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

Taiwan Regulators Express Doubts about Use of BLE for Top Transit E-Purse; Apple Rejects Purse for Wallet

NFC TIMES Exclusive – TAIPEI, Taiwan: EasyCard Corp., which runs the largest closed-loop transit and retail payments service in Taiwan, is seeking to become the first major transit fare-collection system globally to roll out Bluetooth-based mobile ticketing. But Taiwan’s strict financial regulator still has doubts about the security of the technology.

MediaTek Using NFC Technology from STMicroelectronics, Though Extent of Deal Not Disclosed

NFC TIMES Exclusive Insight ­– In what may be a response to the proposed tie-up between Qualcomm and NXP Semiconductors, STMicroelectronics has announced that it is “cooperating” with Taiwan-based MediaTek, the No. 2 supplier of processor chips for smartphones, to integrate its NFC technology into MediaTek reference designs.

Singapore Latest Country Pushing National QR Code Specification

NFC TIMES Exclusive Insight – Singapore is the latest country developing a national specification for QR code-based payments, seeking to reduce fragmentation of various QR code-based schemes.

Another Wearables Maker Enters ‘Pays’ Market with NFC-Enabled Device

NFC TIMES Exclusive Insight – U.S.-based device maker Garmin is the latest company to introduce an NFC-based mobile payments service in a smartwatch, today unveiling its “Garmin Pay” service for its forthcoming vívoactive 3 watch.

Struggling Fitness Band Maker Fitbit Announces Plans for NFC Payments Service with New Smartwatch

NFC TIMES Exclusive Insight – Struggling U.S.-based fitness band maker Fitbit announced today it will introduce an NFC-based payments service, “Fitbit Pay,” after it launches its first-ever smartwatch, the Ionic, promising to enable major issuers in more than 10 markets globally to offer contactless payments supporting the Visa, Mastercard and American Express brands.

Visa Ready Program May Not be Quite Ready for Tokenization Partners

Sep 15 2017

NFC TIMES Exclusive – The Visa Ready program, Visa’s effort to get new digital payments services to the market sooner by giving vendors a fast-track route for their products and technologies to be certified, may not be quite ready–at least as far as Visa’s tokenization partner program is concerned

NFC Transit Ticketing Rolled Out–Likely with HCE–on Beijing Subway System Following Large Pilot

NFC TIMES Exclusive Insight – The Beijing Subway and Beijing’s public transport payments company Yikatong Monday launched what appears to be an HCE-enabled mobile payments system on the entire metro system after piloting the service earlier this summer on one line.

Wal-Mart Starts to Expand ‘Scan & Go’ App; Experience Does Not Seek to Mimic Amazon Go Concept

NFC TIMES Exclusive Insight – Wal-Mart Stores has introduced a “Scan & Go” mobile-shopping and payments app for a limited number of its regular stores in five U.S. states, and said it plans to roll out the service more widely. It follows the launch last year of a very similar app for its warehouse store chain, Sam’s Club, as NFC Times has reported.

Alipay to Expand Acceptance of Mobile Wallet in Russia

NFC TIMES Exclusive Insight – Alipay is expanding acceptance in another overseas market, Russia, seeking to capture business from Chinese tourists who travel to the country.

Parties Could Settle Lawsuits Stemming from Dispute over Apple Value-Added Services Software

NFC TIMES Exclusive –  Software that enables consumers to tap to pay and earn or redeem rewards and other value-added services with Apple Pay is at the center of a legal dispute between Israel-based NFC and contactless reader vendor On Track Innovations and USA Technologies, a provider of payment technology for vending machines and other self-service retail locations.

Apple Discloses Plans for Four More Apple Pay Markets; Confirms Most Transactions Outside of U.S.

NFC TIMES Exclusive Insight – Apple Tuesday disclosed plans to launch its mobile payments service in four more small markets, including three countries in the Nordics, with the tech giant seeing higher usage of Apple Pay outside of the U.S., where NFC-enabled POS terminals are still not widely available.

Major Networks Seek to Capture–and Protect–Transactions by Introducing Global QR Code Specifications

NFC TIMES Exclusive Insight – Major payments networks, including Visa, Mastercard and China UnionPay, have released global specifications for QR code-based payments through their EMVCo joint venture because they see an opportunity to capture more transactions–and also a risk of losing transactions if they don’t support the technology globally.