In Europe and Asia, most operators have succeeded in reaching a compromise with Visa, Amex or Mastercard to launch their NFC enabled mobile payments services, after years when the two sides wrangled over who would take the biggest share of transaction value. But in the US there is a head-to-head brewing. Three of the national carriers have formed the Isis venture to set up an NFC network, working with Discover Financial Services for payment processing, rather than any of the credit card giants. This may well be a tactic to try to get one of the majors onside, but so far the credit card majors, and the web players PayPal and Google, are pursuing their own agendas. Both sides have enhanced their strategies in the past week, with Amex investing in Payfone while AT&T announced a white label m-commerce platform.
Amex’s investment in m-payments provider Payfone came two weeks after the former launched its all-digital platform, Serve. It joins Verizon Investments and Canadian telco Rogers Communications in a $19m round of funding, alongside existing investors Opus Capital, BlackBerry Partners Fund and RRE Ventures.
This is more than a strategic stake for Amex, which will start to leverage Payfone’s technology immediately, integrating it into the new Serve platform. Serve made its debut last week, offering PayPal-like online services, though Amex claims it will be a far broader system in future and will soon incorporate handset swipe transactions. The platform is based on another Amex acquisition, the $300 million purchase of Revolution Money.
For now, Serve allows users to make purchases, transfer money to other people, or withdraw cash from ATMs, using their handsets or PCs. Over time, it will gain NFC-based mobile swipe payments, as well as integration with social networking, recommendations engines and loyalty programs. Like other credit card firms, Amex will look to remain in control if transactions shift from a plastic card to a cellphone ‘ the crossover of which cellcos, too, hope to take advantage. However, Amex knows it will need to work with carriers, particularly on supporting billing to the consumer’s mobile phone bill.
As device makers, operators and banks look to 2012 as the year when mobile payments finally go mainstream beyond Japan and Korea, other specialist start-ups will be looking for powerful investors. Examples include BillToMobile, Mopay, Boku and Zong (all of which, except Mopay, work with AT&T).
Payfone says its differentiator is to leverage the standards used by cellcos to authenticate users when roaming, in order to determine whether a consumer is credit worthy or has funds available for a purchase. By checking with the carrier upfront, it claims to reduce fraud charges and identity theft, which could result in lower fees.
This highlights a key role of the carrier in the m-payments equation, providing authentication and security. In Europe and Japan, this is done via the operator’s control of the SIM card, with which the NFC chip is usually combined, connected using the standardized single wire protocol ‘ and the reason the cellcos have not been easily excluded from a share of the revenues. And the US carriers, even the CDMA players without SIM cards, are also playing the authentication card, as well as providing the lure, to retailers, of carrier billing.
Such capabilities will be the strengths of Isis, but the US operators are also trying to build broader m-commerce platforms and services. AT&T has partnered with mobile retail specialist Digby to create a service, aiming to help retailers launch and manage mobile commerce sites and applications optimized for smartphones.
The offering, called Digby Mobile Commerce from AT&T, provides customers with a set of tools to design and deploy the web sites, storefronts and apps, which will include sales and payment processes as well as product data and reviews, and special promotions. Rich media and tie-ins to location and presence can be supported.
This is a new step in AT&T’s increasingly wide-ranging activities focused on mobile commerce and other functions that drive usage of its wireless data networks ‘ which also include Isis. Last year it announced a selection of partnerships, including those with three m-payment platforms, BilltoMobile, Boku and Zong. These allow subscribers to charge online purchases to their monthly cellphone bill and pay using their phone number instead of credit cards. In these examples, AT&T takes a percentage of sales. It is not clear whether the Digby deal will generate revenue in a similar way, or through straight fees.
The carrier says its Digby white label platform sports a user friendly interface to make it easy for consumers to browse and buy products from most smartphone operating systems. Digby Mobile Commerce also integrates with AT&T Mobile Barcode Services, which allows retailers to provide interactive shopping experiences when consumers scan product codes.
Sprint has been left out of Isis, but recently announced its own NFC activities to join its existing mobile wallet offering. It is likely to pursue a more conciliatory approach than Isis and work with more than one payments processor. It is possible that, rather than battling for a cut of transaction fees, usually the sticking point with credit card firms, Sprint will instead take a revenue share from targeted advertising or coupons, meanwhile deepening its customer knowledge to support the launch of new added value services.
Sprint told FierceWireless: “Given our open philosophy, Sprint does not want to compete with the card companies and banks that people already may use. We want to partner with companies that help our customers pay in the manner they choose. We’re not here to recreate a proprietary solution but to enable our partners and their customers to connect in the easiest and most productive way possible.” The operator already offers Mobile Wallet, which gives smartphone users a single PIN code that works with any of their bank accounts and credit cards, and enables physical or digital purchases to be charged to existing Visa, MasterCard or Amazon accounts (but not the carrier bill).