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Trusted Service Management

  • March 2014
  • -
  • Frost & Sullivan
  • -
  • 15 pages

A Necessary Value-Add?

Summary

Frost & Sullivan believes that Trusted Service Management (TSM) platforms can play a central role in bringing together a number of Near Field Communication (NFC) market stakeholders to develop compelling offers for end users. Large-scale mobile payment roll-outs are expected globally in 2014; alongside such developments, TSM ecosystems will move from project to commercial deployment.
In its last study published in 2011, Frost & Sullivan expected to see the transportation vertical accounting for approximately one quarter of the global TSM market in 2015. However, the reality is different: most TSM projects are now payment oriented. TSM solutions are in greatest demand from banks and financial institutions (accounting for xx% of the total number of TSM clients), while mobile network operators (MNOs) represent xx% of the total TSM clients. The NFC technology was not deployed as quickly as expected. The result is that new technology options, including cloud, have emerged to handle tokens and–in some cases–to bypass TSM SE (Trusted Service Management for Secure Elements). This solution, also known as ‘pure cloud’, is an option and a threat for the TSM industry. Indeed, banks were convinced by this approach, which allowed them to have lower fees during a payment transaction and also to gain more independence against MNOs. Hybrid solutions that combine tokens based on SE storage and a cloud-based platform to facilitate the implementation are likely to gain traction. The recent announcement around host card emulation (HCE) is going in the same direction forcing TSM providers to support secure element in the cloud and any token based solutions.

Key Messages

Payment is the Key Vertical for TSM Adoption: Frost & Sullivan originally expected transit projects to play a leading role in the adoption of NFC services, with the TSM role being crucial for this vertical. The market reality is different. Transportation projects are bespoke in nature, and the market is highly fragmented. At the same time, the timeframe for transit program deployment is quite long. As a result, no TSM commercial roll-outs for transportation have taken place so far. On the other hand, and in Europe in particular, 2014 will be a key deadline as many banks will launch their mobile payment solutions with the support of TSM platforms. This vertical will represent xx% of the total number of TSM projects in 2015.

Cloud Token-based Management to Generate Buzz: NFC technology adoption remains relatively low as compared to market expectations. Due to this reality, many major participants have already decided to investigate cloud options in order to propose an easier, more comprehensive, and cost efficient solution to handle security during a payment transaction (or an access control). A number of banks were sensitive to this technology and the result is that the TSM offer is becoming more complex. With hybrid solutions (combining traditional NFC technology with cloud-based solution) added to the mix, the ecosystem is becoming increasingly complicated.

Where is the TSM Market Headed?

TSM for service providers is going to lead the TSM market. Discussions are on with regard to the type of SE that will lead the market. Globally, many major market participants are reaching the conclusion that an embedded SE is the best option. However, for banks, merchants, and other service providers, this is a difficult discussion point as they do not want to be locked into a specific security solution. As a result, the number of TSM projects deployed (and to be deployed in the short term) is clearly driven by TSM for Service Providers (TSM SP). Frost & Sullivan forecasts that 81.8% of the total global TSM solutions will be TSM SP in 2014.
The Digital Identification industry is in a good position to tap into market opportunities, either through new sales needed to meet the demand from enabling TSM services or through new revenues as a result of providing TSM services in-house. There is a critical role for the Digital Identification industry via the technology and ecosystems that it can bring to further develop the TSM market. In particular, the Digital Identification sector is in a key position to push the development of an interoperable TSM platform, which will be the cornerstone of all secured transactions coming from a mobile and where a third party is needed.

This is because:

- The Digital Identification industry has deployed similar platforms in the past, such as over-the-air (OTA), to provision and to manage the lifecycle of credentials.
- It has a long history with different stakeholders (MNOs and banks).
- It has technical and commercial relations with key participants.
- It has a wide ecosystem that will contribute towards standardization and interoperability.
- It has access to a widespread distribution network that is useful for white goods sales.
- It already has a security background and associated certifications.
- As a member of alliances and working groups, it has the capacity to anticipate future evolutions.
- It has the technical background to support multiple applications, devices, and standards.

In a short past, TSM providers were using sales direct channel as the single sales option. But the market is changing, and many TSM vendors are looking to other sales option to increase thei market footprint. TSM hub is one of this option. The need to use indirect sales channel to share a TSM infrastructure is a solution that TSM market participants need to follow. Gemalto and SIA were joining forces in Italy in march 2013 to propose such solution.

Background

This analysis will answer the following questions for a global audience:
- Is the TSM’s role necessary for mobile payment transactions?
- How can the adoption of such services be accelerated on a global basis?

Frost & Sullivan defines TSM by using the same definition provided by the Global System for Mobile Communication Association in its “Mobile NFC Services” (2007) document. The association defines a TSM as a platform that distributes and manages the service providers’ services to the mobile network operators’ (MNO) customer base securely. A service provider is understood as any entity that offers services via a contactless device to end users, and an MNO is understood as the provider of mobile services to end users.

Table Of Contents

Trusted Service Management
Summary
Key Messages
Where is the TSM Market Headed?
Background
The Role of the TSM Platform in the Near Field Communication Ecosystem
Competitive Dynamics—Card Management Participants are Migrating to Software and Services
The TSM Market to Generate New Revenues
Possible Threats to Rapid TSM Adoption
Last Words
Legal Disclaimer
The Frost and Sullivan Story

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