Telefónica O2 UK Ltd. is adding its name to a growing list of wireless carriers planning to launch Near Field Communication initiatives to enable consumers to use their smartphones to initiate payment at the point of sale.
The United Kingdom-based telecommunication company decided to take the plunge into NFC because “smartphones are getting much smarter and consumers expect to do more with their devices, including managing bank accounts and making purchases,” an O2 spokesperson tells PaymentsSource.
The telco has tested the mobile-wallet concept with consumers, and the concept proved popular, the spokesperson says. A recent Telefónica O2 mobile-wallet trial found that 90% of participants used the service to initiate payments, and 85% felt the technology was secure, she notes.
“Initially we see the wallet operating like a prepaid stored-value account in which consumers load funds into the account on a smartphone or feature phone,” the spokesperson says. In the future, “we hope consumers can store their current debit and credit card details in their mobile wallet alongside their stored-value account,” she adds.
O2 executives ultimately see the wallet enabling consumers to use their phones to purchase goods and services online through either a browser or application, to conduct person-to-person funds transfers, to add funds for pay-as-you-go phone accounts, and to make contactless purchases at the point of sale, the spokesperson explains.
The operator plans to seek permission from the European Commission for an electronic-money operating license so it may hold funds, enable consumers to transfer funds within the UK and make payments at contactless terminals, according to the spokesperson.
Instead of working with one bank, O2 plans to partner with various payments and processing companies and to launch services under the O2 brand, the spokesperson says.
O2 will announce more specific product details such as fees and purchase amounts closer to the official launch later this year. The company did not specify if the payment applications will be located in a SIM card or on a separate NFC chip.
The payments industry is going to begin seeing various wireless carriers around the world working with operating-system providers, banks and card companies to “prop up mobile-payment services,” says Todd Ablowitz, president of Double Diamond Group LLC of Centennial, Colo. Carriers especially need banks because they understand how to handle money and are best suited to prevent money-laundering issues, he adds.
Eventually, “consumers will have a mobile-wallet system that allows them to pay through a variety of methods such as credit, debit and prepaid cards as well as loyalty cards,” Ablowitz says.
The concept of enabling a multiple payment-type system is important because consumers often have a long list of reasons why they choose a specific payment method. Many mobile-based payment services will start out with one payment method, but the services will evolve to support multiple payment methods because of consumer preference, Ablowitz says.
O2’s announcement follows that of Barclaycard and wireless-network operator Everything Everywhere Ltd., which this summer plan to launch the UK’s first contactless mobile-payment system (
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