. In addition, Tencent's share of the NUBIA mobile phone is also a hot topic in the industry. The industry believes that these actions are related to the WeChat layout NFC, looking for hardware terminals.

However, people in the industry pointed out that the current WeChat ability in the NFC field is limited to readers, that is, the NFC device as a read-write head, can read and write external non-contact cards, such as virtual bus cards, to carry out card simulation payments Can't do it.

PK QR code

Chen Jianwei is a co-founder of China Telecom’s payment business. He is currently the head of mobile finance at the China Bank of Communications Payment Company and is one of the earliest Chinese experts who have been exposed to NFC. He believes that NFC payment can help UnionPay regain one game in the field of mobile payment, and revert back to the same starting line with Alipay.

The war between UnionPay and Alipay can also be regarded as a rivalry between NFC technology and two-dimensional code technology in a certain sense.

Li Xiaofeng, director of the Leading Group Office of the Central Bank's Financial IC Card, believes that NFC technology will be a strong competitor for QR code payment. He pointed out that the NFC payment is based on a bank card and belongs to a strong real name account; and the two-dimensional code relies on a third-party payment account, which belongs to a weak real name account and is not protected by law. In addition, the third-party payment transaction is not connected to the central bank's payment and settlement system, and cannot be liquidated nationwide. It can only be traded bilaterally, which compromises the security of the QR code payment.

"Two-dimensional codes can only make a fuss in the field of small-sum payments, and large payments can't be done," said Li Xiaofeng.

"NFC is currently the only mature near-field payment technology," said Chen Jianwei.

"Near-field payment technology is currently NFC, infrared and Bluetooth, but there are no related payment products for infrared and Bluetooth." Wang Weidong, a senior analyst at iResearch, stated that Bluetooth technology has been denied to a certain extent because NFC payment is 10 centimeters. Compared to distance, Bluetooth pays more distance and brings more security risks.

In contrast, the near-field payment technology that can compete with NFC is only the QR code. Although the two-dimensional code itself belongs to far-field payment technology, it is now increasingly used in near-field payment scenarios. For example, in the case of buying a product, payment is made through on-site scanning, although it requires a back-office system, but it is in the form of a near-field payment method that goes hand in hand with NFC payment.

Like other bar codes, two-dimensional codes convert information into numbers first, and then use graphics to express the numbers.

Two-dimensional codes can include text, pictures, and can also be used as a channel for guiding data, such as keys and web addresses. The Alipay and Tenpay two-dimensional code transactions, which are well-known to consumers, generate a two-dimensional code by using the product page address or order information. Consumers read product information and generate orders by scanning codes, or sweep orders into payment. Page, complete the payment.

Previously, relevant person in charge of China UnionPay told Caixin reporter that UnionPay has been actively researching and exploring all kinds of innovative payment models including QR code payment, both at home and abroad. However, due to the problem of payment security of QR codes, Completely resolved, UnionPay has never launched commercial applications for QR code payment in the market.

As NFC technology is accepted by more and more mobile phone manufacturers, flash POS terminal terminals are gradually being rolled out, and the application scenario is no longer a hindrance to NFC payment promotion. In the checks and balances between NFC technology and two-dimensional code technology, the weights that determine the severity are mainly cost and security. The promotion of NFC technology requires more costs, but security is considered superior to QR code payment.

A person familiar with the financial industry safety certification described the risk to the QR code system to the Caixin reporter system: First, the information contained in the QR code itself may be a Trojan horse. After the user scans the code, the Trojan horse causes a financial loss; secondly, the transaction The information itself does not contain a virus. However, because the strength of encryption is not enough, in the process of transmitting information to the mobile phone through the two-dimensional code, it may be deciphered and tampered by the hacker. Finally, the digital certificate and electronic signature for the payment of the two-dimensional code are not perfect. The traceability after the transaction is not strong. Once the funds are lost, it is not easy to find the corresponding real trader.

However, NFC payments also face the risk of hacking. A demonstration by Charlie Miller, a former analyst with the US Security Service, made people stunned by the fact that he used an NFC chip to touch a mobile phone. The mobile phone was implanted with malicious programs and opened arbitrary pages according to the requirements of the hackers.

