M-payments move a step closer

M-payments move a step closer

Joanne Taaffe

A host of regional mobile payment schemes are being piloted, but can any one of them become the ubiquitous standard?

Europe’s most ambitious mobile commerce payment scheme, Movilpago, has gone into commercial trials, increasing the prospect that multiple mobile payments could in future be done securely at the click of a few buttons on a handset.

Movilpago, originally formed by Spanish incumbent Telefonica and Spanish bank BBVA, was adopted earlier this year by Airtel and most major Spanish banks.

Scandinavian operators like Telenor Mobil of Norway and Radiolinja of Finland, and banks such as Nordea of Finland, will trial or commercialize their new in-payment plans over the next two months. But there is still a long way to go before mobile phone transactions become as widely accepted as those made using a plastic credit card.

One of the major obstacles is the continuing lack of mobile transaction processing and mobile-commerce handset standards. Until mobile operators, banks and credit card companies stop grappling with standards and business models and present a common front to retailers and customers, mobile transactions will remain small-scale, say industry observers.

“In [our] past experience of payments…until you have a standard, transactions don’t increase,” said Jim Tomaney, marketing director for Europe, Middle East and Africa at ACI Worldwide, an Omaha, Nebraska-based financial transaction systems developer that helped develop Spain’s Movilpago system.

Despite international standardization efforts like the the banking community’s Mobey Forum, m-payment schemes are typically developed by a single operator with or without a single banking partner. And none has yet been tested outside the originator’s home market.

As a result, a hotchpotch of payment mechanisms is developing around Europe, managed either by the bank, the operator, the credit card company, or a combination of all three. Payment mechanisms are diverse and include slotting a smart visa card into a dual slot phone; inserting a credit card chip into a dual-chip phone and debiting money from a prepaid or bank account via a standard GSM phone.

With such diversity, there is little chance of mobile subscribers being able to make purchases with the majority of retailers in their home country, let alone when roaming internationally. Yet analysts argue that diversity is necessary in such a young market in order to ascertain which m-payment systems will work.

“It’s early days,” said David Birch, director of Consult Hyperion, of Guildford, England. “Seeing how things pan out is not a bad idea…We should be encouraging diversity.”

Third party scramble

Mobile operators and banks will need a third party to manage payments between retailers and subscribers.

“We believe that…a trusted party…will be needed to combine the interest of consumers, merchants and financial institutions,” said Reijo Rummukainen, director of business development at the mobile division of Finnish national operator Sonera Oyj.

Mobile roaming clearing houses such as DanNet and Comfone have already made a move to fill the vacuum, but it is a role that Visa and national operators are jockeying to play. “[Sonera can also be] this kind of intermediary,” said Rummukainen.

The creation of transaction standards and clearing bodies is complicated by the difficulties of bringing together the mobile telecoms and financial services industries. Neither the financial services industry nor mobile operators can yet claim an advantage in the m-payment market. “Banks haven’t been particularly good at bringing new payment technologies into the marketplace,” said Hyperion’s Birch, adding that “emerging possibilities are where phone companies or new entrants aligned with operators take care of payments and banks take care of the line of credit that funds payments.”

Movilpago is unusual in that it does have the backing of Spanish GSM operators and national banks. The consensus behind Movilpago makes it one of the few European m-payment schemes well-placed to become a national standard, claims Tomaney. If Movilpago takes off, it hopes to expand into Latin America and the bigger markets in Western Europe and impose itself as an international m-payment standard. Yet the international success of Movilpago is far from guaranteed.

“I’m reasonably partial to Movilpago, but I don’t think anyone’s hit on the ideal solution,” said Birch.

Keeping payments nice and simple in Norway

Even if an international mobile payment standard remains a distant goal, one lesson operators and banks have learned over the last two years is to keep mobile payment applications as simple as possible. The Sonera and Movilpago systems do not require customers to change phones or upgrade to WAP or GPRS.

And Telenor Mobil’s new mobile payment system–designed to make up for the user interface failings of its previous offering–will only have to fit a new SIM card into their existing handset.

“We have had a mobile commerce service for two years,” said a Telenor spokesman. “But the interface has been way too complicated and it has not been marketed.”

The new Telenor mobile commerce system relies on a SIM card equipped with a public key infrastructure application. That leaves control in the hands of the operators. But some banks prefer to see applications run on separate chips.

