RFID - The Future of Contact Less Payment in Asia (Fusion Consulting) - 050321

strategy from business intelligence
Industry briefing
RFID – the future of contactless
payment in Asia
21-March-05
Fusion Consulting © 2005. All rights reserved.

Contact: Renia Lopez, renia@fusionc.com
Web: www.fusionc.com Email: more@fusionc.com

Tel: Singapore (65) 6423 1681 Hong Kong (852) 2107 4299
© 2005. All rights reserved. www.fusionc.com RFID – the future of contactless payment in Asia | 21-March-05 0
RFID – the future of contactless payment in
Asia
Conclusion: The likely future of contactless payment ______________ 3

Introduction to RFID _________________________________________________________________ 6
RFID in contactless payment __________________________________________________ 17
Integrating RFID with new devices _________________________________________ 23
Appendix: Information sources _______________________________________________ 32
About Fusion Consulting __________________________________________________________ 36
This Industry Briefing report provides an overview of the future prospects for RFID use in consumer payments for public
transport and other small purchases.
The report is provided as is, free of charge and without any warranty or guarantee. Fusion Consulting accepts no
responsibility for errors or omissions, or for any loss or consequential loss arising as a result of decisions taken based on
its contents.
©2005 Fusion Consulting. All rights reserved. This report is copyright, however individual pages or portions thereof may
be copied referencing “Fusion Consulting” as the source.
Fusion Consulting is a business intelligence consultancy providing clear strategic advice on Asia-Pacific markets. With
offices in Hong Kong and Singapore, and over 250 consultants in 14 countries, we conduct custom research and
consulting to help companies understand their markets, compete more effectively and grow into areas of opportunity.
For further information please see the ‘About Fusion Consulting’ section, contact the author or visit www.fusionc.com.
Abbreviations, acronyms and definitions
CAGR compound annual growth rate

Contactless Contactless technology is a generic term for technologies that use electromagnetic waves to automatically identify people and objects.
By storing information in a contactless chip, the data is transmitted from a reader thanks to a coiled antenna. The reader converts the
electromagnetic waves returned from the RFID tag into a form that can then be passed on to computers that can make use of it.
cm centimetres
EMV Europay, MasterCard, Visa. EMV is a global standard for the design, security, and functionality of smart card terminals and
applications.
IC integrated circuit
ICMA International Card Manufacturers Association
ISO International Standards Organisation
kbps kilobytes per second
Mbps megabits per second
M-commerce Mobile commerce. Transactions using a wireless device and data connection that result in the transfer of value in exchange for
information, services, or goods. Mobile commerce, facilitated generally by mobile phones, and internet includes services such as
banking, payment, and ticketing.
MHz MegaHertzs
MTR Mass Transit Railway
NFC near field communications
PIN personal identification number
POS point of sale
RF radio frequency
RFID radio frequency identification
ROI return on investment
SIM subscriber identity module
UMTS Universal Mobile Telecommunications Service. A Third Generation (3G) packet-based transmission of text, digitised voice, video and
multimedia at data rates of up to 2 Mbps.
USIM UMTS Subscriber Identification Module. USIM is the UMTS version of the SIM used in GSM networks. A USIM card will not only identify
the network access account but also provide further services for public key systems, micro-payment, etc.
Conclusion: The likely future of contactless payment
Introduction to RFID
RFID in contactless payment
Integrating RFID with new devices
Appendix: Information sources
About Fusion Consulting
The likely future of contactless payment
Credit cards with RFID capabilities
In cities with strong incumbents, like Hong Kong and Credit card companies should seek early partnerships
Singapore, existing clearing houses might choose to with incumbent companies
compete with credit cards
The future of contactless payment lies with the credit card companies – they have the networks, the experience, the
clearing systems and the customers to make it successful.
• Network of magnetic readers can be upgraded to RFID.

• Existing card format used as the RFID payment device.
RFID payment lead by credit cards involves:
• Transaction management by card companies.
card cos. users
• Users are interested in consolidating their cards into one,
s possibly including ID details to facilitate access,
h ant ban
ks identification and public health services.
m er c
• Intuitive extra use of the card (minimal public education
required) and fast acceptance.
Credit card companies have been piloting RFID

payment solutions successfully in Asia (Visa in Malaysia, Pilots successful. Pilots predicted in other Asian countries
Amex and MasterCard in Japan, Amex in Singapore). including Philippines Singapore, Hong Kong, Korea.
Cities with developed public transport infrastructure

have been using RFID technology to pay for fares and RFID based payments can be very successful. The
are rapidly expanding card uses to pay for small penetration has been very high for users of public
purchases. transport, close to 100% in Hong Kong and Singapore.
RFID technology is developing fast and being deployed in a wide range of industries and solutions; it provides fast and
reliable transmission of data.
The likely future of contactless payment
Value add: Phones combined with credit cards
If credit cards enter the RFID payment market (as they are likely to), telecom vendors and operators will not be able to
compete with them in offering payment solutions. However, mobile users will be a captive (and growing) target market,
especially in countries where there is no strong culture of credit card use.
Some operators have or are developing and managing In most countries operators would still benefit from
billing systems for third parties (Chinese operators cooperating with the credit card companies, sharing POS,
being the best example); they could be interested in using credit card companies’ transaction management
extending their services and taking over small RFID- skills and learning best practices.
based payments.
To develop the integration of phones with payment Credit card companies have over 50 years of relationships
based on RFID, players will involve in the first instance: and experience with affiliated partners, banks and
telecom vendors, telecom operators, clearing houses (to customers.
manage the transactions), banks and merchants.
IT and telecom players have been cooperating with

