The Mobile payment market in 2008
By Paul Budde

In 2008 there will be further trials of mobile payments around the world, including a major European pilot being conducted by O2 in the UK using Near Field Communication (NFC) technology on mobile phones.

In addition to O2, there are numerous European mobile network operators working to develop NFC applications, including Bouygues Telecom, KPN, Mobilkom Austria, Orange, SFR, SK Telecom, Telefonica Móviles España, Telenor, TeliaSonera, TIM, Vodafone, Polkomtel, Elisa and 3.

In 2008 there is speculation that the US may overcome technology incompatibility issues. A study by In-Stat predicted that 25 million mobile phone subscribers in North America would use their mobile phones as mobile wallets by 2011.

In developing markets such as Africa, mobile phones are beginning to be viewed as an opportunity to reach the masses who would not otherwise use banking services or make electronic purchases. While not many Africans have bank accounts or Internet access, many do have access to a mobile phone.

In Asia, Taiwan's Far EasTone Telecommunications (FET), the number three Taiwanese mobile operator, announced plans to launch a NFC payment services early in 2008, following a trial. The trial system, which kicked off in November 2007 and is being rolled out in phases, is part of the GSM Association's 'Pay-Buy Mobile' initiative which seeks to define a common global approach to using NFC technology to link mobile devices with payment and contactless systems.

FET's proposed service, already branded 'Beep 'N Go', is being developed in collaboration with the Taishin Bank and several merchants. Handsets will only be provided by Sagem at launch. At this stage, it is not yet clear whether the service will support Visa and/or MasterCard contactless payment services. Visa has launched a mobile contactless payment trial involving 500 customers of Chunghwa Telecom, the leading Taiwanese mobile operator, Chinatrust Commercial Bank and Nokia.

In addition to payments, the service is designed to enable consumers to receive marketing messages directly into their mobile Visa application providing them with special offers or coupons from merchants. Customers will also be able to get offers by approaching their phones near smart posters embedding NFC tags. If or when this trial could turn into a commercial service was not announced.

FET was planning to use a SIM-centric solution where the payment application is stored in the SIM, while in the Chunghwa Telecom trial it was embedded in the phone.

Taiwan is set to become the first country in the world offering mobile debit and credit card services based on NFC. Both announcements indicate that Taiwanese operators and banks are prepared to offer mobile contactless payment services on a large scale.

The fact that contactless payment is already available and largely deployed in Taiwan is the main driver behind this early launch. Both Visa and MasterCard offer contactless card services in Taiwan. There is no need to deploy new contactless readers in points of sales specifically for NFC, and consumers are also already familiar with using contactless payments. There are around 1.4 million Visa contactless cards in Taiwan and 3,000 stores in the country accept this mode of payment. The presence of large contactless infrastructure can be expected to also drive NFC deployments in other markets, especially the transport sector in Europe and commercial payments in the US.

Despite all this activity, the market trials will need to run for some time. As operators have found in Europe when they have gone commercial with NFC, a lack of handsets is the key limiting factor. At the same time, these initiatives are fragmented, typically being based on partnerships between a single operator and a single bank, and with a different technical platform for each project.

As multiple NFC launches occur in any given market, there is a risk that fragmentation will create confusion for the consumers. Ultimately bank customers need to be offered the option of subscribing to these mobile payment services irrespective of their mobile operator.

Also for more information see BuddeComm's - 2008 Global Mobile - Data and Content Markets

Paul Budde, * Paul Budde Communication Pty Ltd