New deal brings EU mobile phone payments closer

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Using a mobile phone to make direct payments could become the norm in Europe following cooperation announced between the GSM Association (GSMA), which brings together the world’s major mobile operators, and the European Payment Council (EPC), the body representing the EU banking sector.

The first widespread deployment of the new payment system is expected by late 2008 or the beginning of 2009, David Pringle, a spokesperson for the GSMA, told EURACTIV. At the moment, several trials are being carried out across the world. In Europe, the pilot country is France, where retailers are installing terminals to allow contactless payments to go ahead.

According to the GSMA-EPC plan, payments would be carried out through a so-called “trusted service manager,” an intermediary between banks and mobile operators. This third party is necessary because in different EU countries telecom companies are not allowed to act directly as payment providers. The role would in any case be fulfilled by banks.

However, the aim is to have a trusted service manager that can act “on behalf of a number of banks” to give customers the opportunity to choose between different financial institutions, the GSMA spokesperson said.

The EPC’s support is therefore key to the success of the project. The body brings together all the European banks that have agreed upon SEPA, the Single Euro Payment Area, which aims to make EU cross-border payments as easy as a domestic transaction by the end of 2010 (see EURACTIV 29/01/08).

The project enjoys the support of the major handset makers, such as Nokia, Samsung or Motorola, and of the payment card associations – particularly Visa and MasterCard, which will provide the updated applications for the telephone SIM cards and will process the payments, according to GSMA. Visa and MasterCard have even agreed to subsidise the deployment of retailers’ terminals in some countries.

The application of the new system will be worldwide. At the moment it is being trialled by the South Korean operator KTF, the Taiwanese FarEasTone, the US AT&T, the Turkish Turkcell and the French SFR and Orange. The Japanese operator SoftBank, which has already implemented the practice of payments through mobile handsets, is also involved, in order to prevent Japan from becoming “a technology island,” as an expert in the sector put it.

The technology used is the NFC or “near field communications,” an evolution of radio frequency identification (RFID). Please see our Links Dossier for more information.

EU Internal Market Commissioner Charlie McCreevy commented: "Bringing more competition to the payment services market has been my aim and agreements such as this show the possibilities that new technologies and innovative approaches offer in this regard. This is exactly what the Payment Services Directive is designed to promote."

His colleague in charge of telecoms issues, Viviane Redingadded: "Voluntary industry agreements by the mobile industry are always welcome where they bring about concrete benefits of consumers and enhance the level-playing field for European companies in due respect of competition rules. I therefore applaud the announcement which should bring Europe to the forefront of mobile payments."

"Together, the European Payments Council and the GSMA are well-placed to develop the tools our members need to deploy mobile payment services that will work internationally to the benefit of consumers," said Alex Sinclair, chief technology officer at the GSMA. "We look forward to a productive working relationship with the EPC."

"We are convinced that this cross industry cooperation between GSMA and EPC is the best way forward for efficiently enabling the mobile as a channel for initiation of payments in SEPA, and this cooperation model could also be a model for other parts of the world," said Gerard Hartsink, the chairman of the EPC.

András Vilmos, Project Manager of the EU-funded project Stolpan, aimed at bringing to Europe mobile contactless payments, commented: "In general we think it is the right move to the right direction. Key stakeholders need to work hand in hand to be able to realise the potential of the near-field-communications technology. To come to the necessary common understanding and specification on the 'trusted service manager' role and on a number of other issues, not mentioned in the press release, cross industry cooperation is necessary".

Contactless payments through mobile phones are already available in a number of countries around the world, with Japan and South Korea leading the way by far. 

In Europe, mobile handsets are not yet used to pay in shops, although contactless cards have in fact already been issued by banks, and some shops are already equipped with terminals to read them.

The EU legal framework for the mass deployment of this new technology is the Payment Services Directive (PSD), which was officially adopted by the EU in November 2007 and should be transposed into national law by November 2009 (see our Links Dossier).

  • End 2008-beginning 2009: First commercial launch of the new mobile contactless payment system.
  • 1 Nov. 2009: Deadline for the implementation of the Payment Services Directive in EU member states. 
  • 31 Dec. 2010: Deadline for the replacement of current credit cards with SEPA-compliant cards.

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