However, the difference between the two-dimensional code and the two-dimensional code is that the flash POS machine corresponding to the NFC payment is authorized by UnionPay and the bank, and the transaction process is supervised; while the QR code payment bypasses the supervision, anyone can complete it by simply scanning the code. Paying.

People close to Alipay told Caixin reporter that the two-dimensional code and NFC payment are not inconsistent. The two-dimensional code is mainly based on far-field payment. It is a payment option alongside credit cards; and NFC payment is the electronicization of credit cards. Is an alternative to plastic cards. "I don't think NFC payment will pose a threat to Alipay," the source said.

Safe three lines of defense

In addition to regulatory control, Apple's paid fingerprint identification technology, Digital Token technology, and encryption technology of various card organizations can be regarded as the three security lines Apple pays.

Regarding the first security line fingerprinting technology, Wang Weidong stated that it is much safer than traditional passwords. "The fingerprint technology completely solved the risk of password theft."

However, the security research laboratory in Berlin, Germany, recently discovered that the fingerprint recognition function on the iPhone 6/6plus has not been upgraded compared to the previous generation, and the fingerprint film can be used for verification. It can be seen that the fingerprint technology is not flawless.

The second security electronic token technology is a technology commonly used by MasterCard, VISA and American Express. It does not store user account information and automatically generates a one-time use security code. Even if information is maliciously intercepted, it cannot obtain an account. information. In March of this year, EMVCo released the electronic token technical standard of EMVCo1.0. Based on this technology, Apple and various card organizations cooperate.

MasterCard China General Manager Chang Qing told Caixin reporter that every transaction paid by Apple in the future will be replaced by an electronic token. "Like a sign at an auction house, the real account will never be seen at the merchant's end." Information is just a bunch of meaningless tokens.

Gong Liang said that even when the mobile phone is lost, the user can stop the APP payment function online, or inform the issuing bank to invalidate the digital token account previously associated with the main card account before applying for a new series of token account replacement. , instead of going to another card.

In addition, MasterCard and VISA cards, which are cooperating with Apple Payments, have also set up security measures, which are called the third line of defense. Masters related to MasterCard said that when consumers use MasterCard NFC payments, they will receive the same level of fraud protection as credit card payments. In addition, advanced encryption and the like for non-contact RF transaction transmissions are also targeted for NFC payment.

Alipay has been exploring NFC payment technology for a long time. On June 18th, 2014, Alipay released the “Future Public Transport” plan, announcing that users who use NFC mobile phones can download a public transportation card in real time in the Alipay client and swipe their mobile phones in 35 cities. However, people in the industry pointed out that Alipay's views on NFC are inconsistent. The objection is that Alipay cannot rely on NFC chip manufacturers and UnionPay to control core technology on NFC payments.

Cao Yu, head of Alipay's NFC project, wrote that the original one-card system was closed. At the beginning of the system design, only the card he issued was able to complete the consumption on his POS machine, and he barely considered the situation of using a mobile phone. So now that the mobile phone is a device outside the original system, the difficulty of compatibility can be imagined. This kind of obstacle makes the "future bus" in an awkward position, and may even die.

People close to Alipay pointed out that in spite of all kinds of difficulties, Alipay will continue to explore the field of NFC in order to grasp the big cycle and increase customer stickiness in the face of the NFC payment wave.

NFC China Road

NFC is not a technological innovation but a chip based on the EMV standard of the past. Gong Liang said that VISA issued EMV chip cards in 1986. In the EMV technology framework, different card organizations have their own standard names, such as PayWave for VISA, PayPass for MasterCard, and FlashPay for UnionPay.

"The mobile phone with the NFC payment function is equivalent to a chip card that can carry out contactless payment, such as the VISCAyWave card, that is, the mobile phone of the chip card." Gong Liang said.

However, to move the chip from the plastic card into the mobile phone, it is also necessary to cooperate with the controller and the antenna. NFC is divided into two core modules from the hardware perspective. One is an NFC controller and antenna, and the other is an SE security element that stores sensitive data. The core module is divided into three loading modes, namely SIM full card, NFC-SWP and mobile phone full terminal mode. These three models also represent the three stages of NFC development in China.

