Though the mobile-payments market is still nascent, the early successes seem to be those developed by technology companies and mobile-phone carriers–not banks. A new product from Sequent Software Inc. might level the playing field.
Sequent's product will enable banks to more easily develop their own electronic-wallet applications that use Near Field Communication chips to support contactless payments at the point of sale. This potentially frees banks from the limitations imposed by other mobile-wallet systems.
"If [Sequent] is successful in getting this [service] out there, it could be pre-installed by phone manufacturers and standardize how developers incorporate payment into their applications," says Rick Oglesby, senior analyst with Aite Group.
Google Inc. pitched its offering, Google Wallet, in May as a bank-friendly mobile-payment system because Google makes its money on ad sales instead of transaction revenue (
The issue Sequent aims to resolve is how best to provide access to the so-called secure element of the NFC chip, which stores the important identifying credentials used to conduct consumer transactions. Sequent, of San Francisco, has created middleware that lets developers access the secure element without having to take on the role of the Trusted Security Manager, a third party that manages the security of such credentials.
"We let those who manage security send the data to the secure chips we manage," says Drew Weinstein, Sequent founder and chief executive.
Consumer-facing companies have jockeyed to get a leg up in the battle for the electronic wallet. The frontrunner so far is Google, of Mountain View, Calif. Google's system stores the secure element on the phone's chip but only for phones that run its Android operating system.
Citi is Google's financial partner in the endeavor, using the bank's MasterCard products as the funding mechanism for the wallet. First Data Corp., a unit of the Kohlberg Kravis Roberts & Co. private-equity firm, is the Trusted Security Manager.
A Google representative was not immediately available for comment Tuesday.
PayPal Inc., of San Jose, Calif., has also been quite active. It announced plans for a wallet that supports NFC in Android phones but does not require it (
Instead, PayPal's wallet is linked to a magnetic stripe card usable at point-of-sale terminals that run PayPal's software. PayPal stores secure-element data externally in the cloud.
Similarly, a consortium of telecommunications providers which includes AT&T Inc., T-Mobile USA Inc. and Verizon Wireless has created the mobile payment venture Isis, which will let them control the wallet experience through their wireless networks (
Sequent aims to disrupt this culture of control by offering technology that lets multiple wallet applications interact with the secure element of the chip simultaneously. And Sequent's wallet is not limited to payment; it also supports cards used for health care, transit or loyalty programs.
That means Google could work with Sequent just as easily as PayPal could, or with any bank that wants to develop its own wallet application, experts say.
"Consumers using an NFC phone can get their credit card data not just in a wallet but in the mobile-banking application that [banks] own and control," Weinstein says.
The Sequent product is an early display of where the NFC market is moving, says Zil Bareisis, a senior analyst for the research firm Celent.
"The interface gives multiple providers the ability to access the same data credentials," Bareisis says.
Ultimately, platforms such as Sequent's could speed up the development process for the mobile wallet, says Andy Schmidt, director for commercial banking and payments at TowerGroup.
"There is the potential to foster innovation using these tools, which might get [products] to the market faster," Schmidt says.
Sequent says it is working with fewer than a dozen of the largest North American banks developing applications using its technology.
What do you think about this? Send us your feedback.
