Steve Dinneen
VISA will roll out a network that will allow its customers to pay for goods using their mobile phones in time for the 2012 Olympics. The world’s biggest payment processing firm hopes the new technology will allow it to corner the small transactions market, which is still dominated by cash purchases.
The firm believes the technology has the potential to provide a lucrative new revenue stream by attracting millions of new customers. Visa has 1.7bn users worldwide but this is dwarfed by the 4.7bn people who use mobile phones. By 2015, 3.5bn people will be regular mobile internet users.
Visa is expected to have a fully developed network available by 2015, but it says it will use the London Olympics as a showcase for the new technology.
Firms including Caffe Nero, Pret A Manger and Burger King,which rely heavily on small payments of £5 and under, have confirmed they will take part, with payment points already visible in some stores. However, the firm acknowledges that getting major supermarkets on board will be vital for the long-term success of the scheme. The technology allows users to link up to six accounts – including banks, oyster cards and loyalty schemes – to their mobile phone. This can then be used at point of sale, allowing users to bypass their cards altogether.
It can also facilitate bank transfers, peer-to-peer transfers, mobile web payments and let users keep track of their account balance and expenditure. This places the technology firmly in competition with online payment firms such as PayPal and Google Checkout and could open up a fierce battle for control of the mobile payment market. Users can also opt to use the service pay-as-you-go, in much the same way as a mobile phone, topping up and spending a fixed amount. Payments of under £15 can be swiped through in the same way as an Oyster card without the need for a pin, meaning transactions take seconds to process.
Anything more requires a pin which is typed into the phone. It is powered by a special chip, embedded inside the phone, with a built-in antenna to transmit data to merchants. As well as adding security – the chip and the phone are linked, meaning it cannot be removed by fraudsters – this means payments can be made even when the phone is out of battery or reception.
This is not the first time this type of payment scheme has been mooted – Visa failed to attract much interest several years ago – but Mary Carol Harris, head of mobile at Visa Europe, believes the market has developed sufficiently to make it viable. She said: “The roll out of 3G and 4G networks will create the reliability this needs. There has been a rapid shift in demand for mobile payments. People are not going to just throw away plastic but this adds an option for them.”
Sandra Alzetta, head of Innovation at Visa Europe, added: “You’re not going to wake up tomorrow morning and find millions of mobile phones supporting this – but it will happen. This is a great opportunity to grow the Visa business.”
Visa has almost completed a trial of the contactless payment scheme in the Spanish town of Sitges. City A.M. was invited over to see what all the fuss was about. Visa has supplied 500 retailers with payment readers and let 1,500 locals loose with it, linking it to their bank accounts. The firm claims to have had an approval rating of 77 per cent. Crucially, during the test-scheme around a third of the payments were less than £5 – the key bracket for Visa.
The first thing I noticed was the handset itself. It is a mid-range Samsung, technically a smartphone but certainly nothing for an iPhone or BlackBerry user to get excited about.
I used the pay-as-you-go service, with €50 pre-loaded onto the phone. Using the service was remarkably easy. The retailer keyed in the amount and, after briefly placing the mobile on the reader and tapping in my pin (as the transaction was over €20), we were finished. If I can get it inside my BlackBerry, I’ll be joining the ranks too.
