Vodafone enters m-payment arena

Vodafone Group Plc yesterday announced trials of a mobile payment system which will allow customers in Germany, Italy and the UK to pay for goods and services using their mobile handset as ID.

The Newbury, UK-based mobile operator is not the first telco to experiment with turning a handset into an electronic purse or cheque book, but its global stature will make its chosen m-payment model a matter of keen interest to rival telcos, and to financial intermediaries.

With 2.5G and soon 3G network technology opening what carriers hope will turn out to be the floodgates to a new class of mobile internet content, mobile operators such as Vodafone are keen to take a cut from any transactions executed over their networks.

To do so the operators must first build m-payment systems which will at least allow automatic connection with established e-payment systems, such as credit and debit card networks. Some more adventurous operators may also decide to build systems that integrate with their service billing systems - allowing customers to treat their phone bill as a debit account, and putting the operator in the role of financial intermediary.

In Vodafone's case, according to a spokesman, the company "has no intention of becoming a bank" or, initially at least, of setting up in competition with established credit and debit card operators. Its trial model will require customers to enter their credit or debit card details into the Vodafone system where they will be held in an electronic wallet invisibly to merchants, who will nevertheless be able to accept payment via the Vodafone system once the transaction is confirmed by the entry of a personal identification number (PIN) at the handset.

The value of transactions will be limited by the customer's existing credit rating, and transaction details will be entered on credit and debit card statements, not on the customer's phone bill.

The scale of Vodafone's trials puts them among the most significant m-payment experiments conducted anywhere so far. Indeed, assuming the trials are successful, the payment system will be offered to all 50 million of the company's subscribers in the three trial nations, with the likelihood that the platform may subsequently be made available to Vodafone companies and partners elsewhere in Europe, Asia and the Americas. This see Vodafone rapidly overtaking NTT DoCoMo as the largest provider of m-payment services today, via its i-mode network.

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