Four of the world’s largest credit card companies have formed a consortium to jointly develop secure mobile payment standards that they believe will help make m-commerce a reality within two years.
Analysts viewed the formation of the Mobile Payments Forum, as the latest gambit in a high-stakes battle between credit card companies and mobile carriers for control of the m-commerce marketplace and cell phone customers.
American Express Co. in New York, MasterCard International Inc., Visa International Inc. and JCB Co. in Japan on Nov. 6 decided to form the Forum to develop a cohesive approach to issues such as security and customer authentication, rather than awaiting “fragmented” efforts by the card issuers and mobile carriers that have marked the past two years, according to Joe Chouinard, vice-president of new e-commerce channels at Purchase, N.Y.-based MasterCard.
The Mobile Payments Forum, based in Wakefield, Mass., plans to develop a set of standard deliverables to serve as building blocks for security and cardholder verification for use by banks, phone manufacturers and mobile carriers, according to Simon Pugh, vice-president, infrastructure and standards, at Foster City, Calif.-based Visa.
The standards could then lead to development of a system allowing consumers to use mobile phones to execute a transaction at a store, with authorization and payment information flowing securely through the cell phone network to wired networks operated by the four Forum partners and then to member banks.
Pugh said that the Forum intends to invite mobile carriers around the world to join, but he declined to say whether any had signed on yet.
Ritch Blasi, a spokesman for AT&T Wireless Services Inc. in Redmond, Wash., said that “it still needs to be determined” whether the banks and card companies or carriers will be in charge of payments. Cell carriers such as AT&T Wireless already operate sophisticated billing and customer relationship management systems that can be configured to handle mobile payments, Blasi said.
Cell carriers also have a financial inceptive to consider keeping control of m-commerce in-house, he said. “Some card companies gets 6 per cent of every transaction. What if we could get a quarter percent of that?”
Avivah Litan, an analyst at Gartner Group Inc. in Stamford, Conn., said she believes the four credit card rivals formed the Forum in part to develop a united front against cell carriers, who she said want to control the mobile payment process.
“I’ve talked to one of the major mobile carriers in Europe, and it is very interested in developing its own payment system,” she said, adding that a number of carriers are interested in developing their own system for “micropayments” of US$100 or less, with big-ticket purchases handed off to the card companies.
Litan said the Mobile Payments Forum faces a more basic problem than developing standards: poor market penetration. Despite hype about m-commerce during the past two years, there are only 200,000 or so m-commerce users from among 123 million U.S. cell phone customers.
Pugh agreed that Europe – which uses a single cell phone standard and where carriers have been able to sell services beyond basic voice service – offers a better opportunity for m-commerce than the United States. Since European phones already use built-in smart cards to authenticate access to networks, Pugh and Simon agreed it would be easier and quicker to add payment service in Europe.
They emphasized that standards developed by the Forum would allow carriers and banks flexibility in choosing security and authentication services, with a key goal being the need to work on existing phones. “We’re not going to require anyone to buy a new phone” to use payment services, Chouinard said.