Visa eyes mobile phone prize

The mobile device will play a central role in Visa's mobile payment and commerce strategy, according to the head of products for the credit card company's Canadian operations. Speaking at the 2007 Wireless and Mobile Expo and Conference/ RFID Forum in Toronto last month Michael Bradley, VP products at Visa Canada, explained that in the long term, the handset is critical. "What we see in the future is being able to put that contactless card functionality right inside a mobile phone. You'll be able to project, in a very secure way, the ability to make a purchase straight off your mobile phone," he said. "We're trying to get to that stage where consumers can use their phones as wallets. The dream of being able to point your phone at a vending machine or cash register is what we're trying to get to," Bradley explained. "It takes some very coordinated long-term investments in order to facilitate the infrastructure that drives that."But before embedding payment chips into handsets the company is making a bid for greater usage of its chip-enabled credit cards. Launched last May in Canada, Visa's payWave-enabled cards allow customers to make purchases at retailers by simply waving their RFID chip-enabled card in front of a point-of-sale (PoS) terminal at the merchant. The system resembles PayPass from MasterCard, recently launched in conjunction with Tim Horton's, and ExpressPay from American Express. "What has been the case in Canada, is that operators like Shell and Esso put out their own transponders," Bradley said. "Visa, with the launch of its payWave platform is taking a more general approach to how contactless cards are being used." He foresees the smartcards eventually being accepted at convenience stores, fast food restaurants, movie theatres and other high traffic locations. There no word on how many merchants have adopted the Visa system since it debuted here in May, but Bradley is bullish on future adoption. "I expect over the next six months you'll see increased usage by consumers and merchants," he told Report on Wireless in an interview at the conference. But converting to the new system won't be easy or cheap. There are more than 600,000 PoS locations in Canada accepting the 29 million Visa cards that have been issued by Canadian financial institutions. "In Canada we're going through a major change in technology, as we move from strips to chip infrastructure," he told a full audience. "Upgrading merchants isn't going to be easy. We expect that project to cost, on an overall basis, somewhere in the range of $1 billion we expect it to take at least three or four years. Upgrading PoS is a key element for proximity payments, but it will happen over time."Although NFC hasn't developed as quickly as anticipated, Visa is looking at NFC and SMS technology to help them deliver mobile payment applications. NFC could go into a three, four or even seven-year deployment timeframe, Bradley said. "We need to create the right roadmap for consumers to use the service and make it relevant enough, so that as functionality comes in, it'll just be layered on top."PayWave is only one aspect of a larger mobile payment strategy. In January, Visa launched a mobile payment platform that sets the groundwork for commercial availability of mobile payments and services. The platform offers solutions for contactless mobile payment, OTA personalization, coupons - some of which contain barcodes to be read at POS locations - and direct marketing tactics. Visa would also like to integrate person-to-person and international money transfers into their commercial mobile platform. "We intend to leverage SMS capabilities and enable customers to be able to pay from one Visa card to another Visa card, using a mobile phone. In Canada, that could take the form of settling the bill with friends, and globally that could be more about remittances," Bradley said. Visa's mobile platform is being used to fine-tune the business case for financial institutions and mobile communications sectors, while fostering collaboration between the stakeholders. In February, Visa International and SK Telecom, South Korea's leading cellular operator with approximately 20 million subscribers, launched a contactless payment application on a 3G Universal SIM card.Upwards of 30,000 Visa cardholders are part of the ongoing trial, which combines Visa's Wave contactless product - the precursor to the payWave application - and mobile touch merchants. "We're doing it through , so the customer gets the application downloaded over the air," said Bradley. "This is a significant technical achievement and absolutely fundamental to consumer adoption of these services."Consumers send messages to their banks requesting the application, who in turn, send the applications through mobile Internet into the secure USIM chip. In lieu of smart cards, consumers simply wave their phones in front of merchants' readers. The trial coincides with the recent launch of SK Telecom's USIM-equipped 3G phones. While the demand for mobile payment applications is stronger in the Asia-Pacific region than the North American market, Bradley expects interest at home to grow. Citing a March 2007 study conducted by Fabrizio, McLaughlin & Associates, and commissioned by Visa USA, Bradley said that 57% of survey respondents were interested in purchasing a mobile phone with payment capabilities and 64% of respondents between 18-42 years old would consider switching carriers for mobile payment options. These results were similar to the feedback Visa heard after a pilot test of mobile payment applications at Atlanta's Phillips Arena. In conjunction with several partners, including JP Morgan Chase and AT&T, Visa USA launched a trial between December 2005 and May 2006, targeting the NBA's Atlanta Hawks and the NHL's Thrashers season-ticket holders. Users would connect a Wave-enabled device to their phones, enabling them to make concession stand purchases and download coupons from posters embedded with NFC devices. Although unable to provide quantitative data, Bradley said that the consumers "really liked the speed and convenience of the service and were interested in using their mobile phones across a range of locations and across a range of prices."The results of this trial and other in-house trials reinforced the need for collaboration between mobile operators and payment providers, he said. Increased scalability and security measures were additional considerations learned through the trials and were also top-of-mind for conference attendees.Even Bradley conceded that security measures must be improved. "Static passwords need to be upgraded with two-factor authentication. The phone, to that end, allows us to be able to not just have a secure chip inside - which authenticates that the phone is legitimate - but also to process a password to that chip and authenticate it through that chip," he said. "We're not saying that this technology will be available in 2007, 2008, or even 2009, but to paraphrase Wayne Gretzky, ‘it's important to be able to skate to where the puck is going to be, not to where it is today,'" said Bradley.

Visa eyes mobile phone prize

News | August 10, 2007

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