“The customer must be able to choose any bank, operator, handset–and change any one of these without affecting any of the other relationships,” said Bo Harald, head of electronic banking at Nordea Bank and founding member of the Mobey Forum. Nordea’s mobile payment trial starting this month uses a dual-chip phone into which subscribers insert a Visa chip independent of the SIM card, leaving the mobile operator as a conduit for transactions. “Mobile operators will benefit mostly from [increased] airtime,” said Harald.

Mobile operators get their bank cards out: how m-payment trials are shaping up around the world

Nordea Bank: Last month, Nordea announced a trial with Visa and Nokia for a dual-chip phone that holds both the SIM and the banking application chip simultaneously. The drawback for customers is that they need to buy a new handset, but the advantage for banks is that it keeps a clear distinction between the banking application and the SIM. “In this model, no banks would need to strike a deal with any operator,” points out Bo Harald. In France, however, where France Telecom has backed a similar business model with credit card companies and banks, sales of new handsets have been slow.

Hutchison Telecommunications (Hong Kong) Ltd. and Dao Heng Bank: Last month, the Hong Kong-based operator and bank announced a six-month trial with Visa International involving a mobile payment service for Dao Heng’s Visa-holding customers. The partners are developing payment applications for paying phone bills and groceries, among other services. Customers will initially authenticate themselves with a password and then confirm a purchase by entering their Visa card number and expiration date. The retailer is then provided with a confirmation of the cardholder’s identity. Customers will need a WAP-enabled phone.

France Telecom SA: Existing French smart credit cards slot into the end of a dual-slot phone, which acts as a smart-card reader. The service has been on offer since June 2000. By the end of August 2001, the operator had sold 400,000 dual-slot handsets. It hopes to have sold a million by the end of this year. The system requires no upgrade on behalf of French retailers, which are already equipped to process smart credit card transactions.

Mobipago, Incorporating Telefonica, BBVA, Airtel and others: Subscribers can make payments via any GSM mobile phone, and most Spanish banks back the system–with the notable exception of La Caixa, one of the country’s largest banks. The customer sends either an account or phone number to an accredited retailer, who checks the customer’s credit-worthiness. The customer is then asked to confirm the purchase by entering a personal identity number into their mobile phone. The company has a banking license to manage transactions via pre-paid accounts, according to Jim Tomaney, marketing director for Europe, Middle East and Africa of ACI Worldwide, of Omaha, Nebraska.

Telia: Last month, Telia launched a new bank with the co-operative retailer KF and Skandia Insurance Co. The bank will offer services via the Internet, as well as mobile and fixed phones.

Mobilcom AG, of Rendsburg-Buedelsdorf, Germany:

Mobilcom holds a banking license and has set up a mobile bank with the German Landesbank Baden-Wurttemburg. Mobilcom plans to launch the new bank’s mobile payment service this month. Initially, transactions will be restricted to money transfers between individuals and purchases over the Internet, but Mobilcom hopes to launch an in-store purchasing scheme by the end of the year.

KDDI Corp.: Japan’s number two operator is currently trialling credit card purchases in shops via mobile phones and hopes to offer a commercial service early next year. The Japanese have developed an alternative to dual-slot and dual-chip phones–a match-box-sized module that clips onto mobile phones. KDDI has partnered with Bank Corp., Japan’s third-largest specialized online bank.

Telenor AS: The Norwegian incumbent holds a banking license in order to process micropayments, but it claims it has no ambition to offer more complex financial services. Currently, Telenor’s subscribers can pay for a limited range of goods and services, including parking, cinema tickets, flowers and the airport bus, via credit card or smart cash, with the sum being directly debited from their bank account. Only the purchase of flowers requires a WAP phone. Otherwise, Telenor’s customers can use any GSM phone, into which they fit a new SIM card.

Radiolinja Oyj: Last month, the operator announced a pilot of mobile wallet systems in Finland using a Nokia phone. Luottokunta, a credit institution, will provide digital point-of-sale service for retailers.

Sonera Oyj: Subscribers can make mobile payments via credit cards or direct debit cards issued by the major Finnish banks and add payment for parking and goods from vending machines to their phone bill. Sonera also intends to adopt the role of a service facilitator–or a middleman–between banks, other operators and retailers. As a service facilitator, Sonera will seek small revenues from consumers and commission from retailers. The operator also hopes to negotiate advantageous rates from banks and credit card companies, based on scale.

COPYRIGHT 2001 EMAP Media Ltd.

COPYRIGHT 2001 Gale Group