Telefonica UK’s O2 mobile network has struck the first blow in the mobile payment war, launching its O2 Wallet, a virtual wallet that exists on mobile phones to pay for goods and services not just online, but in real world physical retailers.
This means customers can use their mobile phones to buy the newspaper, buy train tickets or loan money to friends – all without having to open their leather and thumb paper copies of the Queen’s head.
The O2 Wallet means that customers can now transfer money to other mobiles, up to £500 – these ‘Money Messages’ will allow consumers to lend, borrow or repay money to friends and family.
Customers can also shop with their O2 wallet, which will incorporate a barcode and search engine function. This will also allow consumers to compare prices on goods from more than 100 online retailers. This will also include daily discounts deals via the ‘My Offers’ icon. At launch these will include discounts and money off offers from retailers such as Debenhams, Comet, Sainsbury’s Direct, and Tesco Direct.
O2 wallet will also store users debit cards and credit cards digitally, Customers can load money into their O2 Wallet account via one of their debit cards, by receiving a Money Message or with cash at more than 30,000 locations including O2 stores, PayPoint and epay retail outlets.
The wallet’s ‘transaction history’ helps consumers keep on top of their expenditure with texts alerts when the account balance changes; a 30 day payment history on the app; and a 12 month history online.
O2 says it will also incorporate NFC touch payments when it launches on more handsets – users will be able to swipe their phones similar to Oyster Card readers and NFC credit cards do currently. Orange already has this functionality through its ‘quick tap’ app.
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Guillermo Escofet, Senior Analyst at Informa Telecoms & Media also laments the omission of NFC.
"Although the service is packed full of cool capabilities, such as text-based money transfers, price comparisons and offers, it is not yet enabled for contactless payments. Unlike other players in the nascent mobile payments market, O2 hasn’t chosen to make NFC (near-field communication) the focus of its mobile wallet’s appeal… O2 is waiting until NFC handsets and payment terminals are more widely deployed to switch on that capability – but is not banking on it for the success of the wallet.
"Currently, it looks more like it’s trying to compete with the Pingit mobile money transfer service that UK bank Barclays launched in February. O2 Wallet is also an evolution of the O2 Money prepaid card launched in 2009 – which is now incorporated into the new service," he said.
O2 Wallet offers both a physical and a virtual O2 Money Account Card, based on a Visa prepaid account, which will utilise this account as any traditional card would. It is also a ‘tap and go’ card.
O2 claims that it plans add further functionality such as topping-up mobile airtime and buying train tickets.
"O2 Wallet delivers the benefits of mobile money to more UK consumers than any other product or service currently available. With O2 Wallet, it’s easier to transfer money, track expenditure and pay swiftly and securely, all using your mobile. We believe it will transform the way people manage their finances and spend money," said James Le Brocq, Managing Director at O2 Money.
O2 Wallet is compatible with the majority of smartphones and iPads. O2 says it is also compatible with feature phones, such as Money Messages, as long as they have web browsing capability on their handsets.
O2 and Visa had originally planned to launch the O2 wallet last year, but delayed the product for further testing. Like most mobile payment systems, security and standardisation has been a problem.
"We recognise that security is absolutely key. O2 Wallet has been trialled internally for months and has undergone extensive ‘stress-testing’ with security experts. In additional to PINs and passwords, all personal details and financial data are held on remote central servers rather than on the mobile device itself. This, we believe, is the safest and most secure way to deliver mobile payment services," said Le Brocq.
The British public has long been warming to the idea of mobile payments, but most of the plans on offer, including Google Wallet’s high profile delays have caused frustration.
"We welcome the launch of O2 Wallet and are delighted to be enabling the m-commerce experience with a Visa prepaid card. The new service creates an easy and efficient online payment experience for mobile device users, supporting the continued growth of m-commerce in the UK, as well as encouraging contactless payments among those users who choose to take a physical card. This announcement is another step towards an integrated future where the way we pay reflects the full potential of these new technologies," said Sandra Alzetta, Senior Vice President of Mobile at Visa Europe.
O2 says the proportion of people using mobile banking increased from 9.7% in 2010 to 20.4% in 2011. Shopping on mobile devices is set to increase by 53% in the next 12 months hitting £4.5bn.
This gives O2 a big leg up over its competitors, Vodafone, Everything Everywhere (T-Mobile and Orange) and Three, all who have yet to launch their mobile wallets.
Project Oscar, that is, Everything Everywhere (owners of T-Mobile and Orange), Vodafone and Telefonica’s (O2) joint submission to the EC for its new payment mechanism, has been stalled as the authorities run a fine toothed comb over the proposal. It is now doubtful for its promised Olympics launch.
Vodafone has also announced a worldwide joint venture with Visa to produce its Vodafone mobile wallet, which will use Visa PayWave NFC technology. Announced in February the service will initially be launched ‘in the coming financial year’. No dates have been confirmed.
The most high profile, Google Wallet, has been beset by a number of delays, the latest of which was a security hole that saw Google pull the wallet entirely. It too had been expected to be running by Olympics 2012.
Realistically, the lack of compatible devices has been a problem for the network operators and banks. More are launching, but the big shift is expected to come when Apple puts NFC chips in its next iPhone, expected to be launched mid-year. Apple is expected to launch its own mobile wallet service with it.
Eden Zoller, principal analyst at Ovum believes that O2’s offering is still the most comprehensive of its kind to be launched in Europe, despite missing NFC.
"O2 Mobile Wallet is a flagship, feature packed service that has clearly been designed to face the increasing threat of mobile payment services from OTT players such as Google Wallet and PayPal, and of course other operators. It is promising consumers an awful lot and all eyes will be on the service, which will need to deliver air-tight security and a seamless user experience across the multiple applications contained in the wallet.
"There could also be challenges going forward in terms of positioning O2 Wallet alongside the collaborative mobile payments service that O2 is planning with Vodafone and Everything Everywhere in the UK, although this venture is currently being investigated by the EC on potential anti-trust grounds."
Further Reading:
Nearly a third of Britons want mobile payments now.
CBR’s indepth feature on the emerging mobile payments industry and the delays.
Q&A with Sybase365’s Diarmiud Mallon discusses mobile killing off all cash payments.
Q&A with Fiserv’s Serge Van Dam on the timidity of UK banks in the sector.