credit card companies (enabling m-commerce through
the internet and mobile devices) and piloting RFID
solutions through added on chips and NFC standards.
The telecom industry has developed a standard – NFC – Cities with developed public transport infrastructure have
compatible with existing RFID. One of the possible uses been using RFID technology to facilitate fare payments.
could be payment for public transport fares and small These are also the locations where acceptance of new
purchases; most other uses are based on the transfer of technology is high. A solution combining mobile phones
data (music, images, etc.) and could also be linked with and payments is likely to take off.
payments.
Conclusion: The likely future
Developed transport systems use RFID; credit
card and telecom players exploring solutions
RFID technology allows for data to be transmitted between two
devices at close range without physical contact – ‘contactless’ 2004
It can be made very secure and fast, and the data stored and • DoCoMo and Sony testing
transmitted can be extensive the use of mobile phones
with RFID technology in
Transmission and validation can be done in less than a second Japan, including train fare
Cities with a good public transport infrastructure have been introducing payment
cashless payment on buses, subways, and trains • Visa testing credit cards
Payment is realised by nearing a pre-paid (and rechargeable) RFID with RFID technology in
card to a reader, upon which the reader discounts the correct amount Malaysia
from the card • Amex piloting key rings
The frequency used (13.56MHz) has a read range of about 20 cm; no with RFID in the US and
physical contact is necessary Singapore for small
payments and access
In addition to being a pre-paid card the card can hold other
information which can be used to identify the user 2005
The two key players in public transport contactless prepaid cards are • Nokia to pilot mobile
Sony (branded solution FeliCa) and Philips (branded solution MiFare) phones with NFC chips
that will allow payment
Sony, Philips and Nokia have developed a standard, ‘near field for bus fares in Germany
communications’ (NFC), to allow compatibility between RFID services
and telecom products – this is enabling the use of mobile phones as • MasterCard and Motorola
‘contactless cards’ developing a solution
together based on NFC
Credit card players (Visa, Mastercard and Amex) are also testing the
use of RFID technology for payments, access and identification
Applications of RFID payment cards are wide
Main uses RFID payment cards

