If paying for groceries or a meal with a mobile phone sounds futuristic, get ready. Like EFTPOS in the 80’s, in 2007 New Zealand technology companies are pioneering new payment systems in conjunction with banks and merchants – this time using mobile technologies. And like the introduction of EFTPOS; retailers, merchants and consumers are taking time to get used to the idea.

Serge van Dam, head of marketing for mobile payments specialist M-Com, says new mobile payment models under development in New Zealand include processing credit card payments through merchant mobile phones, issuing payment reminders or authorising transactions via mobile devices, and using mobile phones with embedded debit or credit ‘chips’ at checkouts instead of a plastic card. He says while New Zealand is “way ahead” of Australia in terms of mobile payment system development, Japan and Korea already use a ‘unique identifier’ in mobile phones so they can be swiped over a point of sale terminal and money can be deducted from a prepaid account. (The embedded technology is based on standards set down by Near Field Communication or NFC, a technology industry forum. According to ABI Research data, mobile phones with NFC technology are a growing trend, with shipments poised to surpass 200 million by 2009.)

Caroline Dewe, executive vice president products and marketing for mobile solution specialists Fronde Anywhere, says “just about every bank in New Zealand” is at some stage of rolling out mobile phone banking services and a wide range of organisations are looking at mobile enabling and adding mobile payment services to their business structures. This makes easier it easier for other organisations to do because it educates the user, says Dewe.

Give me some credit
One organisation leading the way is MasterCard, which in April announced a mobile payment solution for Taiwan in cooperation with Taiwan Mobile and Taipei Fubon Bank. The new service lets consumers pay for purchases using a Nokia 3220 mobile phone and MasterCard’s ‘PayPass’ technology. Customers tap a PayPass enabled phone onto a PayPass reader at a retail store and the transaction is complete. The phone carries the same payment functions that plastic cards provide, and users securely download personal credit card information onto the phone through payments provisioning software implemented by the mobile network provider.

MasterCard says it has issued nearly 13 million PayPass cards and devices in conjunction with banks and other partners, and more than 46,000 merchants worldwide accept PayPass payments. PayPass trials are also underway in Australia in conjunction with the Commonwealth Bank and Westpac.

In New Zealand, van Dam says M-Com is trialling an M-Credit system with a small number of sole traders and the support of the BNZ. Under M-Credit, a customer’s credit card details are entered into a mobile phone which then connects to the BNZ’s credit processing engine for verifying the transaction. Receipts are issued as a text message.

Perhaps one of the most visible mobile payment systems is Fronde’s Text-To-Park service, now available in most major centres and able to be used by either Telecom or Vodafone mobile customers. Text-to-park lets people pay for parking spots by sending a text message to the relevant council. The mobile payment system receives the message, alerts the parking machine payment has been made, the machine issues the ticket (which doubles as a receipt) and the charge for parking appears on the customer’s mobile phone bill. Dewe says between “15 and 20 per cent” of parking payments are now made via Text-to-Park.

Bank on it
Dewe says banks, Telcos, payment card providers and merchants are all looking at how the mobile phone can “jump” them into the next stage of business evolution and see mobile payments as a way to get new revenue streams or a new way to transact and work with consumers. And van Dam says in developing countries more people are banking by mobile phone than through almost any other method, partly because they may not have a bank account.

In New Zealand, M-Com has developed a mobile banking solution for the ANZ National Bank called ‘Bank Anywhere’ and also counts Westpac as a customer. Confusingly, Fronde has also developed a mobile banking system called ‘Bank Anywhere’ for Kiwibank. In a press release, Kiwibank general manager of distribution Steve Ferguson said uptake of the service had been “phenomenal” and had helped Kiwibank establish its brand as an innovative leader in banking services.

Meanwhile, the ASB Bank has developed its own solution. Peter Muggleston, group manager online and information services, says last year ASB launched its browser-based ‘Fastnet Classic’ service for smart phones and PDAs and is examining how to bring that “further down the food chain” to phones with weaker browsers. (There are certainly different schools of thought around the best technology inter-face for mobile payments and mobile banking. Browser champions figure people used to desktop online banking will want a similar interface for mobile banking, delivered either via a pared-down web ‘front end’ or access to the standard online banking web site. Others say banks should look at a blend of interface technologies including browsers, WAP and Java based software because there is still a wide range of mobile devices in the market.)

Muggleston says the ASB has also developed an electronic wallet service called Pago, which lets people make payments to each other via their mobile phones. Payments are deducted from the pre-paid ‘wallet’ and paid into the electronic wallet or bank account of the recipient, who may need to be ‘Pago authenticated’ to receive the payment. Muggleston says while the technology works well, uptake between consumers has not been as successful as the ASB would have liked, and an upgrade due this year that allows consumers to pay merchants via Pago is probably what the market is waiting for.

Telco talk
Jason Foden, head of mobile products for Telecom, says mobile EFTPOS (EFTPOS terminals that process payments wirelessly over mobile networks) is an example of the progression of mobility beyond voice.

“Given this we’d also expect it's likely New Zealand will be one of the first countries to adopt mobile commerce applications. The key challenge is having vendors, telecommunications companies and banks agree the path forward,” says Foden.

He says Telecom partnered with M-Com to provide mobile banking applications directly to banks about two years ago and customers can expect to see new mobile payment applications from Telecom in the market this year.

Hamish Sansom, head of new product development for Vodafone, says mobile payments have been “an awesome opportunity for a long time” but barriers including uptake time have been greater than Vodafone imagined. He says one of the most visible initiatives is Text-To-Park; along with the ability to pay for prepay phone airtime over a mobile phone. (Vodafone’s prepay payment system, developed by BNZ, Fronde and GFG; and Telecom’s, developed by M-Com, are presently being developed to work together so phone airtime top-ups can be purchased by users irrespective of the bank or network provider they use.)

Sansom says Vodafone will also leverage its global buying power going forward to ensure new phones have NFC technologies and other payment mechanisms built in, but there are challenges to widespread acceptance of mobile payment systems.

“Initiatives like the ASB Pago service are a good development; a great service. But it’s hard to get people to remember to use it above other payment mechanisms; why would the customer use it instead of an EFTPOS card, for example?” says Sansom. He says when these barriers and others like mobile battery life are ironed out; people will begin to leave their wallets at home.

“That is absolutely the future; we are just not sure exactly how we are going to get there,” says Sansom.

For more information visit the Mobile Business Research Pavilion

August 2007