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Vodafone Sees Payment in NFC Wallets as ‘Business Opportunity’

Vodafone sees its planned prepaid payment service in its forthcoming NFC mobile wallets as a “business opportunity,” though it intends to enable many other applications, including payment from major banks, Christian Wirtz, group director for mCommerce told NFC Times.

Plans call for the telco to roll out a Vodafone-branded NFC prepaid payment service in at least five European countries over the next 12 months, in the biggest announcement of its kind from a major operator group.

The payment services are part of an announcement Vodafone and Visa made two weeks ago that would see at least five Vodafone branch operators, including those in Germany, Turkey and the United Kingdom, rolling out prepaid payment on the Visa network and using a Visa payWave prepaid application.

Visa Inc.’s head of mobile, Bill Gajda, said recently that he believes most mobile wallets introduced by such players as mobile operators will include a prepaid card for users of various banks. As Gajda put it, the application will be a “cash component that you can sort of drip feed into that wallet.”

Telcos See a Business Case
But it’s clear that Vodafone and most other mobile operators gearing up for NFC see payment as a key part of their business case for their wallets and the rollout of NFC technology. More large telco groups are expected to introduce prepaid applications supporting either Visa payWave or MasterCard PayPass when they launch their NFC wallets. And at least a few, such as Telefónica UK, or O2, will become licensed to issue their own applications.

“We want to get as many existing service providers in our wallet and for them be enabled by us, and this is our main objective,” Wirtz said, adding: “We also want to have a payment product for our own customers, designed to our needs.”

Under the plan, Vodafone operators would earn a cut of the merchant transactions fees when consumers tap their NFC phones to pay with the prepaid card. The Vodafone-branded application is also designed to reduce churn and perhaps tie into loyalty programs. The payment application also could be used for online and peer-to-peer payments, Wirtz indicated.

Unlike what rival O2 is doing in the United Kingdom, Vodafone isn’t proposing to issue its own payment applications in the five European markets where it plans to launch NFC services over the next 12 months, which, in addition to Germany, Turkey and the UK, include the Netherlands and Spain.

Visa would provide the issuer, 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.

To issue its own prepaid application, Vodafone would need to get an e-money license, as O2 UK has applied for. Wirtz said Vodafone doesn’t see the need for that now. And consumers might not warm to the idea, at least at first, that their operator is also issuing their payment cards.

He added, however: “We don’t have one (license), but that does not necessarily mean that we will never have one.”

Wirtz also said the prepaid application in markets outside of Italy could one day support another payment brand, such as MasterCard. Vodafone Italy already has a deal to roll out co-branded prepaid cards supporting MasterCard PayPass and is expected to move the PayPass application to NFC phones.

Wallet as Main Interaction Point
While the other Vodafone prepaid cards will only support Visa, at least for the time being, other payment applications in Vodafone wallets issued by major banks could support PayPass, Wirtz noted.

That is in addition to transit and event ticketing, loyalty, couponing, offers and ID, among other applications the telco would like to host in its wallets. 

“What we want to achieve, we want to establish the Vodafone wallet as the main interaction point for consumers for all of their transactions,” Wirtz said.

While billed by Visa as the largest global mobile-payment partnership of its kind that could potentially extend to 30 countries and nearly 400 million Vodafone subscribers, Vodafone only has commercial agreements in place so far that would allow it to launch in the five European countries.

Most of the other markets covered by the Visa deal are in developing countries without any contactless infrastructure. Vodafone is rolling out peer-to-peer payment in developing countries–most notably Kenya with its M-Pesa scheme–without the help of such established payment networks as Visa.

Vodafone Group is also hiring its own trusted service manager to manage the SIM cards it will use to host the secure NFC applications, such as its payment application. It has already chosen a TSM for at least two markets, Germany and the UK, NFC Times has learned.

Working with Oscar
But Vodafone will have to adapt its groupwide wallet plans to individual markets, where the NFC commercial and technical landscapes differ.

For example, in the UK, the Netherlands and Germany, almost all of the major telcos, including the Vodafone branches, are proposing to form joint ventures to develop common technical and commercial specifications and in some cases hiring a common TSM. In Spain, Vodafone and two other telcos, Telefónica and Orange, are forming a consortium to work on much the same thing.

The joint ventures must still be approved by European Union regulators, including the proposed “project Oscar” in the UK. There, Vodafone, O2 and Everything Everywhere propose to build a common wallet platform and share some sales and marketing functions, but their wallets would carry their own brands and services.

When it comes to Vodafone’s prepaid payment application, Vodafone would, in effect, become a service provider and connect the Visa application to the Oscar platform, Wirtz said. 

The Vodafone deal with Visa will not be the last between a big telco group and payment network to enable the telcos to roll out their own mobile-payment services at the physical point of sale, say sources. Other plans are in the works.

NFC offers the opportunity for new payments players to enter the market, including telcos, handset makers and mobile platform providers, they say.

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