How it works
Event ticketing Mobile device
• Used as a
commuter pass Public transport
(prepaid card) for electromagnetic
trains, busses, waves
subway, taxis These applications
currently use RFID
Reader/writer
technology like FeliCa and
Mifare which are
compatible with NFC • Card detection
Retail • Authentication
• Used in
• Data read/write
supermarkets,
convenience
ID/access card
stores, fast food
• Used to manage attendance, entry and exit to
outlets and other
offices/ factories/ campus
retail outlets
• Allows purchases at company/campus’ vending
machines, cafeterias, etc
• In campuses it includes matriculation,
identification, library borrowing, access control,
anonymous exam marking, student association,
sponsorship, meal tickets, buses, bicycle storage
Source: Fusion Consulting industry interviews; company press releases
RFID cards used for transport, retail
payments and access in Hong Kong
RFID payment technology – the Hong Kong example Octopus in Hong Kong
Smart cards (chip inside) have been in existence for over a decade • Within three months of
MTR Corporation was first to use RFID in the Hong Kong public launching, 3 million
transport system in 1997 to allow for cashless payment of cards had been sold
underground train fares • Today there are 11.1
Today the use of contactless RFID cards in non-cash transactions in million Octopus cards in
Hong Kong is widespread and has been extended to applications circulation (for a
such as access and identification as well as pre-paid cards for small population of 7 million)
retail purchases and public transport • Users span all social
Telecom and credit card players are looking at the possibilities of levels, ages, education
using RFID technologies by integrating existing services with those levels and races
offered by contactless smart cards • Public education needed
Although it has been estimated that by 2006 50% of mobile phones was minimal
in Hong Kong will have RFID capabilities, the credit card companies
might be winning the race in terms of RFID based payments
Contactless card market growing in double
digits to over US$3 billion by 2008
Smart card penetration and growth
• Increased use of smart cards – 1.6 billion chips worldwide in 2003; expected CAGR 14%
• The use of smart cards in public transport payment has been growing faster than other uses
• Smart cards are convenient, fast to use, secure and cheap thus making them viable solutions even in developing
countries
• On average each person holds 4.6 cards in their wallets
• Contactless cards market is projected to grow at a CAGR of 47% from 2002 to 2006
• Revenues from RFID expected to reach over US$3 billion by 2008
Average number of credit cards carried in wallets Global smart card usage growth by application
Indonesia 8.3
Hong Kong 5.9 GSM 10%
Singapore 5.5
5.5 Pay TV 20%
Japan
Taiwan 5.3 Financial 21%
China 4.7
Philippines 4.0 ID security 30%
Malaysia 4.0
Korea 2.3 Transport 61%
Thailand 2.3
India 2.2 0% 20% 40% 60%
0 2 4 6 8 CAGR 2002-2007
Note: Card penetration relates to ALL credit cards, not only RFID cards; urban only.
Source: Fusion Consulting consumer survey, n=80; CIA World Fact Book; Octopus. Source: Gartner
Same technology across Asia but no
compatibility
Details of public transport RFID networks Cards used in public transport
Most public transport payment cards allow for other transactions
to be carried out, within the network (managed by the clearing Hong Kong
house). • Card brand: Octopus
• Clearing house: Octopus Cards
Transactions carried out are managed by clearing houses usually • Main company: MTR
partly owned by the main public transport company. This • RFID system: FeliCa
integrated approach ensures fast deployment of the technology
throughout the public transport. Singapore
Readers are owned by the entity receiving payment (stores, • Card brand: Ezlink
public transport company) but the software can usually only be • Clearing house: EZ-Link Pte Ltd
• Main companies: MRT, LRT
reconfigured through the clearing house.
• RFID system: FeliCa
Data within the chip is stored in folders, readers have to be
programmed to read the right data from each folder. Tokyo
• Card brand: Suica
There is no initial compatibility between existing RFID systems in • Clearing house: BitWallet Inc.
public transport. Hong Kong, Singapore, Beijing, Taipei, Tokyo, • Main company: East Japan Railways
Manila (being introduced) all have customized readers that will • RFID system: FeliCa
not accept each others cards.
A common standard will allow for compatibility but readers will Malaysia
• Card brand: Touch’ n Go
need to be reprogrammed.
• Clearing house: Rangkaian Segar
Most cards are prepaid (although there are some credit cards in Sdn Bhd
use in Korea and Japan). • Applications: Tolls, trains
• RFID system: MiFare
Readers cost ~US$100 (US$400 if sold branded) and cards
US$0.3 (US$2 if sold branded).
Increasing number of RFID players in the
market, lead by Sony and Philips
Map of key RFID payment players RFID technology
• Sony and Philips are heavily
influential in the market
Mobile handset vendors • Cards in Asia are based on
either FeliCa or MiFare
Nokia Samsung RFID technology
• Any future integration with
players other solutions will need their
Philips Motorola approval and cooperation
Infineon Technologies STMicroelectronics
Telecoms
NFC Gemplus • Handset vendors are
TI embracing NFC and
Sony incorporating it into devices
Hitachi • Exploring the use of mobile
Innovision Research and Technology ASK phones to pay for public
Royal Philips Electronics transport and small purchases
• Integration will be required
IRISU with clearing houses,
Samsung Electronics operators, transport
Inside Contactless operators, retailers and banks
Credit card companies Bielo Credit cards
Atmel
American Express • Testing cards and other
Visa devices that use RFID
MasterCard • Credit and debit card
functions so far only in retail
and ID function
Source: Fusion Consulting industry interviews
FeliCa and Mifare RFID payment systems
dominate in Asia
FeliCa Developed by Sony
Year developed 1988
Use in Asia Pacific Hong Kong, China, Singapore, Japan
Cards sold 60 million (estimated)
Applications Public transport, electronic money, ID, direct downloading of value (prepaid money), content-
based data, electronic ticketing and online credit
Mifare Developed by Philips

Year developed 1995
Use in Asia Pacific Korea, India, China, Malaysia, Singapore, Taiwan, Thailand, Australia
Cards sold 250 million
Readers/writers sold 1.5 million
Applications Over 600 (access control ,airline ticketing, banking, city cards, gaming, government, health,
identity, internet, loyalty, payphone, public transport, road toll, ski ticketing, vending, events
ticketing)
Market share 80% of the global market (developing related products, not only the technology for the chips)
Technical specifications (both FeliCa and Mifare)

Security ISO / IEC 15408 EAL4 (criteria to measure the security level of a system) and ISO / IEC 14443
(criteria to measure the transmission protocol, physical characteristics, initialization and anti-
collision, radio frequency power)
Authentication possible for multiple services under one card
Frequency 13.56 MHz
Background noise not an issue
Speed 212 kbps
Processing time 0.12 seconds
Telecom players want a slice of payments too
Near Field Communications (NFC) standard

Telecom vendors have developed the NFC standard, which is compatible with RFID payment technologies
Developers Sony and Royal Philips Electronics

Year 2002
Description A standard to allow communication at short-range (centimeters) between different devices
Devices communicate by bringing them close together
Transfer data without need to configure
Compatibility With FeliCa and Mifare, existing telecom technologies like Bluetooth® or Wireless Ethernet
Use In mobile phones, PDAs, handheld games, MP3 players, as payment devices but more generally
to transmit data
Other players Nokia, Samsung, Motorola, Hitachi, Innovision, VIVOTech, Visa, Universal Music
Technical specifications Frequency: 13.56 MHz (unrestricted frequency, no licenses required)
Range: 0~20 cm
Operation modes: active and passive (allows for a device to work in power-saving mode)
Future applications
• Download train timetable from a station’s central information board to telephone by swiping PDA by the board
• Download promotional music track from advertising poster onto MP3 player by swiping the MP3 player by the poster
• Payment of public transport fares anywhere by swiping the same phone in a bus in New York, Shanghai or London
• Swipe mobile phone by laptop to copy a flight schedule, select and pay for a flight over the mobile phone without the
need to make a call, swipe the phone at the airport to check in
• Buy two theatre tickets over the internet, swipe to PDA, transfer one from PDA to a mobile phone, two people enter the
theatre one using the PDA, one using a phone
The public’s perception of RFID is negative
Issues with RFID

