Still Waiting For Mobile Wallets To Change The Way We Bank and Shop

It has been 12 years since the first person famously bought a Coke from a specially adapted vending machine in Scandinavia using their mobile phone. Yet, the anticipated  mass market adoption of such mobile wallet services has not taken place.  Alcatel-Lucent hopes to change that, announcing March 23 that it will run a new global hosting service for mobile operators wishing to launch person- to- person payment, remote ticketing and mobile commerce services.

Analysts say the new service, thought to be the first in this category to be launched by a telecommunications  gearmaker, could  be a unifying factor in what today is a  highly fragmented mobile payments market. But there is still a wide gap between the vendor hype and the time analysts believe it will take before there is mass uptake of such services.

Alcatel-Lucent’s service is based on a new kind of short-range radio called Near Field Communication, or NFC, that promises to revolutionize everything from payment systems to home networking. In the next few years NFC chips are expected to find their way into cell phones, PCs, consumer electronics, and industrial equipment, ushering in the age of the “Internet of Things,” when real world objects get connected to the Internet.

The technology makes it possible to pay for a service, such as a theater ticket or gas purchase, by simply waving a contactless card or mobile phone equipped with NFC chips, in front of a register or even a poster. Eventually most mobile phones will have built-in NFC contactless card and readers.

 The challenge is to introduce the technology gradually, before all of the new hardware is in place.  Alcatel-Lucent is attempting to do this by teaming with  payments systems specialist Clear2Pay and PingPing, an independent brand created by Belgacom for mobile and micro payments.  The Paris-based equipment maker is also  leveraging NFC applications technology developed in-house called touchatag, which offers mobile services such as interactive advertising, loyalty programs and coupons. Combined into one service, all of these technologies will enable mobile operators to launch mobile wallet services based on contactless stickers.

Stickers, equipped with NFC chips, can be attached to contactless cards, existing mobile phones and some existing point of sale terminals, solving the problem of waiting for consumers and retailers to all upgrade to NFC-equipped devices. 

Accor Services, which provides paper meal vouchers to 32 million employees in some 40 countries, is the first company to trial the PingPing payment system in combination with touchatag contactless applications.  Alcatel-Lucent employees in Belgium have been using a contactless card with a touchatag as a replacement for paper meal vouchers since June 2008.

Hundreds of other NFC trials have gone on around the world. As far back as 2007 commuters in Vienna were holding their mobile phones up to “touch points” on train platforms and receiving tickets via text messages. In the London underground, some subway riders tested  “smart posters” that automatically connected their mobile phones to a Web site with instructions on how to best reach their destinations. And in New York, some consumers got a taste of what it is like to pay for everything from fast food to furniture with a wave of their handsets, instead of using plastic credit cards. At the time, mass-market take-up of NFC mobile applications was considered imminent.

Two years later the message is the same. “The time is now,” says Anthony Belpaire, general manager of touchatag services at Alcatel-Lucent Ventures in Antwerp, Belgium. “We believe that in a short period of time there will be massive adoption by consumers,” he says.

But analysts at technology consultancy Gartner say it is likely to be 2015 before most consumers use their mobile phones to manage the kind of payments, coupons, loyalty points and gift vouchers transactions that Alcatel-Lucent wants to help mobile operators provide. Uptake is happening fastest in the developing world, where some 2.5 million adults have no access to banking but a growing number have mobile phones. It will take longer in the developed world, where consumers will have to change existing habits.

It doesn’t help that major players have  decided to take different directions on the technology itself.  For example, China Mobile, the world’s largest mobile operator, recently announced its own service,  based on a technology that competes with NFC called RF SIM.   MasterCard MoneySend’s mobile service in the U.S. and  handset giant Nokia’s Nokia Money global service don’t use NFC either, they rely on technology developed by Obopay, a U.S.-based start-up. And PayPal’s new SendMoney service, which enables consumers to make payments by simply “bumping together” two iPhones, is based on yet another technology, developed by a a U.S. start-up called Bump Technologies, that uses accelerometers inside high-end phones.   

That’s not all. Jack Dorsey, a Twitter co-founder, has a new company called Square, which is pushing a small magnetic credit and debit card reader that plugs into the headphone jack of an iPhone. When a card is swiped through the reader, the data is converted into an audio signal then is routed to Square’s software application on an iPhone. The encrypted data is then transmitted via wireless networks to servers, which communicate with payment networks to complete the transactions.

Then there is the issue of the business model, says Sandy Shen, a research director in Gartner’s Singapore office. In order to make NFC-based mobile payments work, telecom operators have to work with each other and with the financial community. All sides have to agree on what business model to adopt, how to share revenues and how to acquire and retain those customers.

“Alcatel-Lucent’s offering could be the glue that the industry has been missing,” says Andy Hicks, a senior research analyst in the Prague office of tech consultancy IDC. The service will allow carriers to connect their mobile payment services around the globe. That is important, because some carriers have been dragging their feet in linking with others because they see mobile banking services as a competitive advantage that helps reduce churn, says IDC’s Hicks.

Alcatel-Lucent’s new service will target both banking services for the unbanked in developing countries and mobile commerce services in developed services, says Alcatel-Lucent Ventures’ Belpaire. Alcatel-Lucent will offer it as a “white-label” service, enabling the operators to use their own brands. The services will not be limited to payments.  They will leverage touchatag’s various applications to help drive traffic to retailers through mobile  loyalty cards and coupons, he says.

But Alcatel-Lucent is not the only vendor offering end-to-end hosted services to mobile payment service providers. India’s Comviva Technologies Limited, which is backed by the Bharti Group, Sequoia Capital and Cisco Systems, has launched a hosted end-to-end service  called Mobiquity, which offers mobile money, mobile banking and mobile payment services. Clients of the company, formerly called Bharti Telesoft, include Barclays, which has used the service to launch a mobile banking service called “Hello Money” in India, Kenya and Botswana. Analysts also suspect that Amdocs, a U.S. based supplier of billing and customer relationship management products to communication companies, is working on  white-label solutions for mobile operators. In response to a question from Informilo, Amdocs confirmed that it has invested in an Israeli start-up named Trivnet, which specializes in mobile money and mobile banking services, but declined further comment.  Vodafone, meanwhile, is increasingly trying to host its various mobile money country payment offerings centrally, says IDC’s Hicks.

It will clearly take some more time for the market to decide which technologies and business models resonate best with consumers in different regions.  If getting all of the players to agree was as easy as beaming a signal from a mobile phone to a vending machine, we’d all be using mobile wallets by now.

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