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

Deutsche Telekom Casts Doubt on Future of NFC SIMs, as It Quietly Closes Wallet in Germany

NFC Times Exclusive Insight – Deutsche Telekom, one of the most important backers of SIM-based NFC through the years, now questions whether the technology could ever become a standard, as it quietly withdrew its little-used SIM-based NFC mobile wallet from the German market last week after more than two years.

Top 10 Misses: Wallet Take-Up, Bank Recruitment, Payments Wearables Rollouts Led List of Disappointments in Past Year

Jan 5 2017

NFC Times Exclusive – The rollout of digital payments, including services using NFC technology, are undoubtedly making progress, especially compared with just a few years ago.

More Chinese Smartphone Makers Enable NFC Transit Ticketing

NFC Times Exclusive – More Chinese OEMs have launched support for NFC transit ticketing, following earlier launches by Xiaomi and Huawei, NFC Times has learned, with at least five more device makers enabling service in one to two Chinese cities, or planning to do so.

Moscow Commuter Line Supports Open-Loop Fare Collection; Promotes Payments by Apple Pay

NFC Times Exclusive Insight - All stations on Moscow’s new commuter rail line, the Moscow Central Circle, or MCC, and some Moscow Metro stations linked with the new line, accept open-loop payments, including with Apple Pay, the Russian transit authority confirmed to NFC Times, adding that the authority is looking forward to accepting a range of other NFC-enabled wallets, including Samsung Pay.

Samsung Takes Two-Speed Approach to Launches of Samsung Pay

NFC Times Exclusive – In line with its October promise, Samsung has launched its mobile payments service in two additional markets, Malaysia and Thailand, bringing the number of markets to 12, counting Puerto Rico. Still, in some of the markets where Samsung Pay has launched, the device maker adopted a different rollout strategy, which it calls “early access.”

Huawei Enables More Cities for Transit Ticketing, as OEM Pay Providers Begin to Expand NFC Fare Collection Services

Dec 22 2016

NFC Times Exclusive Insight – Huawei and NXP Semiconductors have announced that the Chinese smartphone maker has added three cities to its transit-ticketing service from its Huawei Pay wallet, as Chinese OEMs continue to lead in enabling NFC fare collection from their devices.

NFC Secure Element Shipments to Miss Vendor Forecasts; Trade Group Eurosmart Declines to Release Details

NFC Times Exclusive – NFC secure element shipments for 2016 will be lower than earlier forecasts by card and chip vendor trade association Eurosmart, although the group is not saying by how much.

How It Works: Android Pay Launches in Japan Without HCE, Backed by One Closed-Loop Payments Service

NFC Times Exclusive Insight – Google is using an embedded secure element to enable users to tap to pay in its latest Android Pay market, Japan–the first time since launching Android Pay that the search giant is not using host card emulation to enable payments.

Taiwanese Telco Launches Wallet Supporting Both NFC and QR Codes, with HCE Coming

NFC Times Exclusive Insight – Far EasTone, one of Taiwan’s three major telcos, officially launched its mobile wallet Tuesday, offering a range of services and technologies as it prepares to compete with the coming of the “Pays” wallets, including Apple Pay, which is expected to launch in Taiwan in the first quarter.

Wirecard Sees Insuring In-Store Purchases as ‘Innovative’ Feature for Boon Payments App, but Will It Help App Stand Out in the Crowd?

Dec 19 2016

NFC Times Exclusive Insight – Germany-based white-label payments software and prepaid payments services provider Wirecard hopes to make its mobile payments app boon more attractive to German users by giving them the option of insuring their in-store purchases.

Apple Pay Chief: Ensuring Consistent User Experience Prompted Apple to Lock NFC Chip, Shun QR Codes

NFC Times Exclusive Insight – In case anyone is still wondering, Apple didn’t launch Apple Pay for the transaction fees it earns from banks, even if the iPhone maker still doesn’t publicly acknowledge it charges the fees to begin with.

Sony Pay? Sony Mobile Unlikely to Join ‘OEM Pay’ Club; Looking Instead to Local Deals to Enable Mobile Payments

NFC Times Exclusive – Sony Mobile has no plans to introduce its own payments service, choosing instead to work with local mobile payments service providers market by market, NFC Times has learned.