The first stage was from 2006 to 2011, with mobile operators as the main players, and the SIM card model was mainly promoted. At that time, only China Telecom had issued nearly 15 million SIM cards. “Today, SIM-PASS and all-antenna SIM cards are still in operation, but they are unable to adapt to the technical challenges of small cards such as the iPhone. The three major mobile operators have adopted the NFC-SWP model as their future direction, and are not expected to meet market expectations and resources. In addition to tilting towards the SIM full-card scheme, the giant's shift has directly led to significant losses for technology-based card vendors and chip makers.To date, card vendors have basically no ability to create new SIM full-card products." Chen Jianwei said.

The second stage is represented by NFC-SWP. Around 2011, the NFC services of the three major mobile operators were slow to develop, and they all reached a point where they were desperate. 2.4 GHz was also eliminated. In November 2012, the central bank issued a series of technical standards for China's financial mobile payment, and proposed that the financial industry standards should be based on 13.56MHz as the basis for near-field payment of non-contact communication technology, and introduced more than 3 million corresponding flash POS machines. The 2.4GHz domestic frequency in China continues to survive only in narrow areas such as campuses and public transportation. In this regard, the standard battle came to an end.

In the NFC-SWP solution, the two core hardware are stripped, the NFC controller and antenna are placed in the handset, and the SE security element is placed on the SIM card and is controlled by the mobile operator.

UnionPay also launched an NFC-SD card, trying to load SE security components into the phone via an SD card. However, since most mobile phones have sufficient storage space, they do not need to put an SD card. This solution has since disappeared.

The interests of mobile phone manufacturers, UnionPay and mobile operators entered a stalemate. At this stage, in order to take control of SE, operators even blocked the SE function in the NFC all-in-one contract machine to promote the NFC-SWP solution.

"Who controls the SE, who controls the contents of the SE and the corresponding precipitation funds, so handset manufacturers, banks, and operators are supporters of the all-in-house solution, the NFC-SD solution, and the SIM-SWP solution, respectively." IWC's research report said.

In June 2012, China Mobile and China UnionPay signed the "Framework Agreement on Mobile Payment Business Cooperation", which was a landmark event in this period. This cooperation means that the hardware application is owned by the operator, and the software application is returned to UnionPay. It is also this landmark event that has caused mobile operators to retire and fade away from NFC rivers and lakes.

Chen Jianwei had been responsible for the development of NFC technology in China Telecom. After working for many years, he left his mind and realized that the era of operator-driven mobile near-field payment has passed. "After the cooperation between China Mobile and UnionPay, the mobile side only bears the cost of the SIM card, but the user data belongs to the UnionPay. Plus, 3G and 4G gradually become popular and the investment demand is very large. Mobile will greatly reduce the investment in NFC." Chen Jianwei said that from there Later, China Unicom (600,050, stocks) and China Telecom also reduced their investment in NFC.

In the second phase of disputes, CUP seems to be a winner, but because China Mobile is not active, the SIM-SWP program has not been well promoted. NFC payments are still rarely known in China.

The third stage thus appeared. Since 2013, mobile phone manufacturers have gradually become the main body of NFC payment, and the mobile phone terminal mode has also become the new trend of NFC payment. According to the statistics of CITIC Securities, at the end of September 2014, there will be 20 domestic NFC-enabled mobile phones. All brands include Samsung, HTC, SONY, LG, ZTE, Huawei, Cool, Lenovo, and other well-known brands at home and abroad with price coverage. High, medium and low grades. Apple payment also belongs to the all-terminal mode.

"The power from the market is much larger than that of mobile operators and UnionPay." Chen Jianwei said that next year there will surely be a batch of NFC payment applications going online, such as bus swiping applications and membership card payment applications.

According to Li Xiaofeng, the central bank is also pushing the NFC technology pilot. At present, Zhejiang based on the SE component can do cell phone personal credit, and open mobile phone credit information, that is, the mobile phone through the SE component for personal credit information protection query, the central bank credit information center to send information to the phone.

Unified global mobile payment?

From a global perspective, it is unclear who will become the dominant NFC payment provider in the future, but what is certain is that the winners must have strong control over the industry chain, especially terminal equipment.

In the United States, Google Wallet, which is basically similar to Pay's function, was launched in a high-profile manner, but failed due to lack of support from operators and hardware manufacturers. Wang Weidong said that Google itself is an Internet company and NFC emphasizes terminal support. In addition, NFC technology involves multiple interests of mobile operators and card organizations. US card organizations and mobile operators themselves are exploring NFC technology. Google's control over the industry chain is obviously insufficient. These reasons led to the failure of GoogleWallet.

