Visa Advances Toward a Digital Wallet

Visa hopes its technology will lead to mobile device apps that create digital wallets.VisaVisa hopes its technology will lead to mobile device apps that create digital wallets. Visa is taking another big step in its continuing efforts to create a universal digital wallet. On Wednesday, the company announced plans to introduce a one-click payment system that will allow Visa customers to sign up for a set of credentials that will allow them to pay for items online with a single click. Jim McCarthy, the head of global products at Visa, said that the company was trying to simplify the process of buying items online or on a mobile site, which can be cumbersome for people who have to re-enter their card numbers and personal information each time they want to make a purchase online. “E-commerce is our fastest growing channel,” said Mr. McCarthy. “We know we can do a lot to improve the experience in the e-commerce environment.” People can buy things with one click at a particular site, say Amazon.com. But they can’t yet do it across the Web.

Visa’s new feature reduces the multitude of ways a consumer might want to pay for an item — whether with a Visa check card, a PayPal account or some other means — into a single log-in and password. All of the information is stored in Visa’s secured servers so that users only have to sign in to pay for their purchase. Mr. McCarthy said the service would be introduced to consumers in the United States and Canada by the year-end holiday shopping season. Visa has also been testing a system that lets users pay for items with an application that uses “near-field communication” technology on a mobile device to process a payment. This one-click system will also be wrapped into that service when it is introduced more broadly, the company said.

The company says that a customer’s entire financial history could be securely stored in one spot, along with frequent-flier accounts, medical benefits, even appliance warranty information from Best Buy, replacing the jumble of account information that most people have stored in different locations — on and offline. The first users of the service will probably be online gamers. The service will be introduced in social and online games, allowing Visa customers to buy virtual goods. Eventually, Mr. McCarthy said, the company will introduce it “broadly to e-commerce merchants, mobile and social commerce developers who will allow consumers to check out of a site with a single click.” Visa even plans to make the underlying code, or A.P.I., available to third-party developers who want to install the features on their payment Web sites. Visa executives said the plan was the result of two strategic acquisitions that the company made over the last several months — PlaySpan, a start-up that lets people pay for virtual goods in games, and CyberSource, an e-payments company.

Representatives at Visa said it was working with several banking partners, but did not specify which ones. Visa faces stiff competition as it ramps up its online and mobile offerings. American Express and other credit card issuers are fast at work developing and adopting their own solutions. Mobile carriers have also struggled to bring their own solutions to market, but it is not yet clear when or if, they will debut. “We’re trying to get ahead of the curve here,” said Mr. McCarthy.

Source: http://bits.blogs.nytimes.com/2011/05/11/visa-takes-another-step-towards-building-a-mobile-wallet/

Who owns the paying mobile consumer: carriers or handset-makers?

Handset manufactuers, carriers and payment franchises: Who has the power?

The battle between Research In Motion and wireless carriers over mobile-payment data is a precursor to a larger war over who owns consumers making transactions using mobile devices.

United States carriers assumed continued ownership of their subscribers with the announcement of Isis, their bid to create a standard for enabling contactless payments and marketing at retailers’ point of sale via Near Field Communication. Now RIM and other handset manufacturers are exploring alternatives to that model, and the equation gets even more complicated when factoring in payment franchises such as Visa, MasterCard and American Express.

“Technically, RIM and Apple cannot preclude the SIM card solution proposed by the U.S. carriers through the Isis joint venture, and the carriers can’t preclude RIM from developing a mobile OS solution,” said David Schropfer, author of “The Smartphone Wallet,” Red Bank, NJ.

“From a consumer perspective, a smartphone connected to a mobile network will have more features—like loyalty program integration), and offer a higher degree of control for the consumer, than an application that relies on the NFC connection to the retailer during a transaction,” he said.

“The biggest question is whether or not the consumer will have access to those products in the future, or if efforts to bring these products to market will be derailed by the incumbents.”

Who will brand the mobile wallet?
The gist of the debate between BlackBerry-maker RIM and the carriers is whether data related to mobile payments will sit on wireless devices’ SIM cards, thus keeping the control with the carriers, or whether the handset-makers can build payment credentials directly into handsets, potentially doing an end-run around the carriers.

The argument boils down to who owns the customers using a mobile wallet and who gets a cut of the revenue—and how much of a cut.

RIM and other handset manufacturers would prefer to partner with financial institutions directly.

BlackBerry devices set to launch later this year will reportedly have NFC chips embedded in them, as does Google’s Nexus S Android smartphone.

Speculation has been rampant as to whether or not Apple will support NFC with the release of the iPhone 5.
The assumption was that when NFC was brought to market, carriers would control the SIM cards, a single-wire protocol with an NFC antenna directly connected to the secure elements in the device, per Yankee Group.

“That was the traditional model—the assumption was that with NFC, the final say of which credentials go onto the mobile phone would be controlled by the carriers, which is why they thought they could shut out Visa and MasterCard with Isis,” said Nick Holland, senior analyst at Yankee Group, Boston.

Inside Secure is an example of a company that sells chipsets that allow operating systems on mobile devices to access not just one secure element, but many.

Mr. Holland said that it does not have to be just the SIM now that is dictated by the wireless carrier—there can be an additional secure element on top of the SIM that companies such as Gemalto supply.

The key takeaway: Whoever owns the secure element, owns the transactions.

“Maybe six months ago the only option for Visa or MasterCard would have been an NFC sticker, but now they have the potential to completely bypass the carriers by partnering with the OEMs or creating an SD Microcard they put out themselves,” Mr. Holland said. “RIM is doing this, and I would expect others to follow suit.

“Carriers want the potential for everybody to access the secure element, but it is going to be messy, especially in the U.S., where the carriers pretty much dictate which handsets are on their networks,” he said. “Is AT&T going to say, ‘no, I’m not going to stock the new iPhone, thank you very much’?

The real value proposition for NFC is it being really simple to use, and if there are multiple secure elements on a device, that is adding additional dimensions of complexity for consumers.

This fight is over who owns the secure element, which could somewhat disrupt the usability of these handsets, per Yankee Group.

Mr. Holland believes that there will be less of a monopoly in terms of who owns the secure element going forward. That will lead to competition for carrier initiatives such as Isis.

“Isis has a real problem on its hands now,” Mr. Holldand said. “The carriers assumed that they would own the handsets and the SIM, and therefore said ‘We will own the transaction and we can shut out Visa and MasterCard.’

“However, if you are Visa, you probably don’t want to put out an SD Microcard on your own—it would be much easier to rent space on the SIM,” he said. “Isis may have to play nice and let Visa and MasterCard rent space on the SIM and process transactions.

“This is going to be really hotly fought over.”

Source: Mobile Commerce Daily http://www.mobilecommercedaily.com