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Tim Culpan

Credit card firms and handset makers contemplate a new cash-payment system

Nokia has been running an international advertising campaign for a few years that previews the future of mobile phones and the diverse role they will play in everyday life.

In one spot, a user pulls out a wallet bulging with credit cards and pretends to make a phone call.

The punch line: mobile phones will one day be used to pay bills.

This scenario envisioned by Nokia and many others in the industry is quickly approaching reality, according to MasterCard.

The Nokia commercial led many to believe a mobile handset would be used for payments by putting the bill on a user's mobile-phone account.

But the business model contemplated by credit card companies and handset makers could wind up bypassing telecoms operators altogether.

Different technologies could make this happen. The most compelling and popular is the ISO 14443 standard, a type of radio frequency identification (RFID) technology used in most smartcards. Visa and MasterCard  back this standard.

While many Hong Kong consumers already have an RFID tag in their wallets or purses, there is no reason why it should be limited to a small square of plastic because the technology is versatile.

'What that means is the ability to have payment functions on almost anything,' said Richard Fletcher, senior vice-president of MasterCard's mobile and wireless centre.

In a proof-of-concept trial conducted in the United States, ISO 14443 tags were glued to the insides of Nokia handsets - clumsy, but it worked, Mr Fletcher said.

The industry  wants to take the technology further.  Sony has  joined NTT DoCoMo to launch handsets with Sony's smartcard technology, called FeliCa.

This technology is different from ISO 14443 and is used in the Octopus payment system.

Motorola is testing ISO 14443 and could incorporate the technology into its handsets soon.

'All the research we've done suggests [RFID-enabled phones] will be a significant part of the payment space,' Mr Fletcher said.

Finance industry research firm Celent Communications  estimates RFID will overtake traditional plastic by 2007, accounting for 8 per cent of transactions compared with 7 per cent for credit cards and 84 per cent for cash.

Putting payment technology into a handset sounds great for the user but could threaten operators hoping to get a slice of the payments pie.

In some markets, consumers can buy products from a vending machine - such as blue jeans in Japan or soft drinks elsewhere - and charge them to their mobile phone account by text messaging a number.

With a pre-paid card built into the handset, the operator is cut out of the transaction.

MasterCard said putting an RFID card into a handset did not mean  encroaching on the territory of others. Instead, it was offering a wider variety of payment options to consumers.

'We see mobile as a channel to expand ... there's no fundamental change to the business model,' Mr Fletcher said.



Pay model shuts out operators