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Hypermarket and supermarket chain Auchan Group competes against giant rival Carrefour Group in several European countries and also in Asia, but competition is probably stiffest between the retailers in their home base of France, where both have their largest markets.
That is not stopping representatives of the chains from sitting at the same table to work out details for how they eventually will offer electronic couponing and other loyalty programs on phones that support Near Field Communication. The technology promises to give the merchants a way to more easily deliver electronic coupons and other promotions to consumers, including at the point of sale.
"It must be simple, ergonomic and comprehensive; smooth (throughout) the chains," Jean François Marconnet, head of card development at Banque Accord, Auchan's banking and card-issuing arm, tells Cards&Payments.
Auchan and Carrefour are members of the latest working group to set up shop in France. French banks and mass-transit operators already have their own consortia (
The phones will carry NFC chips, which will enable the devices to act like contactless cards and readers and also communicate in peer-to-peer mode.
But unlike other countries, the French believe their committee approach to NFC will help lay the foundation for sustained mass-market deployments in cities throughout the country by ensuring consumers have a similar experience tapping their phones no matter the mobile network, bank or retail brand.
"Once again, it's about defining the whole service, from an end-to-end point of view. Once you have that, you share between everybody," Mung-ki Woo, vice president for payment and contactless product lines for France Telecom-Orange, tells Cards&Payments. "That does not, of course, prevent differentiation."
Moreover, the French are not leaving the standards for the budding mobile-commerce market with NFC entirely to outsiders. They hope rules and guidelines set down in France will spread internationally. In this way, consumers could tap their phones to buy a cup of coffee or a bus ticket or receive a mobile promotion, regardless of the country in which the transaction is taking place.
And by taking the lead in forming the working groups, French mobile operators are seeking to influence the way NFC develops globally. Through their committees, the French already have helped cement the role of the SIM card, which telcos issue to subscribers, as the preferred token for storing payment and other secure applications on NFC phones.
Banks and other service providers outside of France may not be so keen to adopt this SIM-based concept. And they may not be as willing as the French to gather around the same table and talk, even though those discussions occasionally become heated among the French mobile-commerce players, say sources.
Banks and telcos in the United Kingdom, for example, seem to be ready to try to steal a beat on rivals by launching NFC with little consultation with their competitors.
To be sure, French telcos have held their own trials and, along with banks and other service providers, are pursuing their own business cases for NFC. They would not necessarily all launch rollouts at the same time.
But late in 2007, French banks and mobile operators joined to launch the biggest NFC m-payment trial to date, in the French cities of Caen and Strasbourg.
"NFC is not feasible without cooperation," Bruno Prexl, m-payment marketing manager for France's third largest mobile operator, Bouygues Telecom, tells Cards&Payments. "We need to have some common strategic view."
The banking group, Payez Mobile, has been setting guidelines for the mobile-payment trial. Among the noteworthy features is enabling consumers to tap their phones to make purchases ranging from less than one euro to more than 200 euros (US$272).
The group has set procedures for how consumers conduct these higher-value transactions, including entering a PIN on their phone keypads and specifying when to tap the handsets on contactless readers. The PIN entry also enables banks to reset security counters for particular customers from time to time.
This is an example of how rules forged in France might find their way to other countries. Visa Europe and MasterCard Worldwide have wanted to limit contactless purchases to 20 or 25 euros, without bothering consumers with PINs. But the French want to be able to conduct higher-value transactions in contactless mode and also give consumers the option of entering PINs for sub-20-euro purchases.
The international card organizations have had to go along with the rules for the French NFC pilot, and they have even joined the banking working group as associate members.
Besides Auchan and Carrefour, the new retail working group, called "Ergosum," counts among its members such large French retailers as consumer electronics chain Fnac and the consumer finance arm of department-store chain Galeries Lafayette.
The new retailer group was perhaps the most difficult to put together because its members take a more short-term view of the return on investment in new technology to increase sales, say observers.
But the French retailers see NFC as a promising technology with which to target consumers wherever they are, including at the point of sale, says Prexl.
A merchant, for example, could enable consumers to tap a chip embedded in a promotional display as they enter the store. The chip would open a mobile Internet connection and let them to download one or more coupons. The consumers then could redeem the coupons by tapping a reader when they check out.
