'Oyster phone' trial goes live

The insertion of NFC technology into mobile phones would also make handsets usable for cashless transactions of under £10, in much the same way as Visa's "wave and pay" banking cards.

Visa's cards are already being implemented in the UK by Barclays, whose OnePulse credit card combines the functionality of a credit card with that of an Oyster card and wave-and-pay card.

According to O2's research, people are more likely to go home to retrieve their mobile phone than their wallet. A spokesperson for the operator said NFC would enable the phone to become a virtual wallet, and added that the trial would be "hugely important for customer insight" into the technology's usability.

NFC-enabled phones have other uses too. For example, they could be used to retrieve information on promotional offers from RFID-bearing posters. The handsets being trialled will also be able to grant access to the "blueroom" VIP lounge at entertainment venue The O2, formerly the Millennium Dome.

The trial will involve 500 O2 customers who are also Oyster-card users. Each user will be given a Nokia 6131 NFC handset preloaded with £200 credit, which they can use as they wish. However, only a subset of those users will have wave-and-pay functionality.

The phone's credit can be topped up at any of the thousands of Oyster-accepting ticket machines and counters across London. However, no functionality is currently being tested which would allow credit to be topped up over the mobile network. The phone network can be used to check available credit though, and can also help users locate their closest retail outlets which accept wave and pay.

Users of the handset will — at least during the trial period — have to carry around authorisation cards to show to ticket inspectors, to prove that their phones are indeed Oyster cards of a sort.

O2 admitted frankly that the project will not ultimately work without the involvement of all the mobile-phone networks and banks. Any issues regarding manufacturer specificity would be moot once NFC technology makes it onto the SIM card.

NFC-enabled handsets are already used for transport in Japan and South Korea and, according to O2's vice president of research and development, Mike Short, the big issues that have arisen in those countries are usability and security. For example, if the handset is to be truly secure, a PIN number may be necessary for commercial transactions — but this may impede usability, which is the main driver behind the scheme.

Furthermore, with so many different players being involved in the scheme, the business model underpinning the project still needs to be thrashed out during and beyond the trial, said O2's spokesperson. Another issue to be overcome is who the customer calls if they lose their handset. At the moment, the loss of a handset would have to be reported to Transport for London (TfL), the operator and the bank.

If the trial proves successful, NFC technology is expected to make it into commercial handsets at the end of 2008, at the earliest.