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China’s giant mobile operator, China Mobile, and the country's big domestic payment network, China UnionPay, have signed an agreement to cooperate on mobile payment, including using SIM cards in NFC phones.

The two big players, in a deal signed today in Shanghai, say they will work together on product development, technical standards, trusted service management interoperability and common promotion of mobile payment.

An announcement by China UnionPay today says the parties have agreed to put UnionPay’s contactless-payment application, which is now called Quick Pass, onto SIM cards. Yesterday, China Mobile stated at the GSM Association’s Mobile Asia Expo that it would support SIM cards for mobile payment in NFC phones.

The deal to cooperate on mobile payment appears to signal a thaw between China Mobile and China UnionPay, which have been at odds over competing m-payment initiatives. That reached a low point after China Mobile launched its effort to jump into the payment market a few years ago with its own payment scheme using proprietary contactless technology called RF-SIM. More recently, UnionPay has launched the rollout of NFC payment on specially equipped microSD cards for NFC phones, an initiative that could bypass telcos.

A source told NFC Times that UnionPay will not drop its microSD card rollout, for which it has signed up one of the country’s major banks, China Construction Bank.

But under the agreement between China Mobile and UnionPay, the telco and payment network say they will launch pilots in several cities. The announcement today noted that payment will be accepted where merchants and vending machines display the Quick Pass logo or a mobile wallet logo from China Mobile.

The agreement includes cooperation on remote payment, including online shopping, but NFC will figure prominently in the deal.

China Mobile, which in 2010 bought a 20% stake in Shanghai Pudong Development Bank, is still interested in becoming more involved in the payment market. On Monday, it announced a deal with the bank reportedly to launch co-branded bank cards and passive contactless stickers for mobile phones. The telco and bank in March reportedly tested an NFC mobile phone service, which they plan to launch later.

China Mobile and the bank will also work together on remote payment for consumers to shop and pay bills on their phones. Their planned co-branded payment application will support UnionPay’s Quick Pass application.

600,000-Plus POS Terminals
UnionPay, which owns a monopoly on domestic bank card transactions, today also announced growing acceptance for Quick Pass. The network said there are now more than 620,000 point-of-sale terminals that accept the contactless application, including those in supermarkets, convenience stores, department stores, pharmacies and fast-food chains, along with some parking lots and gas stations.

Some merchants in a number of provinces and major cities, including Shanghai, Beijing and Guangzhou, accept the contactless service, which UnionPay can promote without competition from such contactless applications as Visa payWave and MasterCard PayPass. Those payment brands are largely locked out of China, though can handle transactions on foreign cards.

UnionPay also said merchants will accept Quick Pass contactless payment in Hong Kong, where it would presumably compete with the local fare-collection and retail payment scheme, Octopus, as well as with payWave.

Since abandoning its RF-SIM initiative, China Mobile has considered supporting payment on embedded secure chips in NFC phones, sources have told NFC Times.

But with China Mobile’s statements this week at the GSM Association’s Asian expo, coupled with a GSMA press release in November it lent its name to promoting SIMs as secure elements in NFC phones, the giant telco appears to have adopted the SIM-based NFC concept. A number of other telcos in Europe, Asia and North America are also promoting the SIM as the secure element in NFC phones that support a single-wire protocol, or SWP, connection between the NFC and SIM chips.

UnionPay also has a deal with No. 3 telco China Telecom to work together on mobile payment. The announcement of the deal mentioned use of SIM cards as well as microSDs. And No. 2 operator China Unicom has long supported the concept of SWP-enabled SIMs in NFC phones.