MasterCard gets moving on mobile payments

MasterCard announced Tuesday that its PayPass chip technology will soon be available in cell phone form, as the credit card giant rolls out a mobile contactless payment pilot across Canada.

The company will be testing near-field communications (NFC) technology on the Bell network with phones from an unnamed vendor. The closed trial will be done with MasterCard Canada and Bell Canada employees.

The phones will be hooked up to PayPass accounts, and used for small transactions at participating PayPass-enabled merchants like Tim Horton’s, McDonald’s, Loblaws, Cineplex Odeon, and various gas chains. Users tap the phone to the PayPass reader.

The application is built into the NFC devices’ secure area, according to Nagesh Devata of MasterCard Canada’s Acceptance Development and New Products space. Secure over-the-air (OTA) provisioning of payment card credentials and the security of transactions on mobile phones will be tested during the trial as well.

He thinks that the key to uptake of this technology is the market saturation that PayPass has reached so far, which includes more than 28 million MasterCard PayPass cards and devices in use at more than 109,000 merchants worldwide. Said Devata: “Before, there wasn’t that infrastructure in place, and now it is, and it’s growing.”

Info-Tech Research Group senior research analyst Mark Tauschek agreed, saying, “PayPass already has a lot of presence in Canada.”

This is one of the advantages, Devata said, that MasterCard has over other emerging mobile device contactless payment options. One of these is Visa’s offering, a Visa PayWave-enabled cellphone also using the NSC chip. A pilot program by Visa and RBC was announced last November. According to Visa Canada’s Mike Bradley, Head of Regional Products, the trial hasn’t started yet (although there are ongoing ones in South Korea and San Francisco), but is on track in Canada for sometime late this year. The carrier that will be partnering for this project has not been announced as of yet.

MasterCard’s partner Bell Canada is another advantage, Devata claims, as their participation sets up an “end-to-end” experience for the customer.

But getting the actual devices could be a challenge, said Tauschek. “There aren’t that many RFID-enabled smart cards yet, and it only works on NSC-enabled phones, and there aren’t many of them either yet, with a couple from Nokia, Samsung, and LG,” he said.

Bradley said that this technology is not exactly going to appear en masse over the next year. “Or even the next few years,” he said.

Interest in it isn’t raging yet, according to IDC Canada’s vice-president of communications and segments Tony Olvet. He cited a 2007 survey of 541 15-to-29-year-olds, where 8.8 per cent of them said they would be interested in contactless payments via cell phone. He said that, once visibility of these technologies increases with the PayPass and PayWave trials and rollout, interest will most likely rise.

User concerns that might rear their heads, Olvet said, include the possibility of decreased battery life, additional fees for the service, and the need to upgrade to a new phone to use the technology (and whether any incentives might be offered to do so).

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