Telcos battle tech, banking titans in mobile payment

 

Near Field Communications on show.

Paying for your morning coffee and newspaper by swiping your mobile phone instead of fumbling for cash or debit card could be just around the corner.

For telecoms firms like Vodafone and France Telecom, it's the innovation they hope may finally enable them to steal a march on Apple and Google who dominate the mobile market with devices, applications and software.

The telecom companies have suffered for years from the "dumb-pipe" phenomenon whereby operators spend billions building the networks on which data travels, only to watch Google and Apple pocket the profits as smartphone and tablet computer users download millions of applications and ring up transactions.

Eye-watering amounts of money are at stake in this new market -- it is estimated at US$1.13 trillion globally by IE Market Research. One in every six phones will be equipped with the new technology by 2014, according to Jupiter Research.

But to succeed, the telecoms operators will also have to take on credit card giants Visa and MasterCard, who are pushing the technology hard as a way to boost transactions and fees.

"There is a game-changing opportunity here for the operators to effectively displace credit cards and banks," said Dan Hays, partner at global management consulting firm PRTM.

"Mobile payments are arguably the next major change in the mobile industry."

 

At the Mobile World Congress, which opens today in Barcelona, telecom operators will be talking up a technology known as near-field communications (NFC), which allows consumers to buy items by tapping their phone on a specialised reader at the cash register.

Such mobile payments exist already in Japan and Korea but have so far been held back from mass-market adoption by a lack of handsets and confusion around the business model.

This year is set to be a turning point, say analysts and industry executives, as about a dozen NFC-enabled phones hit the market and operators across Europe and the U.S. launch wide-scale mobile payment projects.

Already the competition is cut-throat.

Google and Apple are working on mobile payment systems that would marginalise operators by using software instead of the phone's SIM card to process secure payments.

Google plans this year to integrate mobile payment in its Android mobile operating system, which is the world's most popular smartphone software.

Apple is weighing putting a NFC chip in its next iPhone and could tie it to its widely-used iTunes payment system to control the mobile payment value chain like it has with music and magazines on the iPod and iPad.

A slew of start-ups have also created stickers and memory cards that users place on their phones to process payments. Visa's contactless payment program, dubbed payWave, for example, relies on a memory card with a NFC chip in it.

Even simple technologies can cut telecom operators out. Starbucks has launched mobile payment at 6,800 stores in the U.S that relies on an application downloaded on an iPhone or Blackberry.

 

Alternative solutions

Operators are racing to roll out mobile payment programs which try out different business models.

In the U.S., AT&T, Verizon, and T-Mobile formed a joint venture last year with Barclays Bank and Discover Financial Services which required customers to sign up for the latter's credit card to launch mobile payments. It left Visa and MasterCard on the sidelines.

In Europe, France Telecom's Orange teamed up with competing operators SFR and Bouygues, several French banks, and the local government in a year-long project in Nice in which 3000 residents were given a Samsung NFC-enabled phone to use on local trams and at 1,000 local retailers.

"You need a big base of customers to make this work," said Anne Bouverot, Orange's executive vice-president of mobile services.

Under this collegiate approach Orange won't earn much revenue for the mobile payments, but will get fees from banks and credit cards.

"It's also a way to provide an additional service to customers that we think will increase their loyalty and attention," Bouverot added.

Orange has pledged to equip 500,000 clients with NFC phones this year, and announced an accord with Samsung today.

 

Emerging markets

In another bid to nab customers first, telecoms firms are investing heavily in mobile payments systems in Africa and India where many people do not have access to banks or credit cards.

One early success was Safaricom's M-Pesa program in Kenya. Launched in 2007 the system lets customers transfer money via mobile in a network of resellers. South African operator MTN and Orange have similar programs.

Hannes van Rensburg, the CEO of Fundamo, a South African firm that has built 50 mobile payment systems for operators in Uganda, Pakistan and others, said margins on mobile payment projects are much more attractive in emerging markets.

"In the U.S. and Europe, you have to compete with the established credit card system, which is already very efficient," he said. "There is more money to be made in emerging economies."

(Editing by Sophie Walker) (Additional reporting by Nicola Leske and Marie Mawad)


Telcos battle tech, banking titans in mobile payment
 
 
 
Top Stories
Frugality as a service: the Amazon story
Behind the scenes, Amazon Web Services is one lean machine.
 
Negotiating with the cloud email megavendors
[Blog post] Lessons from Woolworths’ mammoth migration.
 
Qld govt to move up to 149k staff onto Office 365
Australia's largest deployment, outside of the universities.
 
 
Sign up to receive iTnews email bulletins
   FOLLOW US...

