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Telecom companies like Vodafone and France Telecom look to surpass Google and Apple in NFC-equipped mobile phones

Telecommunication firms are looking to jump ahead of leaders in the mobile industry like Apple and Google with technology that allows users to pay for items such as their morning coffee by swiping their mobile phones instead of using debit cards or cash. 

Paying for everyday items via mobile phones is a technology known as near-field communications (NFC). It allows mobile users to purchase items by tapping their phone on a specialized reader at a store's cash register. 

Telecom companies such as Vodafone and France Telecom are looking to get ahead of other mobile giants like Google and Apple -- who are leaders of mobile software, devices and applications -- by incorporating NFC technology into their mobile devices. In fact, the Mobile World Congress, which opens in Barcelona today, will allow telecom operators to discuss the use of this new technology. 

"There is a game-changing opportunity here for operators to effectively displace credit cards and banks," said Dan Hays, partner at global management consulting firm PRTM. "Mobile payments are arguably the next major change in the mobile industry." 

While certain telecom firms are eager to jump ahead of the mobile game with NFC technology, they need to pick up the pace because mobile payments already exist in Japan and Korea, though the technology is being "held back from mass market adoption" because of confusion surrounding the business model and the lack of handsets. Also, Google has already started developing such technology for the Android mobile operating system, and Apple has began working on an NFC chip for the iPhone that would utilize an iTunes payment system.  

In addition, Starbucks has even developed a mobile payment system in 6,800 of its stores in the U.S. that utilizes a mobile app downloaded on the Blackberry or iPhone 

It makes sense that the competition for developing the NFC technology is already cutthroat even before mass-market adoption because IE Market Research estimates that the amount of money at stake in this new market is about $1.3 trillion globally. Jupiter Research estimates that one in every six phones will have NFC technology by 2014. 

With that much money at stake, the telecom operators are looking to take on credit card companies like MasterCard and Visa. Credit card companies are optimistic about the technology because it could increase transactions and fees.  

Both the U.S. and Europe have already started experimenting with different business models. For example, Verizon, AT&T and T-Mobile joined together in the U.S. last year with Discover Financial Services and Barclay's Bank and had customers sign up for a Discover credit card in order to launch mobile payments. In Europe, France Telecom's Orange joined forces with Bouygues, SFR, various French banks and the local government to give 3,000 residents a NFC-enabled phone to use at 1,000 local retailers and on local trams in a year-long project.  

"You need a big base of customers to make this work," said Anne Bouverot, Orange's executive vice president of mobile services. "It's also a way to provide an additional service to customers that we think will increase their loyalty and attention."

With several mobile companies competing neck-and-neck, telecoms firms plan to pave the way to NFC victory by heavily investing in mobile payment setups in geographic areas that do not have access to bankcards or banks such as India and Africa. This plan will allow telecom firms to attract those in emerging economies, and help them compete with well-established credit card systems in the U.S. and Europe. In addition, it will help Orange reach its goal of equipping 500,000 clients with NFC phones this year.  

France Telecom's Orange has also announced today that it has signed an agreement with Samsung. 

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RE: Unless I'm misunderstanding...
By Azethoth on 2/14/2011 8:16:59 PM , Rating: 2
That's not the battle thats depicted though. The battle is about a new payment ecosystem and who will "win" it. That seems like a combination of NFC phone market share + retail device / backend market share.

I just started using the Starbucks thing after seeing someone else do it. Basically you link your prepaid card number to the app and then it prints one of those new square bar-codes on the screen which gets scanned. Your card balance updates a few seconds later.

From a user perspective this is completely superior to a credit card swipe which leaves you with no awareness of what you are spending or what your balance is.

I can see NFC becoming the dominant payment system, especially if they can figure out how to provide better security than credit cards. Even the way Starbucks is faking it already is compelling enough for me to switch.

RE: Unless I'm misunderstanding...
By Solandri on 2/14/2011 8:42:57 PM , Rating: 2
From a user perspective this is completely superior to a credit card swipe which leaves you with no awareness of what you are spending or what your balance is.

How so? Don't you get the same functionality by just having an app on your phone (like the Amex app) which reports your credit card balance and latest purchases? Except the credit card will still work when your phone is dead, and your wallet is harder to lose than your phone since you aren't taking it out every few minutes to take calls or write texts/emails. And if the register ringing up your price, the printed receipt, and the notification from this phone app aren't enough to make you aware of how much you've spent, you have no business buying things.

Legit question here. I'm trying to figure out how this is in any way better than a passive NFC loop inside your credit card. What can you do by waving your phone to pay that you can't do by waving your wallet (with cards inside) to pay?

I can see NFC becoming the dominant payment system, especially if they can figure out how to provide better security than credit cards.

That's about the only way I can see it being superior. But that amount of security carries with it the drawback that if your phone has no signal, you can't make a purchase.

The only other superior aspect of it I can think of is you can carry a bunch of cards on the phone without having your wallet grow in thickness. I guess the convenience of that would depend on how many cards you use (not just credit cards but ID cards as well - you could use this for a library card, or monthly subway pass).

Unless cell phone data coverage becomes ubiquitous, or society moves to having tons of ID cards, it's hard for me to see this supplanting cards carried in your wallet.

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