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Europe Insight

Alcatel-Lucent Pushes Mobile Wallets

Posted by: Jennifer L. Schenker on March 26, 2010

A dozen years have passed since the first person famously bought a Coke from a specially adapted vending
machine in Scandinavia using a mobile phone. But in the intervening time, the anticipated mass market adoption
of such “mobile wallet” services hasn’t happened. Alcatel-Lucent hopes to change that, announcing Mar. 23 that
it will run a new global hosting service for mobile operators wishing to launch person-to-person payment,
remote ticketing, and mobile commerce services.

Analysts say the new service, thought to be the first in this category to be launched by a telecom equipment
maker, could be a unifying factor in what today is a highly fragmented mobile payments market. But there’s still
a wide gap between vendor hype and the amount of time analysts say it will take for mass uptake of such
services.

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Alcatel-Lucent’s service is based on a new kind of short-range radio called Near Field Communication, or NFC,
that promises to revolutionize everything from payment systems to home networking. In the next few years
NFC chips are expected to find their way into cell phones, PCs, consumer electronics, and industrial equipment,
ushering in the age of the “Internet of Things,” when real world objects get connected to the Internet and can
even talk to each other.

The technology makes it possible to pay for goods and services, such as theater tickets, mass transit, or gas for
the car, simply by waving a contactless card or mobile phone equipped with NFC in front of a cash register,
turnstile, or even a poster. Eventually most mobile phones will have built-in NFC contactless card and readers.

The challenge is to introduce the technology gradually, before all of the new hardware is in place. Alcatel-
Lucent is attempting to do this by teaming with payments systems specialist Clear2Pay and PingPing, an
independent brand created by Belgacom for mobile and micro payments. The Paris-based equipment maker is
also leveraging NFC applications technology developed in-house called touchatag, which offers mobile services
like interactive advertising, loyalty programs, and coupons. Combined into one service, all of these technologies
will enable mobile operators to launch mobile wallet services based on contactless stickers.

Stickers equipped with NFC chips can be attached to contactless cards, existing mobile phones, and some
existing point-of-sale terminals, solving the problem of waiting for consumers and retailers to all upgrade to
NFC-equipped devices.

Accor Services, which provides paper meal vouchers to 32 million employees in some 40 countries, is the first
company to trial the PingPing payment system in combination with touchatag contactless applications. Alcatel-
Lucent employees in Belgium have been using a contactless card with a touchatag as a replacement for paper
meal vouchers since June 2008.

Hundreds of other NFC trials have gone on around the world. As far back as 2007 commuters in Vienna were
holding their mobile phones up to "touch points" on train platforms and receiving tickets via text messages. In
the London underground, some subway riders tested "smart posters" that automatically connected their mobile
phones to a Web site with instructions on how best to reach their destinations. And in New York, some
consumers got a taste of what it's like to pay for everything from fast food to furniture with a wave of their
handsets, instead of using plastic credit cards. At the time, mass-market uptake of NFC mobile applications was
considered imminent.

Two years later the message is largely unchanged. "The time is now," says Anthony Belpaire, general manager
of touchatag services at Alcatel-Lucent Ventures in Antwerp. "We believe that in a short period of time there
will be massive adoption by consumers," he says.

But analysts at technology consultancy Gartner say it's likely to be 2015 before most consumers use their mobile
phones to manage the kind of payments, coupons, loyalty points, and gift voucher transactions that Alcatel-
Lucent wants to help mobile operators provide. Uptake is happening fastest in the developing world, where
some 2.5 million adults have no access to banking but a growing number have mobile phones. It will take longer
in the developed world, where consumers must change existing habits.