Security
• Personal information stored in an RFID based device could • Believed not to be such an issue in Asia
be used to track individuals (culture of “control”)
• Activist (mainly in the US) are already advocating loss of • Devices are configurable based on
privacy due to RFID use privacy and security standards followed
by each issuing bank in each host
• Information stored in devices could be read by non- country
authorized readers
• However how secure is the system
• The only encrypting done on the card is in a challenge- really?
response process to identify an authorized card reader.
Other encryption is handled by back-end systems.
• Lack of public education is not a barrier
Relative lack of information about RFID in Asia for successful implementation;
awareness increasing fast
Negative image (logistics industry)

• Although mostly referring to the
• Use of RFID for other uses is proving to be costly, not so logistics industry, RFID press has so far
secure and not so effective been quite negative
• Tags cannot always be read • But individual users are likely to carry
• Interference from metals and bulky items on using their devices without linking
them to RFID
• Per-unit cost is high
Consumers and retailers benefit from RFID
Advantages of using RFID in small purchases

Reduction of time spent per transaction
• No signature needed; no PIN or other identification
• Considerable ease of congestion in public transport access points
• Pilots carried out by American Express show checkout time reductions of 30-40%; MasterCard pilots
show savings of 12-18 seconds in fast food outlets and 64% average reduction in transaction time
Reduction in risk of fraud for value stored solutions
• Value stored tends to be <US$60, and payment is guaranteed
• One reader can read multiple cards, therefore there is compatibility of different solutions: credit cards,
telephones, public transport cards, key fobs, etc.
• One card can be used on different readers for different applications
Increased customer spending
• As speed and ease of small payment transactions are increased, customers will purchase more
• Pilots carried out by American Express have seen increases in spending of 20-30% over cash
spending. MasterCard found that the value of transactions using RFID cards was 10% higher.
• Increased card loyalty for financial institutions and increased services for customers
Perceived increased security for users
• The device does not need to leave the hand of the user
• Record of every transaction is available
Fast adoption in most countries
RFID payment card adoption and potential
• Countries with weaker public transport infrastructure don’t use contactless cards
• Only India, Indonesia and the Philippines have no RFID network; users in other countries are familiar with the concept
• Users’ main interest is public transport and toll payments
• Existing users of contactless cards in public transport would like to see services extended to retail and taxis
• The concept of integration with credit cards or phones is not very popular, especially in cities with high penetration
• Users are uncomfortable with consolidation of all their data into one device
RFID payment card ownership Lack of RFID payment integration

yes no with credit card and mobile handset
Thailand 25% 75% No integration with card No integration with mobile
Thailand 25%
Taiwan 67% 33%
100%
Singapore 100% Taiwan 67%
Singapore 62%
Philippines 50% 50% 54%
Philippines 75%
Malaysia 100% 50%
Korea 50% 50% Malaysia 50%
Korea 75%
Japan 50% 50% 50%
Indonesia 100% Japan 80%
India 100% Indonesia 33% 100%

Hong Kong 100% India 50%
33%
China 30% 70% Hong Kong 80%
China 70%
0% 20% 40% 60% 80% 100% 50%
Source: Consumer survey; n=80 20% 40% 60% 80% 100%
Transport is the No.1 application; expanding
into other areas in Hong Kong and Japan
East Asia: Contactless payment card products and main applications
Korea Japan Hong Kong Shanghai/ Taiwan
Beijing/Shenzhen
Contactless
card 50% 56% 100% 10% 67%
penetration
Suica, IO,
Card names T-money Octopus Transcard
Passnet, Easycard
Metrocard,
PT PT, FF, R, PT, R, FF, V,

Main uses PT PT
access, V PK, access
Other uses Integration Taxi, ID R, extend

wanted R Tolls
of cards card network
Respondents 4 11 16 11 3
Note: PT= public transport; R= retail (small purchases below US$25), FF= fast food, V=vending, PK=parking; only includes main uses mentioned by users surveyed
Source: Consumer survey; n=45
High penetration and multiple uses in
Singapore and Malaysia
Southeast/South Asia: Contactless payment card products and main applications
Thailand Philippines Singapore Malaysia India Indonesia
Contactless
card 33% 100% 100%
0% 0% 0%
penetration
Ezlink
Card names ETCS Flash Pass Cashcard Touch’n Go
(Visacash)
PT, FF, R,
Main uses Tolls PT Tolls, PK, R
PK, tolls
ID and Combine
Other uses
loyalty R both cards,
wanted
schemes fuel, ID
Respondents 4 4 15 2 7 3
Note: PT= public transport; R= retail (small purchases below US$25), FF= fast food, V=vending, PK=parking; only includes main uses mentioned by users surveyed
Source: Consumer survey; n=35
Trend towards implement RFID cards in Asia
Main RFID applications and developments around Asia

