UK Telco O2 Prepares For Bigger Push into Payments Business

Telefónica O2 UK plans to launch a number of mobile-wallet services in the second half of this year, as it moves in on banks to enable consumers to shop and pay with their mobile phones.

Among the wallet services O2 plans to offer will be NFC-based payment that could include one or more payment applications the telco issues itself. But O2, one of the United Kingdom’s largest mobile operators with more than 20 million subscribers, plans a number of other services, including mobile browsing and product search, mobile-money transfers between subscribers and bill payments.

As part of its ambition to play a larger role in the financial-services business, O2 will apply for a license that would enable it to become a payment service provider, a spokesman confirmed to NFC Times. In particular, the telco will apply for an e-money license with the UK Financial Services Authority, said James Le Brocq, managing director of financial services at O2, according to the spokesman and reports this week. This would enable O2 to issue prepaid, stored-value, applications.

The telco could offer prepaid accounts, for example, that consumers could use to pay merchants by tapping their NFC phones at the physical point of sale, or to conduct P2P transfers over the mobile network.

O2 last month disclosed plans to commercially launch NFC during the second half of 2011. That planned launch will follow an NFC rollout that rival telco Everything Everywhere and Barclays bank’s credit card unit, Barclaycard, plan to start by early summer. Everything Everywhere is a joint venture of Orange UK and T-Mobile UK.

O2 is perhaps the first mobile operator that has disclosed plans to become either an e-money institution or related payment institution under the European Union’s E-Money Directive or more-recent Payment Services Directive, respectively.

And the plans to take out the e-money license is more evidence that some telcos are intent on entering the turf of banks by offering payment services in Europe and beyond. The biggest example so far–outside of the contactless-mobile payment service launched more than five years ago by Japan's NTT DoCoMo–is the joint venture formed recently by U.S. mobile carriers AT&T, Verizon and T-Mobile USA. The U.S. telcos plan to launch their own payment brand, Isis, in the United States, using NFC phones.

O2 is seeking to build its financial services unit, O2 Money, in the United Kingdom and is recruiting more than a dozen new staffers. To date, the unit has launched two successful prepaid payment cards, in 2009, with a banking partner.

Le Brocq in reports this week said O2 plans to “relaunch” one or both of the prepaid cards this year as contactless cards. Subscribers also could reportedly use the prepaid accounts to make purchases from their phones or do P2P transfers.

Le Brocq, a former UK banker, joined O2 as head of the financial services unit last summer. He has said he believes contactless payment will grow in scale in the United Kingdom by the time of the Summer Olympics, to be held in London next year.

O2 will continue to work with banks to some extent, however. An O2 spokeswoman last month told NFC Times that the telco was in the final stages of the tendering process for a new bank-issuing partner for O2 Money to replace NatWest bank, which confirmed to NFC Times last summer it planned to drop out of the partnership. The telco is considering launching a co-branded credit card, for which it would need a banking partner, since the E-Money Directive does not cover credit issuance.

O2 UK and its parent, Spain-based Telefónica Group, appear to be interested in grabbing a much larger piece of payment-transaction revenue from banks, using co-branded cards or related applications on NFC phones. A Telefónica representative spelled out the strategy last spring in disclosing that the group had an agreement with Visa Europe. O2 UK has not disclosed its business model for O2 Money.

In that article, NFC Times also was the first to report the planned partnership between Telefónica and MasterCard to offer payment services in Latin America. Last week, the two parties announced their joint venture to offer mobile financial services to nearly 90 million Telefónica customers in 12 Latin American countries, including P2P money transfers, bill payment, mobile airtime reload and retail purchases, though not apparently involving NFC phones–at least not at first.

The European Union over the past few years has been seeking to level the payments playing field in Europe to increase competition and remove more cash from the system. Besides the Payment Services Directive, which creates a new class of nonbank payment service providers, called payment institutions, it revamped the E-Money Directive to try to promote use of electronic money.

The latter directive enables users to store funds on a “device,” such as a card or phone, or through the Internet, to do payment transactions, according to the European Union.

