Mobile wallets coming to UK in time for Olympics

Visa road-testing contactless mobile payments in Spain, ahead of UK launch...
Written by Natasha Lomas, Contributor

Visa road-testing contactless mobile payments in Spain, ahead of UK launch...

In Japan, consumers have been able to pay for shopping by swiping their mobile phone over a reader for the last five years. In Europe, however, such technology has struggled to get off the ground.

In the UK, mobile contactless payments have been largely confined to one-off pilots, including a six-month trial in 2007 which allowed Londoners to use their mobiles as Oyster cards as well as credit cards.

However payments company Visa is tipping the London 2012 Olympics as a key date for when contactless mobile payments could take off.

"Huge hype took place about eight or nine years ago with mobile and nothing happened - so why are we so excited now? The reason is we think that a whole bunch of things are coming together," Sandra Alzetta, senior VP, head of innovation at Visa Europe, told a press event in Sitges, Spain last week. "The phones themselves have evolved enormously and if you fast-forward for the next couple of years they're going to evolve even more so."

Phones with contactless functionality aren't about to go mass market overnight, according to Alzetta: "You're not going to wake up tomorrow and there will be millions of handsets out, but they will come soon."

However, Alzetta predicted such phones, which use NFC (near field communications) tech to make payments contactlessly, will start to come onto the market in the next few years - certainly by 2015 - and be used by consumers for both small value and high value transactions.

Visa is doing its bit to encourage takeup with a trial in the resort town of Sitges, near Barcelona, run in collaboration with Spanish bank La Caixa and mobile operator Movistar. "This [trial] is the start of something significant," Alzetta said.

Mobile shopping: A mobile wallet trial in Sitges

Mobile shopping: Signs announcing the mobile wallet trial in Sitges, Spain
(Photo credit: Natasha Lomas/silicon.com)

The Sitges trial, which kicked off in May and is due to run until November, involves 1,500 triallists who have each been given a free Samsung Star Touch device linked to their pre-existing La Caixa bank account.

To see the trial in action, check out our photo story Photos: Sun, sand, mobile wallets - Europe's biggest m-payments trial.

The handset can be used to make payments at more than 500 retailers in Sitges simply by holding it next to a compatible POS terminal. To make the contactless payments, the device uses a built-in NFC antenna, with the holder's virtual Visa card stored securely on the phone's SIM.

The devices involved in the trial feature a mobile wallet app which opens automatically during the payment process, to give onscreen confirmation of the transaction including the amount the shopper has paid, although the app doesn't have to be open for the triallists to be able to make a payment.

The mobile wallet app being used in the trial is just a...

...prototype, so in-app functionality is limited - for instance, mobile users wanting to view their transaction history have to log in to their La Caixa account via the bank's mobile banking portal, rather than being able to view it in-app. The software resembles a virtual wallet and has spaces for up to six cards. Visa envisages a variety of other plastic cards typically found in wallets - such as store loyalty cards and travelcards - eventually having a virtual double in mobile wallets of the future.

"What you're seeing here in Sitges, it's about your Visa card no longer being plastic but actually being inside your mobile handset, being inside a chip in your mobile phone," Mary Carol Harris, head of mobile at Visa Europe, said.

"You're not going to throw away your plastic because there's too many merchant locations around the world where you can use that but your mobile phone actually becomes a companion to your plastic card and in some cases may replace that plastic card for certain purchases."

The phone in the Sitges trial cannot be used to make purchases from retailers that are not La Caixa customers so Mobile Shopping signs (shown below) are displayed in participating merchants' windows and on shop counters around the city's shopping district.

Mobile shopping: A mobile wallet trial in Sitges

A mobile shopping sign in a pharmacy's window
(Photo credit: Natasha Lomas/silicon.com)

"We needed a test lab in order to test these services in a more commercial environment for the first time to prepare for future rollouts that we're planning across Europe, in the UK, in the Czech Republic and in some other countries where Telefonica is quite active and has commercial operations," Harris said.

To see the trial in action, check out our photo story Photos: Sun, sand, mobile wallets - Europe's biggest m-payments trial.

Payments of less than €20 are processed by tapping the device against a POS reader but without the consumer entering a PIN. Larger payments require the user to key in their PIN to the POS after they have swiped their phone on the reader.

It's not necessary for the handset to have it's battery charged to make a payment, and triallists are also able to suspend the contactless payments functionality - and turn it on manually via the app when they want to make a payment - to avoid making any payments by mistake.

