Telcos and M-Payment: Vendors See a Market

While the joint venture formed by U.S. mobile carriers to roll out NFC mobile payment and other services is the most prominent example of telcos planning to enter the retail payment market, it surely will not be the only one. 

A number of mobile operators in Europe and elsewhere no doubt see an opportunity to introduce mobile payment without major banks or card schemes. With NFC and related contactless technologies, the telcos believe they’ve found one of the last remaining missing pieces they need to connect their subscribers’ phones to the retail point of sale.

One of the clearest signals yet that there is a market in the making is the fact some m-payment vendors have begun to directly target mobile operators with their wares. They are convinced the telcos want to grab a slice of the payments business.

And one of the largest vendors hoping to exploit the market is France-based telecom network equipment giant Alcatel-Lucent and the touchatag venture it funds. Alcatel-Lucent and touchatag have been assembling the pieces of a mobile-payment platform that they call the Mobile Wallet Service, which they hope to sell to telcos. That includes phone applications, stored-value accounts, gateways to banks and payment networks, links to an operator’s billing systems and stickers, along with other contactless-mobile devices.

"There are RFPs from operators seeking a solution including regulatory compliance and including a way to have access to a retail network," Anthony Belpaire, GM of touchatag and the Alcatel-Lucent Mobile Wallet Service, told me, though declining to name any of the operators. "It’s our goal to enable the carrier to offer mobile-payment services to the market. It’s our resolve."

Well, despite its resolve, the company has yet to score any projects enabling telcos to introduce payment. But it’s early in the game yet.

Alcatel-Lucent late last month announced it would partner with UK-based Voice Commerce, founded by Internet payments pioneer Nick Ogden. It gives Alcatel-Lucent the licenses and regulatory cover it needs for its offer to telcos. Voice Commerce has qualified as a payment institution under the European Union’s new Payment Services Directive, as well as for membership in both the Visa Europe and MasterCard networks. This means with the Alcatel-Lucent offer, the telcos could offer their own closed-loop debit or stored-value payment applications or one branded Visa or MasterCard. Voice Commerce would serve as the financial institution. And it means Voice Commerce could acquire transactions for merchants. Of course, telcos could qualify themselves as payment institutions or even try to get their own banking licenses, but Alcatel-Lucent and Voice Commerce believe most won't want to go to that trouble. 

"The mobile operators have got this great footprint of consumers that use their service but the mobile operators don’t have merchant relationships," Ogden told me. "We don’t know if the initiatives will work. But we do know many operators are starting to talk to us, because everyone sees the opportunity."

Like Belpaire, Ogden was in Barcelona for the Mobile Payment Services conference, Sept. 27-29, one of the places where they have been trying to promote their offer. One piece still missing from the offer is a trusted service manager to download applications to secure elements in NFC phones and bridge technologies. Alcatel-Lucent is still looking to hire a TSM.

The vendors are also planning to try to rustle up business in developing markets, with network-based retail payment and remittances. 

But regardless of the market, it remains to be seen how much support the vendors and any operator clients they sign up would get from Visa or MasterCard, which probably would be looking after their major customers first, the banks.

And like the U.S mobile carrier joint venture, any operator-led payment scheme faces an uphill climb to take on the incumbent players. Besides the United States, telcos in such countries as Germany, Spain, Indonesia, China and Japan are considering launching their own payment schemes or have already done so. 

But without banks, they would have to roll out their own acceptance infrastructure. In the U.S., the telcos are working with Discover Financial Services for that, yet some speculate they would have to do special deals with major merchants, including promising substantially lower interchange, if they hope to gain broad enough acceptance for their payment services.

That may be why the major mobile operators in such places as France, the Netherlands and likely the United Kingdom appear to be resigned to working with banks.

Still, NFC and related contactless-mobile technologies along with legislation such as the Payment Services Directive, promise to shake up the entrenched payment systems in America, Europe and beyond. 

Article comments

mobiper Oct 12 2010

With the help of business analytics, the telecom service providers can segment their customer base on the basis of various conditions.

China Mobile Phones

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