It doesn't help that major players have decided to take different directions on the technology itself. For example,
China Mobile, the world's largest mobile operator, recently announced its own service, based on a technology
that competes with NFC called RF SIM. MasterCard MoneySend's mobile service in the U.S. and handset giant
Nokia's Nokia Money global service don't use NFC either: They rely on technology developed by Obopay, a
U.S.-based start-up. And PayPal's new SendMoney service, which lets consumers make payments by simply
"bumping together" two iPhones, is based on yet another technology, developed by a U.S. start-up called Bump
Technologies, that uses accelerometers inside high-end phones.

That's not all. Jack Dorsey, a Twitter co-founder, has started a new company called Square that is pushing a
small magnetic credit and debit card reader which plugs into the headphone jack of an iPhone. When a card is
swiped through the reader, the data is converted into an audio signal then is routed to Square's software
application on an iPhone. The encrypted data is then transmitted via wireless networks to servers, which
communicate with payment networks to complete the transactions.

Then there is the issue of the business model, says Sandy Shen, a research director in Gartner's Singapore office.
In order to make NFC-based mobile payments work, telecom operators have to work with each other and with
the financial community. All sides have to agree on what business model to adopt, how to share revenues, and
how to acquire and retain those customers.

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"Alcatel-Lucent's offering could be the glue that the industry has been missing," says Andy Hicks, a senior
research analyst in the Prague office of tech consultancy IDC. The service will allow carriers to connect their
mobile payment offerings around the globe. That should help boost interoperability: Some carriers have dragged
their feet in linking up with others because they see mobile banking services as a competitive advantage that
helps reduce churn, says IDC's Hicks.

Alcatel-Lucent's new service will target both the unbanked in developing countries and mobile commerce
services in developed countries, says Alcatel-Lucent Ventures' Belpaire. Alcatel-Lucent will offer it as a "white-
label" service, allowing operators to retain or develop their own brands. And the services will not be limited to
payments. They'll also leverage touchatag's various applications to help drive traffic to retailers through mobile
loyalty cards and coupons, he says.

Alcatel-Lucent isn't the only vendor offering end-to-end hosted services to mobile payment service providers.
India's Comviva Technologies, which is backed by the Bharti Group, Sequoia Capital, and Cisco Systems, has
launched a hosted end-to-end service called Mobiquity that offers mobile money, mobile banking, and mobile
payment services. Clients of the company, formerly called Bharti Telesoft, include Barclays bank, which has
launched a mobile banking service called "Hello Money" in India, Kenya, and Botswana.

Analysts also suspect that Amdocs, a U.S. based supplier of billing and customer relationship management
products for communication companies, is working on white-label solutions for mobile operators. In response to
a question from Informilo, Amdocs confirmed that it has invested in an Israeli start-up named Trivnet, which
specializes in mobile money and mobile banking services, but declined further comment. Vodafone, meanwhile,
is increasingly trying to host its various mobile money country payment offerings centrally, says IDC's Hicks.

It will clearly take more time for the market to decide which technologies and business models resonate best
with consumers in different regions. If getting all of the players to agree was as easy as beaming a signal from a
mobile phone to a vending machine, we'd all be using mobile wallets by now.

Guest blog post from Jennifer L. Schenker.

This blog post was adapted from www.informilo.com. Click here to read the original posting, provided courtesy
of Informilo.

Reader Comments
Magnus Back

March 26, 2010 09:32 PM

Already commercially implemented in Japan since many moons ago.

http://www.nttdocomo.com/services/osaifu/index.html

Ernesto2732

March 26, 2010 10:13 PM

There is another way to use the phone to make financial transactions, the SMS. Look what was done in Kenya
by Safaricom.

DJC

March 28, 2010 08:26 AM

It will be easily exploited by hackers that will empty your wallets.

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Paul

March 28, 2010 09:35 AM

Blah, blah, blah. This is just technology looking for a market. It does not solve any problem. I already have a
wallet that is just as mobile and a credit card that fits into the wallet just fine. Who cares if I swipe it through a
reader verses "waiving" it in front of one?

ray

March 30, 2010 05:44 AM

E-wallet chip.

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