O2 Plans NFC Rollout in Second Half of 2011

A second major UK mobile operator has disclosed plans to commercially launch NFC, with Telefónica O2 UK planning to roll out the technology during the second half of 2011–as it bulks up its O2 Money unit.

O2 joins the Orange UK-T-Mobile UK joint venture, Everything Everywhere, in making known its plans to roll out NFC. Everything Everywhere, which is partnering with Barclays bank’s credit card unit, Barclaycard, for its launch, is likely to launch before O2.

O2 sees NFC as a major opportunity to build its financial services arm, O2 Money. A spokeswoman confirmed to NFC Times that the telco is recruiting 14 new staffers for the unit. O2 Money launched a pair of prepaid payment cards in 2009, which O2 has touted as the “most successful UK card launch.”

It is in the final stages of the tendering process for a new bank-issuing partner for O2 Money to replace NatWest bank, which confirmed to NFC Times last summer it planned to drop out of the partnership. Some, though not all, of new hires for the O2 Money unit will work directly on NFC, said the spokeswoman.

"We believe that mobile payments will become a reality in the UK during 2011," she said in a statement. "Through O2 Money, we plan to bring a range of card and mobile-based services to market."

The telco has not released the number of prepaid O2 Money cards it has on issue, but said it has 850,000 customers for the cards and insurance products combined. O2 Money is also considering launching a credit card. The telco in June appointed former UK banker James Le Brocq as O2 Money managing director. Claire Maslen continues to head NFC for the UK telco.

O2 UK and its parent, Spain-based Telefónica Group, appear to be interested in grabbing a piece of the payment transaction or other revenue from co-branded cards or related applications on NFC phones. A Telefónica representative spelled out the strategy last spring in disclosing the group had an agreement with Visa Europe. O2 UK has not disclosed its business model for O2 Money.

It is not surprising that O2 UK is among the first mobile operators worldwide to reveal rollout plans. It held a high-profile NFC trial in London beginning in November 2007, called the O2 Wallet. The Nokia NFC phones the telco used in the trial stored Transport for London's Oyster transit application along with a Visa payWave application issued by Barclaycard on an embedded chip.

Barclaycard will be issuing a MasterCard PayPass application for its planned NFC commercial launch with Everything Everywhere. That partnership was formed by Orange UK before it created the joint venture with T-Mobile. Orange and Barclaycard have rolled out their own co-branded payment cards, as well.

There was speculation that Everything Everywhere was going to launch NFC commercially before the end of 2010, but it is waiting for more compelling NFC phones to hit the market, expected in the coming months.

O2 UK, combined with the larger Everything Everywhere, have a total 50 million subscribers in the United Kingdom, an attractive national market for NFC handset makers. O2 UK by itself has 22 million subscribers.

The contactless payment market in the United Kingdom is beginning to pick up steam. Visa Europe has projected there will be 60,000 point-of-sale terminals deployed in the United Kingdom by the end of this year, which could accept payment from contactless bank cards and similar applications on NFC phones. The POS terminal projection includes 8,000 buses in London that Transport for London is equipping to accept open-loop payment applications, such as payWave and PayPass.

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