M-payment moves beyond passing curiosity

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It may seem like you’ve been hearing about the concept of a “wireless wallet” for decades, but in North America, at least, m-commerce is very much in its infancy.

Mobile money seems to be getting legs in Japan, where credit-card companies have teamed with wireless carriers to allow subscribers to use their phones to pay for goods at brick-and-mortar retailers. M-commerce revenues first exceeded mobile content sales in 2004, according to Tokyo-based market research firm Eurotechnology.com, and should surpass $10 billion this year.

Some European markets are seeing uptake of m-commerce, also, as consumers use phones to buy movie tickets or pay for parking meters. Germany’s national railway last week launched a service that allows users to buy tickets on their phone; passengers receive a multimedia message that is read by new scanners.

In the United States, however, m-commerce transactions have been used nearly exclusively to purchase mobile content. But a host of developers, technology companies, handset manufacturers and carriers are working hard to change that.

The mobile payment playground may be the hottest space in wireless. At least a half-dozen companies have joined the battle in the last year: Cyphermint Inc. unveiled an Internet-based wireless payment platform earlier this month, joining text message-based providers PayPal Inc., TextPayMe as well as startups MobileLime, Obopay and Secure Wireless Transfers Corp., which offer service through downloadable applications. Another startup, ClairMail Inc., came to market late last year with a technology that allows mobile users to access their financial accounts via text messaging.

Visa and MasterCard are hoping to drive the mobile payment market with Near Field Communication (NFC), which uses a chip in the handset that can be read at the point of purchase. Visa teamed with Nokia Corp., Royal Philips Electronics, Cingular Wireless L.L.C. and other companies on a trial at Atlanta’s Philips Arena, allowing customers to use specially equipped phones to make “contactless payments” at concessions stands.

MasterCard, meanwhile, claims it has discovered a way to load credit-card account information onto mobile phones through cellular radio waves, according to a new report from Mercator Advisory Group. The system is being tested by one bank, and other financial institutions are expected to sign on.

While both text message payments and NFC-based transactions show promise, both have substantial hurdles to overcome. Only one-third of respondents in a study from research firm In-Stat earlier this year showed substantial interest in making payments with their phones. While carriers will surely want a piece of the action from mobile payments-driving prices up for end users-72 percent of respondents cited added fees as the biggest barrier for adoption.

Mobile payment systems that cut operators out of revenues face an uphill battle, as well. Cingular earlier this year told third-party vendors they were not allowed to accept payments from PayPal or credit cards, and other operators have taken similar measures.

With so many players vying for a piece of the market, it’s likely that some carriers will look to deploy their own services in an effort to “own” the customer and keep as much revenue as possible. The concept of a mobile wallet for mass-market users may be years from fruition, but the window is closing quickly for anyone else who may want to step onto the playing field, regardless of which payment platform they opt to use.

“New market entrants will face a significant challenge on both the acquiring and issuing side,” according to Michael Friedman, director of emerging technologies for Mercator Advisory Group.

“We would suggest that prospective market entrants who have not already lined up their merchants and customers face the risk of arriving too late. Although the door is never completely shut, time is of the essence.”

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