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

CaixaBank First in Europe to Announce Support for Samsung Pay, but Won’t Launch with MST Technology

Feb 6 2016

NFC Times Exclusive Insight – CaixaBank is the first in Europe to announce it has signed up to participate in Samsung Pay, leading an expansion of the mobile payments service to Spain.

OTI Announces Partnership to Supply Readers, Though Share Price Trades Near Historic Lows

Jan 26 2016

NFC Times Exclusive Insight – Israel-based On Track Innovations has announced a partnership with an undisclosed global provider of magnetic card readers whose products are used in financial self-service terminals, such as ATMs, but the deal has not yet had a substantial impact on OTI's share price, which is trading near historic lows.

Rabobank to Use NFC SIMs from KPN for Rabo Wallet, While Competitors Promote Their Own Wallets

Jan 21 2016

NFC Times Exclusive Insight – Rabobank, one of the big three banks in the Netherlands, announced it will make debit cards for its Rabo Wallet available on NFC SIM cards issued by No. 1 Dutch telco KPN starting in the spring, after having anchored the wallet to embedded chips in Samsung flagship phones starting last year.

Gemalto Continues to Promote Cloud-Based Payments Offer, Though No Commercial Projects Launched Yet

Jan 20 2016

NFC Times Exclusive Insight – France-based Gemalto, which has been heavily invested in trusted service management and NFC SIM cards in the past, is continuing to push cloud-based payments, announcing certification by MasterCard for its full host card emulation offer–with the help of technology from Moroccan-based payments software company HPS.

After SIM-Based NFC Fails, Turkish Banks Try Out HCE as They Seek to Advance Mobile Payments

NFC Times Exclusive – Turkey was among the first countries where NFC got a tryout commercially, led by the largest telco, Turkcell, which launched service in 2011 using, of course, its SIM cards as secure elements.

Case Study: ING Bank Customers Opt for No PIN and Very Low-Value Purchases with New HCE App

Jan 19 2016

NFC Times Exclusive – More than two-thirds of users of the ING Bank’s HCE-based mobile payments service in the Netherlands opt for no PIN entry and prefer to tap their phones for very low-value amounts, according to bank, which launched one of the first HCE mobile payments services in Western Europe in late November. 

Year Ahead for NFC: More HCE Rollouts, Expansion of the ‘Pays,’ Tokenization Power Plays Evolve, Fragmentation Continues

Jan 13 2016

NFC Times Exclusive Fifth Annual Year Ahead for NFC Feature: 2016 will see more commercial launches of mobile payments with host card emulation, as banks seek to enable their own apps to do payment, while in some cases competing with the ‘Pays.’

Top 10 Misses for NFC in 2015: SIM-Based NFC Falls Further; Apple Pay Expansion Comes Up Short

Jan 13 2016

NFC Times Exclusive – While 2015 was arguably the year that saw the most important rollouts yet of NFC technology, led by Apple Pay, 2015, like past years, was mar

No. 3 Taiwanese Issuer Seeks to Outflank Larger Rivals with Own HCE Service; Picks Visa Over MasterCard to Sponsor Launch

Dec 29 2015

NFC Times Exclusive Insight – TAIPEI, Taiwan: Taiwan’s third largest credit card issuer, E.Sun Commercial Bank, today announced the launch of mobile payments with host card emulation, the first bank on the island nation to launch HCE commercially. NFC Times had reported the planned launch Dec. 3.

Apple and Samsung Announce Plans for Mobile Payments Launches in China

NFC Times Exclusive Insight – Apple has announced overdue plans to launch Apple Pay in China early next year, touting a list of 15 major banks that will enable customers to load their credit and debit cards in its Wallet app, including China’s big four state-owned banks. Meanwhile, Samsung followed with an announcement of its planned launch of Samsung Pay in China, which was also expected.

Google Announces Plans to Expand Android Pay to Australia, as Apple Regroups in Country

NFC Times Exclusive Insight – Google has announced it will expand Android Pay in the contactless payments hotspot of Australia during the first half of 2016 with at least two of the big four banks among other issuers planning to participate, while Apple had to make do with only one issuer, American Express, for its Apple Pay launch in the country.

China UnionPay, Banks Expand HCE-Based Mobile Payments in Advance of Apple Pay Launch

NFC Times Exclusive Insight – Even as major Chinese banks and payment network China UnionPay prepare to participate in what is expected to be the launch of Apple Pay in China in the first quarter, they are expanding their Android-based mobile-payments services using host card emulation.