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Consumers in the French Mediterranean city of Nice this spring will be able to pay for low-value tickets on the city’s bus and tram network directly on their mobile phone bills as part of a planned multiapplication NFC project.

But mobile operators say they are offering the payment service for consumer convenience, not to compete with banks.

“We are only trying to facilitate, as in the past, digital content,” Bruno Prexl, spokesman for French mobile operator group Association Française du Sans Contact Mobile and m-payment marketing manager at Bouygues Telecom. “In the past, it was ringtones and Java games. Now we are downloading low-value tickets. It makes sense to have one- (or two-) click payment through the phone. And today, the only one-click solution is the mobile operators’ bill.”

Project organizers are considering allowing consumers to pay for purchases as high as about 10 euros (US$14), NFC Times has learned. That would allow them to buy single tickets or perhaps up to a carnet of 10 tickets. For higher-value transit tickets, such as weekly or monthly passes, consumers would pay through their banks, perhaps by securely entering a PIN code on their handsets with their preregistered bank-account information on file, then downloading the pass over the mobile network to the SIM cards in their phones. They would tap the phones on readers onboard buses and trams in and around Nice to cover fares, just as they would with the low-value tickets.

Consumers in the project will also be able to tap their phones to make retail purchases, using bank-debit applications stored on the SIMs. The Nice launch, expected to begin around April 2010, will involve a number of other applications. French operators and other organizers hope the project will serve as a prelude to a national rollout of NFC services in 2011.

For Veolia Transport, the transit operator participating in the Nice project, enabling customers pay for single tickets or other low-value transactions on their phone bills will save time, said Dominique Descolas, manager, smart ticketing systems. He declined to discuss how much customers might be able to charge on their phone bills, but said higher-value transactions, such as passes, would require them to go through their banks. That might require them to enter account numbers for the first purchase then short codes to renew the pass. Or banks might require the subscribers to fill out paperwork to preregister the accounts, also a hassle for many.

“We’ll see if users accept to have a debit (for small ticket purchases) on the telephone bill, despite the fact it’s not a telecom charge,” he told NFC Times recently. “The most important thing for us is what is the most convenient and acceptable for our clients.”

Austria’s largest mobile operator, mobilkom, began enabling subscribers to buy SMS-based transit tickets with their mobile phones in 1999, and in 2002 formed its own bank. The telco also enables small payments, such as parking fares and snacks from vending machines. Most purchases show up on monthly phone bills. But mobilkom is among the rare telcos that also owns a banking license. Japan’s largest mobile operator, NTT DoCoMo, goes further, having launched its own credit brand, iD, in late 2005 and credit service, DCMX, the following year. Subscribers can charge up to 10,000 yen (US$114) per month and have the amount added to their monthly phone bills.

Under a European Union mandate, the Payment Services Directive, which took effect in late 2009, mobile operators and other nonfinancial institutions can offer payment without a banking partner or banking license. The directive, for example, would enable mobile operators to support micropayments for parking or vending-machine purchases, as mobilkom already does with the help of its A1 Bank.

The AFSCM, the French mobile operator's association, said it has no plans to go beyond accepting payment for low-value tickets. Telcos enjoy high profit margins, perhaps 30%, on such digital content sales as ringtones and mobile games in France. But most payment transactions are not nearly as profitable said the association’s Prexl.

“We don’t want to (sell subscribers even) a can of Coke,” he said. “There’s no business to make.”

That might enable the operators to avoid becoming payment-service providers and falling under the regulation of the Payment Services Directive. If they were to expand their payment services, the directive could apply. French banking regulators are "watching the Nice experiment closely," Alexandre Stervinou, of the Banque de France's Non-Cash Means of Payment Oversight Division, told NFC Times.

A separate committee regulating the establishment of credit institutions, investment firms and payment-service providers in France, the CECEI, would decide whether the telcos need a license to sell transit tickets, among other products or services, he said.