China South Korea Japan
• Over 60 cities use RFID cards in the public transport T-money • 40 million cards in transportation uses by 2010
(plans to double that by end of 2005) • The National Police Agency is promoting smart
• Used for tolls, can be
• Government rolling out standard platform nationwide integrated with credit card cards to minimise forgeries
• Based on Mifare but slightly modified (it might not be • RFID card introduced in late Suica
compatible with NFC) 2004 for public transport • Uses: Public transport, retail, home access (key),
uses include small purchases credit card, vending, events, corporate security
• Easy roll out as strong government control of public
transport and legacy of little privacy access (ID card)
• 9.2 million cards in circulation at Jun-04
Philippines
Flash Pass
• Launched in 2004
• A unified ticketing system used in Manila for the
light rail and metro rail networks Hong Kong
• More uses: small purchases Octopus
• Likely to succeed in Manila’s trains but not in • Exploring the potential of linking it with the
other areas or other transport as the culture is not healthcare system (identification and payment)
Singapore
one of ‘storing value’ and purchasing power is low • Uses: public transport, exhibition and convention
Ezlink registration, vending machines, congee shops,
• Over 6 million cards at Dec-04 digital music kiosks and insurance machines,
Malaysia parking, photocopying centers, public swimming
• Uses: Public transport, pools and sporting venues, schools/campus
• Visa piloting RFID based cards trialled in over 150 McDonalds, libraries, cinema, (attendance, access, payment), library cards,
shops and eateries; strong backing from the schools, food courts supermarkets, personal care stores, cinema
banking community ticketing, office access
NETS
Touch’n Go • 11.1 million cards in circulation, 8.7 million
• Uses: carparks, tolls, library,
• Uses: Tolls, petrol, parking, theme park fuel, convenience stores transactions a day (October 2004)
Source: Press; Fusion Consulting industry interviews and consumer survey
Hong Kong and Singapore are key markets in
which to test integration
Preferred locations for introducing integrated solutions Integration of RFID payment
in public transport
• Japan is already using
More contactless cards but there is no
favourable integration between the various
Top locations transport operators
Hong Kong • China will present some
compatibility issues (their
Singapore systems are based on a
modified version of Mifare) as
Korea well as financial insecurity
Malaysia • Malaysia is piloting Visa’s RFID
Adoption
Taiwan credit card, and Philippines is

Thailand introducing Flash cards. In both
Japan countries the public transport
infrastructure might not be
developed enough
China
Philippines • Hong Kong and Singapore are
small market with fast adopters
of new technologies
Indonesia
• Hong Kong has widespread use
India of Octopus (public transport,
retail, access and others)
Less
• In Hong Kong Octopus Cards
favourable Ltd. is open to partnerships with
Limited Existing contactless network Extensive other players (Telecom
operators)
Source: Fusion Consulting industry interviews; press; company press releases
Integrating RFID with credit cards will be
easier than with mobile phones
Advantages and disadvantages of integrating RFID with credit cards and mobile phones
Credit cards Mobile phones
Advantages Disadvantages Advantages Disadvantages
Widespread use No display Widespread use Initial cost
Need to develop
Familiarity All ages
No interaction comprehensive
service offer
POS set up Linked to financial Display

Limited battery life[1]
institution
Clearing Interaction High handset

system set up churnout
Restricted use
to those with Compatible Will require
bank accounts with other IT educating the
Easy to use devices (lap user
(no need to be top, PDA etc)
technically
savy) Complicated network of
approvals (operators,
clearing house)
Note: [1] This issue has already been solved in many handsets, such as
DoCoMo’s FeliCa models with 300 hours stand-by time.
Mobile phone subscription keeps increasing
Mobile phone subscriptions by country

% CAGR
68 7%
Japan 90 • Ownership of the mobile phone is still growing, in
2 7% particular in less developed countries
Vietnam 2
• Services offered on a mobile phone are becoming
24 3%
Taiwan 27 wider, minimising the need for other devices
18 (such as cameras, MP3 players, PDAs)
12%
Thailand 28 • A mobile phone screen will allow the user access
3 6% to more information (such as the remaining value
Singapore 4 on a pre-paid service)
15 25%
Philippines 37 • Mobile phones allow interactions with other
9 12% sources (eg. bank, internet)
Malaysia 14
32 3%
Korea 37 • Handset manufacturers will only develop models
11
Indonesia 43 2002 40% for large markets (Hong Kong or Singapore are
2006 too small)
6 87%
India 78 • Services offered through handsets need to be
Hong Kong 6 3% wide and well developed (to ensure value to
7 user)
207
China 386 17% • Constant new developments in telecoms which
decrease customers’ enthusiasm for new services
0 20 40 60 80 100 220 380 (expectation that something better will soon
Subscribers (million) replace it)
Source: Fusion Consulting; Goldman Sachs; Infora
Telecom would need partnerships to offer
payment solutions
Barriers to integrating handsets with existing public transport RFID solutions
Deployment in cities without RFID networks
In the future all handsets are likely to have NFC capabilities; however the issue will It is unlikely to catch on in less
be who will deploy the network of readers and manage the transactions. Operators developed countries. Might be
are unlikely to have the resources, users in developing countries cannot afford to introduced only in key cities.
“store value”, and RFID readers are more costly than the transport vehicles.
Deployment in cities with existing RFID networks If clearing houses retain the
Handsets with NFC will be developed. To be successful they will need to facilitate management of transactions,
exchange of data between telecom devices as well as m-commerce. Public transport partnering with public transport
fare payment and small purchases could be extra services however this will have to could be feasible and fast (Hong
be done with the cooperation of operators, clearing houses, banks and merchants. Kong and Singapore, mainly).
Existing clearing houses likely to

