Banks, Telcos to Decide on Wallet Phones

HELSINKI (Reuters)- The potentially lucrative business of mobile phone wallets is waitingfor banks and telecom operators to agree on each one’s role andpossible revenue flow in the future.

Technology for paying with mobile phones by just flashing them nearreading equipment in stores or in public transport is ready, andconsumers have appreciated the ease of its use in trials around theworld.

The world’s biggest payment card company, Mastercard, will unveil onThursday a service for banks, enabling them to install payment cardsinto clients mobile phones much easier than earlier, possibly breakingthe deadlock over the market takeoff.

"We are talking to serious banks … and not about trials, but aboutcommercial launches," said James Anderson, a Vice President atMastercard’s mobile business.

Anderson said that during the next two years he expects to seesubstantial activity from retail-focused banks, whose plans to developmobile payment services have been little affected by the financialcrisis.

"We have not seen a lot of impact," Anderson said.

It would still take at least until 2010 before any wideravailability of phones equipped with such technology and the financialindustry and telecom operators would need to agree on some kind ofrevenue and role split.

"Traditional financial industry met telcos by going mobile. Nowtelecom operators want to play a part in that chain. These talks arewell under way," Gerhard Romen, Director for Strategic Alliances &Partnering at Nokia, told Reuters.

"Now it’s like the Olympics, everyone is on their starting blocks, and just waiting," he said.

PHONES NEEDED

Consumers will be able to use a phone as a wallet or as an accesscard simply by waving it over a wireless reader, and in some casespunching a PIN number into the phone — similar to how travelers inTokyo and London access public transport.

"It’s not the payments driving it, it’s the convenience and simplicity for the user," said Nokia’s Romen.

Mastercard’s new service could help deal with some of the problemsfacing the industry, but analysts said there was more to be done.

"A lot of pieces are yet to be fit in and some of them are out ofcontrol of the financial community," said Ed Kountz, analyst at JupiterResearch, adding that lack of availability

of wallet-phones was also holding back the market.

World No. 1 phone maker Nokia has introduced four products using thetechnology, called Near Field Communication (NFC), and also otherhandset vendors are ready to roll out such phones on notice, industryexecutives said.

ABI Research has forecast 6.5 million NFC phones would be sold thisyear, up 10-fold from 2007, but the growth is hampered by costsstemming from low volumes and an extra chip needed in phones for datasecurity.

"Lack of handsets is a symptom of a business model problem, not thecause of it. Handset makers are comfortable with the technology and ifpeople are starting to order them the vendors are going to make them,"said Mastercard’s Anderson.

NFC NETWORKING

Last year Nokia and large European and Asian carriers — includingKPN, Maxis Communications Bhd, O2, Orange, SingTel, SKT and Wind –joined 14 mobile operators that initiated the project for common NFCtechnology earlier.

MasterCard is also involved in the initiative, which is cheaper andmuch faster than other wireless payment experiments, like those usingSMS text messages.

China Mobile, Vodafone, Cingular — owned by AT&T Inc andBellSouth Corp — and Telefonica already support the common wirelesschip format on the mobile phones they distribute for their networks.

Together with chip makers NXP and Sony, which pioneered thecontactless NFC chip, companies plan a global standard for electronicwallets in mobile phones.

(Reporting by Tarmo Virki; Editing by Gary Hill)