Vodafone mobile-as-credit-card scheme due in March

Beginning in March, mobile-telecommunication company Vodafone Group PLC will offer its U.K. customers the ability to use their mobile phones as a type of mobile credit card for making small purchases online.

Users can use the m-pay bill service to buy items priced from £0.05 to £5 (US$0.07 to $7.14) over the Internet or using a WAP (Wireless Application Protocol) phone, Vodafone spokeswoman Janine Young said. The service will charge the purchases to users' phone bills or deduct the charges from their prepaid accounts, Young said.

Vodafone contracted third-party software company iPin Inc. to develop the mobile-payment system and will use the Silicon Valley-based company's e-Payment platform, Vodafone and iPin said in separate statements.

Payment is authorized by a user name and password for Internet purchases and a PIN (personal identification number) number for WAP purchases, the companies said. When users make purchases on the Internet, they do not need to have their mobile phones with them, Vodafone said.

Vodafone competitor, British Telecommunications PLC announced last month that it is working with iPin to develop its own eWallet for its BTopenworld Internet customers.

Vodafone also announced in January that it had begun trials of a global payment platform, or m-wallet service, over mobile devices in Germany and Italy as well as in the U.K. The m-pay service is a "totally separate service from m-wallet" and Vodafone has no plans to offer the m-pay service outside of the U.K. anytime soon, Young said.

Items and services that can be bought using m-pay include mobile-phone ring tones and icons, entertainment and financial information, online games, location services, music, news, sports information, ticket bookings, travel information and reservations and weather information, Vodafone said.

Vodafone has already signed up 50 companies to offer services and products through m-pay, including individual Web sites like iStrat Ltd., Young said. For example, through iStrat, the London soccer team Arsenal Football Club will let fans watch video clips of goals and match highlights over its Web site, Young said.

"Many customers are used to charging things like ring tones over SMS (Short Message Service), but SMS is limited on what you can charge. M-pay offers complete flexibility, for example you can buy both a ring tone and a music file coupled together," Young said.

Vodafone is aiming the service at customers who either don't have credit cards or who don't like using their credit cards for making small purchases, Young said. "We have no plans in the immediate future for offering products like CDs or books over m-pay, because quite frankly, credit cards are more suited for making those larger types of purchases and customers feel more comfortable using their credit cards in those cases," Young said.

When Vodafone launches its m-pay service in March it will have competition from Paybox.net AG, which began in Germany in May 2000 and is now operational in the U.K., Austria, Spain and Sweden. In the U.K., Paybox charges £14.99 per year for the service.

According to Paybox's Web site, it has 500,000 registered users and 6,500 merchants across Europe, and has the advantage of not being tied to a particular network. One of its merchants is the Circus Restaurant and Bar in London, Paybox said.

All transactions are conducted over a secure GSM (Global System for Mobile Communication) network so only a mobile-phone number is entered onto the Web when shopping online, the company said.

When Paybox members use their mobiles to pay for a product or service online or offline, they are contacted with an SMS. Users then reply to the message with a PIN, which authorizes the transaction, and the amount is debited from their bank accounts, Paybox said.

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