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Summary:

MasterCard and Deutsche Telekom announced a partnership today that will bring NFC contactless payments to DT’s 93 million mobile customers in Europe. That puts more momentum behind NFC payments and potentially sets up 2013 as a big break-out year for contactless payments.

MASTERCARD PAYPASS WALLET SERVICES

Mobile payments made through near field communications technology are still waiting to become a mainstream tool for consumers, but momentum keeps building for NFC, which may be looking at a break-out moment next year. Yes, that’s a line that’s been repeated in recent years, but the pieces keep falling into place. The latest news comes from MasterCard and Deutsche Telekom, which announced a partnership today that will bring NFC contactless payments to DT’s 93 million mobile customers in Europe.

The mobile payments system will incorporate a SIM-based chip and will work with a mobile wallet. It will roll out first in Poland while in Germany, DT and MasterCard will start with a trial using NFC stickers and cards this year before a launch in the first half of next year. Eventually, the service will spread out across DT’s European footprint. The mobile wallet service will also be open to other banks and partners, who will be able to access the wallet.

DT is helping take the lead on NFC payments by “becoming a credit card issuer for MasterCard” and “acting as a sales partner for NFC enabled Point of Sale terminals,” said Angel Dobardziev and Eden Zoller, analysts at Ovum in a research note. The carrier is also providing NFC tags for consumers who don’t have NFC-enabled hardware. DT hopes to make money through a share of transactions as well as rental fees. “The drive behind Deutsche Telekom’s mobile payments strategy is to create a comprehensive framework that will address many of the challenges in what is currently an incomplete ecosystem,” the analysts said.

Earlier this year, Vodafone partnered with Visa  in a bid to bring Vodafone-branded NFC payments to at least five European countries over the next year. The prepaid service would enable Vodafone to take a cut of transactions fees when users made purchases. Unlike the DT deal, Visa would be the issuer, so Vodafone would not need to get an e-money license. Telefonica UK launched an O2 Wallet in April and said it will be enabled for NFC later this year. And last week, French carrier Orange announced the launch of a SIM-based NFC payment system across France.

The carrier initiatives suggest that NFC may be finally ready to realize its potential. The operators are getting motivated by the idea that they can make some money through NFC transactions.

But the services still face a lot of the same challenges that have existed for a while. Merchants in many cases are still slow to adopt NFC-enabled terminals, which are needed to complete payments. Carrier-led payment initiatives will also face competition from other payment services, which could ultimately lead to confusion early on as consumers try to understand which system is right for them. Consumers will also need to be pursuaded that paying with a tap of the phone makes more sense than using cash or credit, which are still very easy to use. A lot will depend on the additional services these wallets provide such as deals and offers.

  1. NFC is the logical next step as skimmers take more and more unencrypted credit card info. NFC has far fewer (albeit different) security issues.

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