Before you can pay with phones, near-field communications needs better security

Near-field communications chips promise to launch a new era of mobile commerce. The wireless technology makes it possible to buy something with the swipe of your smartphone, rather than cash or a credit card. But the technology requires rock solid security.

Inside Secure, a French company that designs near-field communications (NFC) chips, is announcing today that it has taken several steps toward making NFC more secure on Android phones. If it succeeds, it could help mobile commerce generate billions of dollars a year in revenues.

NFC is one of the magical new wireless technologies of our age. Already popular in Japan, NFC-based mobile phones have a chip with a very short range (a couple of inches). You can place an NFC phone over an NFC-based transaction reader and use it to pay for something.

Inside Secure, based in Aix-en-Provence, has created a private and secure platform that combines hardware and software for NFC transactions. It will make that platform, dubbed Open NFC, available to other chip makers so that it can be adopted as an industry standard. The Open NFC technology works with Android 2.3 Gingerbread. If adopted, then Open NFC will save chip makers the huge amount of time it takes to create secure NFC hardware and software.

“It’s been slow in developing because it’s a complex business,” said Charlie Walton, chief operating officer of Inside Secure. “But we believe it will see substantial growth. In order to make it happen, we had to break a logjam. We expect that 2011 will be the year of NFC.”

Inside Secure is also setting up an alliance with fingerprint identification firm Neurotechnology and NFC electronic wallet maker TazTag. Combined with Inside Secure’s SecuRead platform, the companies can set up a secure system where a user’s fingerprint can be stored in a device and can be used to verify transactions. The companies will demonstrate the platform more fully at the Mobile World Congress trade show in Barcelona next week.

The demo will use a personal computer with a fingerprint scanner attached to it. The PC captures the user’s fingerprint, then the Neurotechnology software will transmit the fingerprint data to the electronic wallet, which stores it inside the Inside Secure NFC chip. Then the wallet can be used to make a purchase.

Eric Schmidt, chief executive of Google, showed off an NFC-enabled phone last fall. By mid-summer, NFC support is expected to be built into the Ice Cream version of Android. Regarding Open NFC, Walton said, “This is a good time for a Google-led dialogue to begin about how to make it happen.” Walton wants to make sure that the industry creates software for NFC that can run on more than one kind of chip.

Most mobile phone manufacturers have plans to implement NFC and analysts say that tens of millions of NFC chips could ship inside devices in 2011. Inside Secure believes that NFC chips can be used in a wide range of banking, identity, access control and healthcare applications. For security, the SecuRead platform uses Inside Secure’s VaultIC security module, which uses a system of secure storage keys and certificates to authenticate users.

Inside Secure was founded in 1995 and has 350 employees. Rivals include Samsung, NXP, ST Microelectronics, and Broadcom. Inside Secure’s investors include Sofinova Partners, GIMV, Granite Global Ventures, Vertex Management, Alta Berkeley, EuroUS Ventures, Fonds Stratégique d’Investissement (FSI), Nokia Growth Partners, Visa Ventures,  HID Global, Motorola Ventures, Samsung Ventures,  Qualcomm Ventures, and Atmel. The company has raised $150 million, including $65 million in September, 2010.

Inside Secure was started by former executives of smart card company Gemplus. It recently acquired the secure microcontroller division of Atmel.

[image credit: IntoMobile]