The European cellcos are putting considerable weight behind NFC mobile payments, spotting an opportunity to drive a new revenue stream. Deutsche Telekom has announced an alliance with MasterCard which will bring the swipe-based payments to the German giant’s 93m mobile customers across Europe.
The payments system will roll out first in DT’s Polish unit, where the new mechanisms ‘ which use the SIM card for security and authentication ‘ will be trialled. In Germany, the initial tests will use NFC stickers and cards, and the full embedded capability will follow in the first half of 2013, with other European territories to follow. Stickers or tags will still be available for customers who do not have an NFC handset.
The SIM/NFC combination will be teamed with a mobile wallet, which will be open to other banks and value chain partners. DT says it will become a credit card issuer for MasterCard as well as a sales partner for NFC-enabled merchant terminals, and according to analyst firm Ovum, will monetize the service via a share of transactions, as well as rental fees. ‘The drive behind Deutsche Telekom’s mobile payments strategy is to create a comprehensive framework that will address many of the challenges in what is currently an incomplete ecosystem,’ the analysts said.
One of the partners which DT may incorporate into its far-reaching NFC initiative is Google. According to reports, the German carrier has been talking to the search giant about bringing its Wallet to the European market. Operators, apart from Sprint, have generally been wary of Google Wallet, seeing it as an attempt to wrest control of the m-payments value chain away from cellcos. But Thomas Kiessling, DT’s chief innovation officer, commented: “We’re talking to other players in the market, and even a cooperation with Google is theoretically possible. We’re in talks there as well.”
Kiessling said that 57% of all retail purchases in Europe are still made using cash, creating a huge opportunity for contactless payment technologies, which tend to be used for smaller purchases and to replace cash rather than cards.
The DT move follows that of Vodafone, which partnered with Visa earlier this year, and aims to launch NFC services in at least five European countries over the coming 12 months. In Vodafone’s case, it will not issue the payment cards itself, but will leave that to Visa. Orange and Telefonica also have significant m-payments initiatives in Europe. The US cellco joint venture Isis initially tried to bypass the credit card giants but subsequently relented and added Visa, MasterCard and Amex to its ecosystem.
Kiessling said in a statement: ‘This is a huge step on our way to increase mobile payments. We want to build a comprehensive ecosystem around mobile payment, helping Telekom to realise its strategy of being the first choice for customers regarding connected life and work.’
But high hurdles still remain, notably stimulating consumer uptake and merchant interest, as well as competition with non-carrier wallets.