"Think about it," said Prexl at a recent conference. "You are in a large retail store. You have an NFC phone with private-(label) payment cards, multiple loyalty-scheme cards; you have coupons. You tap your phone on an NFC device. What happens? Which payment card will be used? Which loyalty card will be used? What about coupons? What will be customer experience?
"It's really tough issues to solve both on the technology side and business side," he added.
Some retailers already do mobile couponing. But NFC could enable them to do it faster than sending and redeeming vouchers via text messaging or mobile browsers, says Banque Accord's Marconnet. NFC could be easier to use than such other short-range wireless technologies as Bluetooth or 2-D bar codes, he adds. But that advantage would be lost without a standards group to define how mobile couponing will work.
The NFC-based loyalty applications will be designed to work hand-in-hand with payment, and consumers redeeming coupons probably will use the same terminals they tap to pay.
Contactless terminals originally were intended to accept contactless payment cards. But unlike in the United States, and to a lesser extent the United Kingdom, Turkey, Taiwan and a few other countries, France has not yet launched a rollout of contactless payment cards and merchant terminals. Most observers agree NFC alone will not be enough to encourage a broad slice of French merchants to support contactless payment and loyalty applications.
And the lack of cards could delay any NFC rollout, even though the banking arms of Carrefour, Auchan and possibly Galeries Lafayette plan to issue their own contactless cards, either private-label, open loop, or both. If they issue cards, they will, of course, accept them at their stores. Executives with French banks have said they plan to begin issuing their own contactless cards some time this year.
But Auchan and its issuer, Banque Accord, had planned to launch contactless card payment in 2008. Among the problems were difficulties installing and integrating contactless technology at the point of sale.
Banque Accord has issued 22,000 MasterCard-branded cards carrying MasterCard's contactless PayPass application and has equipped one of its hypermarkets in the north of France to handle the payments, says Marconnet.
The chain, however, has not switched the project on with real consumers. It is only testing contactless payment with employees now. If it deems the eventual test with consumers successful, Auchan would expand it to four more hypermarkets. The retailer then could roll out contactless payment to its 121 hypermarkets and possibly later to its more than 400 supermarkets in France and then could expand to its stores in other countries.
Yet the rollout of contactless card payment is running behind expectations in the U.S., UK and other markets. NFC is even further behind, with stubborn questions remaining about the business case for the technology. That, in turn, is holding up handset availability.
Orange had sought to go it alone on a small commercial launch of NFC, in the French city of Bordeaux, which would have involved a major private-label credit card issuer and a transit operator. But technical and commercial issues have delayed the project by at least a year.
Orange may wait for other French telcos to join the project before it tries an actual rollout again. In any case, all this coordination of NFC will take time in France.
But telcos and banks in some other countries might not want to wait that long.
For example, UK-based payment card issuer Barclaycard appears sold on contactless-mobile payment and would not be deterred from a commercial launch by a lack of a broad range of NFC phones on the market or having only one large mobile operator to partner with, suggests Colin Swain, Barclaycard head of research and development.
"We have done trials. We know there are consumer needs," he said during a speech in November at the Mobile & NFC Payment Strategies conference in Budapest. "Our focus now (is), when should we launch."
Barclaycard participated in an NFC trial of mobile payment and transit ticketing that finished earlier this year, after which nearly 80% of participants said they would use contactless mobile services if available. The issuer also is leading the rollout of contactless cards in the United Kingdom.
Swain says Barclaycard would consider forming a partnership with just one major mobile operator for an NFC commercial launch and could make do with one high-end handset supporting the technology to start.
But Swain added that one or two large UK merchant chains, especially supermarkets, would have to begin accepting contactless-payment cards before Barclaycard would move ahead with a mobile-payment launch.
Overall, Swain says, Barclaycard would not get hung up on building an ironclad business case before launching NFC. "It's payment, it's transit, smart-tag advertising and reward and coupons. I think all this bundled together is an extremely good proposition," he tells Cards&Payments.
The French, however, favor the group approach and already have recast their banking group as a "European" association to integrate their budding French specifications into international standards and welcome foreign banks and telcos.
All three of the French working groups would enable their members to set guidelines or rules for smoother operation of NFC without violating any antitrust laws, stress organizers.
The groups plan to wrap up their specifications by mid-2009, barring too much difference of opinion.
But it appears the French mobile-commerce players believe it is better to argue a little bit with one another than to go it alone on NFC. CP
