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Why the Windows Phone 8 digi-wallet is different to the others

Plays nicely with others, unlike Apple and Google

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Analysis Windows Phone 8 will have an electronic wallet, but one which spans the functionality of Google Wallet and Apple's Passbook, and plays nicely with the network operators too.

Demonstrating the Near Field Communications (NFC) capabilities of Microsoft's new phone OS Joe Belfiore couldn't demonstrate pay-by-bonk, as he didn't have a suitable SIM handy, but that deficiency may be what pushes Windows Phone 8 to the front of the queue when it comes to paying for stuff with a mobile phone.

The good Mr Belfiore did demonstrate NFC-enabled business cards, picking up a URL from an NFC chip embedded in a copy of Wired and setting up a peer-to-peer Wi-Fi link to play a Scrabble derivative, but despite flashing a wallet boasting credit and debit cards from Chase he could only use them online as his SIM didn't have the requisite secure element for paying with a tap of the handset.

As well as a short-range radio connection, paying by bonk needs a secure location in which to store the cryptographic keys (and do the encryption) used to authenticate payments, but where that secure location goes is still the subject of intense, and increasingly political, debate.

Mobile network operators reckon the SIM is the perfect place - it's already secure and if the customer changes handsets then their wallet comes with them - but that puts the payment schemes firmly under the control of the network operator and if customers change networks then they'll have to manually move their wallets.

Google's compromise is to have one secure element in the phone (under the control of Google) but still support a SIM-based secure element if that's what punters want - while reminding them it's not something they need. The Android Wallet application will merge the two so punters shouldn't see the complexity, but when they change handsets (or operators) it might become more obvious.

Microsoft, by contrast, is leaving the pay-by-bonk business to the network operators, and has signed a deal with Orange for the first deployments in France though other operators should be quick to jump as their collaborative efforts to create standard platforms come together.

In the US that's under the ISIS brand, in the UK it's known as Project Oscar and is being challenged by Google and PayPal who've complained that their inability to use the SIM is anti competitive. Both ISIS and Oscar will store coupons as well as credit cards, which is important as the Coupon business is considered hugely important to those who make, or intend to make, money from advertising.

Delivering discounts to mobile phones is big business, with market-leader Groupon floating last year with a value of more than $12bn. Having given up on getting a cut of the transaction fee the mobile operators are now hoping that coupon revenue will fund the deployment of NFC handsets, but that's not going to happen if Google and Apple are in control.

Google and Apple both see the coupons section of their e-wallets as critical revenue streams (Apple's wallet contains only tickets and coupons, for the moment at least) but Microsoft seems happy to let the network operators compete with app providers for that market rather than running their own couponing service.

Windows Phone 8 provides a consistent interface, not a competing service, and that could be as critical as any other feature Windows Phone can boast. ®

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