HEADLINE NEWS

Exclusive: What Tokenization Fees from Visa Might Look Like for Issuers

NFC TIMES Exclusive – While Visa has said it is waiving tokenization fees for issuers that join its commercial tokenization hub, VDEP, and use its Visa Token Service, some observers believe the network will charge the fees sooner or later.

Sony Launches Support for FeliCa Technology on HCE Devices, Though Few Handsets Available Yet

NFC TIMES Exclusive – Japan’s Sony Corp. is supporting host card emulation with its proprietary FeliCa contactless technology, which could enable service providers to avoid the need for secure elements in rolling out FeliCa-based applications on NFC phones.

Samsung Semiconductor Faces Challenges in Rolling Out Contactless-Payments Service for Wearables

NFC TIMES Exclusive Insight – Samsung Semiconductor believes there is room for yet another closed-loop payments service, one that enables consumers to pay with contactless wearables devices that carry its dual-interface chips.

Android Pay Launches in Belgium, While State-Owned Belfius Bank Takes Two-Staged Approach to Own HCE Rollout

NFC TIMES Exclusive – Two of the largest banks in Belgium have launched, or are planning to launch, HCE-based mobile payments but chose different approaches: BNP Paribas Fortis decided to first launch with Android Pay, while state-owned Belfius Bank plans to enable the service within its mobile-banking app.

Serbia's KomBank Seeks to Increase Mobile Banking Users with HCE Service

NFC TIMES Exclusive – Komercijalna banka Beograd, known as KomBank, one of Serbia’s largest banks, incorporated a host-card-emulation-based mobile payment service into its mobile banking app to increase awareness and use of the app, Slobodan Lukić, the bank's deputy director of the payment cards division told NFC Times.

Apple Pay Launches in Ireland and Gears Up in Italy; but Only One Major Bank On Board So Far in Each Country

NFC Times Exclusive Insight – Apple has expanded its mobile payments service to another small market, with its launch Tuesday in Ireland, but is preparing to launch in a much larger market, Italy.

Taiwan’s Largest Transit Ticketing Service Plans Bluetooth-Enabled Mobile Ticketing, Though Needs Regulatory Approval

NFC TIMES Exclusive – Taiwan’s EasyCard Corp., the operator of the country’s largest closed-loop transit and retail payments service, is working with a provider of Bluetooth-enabled mobile payments technology to offer customers an NFC-like experience to pay for rides and purchases in stores.

Australian Domestic Debit Network Nears Launch of Token Service Provider to Compete with Visa and Mastercard

NFC TIMES Exclusive – Australia’s largest domestic debit network, eftpos, plans to launch its overdue tokenization service commercially by the second quarter, likely serving at least one of the country’s big four banks for its HCE mobile wallet and one or more of the “Pays” wallets, such as Android Pay and possibly Apple Pay, NFC Times has learned.

Certification Issues and Legal Battle Delay Launch of Kerv Ring; Wearables Maker Says Ring Ready

NFC TIMES Exclusive – After two years addressing design, certification and legal issues, UK-based start-up Kerv Wearables says it’s finally ready to launch its NFC-enabled ring.

Exclusive: Why are Some of the Largest U.S. Merchants Balking at Supporting NFC?

NFC TIMES Exclusive – While the base of contactless point-of-sale terminals in the U.S. has grown substantially over the past two and a half years, some of the country’s largest merchants continue to resist the idea of accepting such NFC wallets as Apple Pay and Android Pay.

Exclusive: Taiwanese Banks to Pay Apple Cut of Transaction Fees on Par with U.S.

NFC TIMES Exclusive – TAIPEI, Taiwan: Apple will collect a cut of transaction fees from Taiwanese banks on credit card transactions that is around the same level as the tech giant takes from U.S. credit card issuers, when Apple Pay launches in Taiwan, expected later this month, NFC Times has learned.

Analysis: Why QR Codes are Challenging NFC to Enable Mobile Payments

NFC TIMES Exclusive – Despite the resurgence in demand for NFC technology with the launch of Apple Pay in 2014, followed by other NFC-enabled “Pays” wallets and the separate rollout of HCE technology by Google, use of QR codes for mobile payments continues to grow in popularity globally.