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Banks And Telecom Operators Negotiate On Mobile Phone Wallets

Posted on: Thursday, 30 October 2008, 16:30 CDT

Although the technology behind mobile phone wallets is ready to go, the implementation of the idea is being held up as banks and telecom firms negotiate on the role each side will play and how the revenue will be shared.

Mobile phone wallets would allow people to use their mobile phones to pay for things by simply flashing them near reading equipment in stores or in public transport.  In trials around the world, consumers have responded favorably to the technology’s ease of use.

On Thursday, MasterCard, the largest payment card company in the world, will launch a service that would enable banks to install payment cards into clients’ mobile phones much easier than previously possible, something that might break the deadlock over widespread market adoption.

"We are talking to serious banks ... and not about trials, but about commercial launches," James Anderson, Vice President at MasterCard’s mobile business, told Reuters.

Anderson expects to see significant activity from retail-focused banks over the next two years in terms of developing mobile payment services.  Such banks have been less affected by the current global financial crisis. 

"We have not seen a lot of impact," Anderson said.

However, it would still be at least 2010 before widespread availability of mobile phones with such technology could take place, and the telecom and financial firms would need to reach an agreement on some kind of revenue and role split.

"Traditional financial industry met telcos by going mobile. Now telecom operators want to play a part in that chain. These talks are well under way," Gerhard Romen, Director for Strategic Alliances & Partnering at Nokia, said during an interview with Reuters.

"Now it's like the Olympics, everyone is on their starting blocks, and just waiting.”

The mobile phone wallets would allow consumers to use their phones as wallets or access cards, with users simply waving the phones over a wireless reader in much the same way travelers in London access public transport. In some cases, consumers would be required to enter a PIN into the phone.

"It's not the payments driving it, it's the convenience and simplicity for the user," said Romen.

Although MasterCard’s new service might help address some of the issues facing the industry, analysts say there is more work ahead.

"A lot of pieces are yet to be fit in and some of them are out of control of the financial community," Jupiter research analyst Ed Kountz told Reuters.

According to Kountz, the lack of mobile phone wallet availability is holding the market back.

Nokia, the world’s top mobile phone maker, has introduced four products using that utilize the new technology, known as Near Field Communication (NFC).  Other handset makers are also ready to roll out NFC phones upon notice, according to industry executives.

ABI Research predicts 6.5 million NFC phones will be sold this year, a 10-fold increase from 2007.  However, costs from low volumes and the extra data security chip required in the phones is hindering growth.

"Lack of handsets is a symptom of a business model problem, not the cause of it. Handset makers are comfortable with the technology and if people are starting to order them the vendors are going to make them," said Anderson.

Last year Nokia and large carriers such as KPN, Orange, SingTel, Maxis Communications Bhd, O2, Wind and SKT joined  with 14 mobile operators that had earlier initiated the initiative for common NFC technology.

MasterCard is also involved in the project, which is faster and less expensive than other wireless systems such as those that use text messaging.

China Mobile, Cingular, Vodafone and Telefonica already support the common wireless chip format on mobile phones they distribute for their networks.  Along with chipmakers NXP and Sony, which lead the way on the contactless NFC chip, companies aim to establish a global standard for mobile phone wallets.

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On the Net:

• MasterCard

Source: redOrbit Staff & Wire Reports

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