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MasterCard Worldwide and Germany-based Deutsche Telekom group have signed a partnership agreement that will help the telco launch a prepaid PayPass application for its planned NFC mobile wallet, NFC Times has learned.

The deal, which will be announced Monday, is expected to be similar to a mobile-payments partnership announced by another of Europe’s largest mobile operator groups, along with a major international payments scheme, UK-based Vodafone Group and Visa.

UPDATE (July 2, 2012): MasterCard and Deutsche Telekom announced this afternoon that the telco will make the move into payments by commercially launching in Poland this year. They will also launch a trial in Germany using stickers and cards later this year, with a commercial launch in Germany planned for the first half of next year as part of a Deutsche Telekom mobile wallet. The telco will issue the payment application via its UK-based ClickandBuy online payments subsidiary, which has an e-money license. Plans call for expanding the mobile-payment services to other European markets later. END UPDATE.

As part of the Vodafone-Visa deal, announced in February, Vodafone said it plans to roll out a prepaid Visa payWave application in the NFC-enabled mobile wallets it plans to launch in up to five countries by next February, including those in the UK, Turkey and Germany.

Deutsche Telekom is expected to launch the MasterCard PayPass-enabled prepaid application as part of an NFC wallet late in the fall in Germany. The application would be stored in the telco’s NFC-enabled SIM cards.

Deutsche Telekom may also launch NFC wallets and PayPass-enabled payment as early as this year in two other European countries where it has branch operators and where there is already a high penetration rate of contactless point-of-sale terminals–Poland and the Czech Republic.

The MasterCard-Deutsche Telekom deal is focused on Europe and is not expected to involve the telco group’s T-Mobile USA branch, which is part of the Isis joint venture with AT&T and Verizon Wireless.

Neither Deutsche Telekom nor MasterCard would comment on the NFC launch or other aspects of the mobile-payments partnership until Monday.

The partnership probably will have a cloud-based payments element. It's unclear how Deutsche Telekom's London-based online payments service unit ClickandBuy will be involved. The service has more than 14 million customers and has signed up more than 16,000 online shops.

What is clear is that Deutsche Telekom, Vodafone and some other major mobile operators gearing up for NFC see payments as a key part of their business case for their wallets and the rollout of NFC technology.

More large telcos are expected to introduce prepaid applications supporting either Visa payWave or MasterCard PayPass when they launch their NFC-enabled wallets. And at least a few, such as Telefónica UK, or O2 UK, will become licensed to issue their own applications.

The operators’ mobile wallets will include payment applications from major banks, but they see their own branded mobile prepaid cards as a way to reduce churn, enable more consumers to make purchases using their wallets and also earn some transaction revenue.

UPDATE (July 2, 2012): ClickandBuy has an e-money license, which it could use this license in all of the countries where it plans to launch its mobile wallet. ClickandBuy could work with such payments services providers as Germany-based Wirecard to help manage the payment service and perhaps acquire transactions. END UPDATE.

Vodafone isn’t proposing to issue its own payment applications in the five European markets where it plans to launch NFC services by early next year as part of the partnership with Visa. In addition to Germany, Turkey and the UK, the markets include the Netherlands and Spain. Visa would provide the issuer in each market, which would be a small bank or payment service provider licensed in the particular country to issue prepaid cards. It would also be a member of the Visa network.

German Telco Payment Scheme to Go Forward
But, the two telcos are involved in another NFC-based payment initiative in Germany, along with a third major German operator, Telefónica (O2) Germany. As NFC Times first reported last year, the three have formed a consortium and plan to try to expand their mpass Internet payment service to the physical point of sale using NFC phones.

They plan to launch the NFC version of the mpass scheme before the end of 2012 and will launch a sticker trial by September, Martin Schurig, head of financial services products for Telefónica Germany, told NFC Times. That trial has been delayed.

A key question is how the telcos and their partners will deploy a significant number of terminals at the retail point of sale to accept the new payment brand. Germany, in fact, has relatively few contactless point-of-sale terminals in active use of any kind at present, including those supporting PayPass and payWave.

Schurig declined to specify, saying only, “we’ll have a solution.”

The mpass application would be part of mobile wallets that all three German telcos will introduce, sitting alongside their prepaid applications, such as the payWave-enabled service for Vodafone Germany and PayPass application for Deutsche Telekom.

The telcos are expected to eventually offer other applications in the wallets, including loyalty, transit ticketing and access control.

Deutsche Telekom had announced in early 2011 that it would launch its NFC mobile wallet in Germany and Poland before the end of the year, but moved that back for a variety of reasons, including scarcity of NFC phones. While NFC Times has learned that a launch by more than one Polish telco is in the planning stages, Deutsche Telekom hasn’t confirmed yet that it plans to launch NFC this year through its Polish mobile operator unit, PTC.