Cell Phones and a Cashless Society

Mobile Network Operator and Visa Begin Mobile Payments Pilot in Spanish Resort

May 28, 2010

NearFieldCommunicationsWorld.com - 1,500 customers of Telefónica and La Caixa have been issued with Samsung S5230 NFC phones which they can use to make debit and credit card payments in taxis, sports centres, at market stalls and in retail stores.

The pre-commercial NFC trial in the Spanish resort of Sitges, announced in February, has gone live.

The 'Mobile Shopping Sitges 2010' pilot is being led by mobile network operator Movistar, part of the Telefónica group, La Caixa and Visa and includes the participation of Gemalto, Giesecke & Devrient, Samsung, Ingenico and the Sitges city council.

1,500 customers of both Movistar and La Caixa have been chosen to participate in the pilot and can use their Samsung S5230 NFC phones to make payments using their La Caixa credit or debit card accounts at 500 merchants in the town.

Transactions valued at up to €20 can be made without a PIN and larger transactions can be carried out provided the customer enters their PIN on the keypad of the merchant's POS terminal to confirm the purchase.

Each of the pilot's participants are being given training on how to use their phones and a website providing comprehensive information on the new service and how it works has been set up by Telefónica at http://www.mobileshopping.es/.

"Telefónica will expand the offer to use its technology to other banks, and expects that La Caixa will partner with other platforms in addition to Visa," Kim Faura, head of Telefonica's Catalonia region, has told Europa Press.

The pilot is scheduled to last for six months. Participants will not be required to return their NFC phones at the end of the pilot, however, as there are plans to both continue the service in Sitges and to expand it to the city of Barcelona, just 35km up the coast from the resort.

The start of the Sitges pilot is the second of a pair of significant moves towards the adoption of NFC by Telefónica to take place in the last seven days. Earlier this week, we reported that the company's first commercial NFC service has gone live in the Czech city of Pilsen and that Telefónica's business strategy for NFC deployments is now in place. An NFC bus ticketing trial is also due to go live in the near future in Lima, Peru.

Mobile Network Operator Launches Mobile Phone Payments in Czech Republic — and Sets Out Strategy for Future Deployments

May 27, 2010

NearFieldCommunicationsWorld.com - The mobile network operator Telefónica is starting small with a limited rollout in the Czech city of Pilsen, but a business strategy is now in place and commercial launches in the UK and Spain could be next.

Telefónica O2 Czech Republic has put a limited number of NFC phones, pre-loaded with the local Plzeň transport and city services card, on sale in the Czech city of Pilsen.

The launch of the new service marks the first time that Telefónica, which offers mobile services in sixteen countries in Europe and Latin America, has offered NFC phones on a commercial basis to its subscribers. For the launch, Telefónica O2 subscribers can obtain a Nokia 6212 Classic NFC phone on a contract for 495 crowns (US$24), or without a contract for 4495 crowns (US$216), from any of the operator's six stores in Pilsen.

The Plzeň card is issued by the city's regional transport operator PMDP and allows local residents to pay for public transport, purchase tickets to local events, make payments in local stores and receive special cardholder-only discounts. Some 230,000 local residents currently hold a Plzeň card.

"Now anyone can buy a mobile phone that supports NFC and start benefiting from this service," says Michael Kraus, CEO at PMDP. "I know of no other city in Europe where [there is] NFC technology in commercial operation."

Preparations

At Telefónica's head office in Madrid, meanwhile, preparations are gathering pace for the introduction of larger scale commercial deployments in the near future.

Technical development work in now complete, Michiel Van Eldik, Telefónica's group director for new business and innovation, has told NFC World, and a business strategy for NFC services is now in place. Key to that strategy, says Van Eldik, is an understanding that "money will go mobile" and that "the biggest favour we could do ourselves as an industry is to recognise that there is money to be made for all of us."

"It has to be based on partnerships," he added, explaining that his experience working on Telefónica's mobile health initiatives has taught him the value of each party being responsible for its own area of expertise. So, while Telefónica has a banking license in some countries, cooperation with other service providers will be the way ahead, Van Eldik says. "We could try and become doctors, but that would be the biggest mistake we could make," he explains.

Telefónica's strategy, therefore, is multi-layered, involving a number of different business and consumer propositions with the aim of providing solutions that work for all. Currently, they include:

• Co-branded products. Telefónica has signed a deal with Visa Europe that will see the introduction of services, similar to the UK's existing O2 Money product, across all the European countries in which Telefónica currently operates. Here, the operator will partner with a Visa-card-issuing bank in each country and, in exchange for its business, will receive a share of transaction revenues or, as Van Eldik neatly puts it, "we will take a slice of the dice." A similar deal is also set to be signed with either Visa or MasterCard for the Latin American market in the near future.
• Existing card products. A number of pricing models are under consideration to enable banks and other card issuers to add their products to Telefónica subscribers' NFC phones, although the operator currently favours a straight rental fee.
• B2B customers. For merchants and other service providers, Telefónica will offer a range of products and services "that work out-of-the-box" and will also offer tools for developers, including APIs and toolkits.

Before any large scale launches can take place, however, phones must pass the scrutiny of Telefónica's consumer focus groups. Since its phones are subsidised, Van Eldik explains, decisions over which handsets the operator should offer are only made after in-depth customer research has been conducted — and "they must see a clear advantage" before a device can be offered to subscribers.

That said, in volume, the operator is now expecting to pay a premium of just US$5 to have NFC functionality built into its phones. That means, Van Eldik says, that if a sufficiently strong case can be made for being able to generate revenues from NFC service provision, it is possible that this premium would not be passed on to the customer.

Performance issues

The need for reliable handsets is also still a potential stumbling block. Performance issues with the Samsung S5230 NFC phone became apparent during the NFC trial conducted at the Mobile World Congress in February. Telefónica plans to use the same phone for the pre-commercial pilot it will be running in Sitges, Spain from June this year and, says Van Eldik, the operator has been working very closely with Samsung and with its NFC SIM supplier Giesecke & Devrient since February to ensure the phone meets its performance requirements in time for the launch.

A large scale trial is also due to begin in Peru soon, which will see commuters in the city of Lima able to use NFC phones to purchase bus tickets and, says Van Eldik, we are "running a few trials with stickers" and "we are looking at some other solutions too."

Where will the first major commercial launches take place? Spain, the UK, and the Czech Republic are the furthest ahead of the countries in which Telefónica operates, says Van Eldik, with each having the potential for expansion in late 2010 or early 2011.

"In these countries, we are seeing more and more evidence of market readiness and we at Telefónica are most advanced in our developments," he concludes.

Meanwhile, Pablo Montesano, Telefónica’s director for new businesses, told delegates attending the Mobile Money Summit in Rio de Janeiro this week that the operator estimates that it could ultimately generate US$1.5 billion from mobile financial services.

"The last 18 months have been important to our understanding," he explained. "We consider financial services one of the biggest opportunities within the group."

Montesano also confirmed the operator's commitment to a partnership model, the GSMA's Mobile Business Briefing reports:

"Telefonica is looking at an open model whereby it could share the spoils with several partners, he said. And Telefonica does not believe in 'the silo approach' and is prepared to work with other mobile operators to see services become successful. Montesano has had to convince colleagues internally that co-operation rather than competition is the way to go.

Mobile money is also a rare opportunity to create value both for shareholders and the wider society, said Montesano: “Even a one percent inclusion of the unbanked creates a significant improvement in reducing inequality.”