Underscoring its desire to influence payment transactions on mobile communication devices, Visa International announced a system development agreement last week with the Swedish cellular telephone leader Ericsson.
The companies said they signed a memorandum of understanding to cooperate on mobile commerce systems and promote open standards for wireless payments.
Visa will, in effect, contribute its expertise with EMV, the Eurocard-MasterCard-Visa standard for smart card terminals, and SET, the secure electronic transaction protocol for card payments on the Internet. Other technical standards likely to come into play are WAP, the wireless application protocol, and Bluetooth, a radio frequency system that Ericsson is building into a "wireless wallet" that can enable a transfer of funds between a mobile phone and a point of sale device.
The announcement, made during the Cartes '99 smart card conference, strengthens the signal Visa has been sending about the importance of mobile commerce technology. Visa recently became the first payment association to join the WAP Forum, a consortium organized by the telecommunications industry that is accelerating the wireless commerce trend.
Visa also previously announced an alliance with Ericsson rival Nokia and the Scandinavian banking giant, MeritaNordbanken, to combine WAP, SET, and the Visa Open Platform smart card specification.
Speaking at Cartes '99 last Tuesday, Visa chief executive officer Malcolm Williamson said alliances like these and "coopetition" will be critical to achieve the interoperability that such new service delivery channels will require. He pointed to other examples in the wireless realm including a joint venture that Microsoft Corp. formed with the cell phone company Qualcomm called Wireless Knowledge and America Online Inc.'s $1.5 billion investment in Hughes Electronics aimed at delivering Internet access via satellite.
"In the wireless environment, the chip can become untethered from the card altogether, embedded directly into a mobile device, providing customer identification, service access, and payment functions all at once," Mr. Williamson said.
The interest in wireless commerce resonates particularly in Europe where the GSM - Global System for Mobile communication - standard predominates. GSM is also "smart card friendly" in that it requires a computer chip to authenticate the subscriber. The subscriber identity module, or SIM, can be combined with a chip card payment service, or, as in the case of Visa's work with Nokia's 7110 phone, there can be a second chip dedicated to bank card functions. That test, which includes Bluetooth, is under way and expected to be in full swing by summer.
In Finland and Sweden, the main countries served by MeritaNordbanken, 60% and 50% of the population, respectively, have GSM phones, Sandra Alzetta, senior vice president of e-commerce for Visa's European Union region, said at Cartes '99. Among more populous countries, France, Germany, and the United Kingdom are at 20% or higher.
"Once it gets past 10% or 15% it is no longer a niche market but it becomes a mass market," Ms. Alzetta said. Visa therefore views wireless, "particularly in this region with GSM," as a new delivery channel deserving top priority, she added.
"This is one of the big things happening in the banking world these days," said Bo Harald, executive vice president of MeritaNordbanken. He said there is a "symbiotic relationship among electronic banking, card payments, and mobile commerce. They are technically close and almost all of our important customers use all three services already."
On another cooperative front, GlobalPlatform Inc., the company Visa formed last month to promote a common smart card infrastructure for multiple industries, announced 11 new members, bringing the total to 30.
Among the companies in the group as of the original Oct. 21 announcement were operating system rivals Microsoft and Sun Microsystems, British Telecommunications, Nokia, the electronic purse company Proton World International, and smart card and chip vendors Gemplus, Infineon, Oberthur, and STMicroelectronics.
The additions are: Carte Bleue of France, the South Korean government agency TTA, Eircom of Ireland, First Data Corp., MeritaNordbanken, Digital Courier Technologies, ACI Worldwide, Cards Etc., and the terminal vendor Ingenico. Two other "large organizations" have joined but GlobalPlatform is withholding their identities.
Though the Multos operating system associated with MasterCard International's Mondex program has not joined, there are some cross-system links. Two GlobalPlatform members - the semiconductor company Infineon and the Australian payment automation company Keycorp - are also owners of Maosco Ltd., the Multos consortium.
Digital Courier, a payment processor, announced an alliance agreement this week with Mondex International to promote that brand of electronic cash. Gemplus of France, which has ties to all the major card associations and payment platforms, said it is taking an equity position in the Mondex Korea franchise and will deliver 400,000 Multos cards as that program unfolds.