Counting on contactless?

Using a mobile phone to make payments seemed the stuff of science fiction only a few years ago. Now, as more pilot schemes roll out, how long will it be before consumers outside major cities have access to such technology – and do they want it?

The results of the UK’s O2 Wallet trial are now in, and are giving bankers something to smile about. Billed as Europe’s largest test of near-field communication (NFC) technology on mobile phones, it included industry leaders such as O2, Transport for London (TfL), Barclaycard, Visa Europe, TranSys, Nokia and AEG. It measured demand for having cards normally carried in a wallet – such as credit and Oyster transport – on a Nokia 6131 NFC handset. “It was very positive and we found that women really grasped the convenience factor – quite simply, one less thing to carry around,” says Claire Maslen, head of NFC at O2.

Outside London, few people were aware of the trial, but the consumers who took part said they found the technology convenient and easy to use. They also liked the status of having such a device, with nine out of 10 participants saying they were happy with it, and 78% saying they would be interested in using contactless services if they became available.

Paywave payment

Some participants had the Barclaycard Visa payWave application on their phone, which they could use to make contactless payments of £10 and under at a number of outlets across the capital, including Books Etc, Chop’d, Coffee Republic, EAT, Krispy Kreme, Threshers and Yo! Sushi.

Questions have been asked about the usefulness of a pilot where the technology could be used only in a narrow selection of outlets, and this was reflected in the results, as participants requested wider payWave acceptance in retail outlets to make the facility more appealing.

“More than two-thirds of participants liked the ability to make payments using – in this case – a mobile phone. But there’s nothing to say in the future that it might not be another device that is carried – such as an iPod or something similar,” a spokesperson for Barclaycard told The Banker.

Further analysis of the results revealed that while the user interface was popular, testers wanted the ability to manage their accounts and view Oyster and Barclaycard balances through the application. In addition, while participants wanted speed and convenience when using their mobile phone, they understood the need for security and could see the benefits of being asked for a PIN periodically.

“The focus groups say they immediately understood how it works and what the security involved was,” says Guido Mangiagalli, vice-president, payWave and Mobile, Visa Europe. “At the beginning, people were asking ‘what happens if I lose the mobile or it’s stolen?’ But when we told them that spending is limited – and the maximum spending was £10 – they were willing to take this application.

“From a security point of view, we can monitor and close down an application much more quickly when it’s in the mobile phone than when it’s on the card. This is because when it is in the handset, the mobile is connected to the network. So as soon as testers communicated the loss of their phone to our customer support team, we could send out an SMS and close down the application.”

Wider remit?

Expanding the pilot outside London will have its challenges, however. “In some ways, London is like a closed environment, thanks to its transport network and the behaviour of people living and working there,” says Ms Maslen. “For a trial to be successful nationwide, it would need to involve many more parties from the different sectors. Transport would be key and that would require a large number of companies, standards bodies and the willingness of travellers to adopt something new.”

Mr Mangiagalli adds: “The major challenge now is to get the merchants installing the contactless readers for acceptance.”

A Barclaycard spokesperson says: “We have made a commitment that, by the end of this year, we will have 15,000 merchants set up with contactless. We believe it is something that people will see more in their everyday life and not just in London. We bought the Discover Financial Services portfolio earlier this year and we are migrating those cards over to about 1 million customers who will get contactless, so retailers will know that there will potentially be more people wishing to use the technology.”

“In theory, any card that you carry in your wallet could be on your mobile phone in the future,” says Ms Maslen. “To make this a reality, we need to work cross-industry with a shared vision of what commercial services will look like.”

O2 is establishing a UK Mobile NFC Taskforce to bring together mobile operators, handset manufacturers and key players from the transport and finance sectors to form the foundations for commercial NFC on mobile services.

Ms Maslen adds: “O2 aims to get the other mobile network operators together by mid-November to agree how we can work together and share what we’ve learnt. We hope that once all mobile network operators are in agreement, we can tackle each topic in turn, inviting the other parties along as required.”