Near field communication, which many financial companies are testing, is derived from the technology already used in contactless payment cards, and installing it on phones would make them compatible with contactless card readers. However, few phones currently include NFC components.
Rollcomm Worldwide Corp. says it has developed a payment system that uses the Bluetooth wireless communication format, which is installed in almost every handset. The system lets people make purchases at the point of sale, and it can support a wide range of functions, including payments, loyalty tracking, and account inquiries, Robert Szabo, a co-founder of Rollcomm, said in an interview Wednesday.
The debate over formatting underscores the larger question of how the revenue model for mobile payments should be structured. Financial institutions, mobile carriers, and payment networks have yet to agree on a model that would let each share in the expected income streams.
Mr. Szabo said using technology already built into phones can remove carriers from the equation and simplify the business model.
"The bank could own the system," he said.
Carriers are in no rush to deliver NFC-capable phones to the market without assurances that they would get a piece of the action from mobile payments, Mr. Szabo said. Using Bluetooth would eliminate that leverage, he said, since it would not require the operators to distribute a new generation of handsets.
Payment executives question whether a Bluetooth-based mobile payment system could work without the cooperation of the mobile operators.
"My sense is that mobile operators will need and want to cooperate with Bluetooth payment systems. We'll see how this plays out," said Jeff Semenchuk, an executive vice president and the head of growth ventures at Citigroup Inc.
Citi expects carriers to have a role in mobile payments, no matter which communications platform is used, Mr. Semenchuk said.
"No one will make money until we all decide to make money together," he said. "We can't do it alone."
Citi is planning a large test of NFC mobile payments in India, but it also is investigating Bluetooth options, which have only recently become available, he said. "It's too soon to make the call" on which technology will prevail or whether they will coexist.
Simon Pugh, the head of MasterCard Inc.'s worldwide global center of mobile excellence, said his company has spent years preparing its network to support NFC, which it thinks is the most viable option for mobile payments.
MasterCard evaluated Bluetooth, but concluded that it would be too cumbersome for use at the point of sale, Mr. Pugh said. Systems using Bluetooth must search for Bluetooth-equipped devices — for example, a phone would have to search for merchant terminals — and users must select the device with which they want their phone to communicate.
Contactless cards, which use radio frequency identification, and NFC-capable phones can be waved near a reader to make a payment, and that setup is much easier than using Bluetooth, he said. "It provides the simplest, most intuitive experience."
Pam Zuercher, the head of product innovation at Visa Inc., also expressed support for NFC over Bluetooth.
"We believe NFC is a superior technology based on its short read range, ability to transport encrypted information, and positive user experience — consumers simply wave the phone in front of a contactless reader to pay," she wrote in an e-mail.
