Perspective: The Evolving Role of the Trusted Service Manager
The activities performed by the trusted service manager (TSM) are quite complex, especially given the nascent state of the NFC mobile payments market, the vast size of the potential market, the transient nature of consumers’ mobile subscriptions, and the highly sensitive data involved.
And then there is the biggest challenge of all: consumers want to be the ones to decide what device they use, on what mobile network, and which personalized applications they want to run on their device. They do not want to be told that in order to have a mobile wallet, they must have “X” brand of device, subscribe to “Y” brand of mobile network coverage, and have a credit card from financial institution “Z” associated with card association “A” and shop at a merchant who uses payment processor “B.” In many of the mobile wallet pilot programs–which were conducted for proof of concept more than anything–the ecosystem players were intentionally limited, but this isn’t likely to be accepted in the open market.
The mobile wallet ecosystem has to be more open in order to provide more value to consumers and in turn gain their acceptance. As more consumers embrace a mobile wallet solution, more merchants will want to accept payments via the mobile wallet, creating a cycle that spirals upward to broad acceptance.
In consideration of these challenges, the role of the trusted service manager is evolving to adapt to market needs.
How the market has evolved from a single TSM model to a multi TSM model
The concept of the TSM was initially introduced in 2007 by the Global System for Mobile Communications Association (GSMA) to facilitate adoption of NFC services. The TSM role addresses the biggest challenge to realizing simple, transparent mobile payments within the mobile commerce ecosystem, bringing multi-account services to different mobile NFC devices accessed through a variety of proprietary networks.
A key element of the TSM role as envisioned by the GSMA is that it is an independent entity serving mobile network operators or secure element owners and any account-issuing entities such as banks, card associations, transit authorities, merchants and marketing companies, to name a few potential service providers. An independent TSM is key to the provisioning of applications to NFC-enabled devices such that they have the broadest possible array of uses for the consumer.
Given the scope of the worldwide mobile commerce ecosystem, as well as markets that vary from one region of the world to another, the role of TSM is too large and complex to be met by a single entity. Many companies, including First Data, have stepped forward to assume different aspects of the TSM role. In fact, there has been an evolution toward two distinct sides of the market.
On the one side there is the service provider TSMs (SP-TSMs) which cater to the entities that have applications and content to deliver and provision to the secure element of consumers’ mobile devices. The SP-TSMs typically represent banks, card associations, transit authorities, merchants, marketing companies, and so on. On the other side there are SE-TSMs (also called MNO TSMs) that have taken on responsibility for managing access and allocation of space and privileges on secure elements on behalf of MNOs or other secure element owners. Some TSMs play both roles. Nevertheless, in most markets this split of the TSM roles and responsibilities results in each TSM participating in multiple relationships with other TSMs.
Chris Cox is vice president of mobile product development at First Data.