Facing a potential onslaught of conflicting mobile payment systems, two industry groups are wondering whether a set of standards would smooth the road to adoption.
The Clearing House Payments Co. LLC, which is owned by 21 large U.S. banking companies, and the Financial Services Technology Consortium, an industry-backed research organization, are expected to announce plans today to conduct a joint two-month study of mobile banking standards. Related Links
Numerous issuers, card companies, and vendors are testing the use of mobile devices for banking and payment-related functions. The contenders offer a wide variety of alternatives - some based on text messaging, others using the Web browser in wireless devices, and others employing downloaded applications or radio-frequency identification chips embedded in the devices' case.
The plethora of choices raises the question of whether the market already has moved past the point when standards might offer benefits, but Daniel Schutzer, the consortium's executive director, argued in the interview that just the opposite is true. A certain amount of development and testing "has to take place before the time is ripe for a standards-type approach."
The executives compared the evolution of mobile payments to the development of debit networks, which began as closed proprietary automated teller machine systems within individual banking companies but surged in popularity after the networks were connected.
An early look at the standards question could enable mobile payments to achieve their potential more quickly, the executives said.
The two New York organizations plan to confine their research to two specific areas: mobile proximity payments, which can be made at point-of-sale terminals using near field communications chips or other contactless technologies; and mobile person-to-person payments, which involve moving funds from one individual's account to another.
Thirteen banking companies have agreed to participate - ABN Amro Holding NV's LaSalle Bank Corp., Bank of America Corp., BB&T Corp., Citigroup Inc., Comerica Inc., HSBC Holdings PLC, KeyCorp, JPMorgan Chase & Co., National City Corp., PNC Financial Services Group Inc., U.S. Bancorp, Wachovia Corp., and Wells Fargo & Co.
However, some of the leaders in the developing mobile payments market, are bank-backed organizations such as Visa International and nonbank competitors such as eBay Inc.'s PayPal Inc. of San Jose.
Though all the participants in the study are banks, "we're going to engage with other players in this market to see what they're thinking, how they're doing," Mr. Leander said. "It's important for this core group to lay out some foundation steps first."
Amanda Pires, a spokeswoman for PayPal, called mobile payments "a very nascent market" with many unsettled issues.
"There's a ton of opportunity," she said. "We're open to a number of approaches."
Mr. Leander said the study also will look at foreign markets where mobile payment systems are more advanced and participants have taken varying approaches. "We're being very careful to be open-minded about the way this might evolve."
The executives said the results of the study might lead to further efforts to develop standards or to build back-end systems for processing payments, but Mr. Leander said, "It might not be something that the Clearing House operationalizes."
The establishment of standards also could forestall legal challenges, such as the suits filed by DataTreasury Corp. a small processor in Plano, Tex., over image exchange. DataTreasury claims broad intellectual property rights over the process of creating and storing digital check images, but those patents are being challenged.
"Keeping it open and not encumbered by IP, I think that would be a hope," Mr. Schutzer said.
However, Mr. Leander said, "Things crop out of the woodwork all the time that have the potential to be meddlesome."
Pam Zuercher, a vice president of product innovation for Visa, said that standards would accelerate the "broad scale commercialization" of mobile payments, and that developing the standards "will absolutely take collaboration across both the financial services and the wireless stakeholders."
