Well so much for that — less than two years after Telefonica(s tef)’s U.K. carrier O2 launched its mobile wallet service, it’s shutting the service down. In a Thursday statement on its site, the company said O2 Wallet would cease to exist at the end of March, “to give us time to look into new and better ways to help people manage their money on the move, both in the U.K. and abroad.”
O2 Wallet allowed users to transfer sums of money (£1-£500, or $1.64-$820) to other users, to compare online prices by scanning barcodes on physical products, and to pay for things in person using a companion contactless Visa(s v) card. The app didn’t draw on mobile devices’ contactless NFC capabilities, although O2 said this feature was under development.
So what killed it? That depends on who you ask.
An O2 spokesman pointed to several developments over at the parent company – in 2013, Telefonica set up a mobile payments joint venture with Spanish banks Santander and CaixaBank while also signing up Monitise as a technology partner. O2 is also part of the Weve joint venture, alongside EE and Vodafone(s vod), which will take in mobile payments, advertising and loyalty schemes.
However, one thing strikes me as rather weird about this version of events: why kill O2 Wallet before Weve properly launches? Why not just transfer over the users, rather than starting from scratch?
According to Windsor Holden, research director over at Juniper Research, this may be because the operators aren’t quite sure yet what they’re doing in the mobile commerce space.
“The operators want to get involved in mobile commerce, but there are so many different stake-holders involved in this, and so many potential channels,” he told me on Friday. “The optimal business models have yet to be decided on, the consumers are still unconvinced about the security … but most of all the consumers are unaware of [mobile payment services].”
A key problem here, Holden suggested, is the failure of NFC to take off as a contactless payments technology. Apple(s aapl)’s refusal to incorporate NFC into its devices surely plays a part here, but even the use of NFC in contactless bank cards hasn’t become widespread outside of a couple of countries, notably Poland and Australia.
Holden also pointed to Google(s goog)’s recent adoption of host card emulation, making it easier to emulate a payment card in an NFC-capable Android phone without any carrier involvement. “The potential there is for operators to get bypassed from the value chain,” he said. “Maybe the operators are getting wind of this and are having second thoughts.”
“O2’s been heavily involved as a sole player in the mobile wallet business and, for it at this stage to say ‘Hang on, we’re canceling our service,’ that to my mind shows deep doubts in their ability to communicate the benefits of this technology and make money out of it,” he added. “People aren’t putting money on their handsets. If you’ve got a card, people would just use that — why hassle with an extra step? If you’ve got means of paying that are not fundamentally flawed, why move to alternatives?”
It’s probably too early to tell, but I think it’s safe to say we’re still waiting for someone to prove that mobile wallets are a viable mass-market proposition.