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Should retail banks be thinking about Single Wire Protocol?

Alex Kwiatkowski | April 28, 2010
If this is the first youve heard of SWP, and youre worrying that youre somehow at a competitive disadvantage to those already in the know, dont panic.

Discussions over Single Wire Protocol (SWP) have largely been confined to technical forums frequented by those from the mobile community, be they device manufacturers or service providers. However, judging by recent enquiries from some of Ovums clients, banks are also beginning to show interest in SWP. They are mainly focused on gaining insight into the effect SWP would have on their strategic roadmaps for transactional mobile services, and understanding if its the magic ingredient needed for mobile banking to achieve its full market potential. Institutions are right to be inquisitive, but a paucity of contactless-enabled devices is restricting the usefulness of SWP.

SWP and NFC: getting behind the acronyms

If this is the first youve heard of SWP, and youre worrying that youre somehow at a competitive disadvantage to those already in the know, dont panic. SWP is essentially a standard which establishes uniform technical criteria for making the connection between a SIM card and a near-field communications (NFC) chip within a mobile device.

Stand-alone NFC chips are already being used to perform a range of proximity-based tasks, and have been embedded into different form factors for different purposes. The Oyster and Octopus cards, used to increase the speed of passenger flow across London and Hong Kongs mass transit networks, are two prominent examples of NFC in action: passengers tap their cards rather than inserting paper tickets into a barrier. Barclaycards OnePulse credit card contains both an Oyster card chip and a (separate) contactless payment chip (using Visas PayWave technology). NFC chips can also be used in mobile devices, although debate rages over the most appropriate method. An NFC-enabled handset could enable stored content (e.g. photos) to be transferred by holding the device near a screen, or open a locked door without the need for a key. And, most relevantly in the context of banking technology, it gives handsets contactless payment capabilities.

Lets have a reality check. While increasing numbers of contactless-enabled plastic cards are in circulation, adoption among consumers remains low. Outside of vendor R&D labs, payments made in the real world by NFC-equipped mobile devices (where the NFC chip is linked to the SIM) are even rarer. Certainly there have been trials orchestrated by various parties, and announcements made regarding the launch of new devices but there have been device withdrawals too. At this stage, our feeling is that the widespread commercial rollout of contactless-enabled handsets remains a long way off. And of course, deployment can never be interpreted as guaranteeing actual usage.

So where are the phones?

What exactly is so important about connecting a SIM card and NFC chip together with SWP? As far as banks are concerned, our answer is its not important for you to worry about, at least not yet. However, for others interested in getting in on the contactless payments action most notably, mobile operators SWP does have greater prominence, as it potentially gives them the ability to own part of the value chain. On first reading, this could give banks cause for alarm. Having seen PayPal grow corpulent by gorging itself on the banks lunch (and supper too), concern over losing revenue to another non-traditional new entrant coming into the payments business is entirely understandable. However, this fear is misplaced.


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