Managing the transactions
consider partnerships with
Telephone manufacturers and operators are unlikely to have the resources or know-
operators. Some operators may
how to manage the transactions. A third party will be needed.
offer RFID solutions (China).
Integration with existing systems (public transport and some retail) Technically possible.
Competition from credit cards and incumbent systems who may block new players Feasible if partnerships with
existing players are set up.
Security and phone-renewal

Technical issues which are
The RFID chip is not part of the SIM card and as the phone reaches the end of its
being solved.
life-span this presents some issues regarding security and transferability of the data
Level of difficulty
Coordination between players will be
complex for telecom based solutions
Integrating existing solutions with mobile phones
Need to coordinate: Banks

Equipment Operators Central clearing Credit
vendors (phones) • Get most of the house transfer/
• Develop handsets operators on board • Process payments clearance
with NFC standards • Integrate existing • Settle and record
compatible with solutions with mobile transactions
existing contactless phone offer • Interface with banks User
solutions • Coordinate sales of and other organisations
• Make NFC available handsets and services • Market to different
in all models • Carry out marketing front-end solutions
• Add NFC to other and customer education • Provide secure key Merchants
devices (PDAs, • Widen network of management POS
laptops, etc.) front-end solutions compatible
with NFC
Integrating existing solutions with credit cards
• Extension of existing services to incorporate contactless payments

• No need to coordinate with equipment vendors, operators or clearing houses as credit card companies
can use existing cards, POS network and their clearing house resources
Learnings from Japan indicate a slower than
expected uptake of RFID payment cards
• NTT DoCoMo has been piloting RFID services in mobile handsets (Suica)
• Felica phones will be used from January 2006 for payment of train fares with East Japan Railway
• However the rail network is run by various companies and Suica adoption might not be standard
• Only 2% of passengers were seen to use Suica cards (as of September 2004)
• Extensive payment infrastructure (turnstiles, ticket machines) would need replacing if RFID payment is enforced
• Japan’s customers are technologically open to changes and are fast adopters but there is still strong resistance to RFID
applications on phones and concerns with data privacy and security
• However handsets with fingerprint recognition sensors could help solve that concern (for large transactions)
• And DoCoMo is offering already FeliCa in 4 handsets for 3G and 3 for 2G so penetration is expected to be fast
• Large handset churnout (handsets are replaced every two years)
• Vodafone KK and Sharp are developing a transferable IC chip to be used in handsets, PDAs, car navigation systems and PCs
• KDDI is working with Hitachi to offer RFID services through USIM card
• Currently offering credit card transactions (Kei-Credit) where credit card data is sent through the infrared port of the handset (this is not RFID
based technology but is also contactless)
Japan: Phone payment preferences and issues RFID services Japanese customers would like on their handsets
Concerned about 3%2% Train fare payment
safety of data 69% 3% Purchases from convenience stores
4%
Would use the Access to private house (key)
10% 7%
phone as home key 34% Credit card
Would use the phone 8% Purchasing of tickets and entrance to events
for purchases 37% Purchases from vending machines
9%
Access and payment at amusement centers
Would m-commerce 30% 13% 17% Flying without needing a boarding card
Access to offices
10% 30% 50% 70%
Payment at karaoke clubs
Source: Yahoo! Japan, based on 17,511 responses; IT Media Mobile; Fusion Consulting industry interviews
Increasing use worldwide of financial cards
Credit cards in use Credit card usage trends

• Credit card usage keeps increasing,
Visa and MasterCard financial cards in circulation 2003 global growth between 2002 and
2003 was 10%
China 10% • China, despite its weak financial
Japan 7% reputation, is the second country in
S Korea 6% the world in terms of number of
2.5 2.4 cards in circulation (USA is leading
Taiwan 4%
billion cards
2.0 1.7 with 755 million cards)

1.5 73% • China has 648 million payment
1.0 cards with 150 million branded
Other non-Asian VISA and 84 million MasterCard
0.5 top ten countries
• India has seen over 25% annual
0 growth in credit/debit cards and
Global Top ten expect to grow from 6 million cards
total countries in early 2003 to 10 to 15 million
cards by 2005
Note: Includes both credit and debit cards. Visa and MasterCard constitute 94% of all credit cards in circulation;
others include Amex (3%), JCB (2.5%) and Diners (0.4%).
• Korea is believed to be one of the
Source Nilson Report; CardWorld; Korea Herald; NE Asia Online
key players for future development
involving payment systems thanks
to both its technological edge and
high Internet and wireless telecom
penetration (according to Visa)
• Japan expects to have over 200
million financial cards by 2010
Main credit card players are looking at Asia
Credit card RFID pilots

Visa MasterCard American Express JCB
Name VisaWave PayPass Express Pay QUICPay (Oct)
Location Malaysia, Taiwan Japan, Florida, Texas New York, Phoenix, Tokyo
Singapore
Card users
Users Card users Employees and card users Card users
Stores, food outlets
Applications Stores, fast food, fuel, Stores Taxis
events
Card, integrated with EMV
Device Card, integrated with Key fob and card Mobile phone
magnetic strip (Singapore only key fob)
Credit
Payment Value stored, credit and Credit, charge, debit, Value stored (linked to
debit capabilities stored value credit card)
Users content with
Issues Users afraid of losing the Acquired part of EMV;
existing cards
devices will they integrate?
Other markets in Asia

