Fare by phone

An open security standard for transit fare collection unveiled on Tuesday could transform the next-generation mobile telephone into a ticket to ride.

The specification supports both smart cards and future versions of smartphones. Mobile devices equipped with near-field communications (NFC) chips would enable customers to pay for their journey at a ticket turnstile with a wave of a cell phone.

Known as "Cipurse," the standard was developed by a group of leading technology firms, which announced a new partnership, known as the Open Standard for Public Transport (OSPT) Alliance.

"For mobile device manufacturers, the open security standard will be the next ‘must-have' checklist item they include in all next-generation NFC implementations," the group said in a statement.

The OSPT Alliance described its open system as offering an alternative to proprietary technologies, which the group said "limit choices, are potentially less secure and cost more to acquire, deploy and maintain."

Collaborators welcome

The developers of the open security standard say their alliance is also open to bringing new partners into the fold.

On Tuesday, Watchdata Technologies Ltd. and the Open Ticketing Institute of the Netherlands joined the group, which already included Inside Secure, Oberthur Technologies and Giesecke & Devrient, as well as German chip maker Infineon Technologies.

The Cipurse system was welcomed by transit industry representatives - among them the fare system director for Singapore's Land Transport Authority.

"Cipurse is an important step towards establishing standardized, secure and interoperable fare collection for all public transport schemes, and we plan to adopt it for future releases of (Singapore's Contactless e-Purse Application) CEPAS," said Silvester Prakasam, Singapore's fare system director, in the same statement.

The vice president of engineering with Cubic Transportation Systems, Inc., Pradip Mistry, also described his company as "thrilled" with the group's new open security standard.

An eye toward security

The Alliance is now looking to finalize its new specification – which can be used for smart cards and contactless tickets, as well as mobile phones and other media.

Though smart card technology has been around for years, the companies behind the open standard wanted to take another look at security. The Mifare Classic chip, the technology and security standard widely used in today's smart cards, saw its encryption cracked in recent years.

Tilo Pannenbaecker, Infineon Technologies' vice president and general manager of business line personal and object ID, told Deutsche Welle that the new security standard uses the Advanced Encryption Standard (AES) 128, which he called "a more advanced, more modern cryptography."

But the Alliance also found fault with the proprietary nature of the Mifare technology. Pannenbaecker said the group's new specification would allow a range of vendors to offer NFC-capable SIM cards and phones.

"Our security standard that we are proposing now is the ideal security concept for NFC because it is offering advanced security, so chances of fraud and counterfeiting are limited," he said. "And it is a technology available at fair and reasonable terms."

The future of financial transactions?

Google plans to put an NFC-enabled smartphone on the market this month. At a Web 2.0 summit in San Francisco this past November, Google's chief executive Eric Schmidt said the next-generation devices "will be able to do commerce."

The head of Research in Motion, the company behind the BlackBerry smartphone, also expressed interest during the summit in incorporating NFC chips into the firm's product range - and soon.

2011 could be off to a strong start: Charles Walton, chief operating officer for Inside Secure, cited estimates of between 40 and 50 million payment-equipped phones hitting the market next year.

"Now that the industry is moving to NFC phones and guys like Google and Apple and others are getting on board with NFC, they are looking for some global standards," he told news agency AFP.

Winning over consumers

Still, some analysts suggest taking a step back - and looking beyond the buzz surrounding the "tap and pay" phenomenon when it comes to mobile phones.

"It's a move in the right direction," said Christophe Uzureau, research director of banking and investment services at Gartner Research, "but we tend to forget the big picture."

Uzureau told Deutsche Welle that mobile providers are keen to seize upon the potential of NFC-enabled phones - but the industry is creating "a lot of hype."

Consumers in Hong Kong, with its "Octopus card," and Japan, which has "Suica," are accustomed to using prepaid, contactless means for transit. But replacing cards with phones is easier said than done.

"This only works if all consumers have NFC-enabled phones, and if they are confident in using them," Uzureau said. "And right now, most consumers are not."

That means mobile operators must convince their customers to increase their usage of NFC-enabled phones - and to do so, they must show them that the chips allow for better financial access and control.

But companies might have trouble persuading customers to change their habits. Despite what Uzureau called a "perfect supply-side arrangement," in Japan, cash-centric consumers there have been slow to latch on.

"On the demand side, most customers don't see the point of NFC-enabled mobile phones," he said, adding that having a bit more speed at the point of sale still doesn't outweigh the benefits of secure cash transactions.

"It's not going to replace the wallet," Uzureau said.

Author: Amanda Price (AFP)
Editor: Cyrus Farivar