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Austria’s largest mobile operator, A1, has announced plans to roll out NFC payment using its own payment scheme.

The telco, which is one of the few operators worldwide to own its own bank, today announced it is launching a trial of its “paybox NFC” application, with the intention of launching it commercially this summer.

The application will be available on both NFC SIM cards and contactless stickers issued by the telco. Among the NFC phones that will support the SIMs will be the new Sony Xperia S and HTC One X, said the telco, though a 500-person trial kicking off this month is expected to start with the passive stickers.

In shunning major Austrian banks and the established card schemes, Visa Europe and MasterCard Worldwide, A1 believes it can expand its paybox online payment and mobile parking fare-collection service to the physical point of sale. By doing so, it could earn transaction fees from merchants.

Perhaps the biggest challenge facing A1 will be recruiting enough merchants to join the scheme and convincing them to deploy point-of-sale terminals supporting the contactless paybox application.

Christoph Kössler, senior product manager and project lead for paybox NFC told NFC Times the telco is targeting restaurants and other retail merchants that could benefit from fast cashless transactions. He said an estimated 80% of retail spending is done with cash in Austria.

Kössler indicated A1 plans to offer the merchants attractive packages that will include competitive transaction fees and terminals and terminal maintenance to encourage them to sign up. The telco might offer to pay for terminals, though Kössler would not confirm this.

McDonald’s restaurants and large Austrian retailer Merkur are participating in the first phase of the paybox NFC trial announced today in Vienna. Four McDonald’s locations and five Merkur supermarket outlets in Vienna, with a combined 57 POS terminals, will support contactless paybox.

“This is the biggest telecom operator in Austria and really has a good experience in providing infrastructure and partners and merchants,” Kössler said. “We are also convinced we can handle a quick ramp-up of terminals at the point of sale.”

Few Contactless Terminals
A1, in fact, will be starting out just about even with Visa and MasterCard in terms of contactless terminals in Austria–since there are few contactless point-of-sale terminals supporting any brand in the country.

Raiffeisen Bank International, one of Austria’s largest banks, along with Visa, is planning to launch contactless-mobile payment with microSD cards and an iPhone attachment this spring. Plans call for moving the Visa payWave debit application to full NFC phones later.

A Visa Europe spokeswoman for Austria said in late January there are no Visa payWave terminals, and there would only be a couple of thousand by the end of 2012. 

Representatives of the bank and Visa in Austria were not immediately available for comment today on A1’s plans to launch a competing contactless scheme.

Three major operators in Germany have announced similar plans to A1, that is, expanding their online payment system to the point of sale using NFC phones. In Germany, the plans to launch an NFC version of the telcos’ mpass payment scheme are believed to be delayed, however. 

But nearly all telcos elsewhere in Europe and beyond plan to work with the established payment networks when they commercially launch NFC services. The most notable example are the three carriers making up the Isis joint venture, Verizon Wireless, AT&T and T-Mobile USA, which abandoned plans to roll out their own payment brand after finding merchant recruitment a difficult slog. They will work with all four major U.S. payment networks.

‘Difficult to Sustain’
One industry observer in Austria not connected with a bank or established payment network told NFC Times he believes the launch of the payment service will be “difficult to sustain” in the long term for A1.

“It is a closed-loop scheme not supported by other MNOs (mobile network operators), banks or even supported outside of Austria,” he said.

Kössler said A1, which is part of the Telekom Austria Group, is talking with other Austrian telcos to possibly be part of the paybox NFC scheme. He declined to elaborate.

The plans by A1, formerly known as mobilkom Austria, to launch its own mobile-payment brand at the physical point of sale are not surprising.

The telco is believed to be the first operator globally to also become a bank, when it launched A1 Bank in 2002, after receiving a banking license.

It had launched the paybox mobile platform a year earlier. And it has been processing mobile-parking fares via SMS since 2003. Competing operators Orange and T-Mobile later adopted the paybox platform, which handles a total 1.7 million parking transactions per month in this Alpine nation of less than 9 million, according to Kössler.

The telco launched its co-branded A1 Visa Card in 2009 and acquires some of its own transactions, according to Kössler.

Two years earlier, in 2007, A1 launched what it called a “rollout” of NFC-enabled transit ticketing and payment in vending machines, though subscribers only can initiate transactions by tapping NFC tags. The transactions then go over the network as they do with non-NFC phones.

The telco introduced two generally unappealing phones, the Nokia 6131 and Nokia 6212, for the NFC ticketing service, which were among the few NFC handsets available at the time. Use of the NFC tags by subscribers remains low.

More Compelling Phones
But A1 says it plans a more compelling lineup of NFC phones for its paybox NFC service. The phones will support the single-wire protocol standard, enabling the telco to issue NFC SIMs storing paybox.

In addition to the Sony Xperia S and HTC One X, both new phones, the telco said it is offering three NFC-enabled BlackBerrys for the service, the Curve 9360 and 9380 and Bold 9900. Other models will follow.

It’s not clear whether A1 has all five phones yet or the NFC SIMs. Kössler said paybox NFC would be preloaded on the SIMs, though the applications could be downloaded and provisioned over the air. He declined to reveal the name of the SIM provider or trusted service manager the telco is using.

The 500-user trial, which is expected to gather steam by next month, will include employees and real subscribers. The telco is funding the cost of the devices and SIMs, as well as the stickers.

Plans call for expanding the trial to a second phase with 5,000 users in early June and then to commercially launch the service during the summer. The operator predicts it will have 200,000 NFC phones in circulation by the end of 2012.

“We have parallel approach, NFC phones and stickers,” Kössler said. “Those who have NFC phones can receive an NFC SIM card. Those who don’t have NFC phones can have a sticker.”

The telco apparently plans to sell the service to consumers as being more secure than competing mobile-payment or contactless schemes, such as payWave and PayPass. A1 will encrypt information passing between the phone and terminal and won’t store any sensitive data on the SIM or sticker, the telco said.

Users won’t be able to make high-value transactions and will not enter PIN codes, at least not at first. Transactions will be limited to €25 (US$32.82) each and €50 per day.