Enabling Technologies

It's All About Identity Now and MNOs Have a Strategic Enabler Role to Play

MEDICICEO

A senior executive from a large mobile network operator (MNO) called me and sighed, "There's not much left for us to do [in mobile payments and commerce]...it's only about Identity now." I was not surprised - the MNOs are going through a rough phase in this space. I suggested he should read my last API article, and that the MNOs actually deserve more credit than they give themselves.

It's amusing that those who have the most potential to add value are the ones looking elsewhere for ideas, which is great news for relatively younger, nimbler and hungrier companies who are able and willing to do cool new things in this space. Some of the MNOs' venture fund portfolio companies are doing quite well, even as their commercial initiatives have failed. Even banks are buying into "external" innovation and acquiring digital experience focused companies.

This also reminds me of some of the earliest mobile commerce conversations within MNOs 10 years ago.

[TL;DR? You can skip the following 2 paragraphs if you are in a hurry.]

At the time, some of the mobile operators were being pitched RUIMs (removable user identity modules), which were basically SIMs (subscriber identity modules), just that the MNOs using CDMA technology (Code Division Multiple Access) such as Verizon & Sprint had strategically decided  not to use SIMs, but rather control the devices directly by putting that information directly in the handsets. This allowed them to fully control the device ecosystem, and manage their growth using the subsidy model very effectively. So, RUIMs were not just unnecessary for them, but removable identity  were also not aligned with their growth strategies at the time because that would mean less control over the sale of handsets. However, there was one exception, and some of the predecessors of today's mobile payments players, especially the TSMs (trusted service managers), such as Gemalto, were partially successful in making the point that SIMs/RUIMs were very potent identity control points with future commerce applications. (At the time, 10 years ago, 2 separate companies - Axalto and Gemplus - were making the pitches, and were later merged into one Gemalto.)

So, way before Softcard/Isis was conceived, some of us at the MNOs had identified mobile commerce as a killer app for this SIM/RUIM to potentially enable new revenue streams. Now, let's remember that this was the in the pre-smartphone heyday of walled gardens (BREW) and carrier-managed UI/UX. Android and other "open OS" platforms changed everything in a few short years, but unfortunately the MNOs were stuck in the old walled garden paradigm, gave birth to an almost DOA Isis, leading to the eventual death of Softcard (you don't need the hyperlink!), delay in the introduction of NFC (near field communication) wallets, and the destruction of value in the ecosystem.

[Back from TL;DR]

Essentially, provisioning and managing subscriber identity has been a function at the very core of the MNOs' strategic asset portfolio. This ID management is not only central to the reliability and security of wireless communications, but is also critical for the primary MNO business model which pairs devices with the expensive network via the subscriber's identity which resides on the SIM, which is still owned and managed by the MNOs.

This is exactly why Google and the device manufacturers have built smartphone platforms with the NFC secure element embedded in the phone as opposed to the SIM (which is what Softcard wanted, so their MNO investors are now sitting on tens of millions of dollars worth of useless NFC SIMs from Gemalto and G&D!)

This is also why Apple has tried to build SIM-less iPhones where subscribers could easily swap wireless carriers. That strategy has worked well in iPads and in non-subsidy markets for iPhones, but obviously the notion of SIM still lives. The NFC secure element, however, is fully in Apple's control for Apple Pay.

Finally, this is also why the MNOs themselves seem to be coming back to realizing their own strength in subscriber ID, but will hopefully apply it wisely this time around. As I mentioned in my last article, they have a head-start already. All the Tier-1 MNOs in the US (and others) provided companies like Payfone access to their billing and provisioning systems for smart ID management and mobile authentication. This is something even Apple and Google do not have access to, and this is crucial to dealing with fraud in mobile payments/commerce transactions.

So, yes, MNOs: it is all about Identity now for you in this space, but I wouldn't minimize the importance of this capability. It's your true enabling strategic asset!

Aditya Khurjekar

MEDICICEO

Aditya Khurjekar is CEO and founder at MEDICI (formerly LTP, Let’s Talk Payments), the trusted source for global FinTech insights and ecosystem engagement.

Previously, Aditya was a founder of Money20/20, and on the the founding team at Softcard, the mobile commerce joint venture between AT&T, T-Mobile & Verizon. Aditya also held a number of leadership positions at Verizon Wireless, CSG Systems, Lucent Technologies and Bell Laboratories.

Aditya holds an MBA in Finance & Management from New York University and an MS in Electrical Engineering. He lives in Charlotte, NC and works with teams all over the world.