Pay as you go

Operators launch NFC-based mobile payment services. But they may not be for everyone…

Over the next several months, 12 mobile operators will run trials of contact-less mobile payment services in Australia, France, Ireland, Korea, Malaysia, Norway, The Philippines, Singapore, Taiwan, Turkey and the USA as a precursor to commercial launches. The trials form part of the GSMA’s ‘Pay-Buy-Mobile’ initiative, which is designed to provide a single global approach to enabling contact-less payments using a mobile phone. The idea is that consumers will be able to use their handsets to quickly, easily and securely pay for goods and services in shops, restaurants and train stations.

The ‘Pay-Buy-Mobile’ initiative supports the use of the Single Wire Protocol, which was adopted by ETSI as a standard in October 2007, to link the Universal Integrated Circuit Card (UICC) contained within the mobile handset with the phone’s embedded near field communications (NFC) chip. The NFC chip can communicate with existing contact-less payment systems to deliver a range of secure, interoperable and transparent services, such as credit and debit payments. According to the GSMA there are 35 mobile operators with 1.3bn customers participating in the initiative.

And, in a global first, executives from Korean operator KTF have paid for goods by passing their NFC-equipped handsets by contact-less readers in retail outlets in Korea, Taiwan, and the USA in a trial involving real transactions facilitated by MasterCard. For this trial, MasterCard’s Paypass application and Shinhan Bank’s credit card application were downloaded to a KTF UICC embedded in the mobile handsets, which were provided by LG Electronics and Samsung Electronics. The retail outlets at the respective locations were equipped with readers that support the NFC interface and accept MasterCard’s Paypass applications, enabling real transactions in three different countries.

“Just nine months after this programme was launched in Barcelona, the first pioneering mobile operators are preparing for the rollout of commercial services that have the potential to become the foundation of a global, interoperable mobile payment service,” comments GSMA ceo Rob Conway. “Mobile payment services, which will enable transactions to be completed faster in shops, restaurants and train stations, will also make it easier for merchants to offer their customers precisely-targeted discounts and other promotional offers.”

Field day?
The GSMA may be on to something. A new report from Juniper Research – ‘ Mobile Payments: Strategies & Markets 2007-2011’ – calculates that around 52mn consumers will adopt new mobile technologies such as NFC and other physical mobile payment methods to pay for everyday goods and services by 2011. This will help drive the physical mobile payments market to US$11.5bn by the same year.

The Juniper Research study found that by 2011, around 12% of the total mobile phones in circulation will offer support for contact-less payment, specifically NFC - equating to nearly 470mn NFC-enabled handsets worldwide, thereby providing a significant marketplace for retailers to offer goods via mPayment applications.

Other findings from the report include:
· mobile payment applications and services are already available in most regions in a variety of formats where they are being adopted in either a trial or commercial mode with favourable user feedback
· industry players (including retailers, handset vendors and the financial community) in the Far East and the USA are seen as particularly receptive to the idea of using radio frequency identification (RFID) or NFC to facilitate mobile payments for physical goods and services
· members of the mobile payments value chain must develop a mutually satisfactory, robust business model, guaranteeing revenue to all parties

Left field?
There may just the teensiest fly in the contact-less mobile transactions ointment, though: the attitudes of consumers. In another new analysis – ‘NFC: the Road to Mass Market’ - IMS Research allows that NFC has tremendous potential for contact-less ticketing, payments and passive door entry. IMS notes that the key benefits for consumers are reported to be faster transactions, no more carrying loose change, even a wallet could be discarded and everything in the future can be performed on one’s mobile phone. IMS says thanks to significant NFC pilots, technically this is all feasible. But what of the consumer mindset?

IMS reckons that culture, age, lifestyle, perceived value and psychological attachment are a few of the factors that will affect the consumer adoption of NFC. To illustrate this point IMS cites a survey performed by Visa in January 2007 which showed that 61% of Americans aged 25 to 34 would want to use their cell phones to make payments.

This sounds positive. However, American culture is a far cry from that of most European countries, Asian countries and pretty much the rest of the world. The whole American culture revolves around convenience; therefore, believes IMS, it could make sense to install NFC points of sales in say for example McDonalds or on the New York Subway. But would a more ‘laid-back’ culture, say, Greece for example, embrace NFC in the same way?

Secondly, even in America this view could change dramatically; after all those surveyed were of the era of MTV and dot.com. Would the age bracket 45 to 59 share the same opinion? Many consumers have only just grasped chip and pin; and if asked a similar percentage probably would say that cash would be their preferred way to pay for goods.

IMS research director John Devlin can envisage NFC-enabled mobile phones being used to support a multitude of applications all designed to benefit the user, improve their experience of transit, banking and payments solutions. “However, it is definitely not a case of one size fits all and consumer adoption will vary widely, affected largely by cultural differences in consumer behaviour but also by the demands and competitive influences of local businesses,” cautions Devlin. “Of course, this all depends on the various stakeholders agreeing a suitable business model, and relevant revenue streams, for each particular case.”