One of the main impediments in Italy, as well as in Europe, for the diffusion of mobile payments made with NFC technology was the incapacity of the actors involved to agree on how to divide the pie.
In other words, telco, payment circuits, banks, and smartphone producers could not find a business model that convinced everyone. The introduction of the Host Card Emulation (HCE) technology, an open architecture that permits payments and other NFC services, ensuring the Secure Element in Clouds, would make it possible to bypass both device producers and phone operators. HCE is supported by all of the Google devices that use KitKat as an operating system, and is also supported by Visa and MasterCard who are trying to massively push the use of NFC technology.
It is interesting to watch how other countries are moving, even from a regulatory point of view, in order to understand the possible evolution of this type of technology, and more specifically in regards to payments. In the U.S., regulators have avoided creating a detailed and stringent regulation for the mobile commerce world preferring that the market determine the best solution in terms of competition and innovation. In other countries, though, the situation is very different.
In China, for example, the bank lobby and government regulators have forced the implementation and use of specific laws to block competition from big businesses in the Internet world. China’s Central Bank began a procedure last March 24 to set a spending limit that Chinese consumers will have on their smart phones. The so-called “smatphone-cap”, as the Wall Street Journal has defined it, claims to have the task of limiting business risk. The regulation also has the clear goal of slowing down business related to e-commerce, which is continuously increasing for Internet colossals like Alibaba and its Tencent Holdings Ltd. It is an obvious attempt by the more conservative part of the banking industry to slow down the competition and, along with this, innovation in online commerce.
In New Zealand, on the other hand, the situation is very different. The payment entity, Payments NZ, was created in 2010 by the Central Bank to preserve the integrity of payment systems via mobile. On March 25, the organization announced the launch of the Mobile Device Rules and Standards “packet” to define the common rules for the fragmented and increasingly relevant offers for online commerce. In New Zealand 25 million dollars a day in transactions occur via mobile phones.
The standards have been designed to ensure the integrity, efficiency, and security of payments made on-the-go. This means that whoever (telco, bank, or OTT) decides to provide such services, must follow the pre-existing sector regulations. To the contrary of what is happening in China, however, these standards do not want to slow down the competition, but, rather, want to accelerate it in a fair way for all parts involved. The new rules will also protect the final consumer by making things more or less uniform and simple. In New Zealand, therefore, Internet companies are not considered a threat. It is also true, however, that there are no equivalents to Chinese Internet giants like Alibaba and Tencent that are true competition for banks.
In light of so many approaches that are so different from one another it is a valid question to ask what (and if) Italian legislators are preparing regulations for the emerging phenomenon of mobile commerce. The hope is that the main interests that will be protected are those of the country as well as innovation.