Japan's NFC payment is the most popular in the world. CITIC Securities Research shows that as of 2010, approximately 98 million users in the Japanese market use mobile payment services, and the mobile payment penetration rate exceeds 50%. For a long time, what Japan adopted is not a standard NFC technology. Instead, it is a closed industry chain jointly created by operator NTTDoCoMo and Sony Corporation, namely, Felica. Chen Jianwei reads that Felica looks like an all-terminal NFC phone on the surface, and all hardware is on the phone. Software control is in the hands of operators. After NTTDoCoMo launched Felica, two other operators, KDDI and Softbank, also joined the Felica camp. However, with the trend of NFC technology, almost all three major operators currently give up Felica technology and instead study NFC payments.

"At present, Japanese operators are mainly engaged in NFC-SWP, but it may not be after Apple paid out," said Chen Jianwei.

Japan's NFC payment can be popularized, which is inseparable from the "families" between operators and banks. In Japan, because of its relaxed financial environment, operators generally inject capital into banks to achieve the same interests. For example, the operator NTTDoCoMo invested 34 billion yen in Mitsubishi Sumitomo credit card company in April 2005 to obtain 34% of the shares; the operator KDDI announced in April 2006 that it planned to establish a joint venture with Tokyo Mitsubishi UFJ to establish the first mobile phone as the main channel. bank.

NTTDoCoMo once tried to replicate its business model globally and suffered a terrible failure. Ping An Securities believes that the failure of NTTDoCoMo is mainly due to the lack of dominance of the local industry chain.

CITIC Securities Research shows that in South Korea, mobile payment penetration rate is even higher than Japan: In 2011, operator KT users used a total of 30 million NFC services, the transaction amount reached 9.5 million US dollars, and the operator SK has issued more than 1.5 million. Zhang NFCSIM card, its mobile payment product "SmartWallet" has 4 million users. At present, 70% of electronic payments in Korea are completed by mobile phones, and mobile payment accounts for 60% of users. The Korean government strongly supports mobile payment and provides 2% consumption tax concessions to merchants supporting near-field payment. For merchants in the retail, catering, hotel, etc. industries, if they do not accept mobile payment, they will be regarded as the focus of tax inspection.

Ping An Securities Research believes that Apple will become the only integrator and leader in the global mobile payment industry in the future. "From the collapse of Google Wallet to the failure of global promotion of the NTT model, what we are seeing is the possibility of Apple unifying the world."

However, Apple's "single go-ahead" involving NFC has caused U.S. mobile operators to suffer. A week after Apple paid for the release on September 9, the United States' AT&T, Verizon, and T-Mobile announced that they are lobbying for Apple's next launch of the NFC-SWP version. The joint statement said that three mobile operators have established Softcard "soft card" alliance. CEO Michael Abbott told the media that he is currently working with Apple and hopes to launch an NFC-SWP-based mobile payment system in the second half of 2015, when the iPhone 6S is released.

In China, then, is Apple's payment smooth all the way? The answer is not necessarily.

Analyst Analyst Li Yan believes that Apple Pay will face the balance of interests with mobile operators in China. After the spread of NFC payment scenarios and applications, it takes a lot of costs to cultivate people's awareness and habits of NFC. "Alipay and WeChat are not hesitating to promote mobile payment." In China, who will pay for the future cost of NFC promotion?

UnionPay experts believe that Apple's current payments are all foreign card organizations. Spreading Pay overseas, card organizations also need to transform POS terminals one by one, which involves a large amount of costs, and is similar to UnionPay's Flash transformation costs. Flash transformation costs, a POS terminal needs about a few hundred dollars.

He Dayong, a Boston Consulting Director, said: "Payment is a very thin profit. The bilateral activation between the consumer and the merchant is the core. Google Wallet is a good consumer, and the merchant can't keep up. Square is the other way around. Can Apple? The activation of merchants and consumer duals is the key to Apple's popularity."

"If the domestic market wants to do it, there must still be companies with industry integration capabilities." Li Xiaofeng believes that Alibaba and Tencent have considerable potential and have advantages in technology and industry integration.