Dial M for money and mainstream_

The telecoms industry has long been heralding a time when mobiles will replace wallets by allowing people to pay for goods and services simply by swiping their handset across a machine. But the concept could best be described as blue-sky thinking – until now.

Last week, O2 announced the UK’s first mainstream trial of near field communications (NFC), paving the way for those lofty predictions to become a reality. The mobile operator has teamed up with Transport for London (TfL) and Visa Europe/Barclaycard for the London-based trial.

It has given 500 customers a Nokia 6131 handset with a built-in Oyster card that enables them to pay for Tube and bus journeys by swiping the phone across a ticket-reading machine. They will be able to buy goods worth up to £10 in the same way, although a PIN must be entered for purchases costing over that.

Phone value
O2 UK customer director Cath Keers says: “Research shows that people are more likely to return home if they leave their phone behind than their wallet or keys. So why not have your wallet on your phone? We believe that NFC technology is going to fundamentally change the way people use their mobile phones.” If the trial is a success, the O2 Wallet – the name given to the small microchip inserted into the phone – is likely to be launched next summer. It would mark a significant expansion of the Oyster card scheme already used by TfL, which allows travellers to pay for all their journeys using a single swipe card.

It would also extend Visa’s “contactless” PayWave initiative, which launched in London in September and allows customers to pay for purchases under £10 without signing or entering a PIN. Rival Mastercard has similar contactless technology and puts chips in phones and watches in other parts of Europe.

Paul Berney, managing director of mobile marketing specialist Response Mobile, says of the O2 Wallet trial: “Will this particular one work? I don’t know,” though he adds that mobile payments, or m-payments, will “absolutely” become a reality.

“There is massive evidence to suggest that this will be the case,” Berney says. “Every single credit card company has some sort of m-payment trial going on.” Retailers already accepting contactless payments include Threshers, Yo! Sushi, Books Etc and Coffee Republic. But Berney believes the system is best suited to simple tasks such as paying for travel, rather than for goods in shops because of the specialist hardware needed. “It faces the same sort of obstacles as mobile vouchering,” he adds. “The companies working on this need to find simple applications that will lead to volume usage and mass acceptance.” Some countries have been using radio frequency identification – the technology behind the Oyster card system – for a number of years. Chips are embedded in about 50% of all phones sold in Japan.

Loss leaders?
But critics have questioned the commercial side of O2’s plans, asking what financial benefits the mobile operator and Nokia will get from the scheme in the long term.

A Nokia spokesman says: “This is a good demonstration of us leading the way – and that’s what we do best. We did it with ringtones and graphics as well. As a responsible market leader, we want to help implement technology. It drives the industry forward and will sell more phones for us.” With such industry giants behind the mobile money scheme it looks likely that UK m-payments could finally become mainstream. But with a nationwide infrastructure needed to pay for products using a mobile phone, the traditional leather wallet should be around for some time to come.