31 January, 2011

Contactless payments coming to the UK in the summer 2011

Near Field Communication is the swipe 'n' go technology that enables the ticket payment at the London Underground's barriers via the Oyster card.

Everything Everywhere is launching contactless payments in the UK this summer in collaboration with Barclaycard - see press release. The Register has some of the details of the technology - UK proximity payments by phone this summer.

Retailers that have signed up are: Pret a Manger, Little Chef and the Co-op amongst others. Obviously, this requires special terminals in store to make happen. AND this will require special chips in credit cards (and phones - more on this later on in this article) to work.

In short, in order to make all this work, lots of players have to have signed up to the concept and make a lot of investment.
  • Firstly, the credit card providers have been shipping replacement cards to their customers with an embedded contactless chip. There are now 11.6 such cards according to this article from the BBC - Orange customers of Everything Everywhere get mobile payments.
  • Secondly, credit cards with a pre-pay facility have helped. I find it amazing that pre-pay credit cards have take so long to come onto the market. Not sure why it has take so long - any comments anyone??
  • Thirdly, retailers need to make the investment in the terminals in-store.
So quite an ecosystem..... coming up next, embedding the contactless chips into mobile phones - the long awaited m-payment revolution. But wait, contactless payments via mobile phone is a commonplace transaction in Japan.

The last time I visited Japan (5 years ago), a friend lent me an Suica-enabled phone, which allowed me to swipe through Tokyo's subway - fantastic. I'm told that if you wish to pay for something in a newsagent's in Japan, then Johnny Foreigner will be one of the few people that pays for sweets, cigarettes, etc with coins and notes, whereas the natives will be using their phones.

The mobile environment in Japan is very different to GSM world: the operators are tightly integrated with the handset manufacturers. Financial Regulations permit operators to run pre-pay services for services other than calling, texting and accessing content on their mobile phones.

Back to Europe...
Pan-european mobile payment system, Simpay, failed in June 2005 (see Simpay halts mobile commerce project). There are a number of reasons for this, but mainly it was the inability for the ecosystem to coalesce around the concept.

This time around, competitive pressures are MUCH stronger. Apple, with its App Store, has shown the consumers will buy goods via their handsets and have done VERY well to cream off lots of profit from these transactions. The operators are very unwilling to surrender this potential revenue stream to a handset manufacturer - particularly Apple - that really turned the screws on UK Operators when it launched in this country - see O2 wins Apple iPhone deal - at a hefty price (from September 2007).

Also, Kenya's MPESA, a mobile wallet, has been an outstanding success - see this nice story from BBC.

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