Of the 1,500 mobile users currently involved in the mobile payments trial, 80 per cent have already...

...used the mobile wallet to make a contactless payment, according to Visa and its trial partners, and 70 per cent of the participating retailers have been paid by mobile.

Just over half of the triallists (52 per cent) are regular users of the mobile payments service, making one or more contactless payments per week, while 48 per cent are occasional users, making an m-payment every 15 days or longer.

The majority of purchases - 60 per cent - made using the contactless handsets fall into the sub-€20 bracket, about a third (30 per cent) of which cost less than €6.

Supermarkets have been the most popular retailers for Sitges trialists to whip out their mobile wallet, with 52 per cent of the purchases being made in 'supermercados'. After supermarkets, restaurants were next most popular places, accounting for 14 per cent of all the transactions, followed by clothes shops (six per cent) and pharmacies (four per cent).

Mobile shopping: Contactless POS and NFC handset

The NFC handset and POS after a contactless transaction has been processed
(Photo credit: Visa)

According to feedback from trialists, 70 per cent said they were highly satisfied with the mobile wallet payment experience. Asked whether they would use the wallet in future, over half (66 per cent) said they would definitely do so, a quarter (25 per cent) said they probably would, and eight per cent said perhaps. None of the trialists said they would "probably not" or "definitely not" use it in future.

To see the trial in action, check out our photo story Photos: Sun, sand, mobile wallets - Europe's biggest m-payments trial.

Visa's ultimate vision for mobile payments is an ambitious one: a Visa representative demonstrated another prototype which integrates multiple mobile payment options into a single app interface - not just contactless payments, but person-to-person mobile payments and money transfers, and also the ability to pay online for goods or services using a virtual Visa card over the mobile web.

Noting past hype around mobile payments and failure to deliver on it, Harris said the environment is now more conducive to launching advanced applications such as mobile wallets than in previous years. "Fundamentally we were going a little bit too fast too soon," she said.

The rise of smartphones such as the iPhone have helped to make consumers more comfortable with the idea of doing more on their devices, according to Harris: "Today we have devices coming onto the market like the iPhone... that are actually raising the bar in terms of what consumers expect of their phones but also creating a fantastic user experience on the device to give consumers more confidence in doing advanced applications from their handsets."

Better and faster mobile networks - with 3G and even 4G network rollouts - are also putting wind in the sails of mobile payments.

However Harris said that big hurdles still remain, including...

...getting all the different players to agree on a business model.

"We're not saying that there's not a business model to be found in these services, it's that we're still agreeing what that business model will look like and how we integrate all the different players and partners needed to deliver these services into the value chain.

"Mobile operators aren't going to do this for free, banks aren't necessarily going to pass on all the revenue that they earn from contactless payments... so a balance needs to be found and that's something we're working very closely with our partners on," said Harris.

"We've made a lot of progress since 2007," she added. "But we still have quite a lot of work to do in terms of taking these services towards commercialisation."

To see the trial in action, check out our photo story Photos: Sun, sand, mobile wallets - Europe's biggest m-payments trial.

Other hurdles to mobile payments rollouts include so-called acceptance infrastructure - ensuring enough retailers can process the payments - and broadening the supply of NFC handsets so that consumers don't have to specifically choose an NFC handset but instead can get NFC in any device they want.

Visa is hoping to prepare the way for mobile payments with some POS sleight of hand - terminals that are being rolled out to accept contactless debit and credit cards will in future also be able to process mobile contactless payments, according to Alzetta.

"The terminals that are now processing [contactless] card transactions will also be able to process mobile payments in the near future," she noted, adding that there will be 10 million contactless cards in circulation by the end of this year, and 20 million by the end of next.

Visa believes its contactless cards push will also help to acclimatise consumers to paying contactlessly - thereby making the step to using a mobile wallet even easier.

"We've proven that consumers love having mobile payments services, they like the technology, after we get them over those initial security fears and they start to use the tech more they start to be more comfortable with it," added Harris.

Another factor that Visa believes could expedite the launch of mobile wallets in the UK is the 2012 London Olympics.

Pablo Montesano, director of new business at Telefonica, which owns trial partner Movistar, said mobile operators are facing the commodification of their traditional revenue streams such as voice so must seek new ones elsewhere.

"We see places like London where we see already very strong penetration of [contactless] acceptance points and in our case, in Telefonica's case... expect a lot of activity around this space in London before the Olympics. There's going to be a significant push from several players and I'm really convinced that London will be the place the first mass rollout, after Japan and Korea, in Europe."

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