British issuer Barclaycard and mobile-network operator Orange UK have launched a cobranded contactless credit card, a product that brings the two firms closer to offering payments via mobile phones.
The MasterCard-branded card hits the UK market about 10 months after Orange and Barclaycard announced a mobile-payments partnership, one of the most-important declarations to date of plans by major telecommunications and banking-industry players to launch services that revolve around Near Field Communication technology.
NFC enables mobile phones and similar devices to use applications to make contactless card payments and to download such information as coupons and tickets. The technology has seen dozens of tests around the world but no significant rollouts.
The new card’s technology differs little from the approximately 5 million other contactless cards Barclaycard has issued in the UK. A chip that consumers wave or tap in front of readers generally enables consumers to make purchases of up to 10 pounds (US$16 or 11 euros) without the need for merchants to issue receipts or cardholders to enter PINs. Like other Barclaycard-issued cards, these new cards offer customers text-message alerts for spending, balances and credit remaining, a spokesperson for the financial institution tells PaymentsSource.
There is at least one slight difference, however, from other contactless cards Barclaycard issues. The new card relies on MasterCard’s PayPass application instead of Visa’s payWave, which the issuer used with most of its earlier contactless cards. That includes Barclaycard’s OnePulse card, which consumers can use not only for contactless retail purchases but also for fare payments on London-area mass transit.
In fact, OnePulse represents one of the most-significant cobranding partnerships for contactless cards in the UK before the Orange-Barclaycard card launch. OnePulse cards carry the Oyster brand. Oyster is the electronic ticketing system for London’s mass transit.
But the most interesting feature of the card is that “Orange is involved at all,” says Nick Holland, a senior analyst at Boston-based consulting firm Aite Group LLC. The launch, the first public fruit of the partnership between the mobile operator and the issuer, “telegraphs [Orange’s] interest in transitioning to NFC at some point.”
Terry Xie, director of the international advisory service at Maynard, Mass-based consultancy Mercator Advisory Group Inc., agrees. “This is the first step toward finding a solution to the business-model question that has long plagued the NFC mobile payments,” he tells PaymentsSource.
Along with the lack of NFC-enabled handsets, uncertainly over business models for the technology, which requires the participation of various companies on nearly every NFC scheme, has slowed rollouts. Financial institutions and mobile operators especially have butted heads over how to divide responsibilities for NFC programs–for instance, billing and customer service–and how to split revenues.
“This new deal allows [issuers and mobile operators] to work out their disagreements by starting from a simpler business model–cobranded cards,” Xie says. “Using the established cobranded model, they can work to adapt and adjust that to feed specific needs in NFC mobile payments. In other words, this gives them a reference point to start with.”
Additionally, working together on a contactless card allows Orange and Barclaycard “to identify a potential NFC mobile-payment user base,” Xie adds. “Consumers interested in this cobranded contactless program … are the most promising potential adopters of NFC mobile payments.”
The Barclaycard spokesperson declines to be specific about when Orange and the issuer might begin to offer NFC services to consumers, either through pilots or a rollout. The spokesperson said an NFC project could happen by year’s end.
“It is possible that Orange and Barclaycard might introduce NFC payment service by end of this year,” Xie says. “But considering all the remaining issues [for instance, lack of handsets and payment-network certifications], I would say a more likely scenario is that it will come next year rather than this.”
Orange could start distributing handsets later this year that have NFC chips, even if consumers would not immediately start using those chips, Holland says. Orange could not be reached for immediate comment.
Analysts, technology experts and payments executives regularly have pushed back predictions of NFC rollouts nearly a decade, though the Orange-Barclaycard launch gives cause for optimism, Holland notes. “It’s been two years away for seven years,” he says. “It actually might be two years away at this point; the world is sick of NFC pilots.”