Latest VideosSee all videos »

The great data centre opportunity on Australia's doorstep
The great data centre opportunity on Australia's doorstep
Scott Noteboom, CEO of LitBit speaking at The Australian Data Centre Strategy Summit 2014 in the Gold Coast, Queensland, Australia. http://bit.ly/1qpxVfV Scott Noteboom is a data centre engineer who led builds for Apple and Yahoo in the earliest days of the cloud, and who now eyes Asia as the next big opportunity. Read more: http://www.itnews.com.au/News/372482,how-do-we-serve-three-billion-new-internet-users.aspx#ixzz2yNLmMG5C
Interview: Karl Maftoum, CIO, ACMA
Interview: Karl Maftoum, CIO, ACMA
To COTS or not to COTS? iTnews asks Karl Maftoum, CIO of the ACMA, at the CIO Strategy Summit.
Susan Sly: What is the Role of the CIO?
Susan Sly: What is the Role of the CIO?
AEMO chief information officer Susan Sly calls for more collaboration among Australia's technology leaders at the CIO Strategy Summit.
Meet the 2014 Finance CIO of the Year
Meet the 2014 Finance CIO of the Year
Credit Union Australia's David Gee awarded Finance CIO of the Year at the iTnews Benchmark Awards.
Meet the 2014 Retail CIO of the Year
Meet the 2014 Retail CIO of the Year
Damon Rees named Retail CIO of the Year at the iTnews Benchmark Awards for his work at Woolworths.
Robyn Elliott named the 2014 Utilities CIO of the Year
Robyn Elliott named the 2014 Utilities CIO of the Year
Acting Foxtel CIO David Marks accepts an iTnews Benchmark Award on behalf of Robyn Elliott.
Meet the 2014 Industrial CIO of the Year
Meet the 2014 Industrial CIO of the Year
Sanjay Mehta named Industrial CIO of the Year at the iTnews Benchmark Awards for his work at ConocoPhillips.
Meet the 2014 Healthcare CIO of the Year
Meet the 2014 Healthcare CIO of the Year
Greg Wells named Healthcare CIO of the Year at the iTnews Benchmark Awards for his work at NSW Health.
Meet the 2014 Education CIO of the Year
Meet the 2014 Education CIO of the Year
William Confalonieri named Healthcare CIO of the Year at the iTnews Benchmark Awards for his work at Deakin University.
Meet the 2014 Government CIO of the Year
Meet the 2014 Government CIO of the Year
David Johnson named Government CIO of the Year at the iTnews Benchmark Awards for his work at the Queensland Police Service.
Q and A: Coalition Broadband Policy
Q and A: Coalition Broadband Policy
Malcolm Turnbull and Tony Abbott discuss the Coalition's broadband policy with the press.
AFP scalps hacker 'leader' inside Australia's IT ranks.
AFP scalps hacker 'leader' inside Australia's IT ranks.
The Australian Federal Police have arrested a Sydney-based IT security professional for hacking a government website.
NBN Petition Delivered To Turnbull's Office
NBN Petition Delivered To Turnbull's Office
UTS CIO: IT teams of the future
UTS CIO: IT teams of the future
UTS CIO Chrissy Burns talks data.
New UTS Building: the IT within
New UTS Building: the IT within
The IT behind tomorrow's universities.
iTnews' NBN Panel
iTnews' NBN Panel
Is your enterprise NBN-ready?
Introducing iTnews Labs
Introducing iTnews Labs
See a timelapse of the iTnews labs being unboxed, set up and switched on! iTnews will produce independent testing of the latest enterprise software to hit the market after installing a purpose-built test lab in Sydney. Watch the installation of two DL380p servers, two HP StoreVirtual 4330 storage arrays and two HP ProCurve 2920 switches.
The True Cost of BYOD
The True Cost of BYOD
iTnews' Brett Winterford gives attendees of the first 'Touch Tomorrow' event in Brisbane a brief look at his research into enterprise mobility. What are the use cases and how can they be quantified? What price should you expect to pay for securing mobile access to corporate applications? What's coming around the corner?
Ghost clouds
Ghost clouds
ACMA chair Chris Chapman says there is uncertainty over whether certain classes of cloud service providers are caught by regulations.
Was the Snowden leak inevitable?
Was the Snowden leak inevitable?
Privacy experts David Vaile (UNSW Cyberspace Law and Policy Centre) and Craig Scroggie (CEO, NextDC) claim they were not surprised by the Snowden leaks about the NSA's PRISM program.
Latest Comments
Polls
Which bank is most likely to suffer an RBS-style meltdown?





   |   View results
ANZ
  21%
 
Bankwest
  9%
 
CommBank
  11%
 
National Australia Bank
  17%
 
Suncorp
  24%
 
Westpac
  19%
TOTAL VOTES: 1429

Vote