Payments at the wave of a mobile

Japan is way ahead of others with its wallet phone

Imagine giving your bank and credit cards the heave-ho in favour of your omnipresent mobile phone - and simply waving it before the cash register to pay for meals, goods and services ultra conveniently.

The Japanese and the Koreans do this every day and according to some, the experience is only 20 months away for Londoners.

Using mobiles with a special SIM card to pay for everything from train tickets to groceries could be a reality at the London 2012 Olympics claims European telecoms giant Telefonica.

Used for years in Japan and Korea, where many handsets come equipped with some type of wireless payment chip, Europe and the US have fallen behind as interested parties squabbled about standards, security, and shares in revenues for providing the service.

E-wallet

Currently the leading candidate for enabling the doubling of mobiles as wallets is Near Field Communications (NFC) technology for handsets that employs short-range wireless communications.

This allows data exchange between devices over 10cm or less apart.

One of the key figures promoting an NFC based e-wallet scheme in Europe is Telefonica's director of mobile financial services Pablo Montesano.

He recently made the bold prediction that London would be the first in the West with a commercial set-up.

"The Olympic games will push the introduction of NFC wireless payment in the London area but this is not the only factor.

Banks in the UK are very advanced in the deployment of plastic contactless payments and there are already more than 25,000 contactless point of sale terminals.

On top of that, big mobile operators such as O2 are acting as the driving force for the implementation of these services," he told the BBC.

This would make it the first mass-market deployment outside of the Far East where just by swiping a mobile near a special cash desk reader you can buy something.

But although contactless card payments have been in use in Japan for nearly a decade, it took time for them to gain mass popularity.

Outside of East Asia, foundations were also been laid over 10 years ago when credit card company Visa Europe introduced a secure payment service for mobile devices in 1999.

London trial

The Oyster card has been one of the UK's most successful contactless payment method

Since then little progress has been made owing to the complexity of getting so many different sectors to co-operate -- from retailers to handsets makers -- to make it happen,

Montesano's belief that increased consumer demand, a coming together of standards and the claim that more handset makers are about to include wireless payment chips in a wider range of phones means an European phone-as-wallet is looking more likely.

Other moves by tech giants look encouraging, too. Apple has announced it is to develop an iPhone supporting mobile payments and Japanese handset makers say they are ready to fill any demand there might be in Europe for NFC-enabled phones.

But the real force behind the push for mobile payments is Visa, which also happens to be one the larger sponsors of the Olympics.

The credit card company has already completed one London trial last year with Telefonica subsidiary O2.

In the experiment commuters were handed mobiles, instead of the wireless payment Oyster cards many Londoners use on the underground, to pay for their trips.

Visa claims the response from users was very positive. As Londoners are already familiar with Oyster cards, taking the next step, paying for for everything via their mobiles, will be painless Visa argues.

"The convergence of payments and mobile is inevitable, and we are at the heart of developments to make this happen through supporting strategic mobile payments projects across Europe," said Sandra Alzetta, head of innovation at Visa Europe.

"Our strategy is to extend cashless payments, particularly for low- value transactions through contactless and mobile transactions and, in future, the use of mobiles for remote (online) and person-to-person(P2P) payments," she added.

Visa's idea is to have a special SIM card embedded in a smartphone that acts just like a credit card.

Using Visa's Java-based payment application, with the secure element sitting on the SIM, the software carries out the actual transaction extremely securely said Visa.

So far trials across Europe by Visa suggest there is a demand for such convenience despite some worries over security.

To allay customer fears, any transaction over 20 euros will require a PIN to be entered on the phone.

Users are also prompted for a PIN number after a certain number of transactions to prevent fraud.

If a handset is lost or stolen, payment capability can be remotely disabled, while any liability arising will rest with the bank says Visa.

As a leader in such tech, Japan proves the workability of such payments.

However, unlike plans by Visa for Europe, transactions in Japan are not only deducted from a credit card account or a bank account but you can also choose to have purchases debited as micro payments on your telephone bill.

Japan stole the lead on other countries with this simple debiting arrangement and because a common standard was readily agreed upon earlier by the mobile phone service providers and the handset makers.

Lukewarm response

This is something that has yet to happen in Europe or the US and remains a huge stumbling block to implementing wireless payments via mobiles here.

So mobile payments and even using a mobile phone as a ticket for the Olympics are still no certainty says mobile technology consultant Steve Nagata.

"Japan is certainly way ahead of the rest of the world with it's 'Saifu Keitai' (literally 'wallet phone') implementation.

Japanese mobile phone manufacturers started rolling out devices with compatible IC chips installed a few years ago. Japan's 'Galapagos' mobile system was beneficial in this case as in the tight, competitive domestic handset market, manufacturers are forced to quickly implement popular new features."

Japanese retailers, too, were quick to invest in readers for the phones which is something UK retailers are not yet doing.

When the BBC asked Tesco to comment on future commitment to mobile payments, the grocery chain declined to either endorse the new technology or to dismiss it.

Although it did say it was trialling Oyster-like contactless card payments in one London branch.

Given such lukewarm response from the UK's biggest retailer the idea of e-wallets on our phones as standard by 2012 might require an Olympian leap of faith.