Mobile payments – the new technology coming to the UK

The Guardian looks at the Visa, Telefónica (owner of 02 in the UK) near field identification (NFID trial in Stiges Spain.

Powered by article titled “Mobile payments – the new technology coming to the UK” was written by Miles Brignall, for The Guardian on Friday 1st October 2010 23.01 UTC

How would you feel about abandoning your bank cards and using your mobile phone to pay for your morning coffee, your daily Guardian – or even a haircut?

You could bypass the queues and use your handset to pay by simply placing it against the cash till reader. You’ll usually be in and out of the store in less than a minute, and when you get to the station or bus stop, you will use your mobile to pay for the journey, too.

This could be reality in Britain in less than two years if a Visa trial currently taking place in Spain proves a hit. The payments company is convinced that paying by mobile – allowing consumers to ditch plastic in favour of their handset – is the next big thing.

Guardian Money travelled to the Spanish beachside town of Sitges, 40 minutes from Barcelona, a fortnight ago to see the trial in action – and can confirm the technology works.

The Sitges pilot will interest anyone who won’t leave home without their mobile. It also gives the clearest indication yet of how the technology, and issues such as security and liability in the event of a theft, work in practice.

To set up the trial – the biggest of several in Europe – Visa teamed up with Spanish savings bank La Caixa and mobile phone company Telefónica, owner of 02 in the UK.

Around 1,500 local residents were chosen and Visa persuaded 500 retailers, from tobacconists to hairdressers, to accept the mobile payments, giving them adapted sales terminals.

Every participant was given an adapted Samsung handset that, to the untrained eye, looks exactly like any other smartphone. Embedded in the phone is a chip containing the user’s bank card details – similar to the chip in a conventional credit or debit card. The phone also has a local transmitter to allow it to communicate with the retailer’s sales terminal.

To make a purchase, the salesperson keys in the amount to be debited and, if it is less than €20 (£17), the buyer places their phone next to the terminal. The bank card details are transmitted to the terminal to make the payment and if successful, a tick appears on the phone’s screen. For items costing more than €20, the process is the same except that a pin is required – input in the normal way. The amount is then debited from your account as though you had made a conventional card purchase.

When we visited the town, mobile shoppers were thin on the ground. We were given a phone and found that using it wasn’t that much quicker than using a conventional card or cash. However, we were assured that once retailers and shoppers got used to it, the process would be faster.

Visa says early feedback on the six-month trial, which ends in November, has been positive, with 90% of participants saying they will continue to use mobile payments. Over half the payments have been made to the supermarket in the town while 14% have been in restaurants. The rest have been evenly spread among participating retailers. The average spend has been €31 – above the €20 pin threshold.

Visa says that, so far, not one phone has been stolen, but emphasised that the liability for unauthorised use following a theft remains with the bank – a key concern for many potential users.

Telefónica’s Pablo Montesano, who was on hand to show journalists the technology, says mobile phone users, on average, report their handset stolen within 13 minutes of its loss – it takes much longer for bank card users to realise their purse or wallet has gone.

He says users of a card-embedded phone would be able to cancel their phone and cards at the same time. He suggested most smartphone users already have their handset pin-enabled, which would stop a phone thief making lots of purchases. The system is designed to ask for a pin every few transactions, to prevent a thief making small purchases in quick succession.

If “payment by mobile” technology is widely adopted, it would pose an interesting problem for phone companies in the event of a theft. Currently in the UK, if your card is stolen and used before you report it missing, the most you can lose is £50. However, mobile phone contracts currently hold the owner liable for all calls made until the theft is reported.

So will it come to Britain? It’s clear Visa sees mobile payments as an important part of the future. It says worldwide, 1,000 new mobile phone users are signed up to networks every minute of every day, and mobile users are now close to numbering 5 billion.

Visa accepts that to be successful, it will have to offer users a full choice of handsets. Apple is understood to be developing an iPhone that will support mobile payments, and other manufacturers are sure to follow.

Eventually, Visa says, bank customers will be able to have several bank cards and a travelcard all embedded in their handset.

For the tiny percentage of the population who still don’t have a mobile, cards are expected to be around for a while longer. However, it looks like mobile addicts visiting the London Olympics in 2012 could leave their wallets behind and pay for everything with their handset alone. You have been warned. © Guardian News & Media Limited 2010

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