Future uses Integration with mobile Various devices being Stores in Asia (JCB
Pacific
and markets phones. Expanding trials considered markets), no US or
in US; introducing in EU. Public transport Europe market
(expected), Asia Pacific
and US; interoperability
with other players
MBF cards, Association of
Cooperation Nokia (external chips), With NTTDoCoMo
Banks in Malaysia, Bank
Motorola (NFC), Chase,
Negara, Philips, DoCoMo
Citibank, MBNA
Credit cards have networks and know-how
Barriers to integrating credit cards with existing public transport RFID solutions
Technically possible but time
Integration with existing systems (public transport and some retail) consuming as readers will need
Although not necessary for a successful deployment, existing contactless card users reconfiguring. Negotiating with
will expect integration of the two systems (public transport solutions and new credit clearing houses and agreeing
card based solution). partnerships will be more
complicated.
Deployment Interoperability between cards

POS accepting credit cards will be expected to accept RFID based cards, globally – and magnetic strip solutions
this means ensuring that all the readers are compatible. already being considered
Merchants will need to see its benefits and the public to buy into the idea. Merchants will see a ROI
(readers cost from US$100)
Cost of managing the transactions

Mondex (launched in the UK in 1995) was withdrawn after two years due mostly to If the cost of managing the
the high costs. transactions can be kept down it
• UK Universities trialed Mondex as a bank card also providing identification, is profitable and credit cards
matriculation, library and access at US$12 per card per year. Other solutions (not companies have the
bank related) provide the same services at US$0.18 per card per year. management skills
Access to personal information

Personal information will be stored in a personalised card (any card offering access Less of an issue in Asia where
and other ID related services), in addition to bank details. government control is more
RFID allows tracking of each card, and can disable specific readers – this means accepted than in Europe and US
RFID card users and their transactions will always be traceable.
Level of difficulty
Desk research sources
ABI Research, www.abiresearch.com/home.jsp Internet World Stats,

http://www.internetworldstats.com/stats3.htm#asia
CardsnowAsia,
www.cardsnowasia.com/search.cfm?q=RFID&x=47&y= IT media, www.itmedia.co.jp
14
Nokia,
Card Technology, www.cardtechnology.com/cgi- www.nokia.com/BaseProject/Sites/NOKIA_MAIN_18022/
bin/readstory.pl?story=20030101CTMC219.xml CDA/Categories/Business/LargeBusiness/FieldForceSolut
ions/UserScenarios/_Content/_Static_Files/in_touch_fina
Computerworld,
l_logo2_story1.swf
www.computerworld.com/softwaretopics/erp/story/0,10
801,96051p3,00.html NTT Docomo, www.nttdocomo.co.jp
Contactless News, Philips Semiconductors,
www.contactlessnews.com/news/2004/04/26/inside- www.semiconductors.com/markets/identification/articles
launches-its-portable-multistandard-reader-and-4k-byte- /success/s81/
secure-memory-chip-at-cards-asia-2004/
RFID Journal,
CNN, www.rfidjournal.com/article/articleview/208#Anchor-
http://edition.cnn.com/2004/TECH/12/06/spark.nfcchips 23240
/index.html
RFID Weblog,
CSIER, http://www.rfid-
www.csiesr.jussieu.fr/IMG/pdf/carte_edinburg.pdf weblog.com/archives/if_your_rfid_mastercard_is_stolen
_are_you_liable.html
DevX.com, www.devx.com
Technology Review,
Fusion Consulting weekly market update
www.technologyreview.com/forums/forum.asp?forumid
How Stuff Works, =149
http://electronics.howstuffworks.com/question332.htm
Texas Instruments,
ICMA, www.icma.com/info/contactlesscards1204.htm www.ti.com/tiris/docs/news/partner/2003/07-16-
03.shtml
Inside Contactless, www.insidecontactless.com
Yahoo! Japan, www.yahoo.co.jp
International Standards Organization, www.iso.org
Industry interviews
Alcatel Octopus Cards

American Express Philips
CPP Siemens
EZlink SingTel
Gemplus SmartTone
Hutchinson Sony FeliCa
JCBC Starhub
MasterCard Sunday
Motorola Visa
MTR Corporation
Consumer survey
80 people across Asia Demographics

Hong Kong: 16 Age range: 27-50
India: 7 University graduates
Indonesia: 3 Middle income in local terms
Japan: 11
Korea: 4
Questions administered by telephone
Malaysia: 2
Philippines: 4 and email
Shanghai/ Beijing: 11
Singapore: 15
Taiwan: 3 Questions asked
Thailand: 4 Number of credit cards in your wallet?
Do you use RFID cards?
How many RFID cards do you have and what are
Note: This survey was intended as a rough
their names?
snapshot, not a statistically accurate How do you use your RFID cards?
sample What other uses are there for your RFID cards?
What other uses would you like?
Would you like to see your RFID card integrated
with your mobile phone/your credit card?
Clear strategic advice in Asia Pacific
A business intelligence consultancy
providing clear strategic advice
on Asia Pacific markets
We help our clients

• Understand their markets
Our strategic advice • Compete more effectively
• Makes companies more successful • Grow into areas of opportunity
• Stems from business intelligence
• Is nurtured by experience
Our mission
• To be the partner of choice for
pragmatic strategies in Asia Pacific
Industry experience in 14 countries
Strategy centres in Community of 250 consultants Jun, Manila

