The Power of Nokia Money

January 19, 2010

With the rapid growth of data centric smartphones and embedded broadband consumer devices (netbooks, smartbooks, e-readers, mediaphones, etc.), it is clear that the future of wireless is in intelligent web-centric connected devices, applications, and managed services.

Battered by decreasing margins in its handset business, aggressive competitors (e.g. Samsung) nipping at its market share, and intensified competition by disruptive new entrants (Apple, RIM, Google, HTC) in the growing and profitable smartphone segment, Nokia is fighting to regain its innovative edge and find a niche in applications, services, and markets where they will have a sustained competitive advantage and profitable revenue growth.

The one mobile frontier that has shown a lot of promise but has hardly gained momentum is mobile commerce or m-banking. Rather than technical gaps, the most challenging hurdles remain around business issues.

NOKIA MONEY, a new mobile financial service that offers consumers access to basic financial services via mobile devices, is poised to be that silver bullet which transforms Nokia into a revenue generating juggernaut over the long run.

It promises to give a boost to mobile-commerce via NFC (near-field communications), that has long been touted as the technology that will bring about a profound impact on the payment transaction world.


Near Field Communication (NFC) is a standards based wireless communication technology (ISO/IEC 18092 and ECMA-340) allowing two devices to communicate over a short distance of less than 10 cm. The technology is an extension of the ISO 14443 contactless card standard, RFID, that combines the interface of an ISO 7816 smartcard and an RFID reader into a single device. The ubiquitous nature of mobile phones makes these the ideal device to place NFC chip technology.

NFC-enabled mobile handsets can communicate with the present ISO 14443 contactless cards and readers. The mobile handset becomes the subscriber’s key for authorizing payments, accessing services and getting information from their immediate environment. This makes the NFC-enabled handset compatible with existing contactless infrastructure as used in public transport and payment applications.

NFC has major advantages over other wireless technologies:

  1. Its short range provides a degree of security: the user can establish a connection between two devices by simply bringing them together, versus a more complex pairing process (e.g. Bluetooth).
  2. An NFC enabled mobile handset adds the advantage of user interaction (via a display and keypad) and an internet connection. This enables applications like payments, ticket services, access control and loyalty programs

NFC has three main operational use cases:

  1. Contactless reader/writer (e.g. read NFC tags)
  2. Contactless card emulation (e.g. electronic wallets, ticketing services, payments)
  3. P2P or Peer-to-peer mode (e.g. data/payment exchange between two devices)


Rather than technical gaps, the most challenging hurdles remain around business issues.

Some of the key business challenges are:

  1. Too many players in the value chain seeking dominance
    — For example, non-cooperation between telcos and banks has been an impediment to mobile banking
  2. Banks/credit card institutions want control
    — For example, credit card companies desire to certify devices, readers, and financial applications
  3. Regulatory/anti-trust hurdles
    — For example, telcos cannot function as financial institutions in certain markets

NFC Ecosystem and the relationships between the key players. (Source: GSM Association) CLICK TO ENLARGE


With NOKIA MONEY, Nokia calls the shots….and promises to provide the momentum to mobile commerce in mass markets that has largely been elusive.

Here’s why…

►Nokia has a large footprint in emerging markets (e.g. over 70% in India).

► Nokia can thus build an m-commerce ecosystem with little competition (from Apple, RIM, SAMSUNG,  etc.) in emerging markets

► Nokia could make a significant headway in introducing m-commerce before other e-payment methods reach mass markets. Credit card penetration in emerging markets is still very small. Also, cell phone penetration is far greater (and increasing even more rapidly) in comparison with desktop computers and laptops.

►Nokia can provide ‘certified’ reader technology embedded within the handset – thus promoting per-to-peer transactions between handsets. This removes the obstacle of credit card institutions certifying readers as is the case for POS credit card transactions.

►Nokia Money gives Nokia influence over the value chain (see diagram above)
– HANDSET: Nokia is the OEM
– TSM:  OBOPAY (in which Nokia has an investment stake)
– APPLICATION OWNER:  For peer-to-peer transactions, Nokia can be the application provider on both the handset and the reader, thus removing dependencies on many 3rd parties

►Emerging markets are mostly ‘retail markets’ (consumer driven) as opposed to ‘operator driven markets’ characteristic of the western world (NA, EU, Japan, etc.). Nokia is thus not at the mercy of TELCOs, and has greater control over the definition and design of handset features.

► There are no regulatory hurdles in emerging markets – Nokia can bypass banks and financial institutions to create its own financial services brand.

►Pre-paid is king in emerging markets. A pre-paid SIM card in a handset can thus act as “cash in an m-wallet”. Merchants can accept m-commerce transactions on their handset readers instantly as credits/top-off to their SIM cards.

►Micro-transactions are the norm in emerging markets. The financial risk posed by security breaches are thus mitigated relative to situations involving large-dollar value transactions.

►Nokia possesses significant security expertise within the handset and significant brand recognition in emerging markets. This plays well into its long term strategy of strengthening its “trusted and reliable handset company” image.

►With a stake in OBOPAY, their chosen TSM (Trusted Service Manager) partner, Nokia gets the cake and eats it too (little transactional costs passed on to banks)


►In some emerging markets such as India, banks and telcos are set to push mobile banking and m-commerce, and have agreed on a revenue sharing model to roll out mobile banking. This will only enhance the momentum for NOKIA MONEY, as Nokia will be a central player in enabling m-commerce in this market. The Unique Identification Authority of India (UIDAI) is working on an aggressive plan to issue unique IDs to mobilize m-banking. While individual banks and mobile companies would initially work to create closed networks of m-banking systems, UIDAI and the National Payments Corporation of India (NPCI) aim to mobilize interbanking capabilities by 2011.

In summary, NOKIA MONEY could indeed be that profitable revenue machine which transforms Nokia into a formidable services provider it has long yearned for. The question then is — how well will Nokia execute?

★★★ There’s more valuable insight on smartphones and new wireless frontiers at in the Resources section (see whitepapers)