Barclaycard and network operator Everything Everywhere are set to launch the UK's first commercial contactless mobile phone payments system this summer.
This is fine, and I look forward to more details, but looks again to be yet another 'stick the credit card on the phone' deal. The payment doesn't get applied to the Everything Everywhere bill, but to your Barclaycard Account. If you don't have BC, then
EE will act as a consumer acquirer to make you one. There is also presumably a B2B relationship since EE take the role of NFC/SIM distribution and provisioning and cut out the traditional card production costs. Perhaps they track and take a per transaction
Its not what I call m-commerce or mobile phone payments, but just another payments channel for the cards industry (NFC)
Mobile NFC - The Chicken and the Egg arrive together!
The full scale launch of a new mobile phone payment solution by Orange and Barclaycard, marks a sea change for electronic payments both in the UK, and a wider afield. We have seen many successful mobile NFC pilots with consumers loving the speed and convenience,
but until now no commercial roll out of this technology.
The fact that two of the UKs largest banks and MNOs are working together answers "the chicken or the egg" question that has been holding back wide scale adoption of contactless and NFC payments. The technology and user acceptance has been proven, and now
we see that banks and MNOs starting to make the investment to make mobile payments widely available to consumers.The use of an NFC enabled SIM should mean that Orange can make this available to its customers quickly and without having to replace all their
Some other countries, such as Poland, are now actively rolling out a contactless infrastructure, and all newly installed POS devices will have contactless capability by default. As these all use the established MasterCard and Visa Standards, Orange customers
will shortly be able to use their phones to pay there too.
This is good news for the economy, banks and payments processors. Cash is very expensive to handle - it needs counting, storing and physical security - whereas electronic payments can all be handled automatically. Furthermore, electronic payments provide
a strong source of revenue for banks and payments processors at a time when there is more pressure than ever to focus on "back to basics banking" rather than high-risk activities.
The key for other banks wanting to offer mobile payments will be to ensure that they have agile payments systems equipped to handle payments from any source. Without putting these types of systems in place, they could find themselves struggling to handle
the increasing payments volumes in the future.
Not a very big egg (or chicken)!
According to APACS, there were 1 million POS terminals in the UK in 2006. So even if there has been no growth since then, and even if the figure of 40,000 working contactless terminals is to be believed, the maximum penetration is 4%. Hardly critical mass.
Once again, the acceptance side of the proposition seems to have been overlooked.
I have a number of Barclaycards and Barclays Bank cards and all new and re-issued cards support contactless functionality. I'm also keen to be able to make use of a mobile phone to 'carry' these card products. But and it's a big BUT I'm not prepared to except
Barclaycard telling me what handset to have and which network to use. I want to be able to choose the handset that meets my needs and the network that provides a service that also meets my needs. Until the Issuers realise that the one that lets me make those
choices is the one that I will use not the one that tries to prescribe my handset and network choices.
My ideal is the true electronic equivalent of my leather wallet. What do I do today? As I approach the point of sale I take out my wallet, open it, choose a card (is it business or private; debit or credit) and pay either chip and PIN or contactless. So in
the "New Contactless World" as approach the point of sale I want to take out mobile phone, turn it on, open the wallet application, choose the card to pay with, enter a PIN or password to enable the "pay" function and PayWave or Tap & Go. I also want that
application to record the transaction so that I can open the application on the phone and review spending (no password required) and on the phone the cards / accounts should have the "names" I want to give them not card numbers i.e. Company Card, Expenses
Account, Personal Debit etc. Ideally I would like to be able to synchronise this with an application on my PC.
And all this not just on an iPhone (haven't got one -won't have one) but on Android that continues to grow its market share.
While issuers continue with the "have this handset on this network and you can have the functionality" I think the general answer will be a resounding NO.
By this definition of 'mobile payments', my existing plastic is mobile and makes payments. Whats the difference? At no point are you paying with your mobile. The Issuing Bank saves on plastic administration and provisioning costs, because the mobile
operator takes it on as part of the SIM provisioning. The Acquiring Banks have to invest in new POS infrastructure to get a slice of the transactions, and the real winner is BarclayCard who gets new customers through the MNO and perhaps some more spending
The potential for deeper integration between NFC chip and Mobile Operator SIM is definitely there, and maybe its used as part of the provisioning work, or even to help verify the payment transaction. That's what I mean about looking forward to finding out
more about it. Its not that its 'not good', just that its not really 'mobile payments'.
Excuse me while I just climb onto my ‘high horse'.
Mobile Payments - what exactly does that mean? I would argue that it is completely meaningless because it has been used by every marketing department to spin their products as the new "m-payment". OK set let's look at the candidates 1) Buying goods on-line
from your mobile phone. If you are browsing the internet and then buying something using a payment card or PayPal - isn't that just ecommerce on a mobile phone? What's new? 2) Using your mobile phone to pay contactlessly - isn't that just using an existing
card payment system using a different form factor? 3) Charging goods purchased to your mobile phone bill - surely that's just another payment system where the phone itself or your number becomes the token to point to your phone account. But apparently it's
all of these and loads of other stuff besides.
To establish charging stuff to your mobile phone bill the phone companies will have to become essentially ‘card issuers' with all of the account and fraud management that entails, acquirers to have the relationship with the retailers to pay them for the
goods they sold and create and international interchange process for the times I'm not on my network provider's network and buy something. Frankly I don't trust mobile operators to get my phone bill correct let alone financial transactions (I have a little
more faith in the banks - only a little). I prefer mobile operators to concentrate on giving good coverage, cheaper data charges and cheaper roaming charges. To me this looks like one for the too hard to do pile.
Using my mobile as the token - I'm in favour of that and probably willing to pay for the application for my phone but it is just another form factor to access the existing payment system. And buying stuff online - well it's buying stuff online.
Mobile Payments - sounds sexy but is completely meaningless.
I'll get down now.
I'm with you on the first 2, but the 3rd is where the term m-payments is justified. The point is that if you have a phone, you have a billing relationship with the MNO, or MVNO. That billing relationship is something powerful - it might be the first or
only financial relationship a customer actually has. Its therefore a big option compared to a signing up to a 'traditional' payment provider like a credit card issuer. So it offers competition and an alternative to the monopoly/cartel of cards. Of course,
the cards industry has had decades of experience to do their job very well and have paid for huge infrastructure necessary to have merchant penetration etc. When Operators tackle those issues of robust transaction control, billing cycles and customer care,
it takes a bit of investment in tools, resources and training. It might also need a banking licence! Which is why about 10 years ago a lot of the Operators decided not to go head to head with the banks and now settle for a standard of lower value payments
only (£10 expected to rise to £20), so their post pay accounts were not effectively being used as a credit mechanism. You wouldn't want to buy your washing machine on your post-pay phone bill, would you?? In the UK, this and other paying by mobile regulations
are set by Phonepayplus and the Operators themselves created the Payforit scheme from 2006 to provide a more trusted way of (initially) using premium SMS to acquire content and services and now direct to bill (or billing on behalf of, BOBO) payments.
Its difficult for Operators to use those NFC chips in phones because they don't have any control or ownership of the POS network needed at the merchants, and its not in the interests, yet, of the acquiring banks to offer it. But there are ideas coming.
© Finextra Research 2013