UK mobile operator JV is critical for operator success in NFC mobile payments

BOSTON, USA: According to research firm Strategy Analytics, the newly announced mobile marketing and mobile payments joint venture between Everything Everywhere, Telefónica O2 and Vodafone in the UK is a positive move, and will enable these mobile operators to secure a position at the heart of the nascent NFC contactless payments ecosystem.

The Strategy Analytics report, “Collaboration Essential to Operator Success in Proximity Payments,” underlines the importance of successful mobile operator partnerships to reduce fragmentation, boost scale, and help position strongly against competitors, such as Google Wallet.

By working together mobile operators are in a better position to drive the availability of NFC handsets, a fundamental enabler of mobile contactless payments. The collaboration will also create scale, which will be more likely to attract payment service issuers such as banks and also drive interoperability.

Nitesh Patel, senior analyst for Strategy Analytics, said: "Banks and retailers are interested in scale and reduced complexity. Banks do not want to work with each operator and handset vendor individually in order to enable all customers to make mobile payments. Similarly, retailers do not want to upgrade point-of-sale infrastructure to accept contactless payments if customers of only one or two mobile operators can use it.

"This multi-carrier agreement between Everything Everywhere, Telefónica O2 and Vodafone in the UK has the potential to overcome these challenges and allow operators to compete with solutions like Google Wallet, which will initially be limited to Android handsets only."

The report, “Customizable Mobile Contactless Payment Forecast: 2004 to 2015,” estimates that mobile contactless spend in the United Kingdom will reach $328 million by 2015. However, while this joint venture puts mobile operators in a strong position, it does not represent a home run.

David MacQueen, director at Strategy Analytics, commented: "Mobile operators do not have a long track record of success when it comes to collaborations. The Mobile Payment Services Association, a previous mobile payment joint venture launched by UK operators in 2003, failed to get off the ground and was subsequently dismantled. Furthermore, mobile operators are not well known for moving fast. So, while this joint venture is a positive step we remain cautious about its chance for success. In particular we look forward to seeing how the operators differentiate their respective payment offerings."