Using cellphones as cash

November 22, 2007 on 2:38 pm | In Cell phones | 2 Comments

A dozen major European companies in November have opened the largest trial outside of Asia for the use of cellphones as mobile money – giving consumers the ability to pay for everything from croissants and toothpaste to subway fare and wine with a wave of a handset. And they have global aspirations, hoping to prove that their systems, using the short-range radio technology called near field communications – NFC, can work securely on a mass scale.

Cellphones could start masquerading more widely as bank debit cards a year from now – assuming the manufacturers can get the right handsets to market and the players can agree on how to divide the revenue, two issues that have tripped up the mobile industry in the past.

The experience in Asia, where the Sony technology called FeliCa has already turned the cellphone into a contactless mobile wallet, is something of a model for Europe.

But despite more 30 million wallet phones in circulation, success there may be overrated: As with other mobile technologies, Vestergaard said, the Japanese and South Korean markets are “special cases,” with dominant players and closed markets.

Card Technology magazine last month called the Japanese use of NFC in train ticketing “less than inspiring,” with only 520,000 customers signed up through midyear because of downloading and other issues.

Orange, the European mobile carrier owned by France Telecom that is among the most aggressive promoters of cellphone-based NFC payments, will bring the technology out of test mode and onto the commercial market in Bordeaux next year. But visions of mobile phone-swiping at a vending machine may be unrealistic.

“I don’t think cellphone will replace cash,” said Jerome Sion, director for mobile contactless activities at Gemalto, the French company that is the world’s biggest maker of smart cards. “Just as checks didn’t replace cash, and bank cards didn’t replace checks, you will still have cash along with the contactless mobile phone.”

Still, the cellphone-as-debit card is seen as special in the world of payments. In some countries, for instance, there are more mobile subscribers than bank card users. Many people are already using the phone’s text-messaging (SMS) capability for limited e-commerce: to pay for parking, vote on TV shows, receive product discounts and gain entrance to events, for example.

Yet it is not the cellphone manufacturers who are calling the shots in this game. Across Europe, network operators like Vodafone have been setting the direction on mobile payments ever since the GSM Association in February endorsed the use of the SIM card as the item that would carry the NFC technology.

That means the SIM card makers in the trial – Gemalto and and Paris-based Oberthur Card Systems, which are also supplying secured application management behind the technology – are certain winners, analysts say. The chips themselves are from Inside Contactless of Aix en Provence and NXP, a spinoff of Philips.

Even though they are not in the driver’s seat, cellphone manufacturers still have the power to make or break mobile commerce. If they do not build the capability into a decent selection of phones – along with cameras, Wi-Fi and all of the other features that users and operators are demanding – the mobile wallet cannot go forward.

The Nokia 6131 is the only commercially available NFC phone today, but the technology is built into the phone, not the SIM card, so it does not fit the GSMA’s requirements.
Sony Ericsson, meanwhile, is providing a SIM-based model for Orange to use in February in a test of ticketing for home games of the Manchester City soccer team, while Samsung created an NFC phone for an earlier Orange test in Caen. The SIM-enabled L7 from Motorola, LG’s L600V and the Sagem My700X are designed only for the Payez Mobile project.

While handset manufacturers plot their NFC strategy, other companies are taking advantage of the payment technology cellphones already have – text messaging SMS – which is especially attractive in developing nations.

But I think that in the United States now use cellphones as wallet had no big prospects. In the USA, a system perfectly credit cards and credit cards absolutely pervasive, and there is no problem with them. It is not clear that we stand to gain from the switch to the mobile phone charges? The obvious way this will require some changes in payment terminals, education-people how to use all of these. Have to learn to require a change in legislation in the rules. And it is not clear that improved.


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