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In the latest tie-up between a major telco and international payment scheme, MasterCard Worldwide has announced a partnership with mobile operator Everything Everywhere, the UK’s largest telco.

The partnership will help Everything Everywhere, the joint venture between Orange UK and T-Mobile UK, to introduce its own co-branded prepaid payment service on NFC phones. 

Orange UK itself has already introduced NFC payment, as part of a partnership with UK issuer Barclaycard. Their Quick Tap service, launched last year, is believed to be used very little by British consumers, however.

MasterCard said an NFC-enabled prepaid application, supporting its contactless PayPass technology, would be among the first products to launch resulting from the new partnership with Everything Everywhere.

The MasterCard deal will expand to include person-to-person money transfers, loyalty rewards and “digital payment services.” The latter would enable consumers “to have the same simple shopping experience whether they're paying in-store, online or using their mobile device,” said MasterCard in an announcement today.

And the five-year partnership will also yield products that will enable small business customers to accept payments using mobile devices, said MasterCard.

The deal follows a partnership MasterCard announced in July with Germany-based Deutsche Telekom group. That deal will cover the telco’s European operations and will help Deutsche Telekom make its move into the payments market at the physical point of sale.

Deutsche Telekom will launch first in Poland, scheduled for later this year, before expanding to Germany and other European countries.

Deutsche Telekom plans to issue its own PayPass-enabled payment application through its ClickandBuy unit, which has an e-money license through the UK Financial Services Authority. This allows it to avoid going through a bank. The deal between MasterCard and Deutsche Telekom didn’t apparently include T-Mobile UK, but the Everything Everywhere deal does.

The joint venture has indicated it will drop the Everything Everywhere name later this year for a new name. Venture partners Orange and T-Mobile will continue to use their own brands, as well. The two telcos have a combined 27 million subscribers in the UK.

The joint venture does not have an e-money license, and if it doesn’t get one, it would likely have a small licensed e-money institution, such as a prepaid program service provider, or a small bank, issue the application. The issuer would also have to be part of the MasterCard network.

Two of Europe’s other large telco groups, Vodafone and Telefónica, have announced similar deals with Visa Europe to help them expand into the payment market and to offer other payment products to their subscribers. Except for Telefónica’s UK branch, O2 UK, which might issue its own payment application, the two telco groups or their branches would probably work through small financial institutions.

The European mobile operator groups that have signed deals with Visa and MasterCard say they will also open their mobile wallets to applications issued by major banks, along with such other applications as ticketing, couponing or access control.

But it’s clear the operators see revenue from their own co-branded payment applications as a key part of the business case for their mobile wallets and NFC rollouts.

The telcos plan to take a cut of the merchant transaction fees each time consumers tap their phones to use their payment applications or companion co-branded cards.

That’s in addition to rental fees that operators generally plan to charge banks and other service providers to put their secure NFC applications onto the telcos’ SIM cards. Deutsche Telekom has said it intends to take a cut of transaction fees even for the applications issued by banks. Other big telcos might have the same idea in mind.

The tie-ups with Visa and MasterCard not only assist the mobile operators to expand into the payments market but also helps them gird against the entry of such over-the-top players as PayPal and Google.

MasterCard was not available for comment on when Everything Everywhere might introduce the NFC payment application. The telco also couldn’t comment immediately.

There are more than 100,000 contactless point-of-sale terminals in the UK that can accept PayPass or Visa payWave, at present.

But UK telcos have introduced few NFC phones so far that can be used for NFC payment. In fact, Orange has had only one mid-tier and one low-end phone available for Quick Tap, and it's not clear they are still available. Orange is expected to announce one or more new Quick Tap phones soon, however.