BSc, 7 years in fixed and mobile telecom
and Internet services
Hong Kong and • Know their local markets and business practices Ganesh, Mumbai
MEng, 30 years in chemicals, IT, telecom,
• Have expertise in one of the industries we serve medical and financial services
Singapore Rajendra, Pune

BEng, 17 years in electronics, plastics, and
industrial
Directors 10+ years research and Justin, Seoul
PhD, 16 years in agriculture, chemical and
consulting experience in Asia-Pacific engineering
Xiaowen, Shanghai
Strategy Directors developing MBA, 16 years in chemicals
Jerren, Singapore
recommendations for clients BCom, 8 years in IT and telecom
Wayne, Sydney
Business Analysts gathering and MBS, 28 years in agri-chemical and food
Ti Fan, Taipei
analysing business intelligence MBA, 14 years in equity research, asset
management and international investment
Knowledge Specialists tracking Kara, Tokyo
BA, 10 years in equities and technology
industries and economies
Sunita, Ahmadebad
MCom, 13 years in broadcasting and IT
Sandra, Auckland
Industry practices
BA and MPP, 24 years in healthcare,
biomedical, biotechnology and IT
Uday, Bangalore
Consumer & retail PhD, 21 years in IT and media
Pakinee, Bangkok
Chemical MSc, 25 years in medical and finance
Timothy, Beijing
Financial services MBA, 22 years in paper and packaging
Phyllis, Guangzhou
Industrial & logistics MCom, 5 years in corporate banking and financial
services
Information & communication K.K., Hong Kong
technology MBA, 11 years in equities and financial services
Putera, Jakarta
Life science MAC, 8 years in investment banking
Timothy, Kuala Lumpur
Media & leisure MBA, 9 years in telecom and chemicals
Strategy from business intelligence
We start by understanding
more about your business, your Practical advice with evidence
strategic intentions and what you
already know about the market Analysis
• Benchmarking
Our consultants bring practical • Validating
expertise rather than academic Operational
• Frameworks
knowledge in the industry and experience
• Interpreting
their home market
We apply knowledge from one Secondary
data Common
industry to another so you benefit Cross-industry sense &
directly from the best practices knowledge
we have identified intuition
Deep business intelligence

underlies all our Client
Primary
recommendations, which are input
research
delivered with evidence you can Project management
dissect and discuss • Critical updates to client
• Interim reports
• Field research team
• Strategy team
Range of services
Understand your markets
Monitor your markets and competitors. Benchmark your ?
performance. ?
?
Market profiles ?
Customer intelligence
Market update service ?
Understand
Compete more effectively

Size your competitive opportunities and make the most
of them.
Market sizing and modeling
Competitive intelligence and strategy
Value chain consulting
Compete
Grow into areas of opportunity

Prioritise your expansion options. See how to grow and
who to partner with.
Business expansion strategy
Market entry strategy
Partner evaluation and selection
Grow
a business intelligence consultancy
delivering clear strategic advice on
Asia-Pacific markets
www.fusionc.com
more@fusionc.com

RFID - The Future of Contact Less Payment in Asia (Fusion Consulting) - 050321

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

RFID - The Future of Contact Less Payment in Asia (Fusion Consulting) - 050321

Uploaded by

Copyright:

Available Formats

strategy from business intelligence

Fusion Consulting © 2005. All rights reserved.

Web: www.fusionc.com Email: more@fusionc.com

Conclusion: The likely future of contactless payment ______________ 3

CAGR compound annual growth rate

• Network of magnetic readers can be upgraded to RFID.

Credit card companies have been piloting RFID

Cities with developed public transport infrastructure

IT and telecom players have been cooperating with

Main uses RFID payment cards

Source: Fusion Consulting industry interviews; company press releases

Mifare Developed by Philips

Technical specifications (both FeliCa and Mifare)

Near Field Communications (NFC) standard

Developers Sony and Royal Philips Electronics

Source: Fusion Consulting industry interviews; company press releases

Issues with RFID

Negative image (logistics industry)

Advantages of using RFID in small purchases

RFID payment card ownership Lack of RFID payment integration

India 100% Indonesia 33% 100%

Source: Consumer survey; n=80 20% 40% 60% 80% 100%

PT PT, FF, R, PT, R, FF, V,

Other uses Integration Taxi, ID R, extend

Main RFID applications and developments around Asia

Taiwan credit card, and Philippines is

Widespread use No display Widespread use Initial cost

POS set up Linked to financial Display

Clearing Interaction High handset

Mobile phone subscriptions by country

Source: Fusion Consulting; Goldman Sachs; Infora

Existing clearing houses likely to

Security and phone-renewal

Need to coordinate: Banks

Integrating existing solutions with credit cards

• Extension of existing services to incorporate contactless payments

Credit cards in use Credit card usage trends

2.0 1.7 with 755 million cards)

Credit card RFID pilots

Other markets in Asia

Deployment Interoperability between cards

Cost of managing the transactions

Access to personal information

ABI Research, www.abiresearch.com/home.jsp Internet World Stats,

Alcatel Octopus Cards

80 people across Asia Demographics

We help our clients

Strategy centres in Community of 250 consultants Jun, Manila

Singapore Rajendra, Pune

Deep business intelligence

Compete more effectively

Grow into areas of opportunity

You might also like