Four of the world's largest credit card firms have formed a consortium to jointly develop secure mobile payment standards that they believe will help make mobile commerce a reality within two years.
Analysts viewed the formation of the Mobile Payments Forum as the latest gambit in a high-stakes battle between credit card companies and mobile carriers for control of the m-commerce marketplace and cell phone customers.
New York-based American Express Co., MasterCard International Inc., Visa International Inc. and Tokyo-based JCB Co. last week decided to join forces to develop a cohesive approach to issues such as security and customer authentication, rather than waiting for results from the "fragmented" efforts by the card issuers and mobile carriers during the past two years, said Joe Chouinard, vice president of new e-commerce channels at Foster City, Calif.-based Visa.
Based in Wakefield, Mass., the Mobile Payments Forum plans to develop standard deliverables to serve as building blocks for security and cardholder verification for use by banks, phone manufacturers and mobile carriers, said Simon Pugh, vice president of infrastructure and standards at MasterCard in Purchase, N.Y.
The standards could lead to the development of a system that lets people use mobile phones to make purchases at stores, with authorization and payment data flowing securely through the cellular phone network to wired networks operated by the forum partners and then to member banks.
Pugh said the forum intends to invite mobile communications carriers around the world to join, but he declined to say whether any had signed on yet.
Ritch Blasi, a spokesman for Redmond, Wash.-based AT&T Wireless Services Inc., said it still needs to be determined whether banks and card companies or carriers will be in charge of payments. Cellular carriers such as AT&T Wireless operate sophisticated billing and customer relationship management systems that can be configured to handle mobile payments, Blasi said.
Cellular carriers also have a financial incentive to retain control of m-commerce, he said. "Some card companies get 6 percent of every transaction. What if we could get a quarter-percent of that?"
Avivah Litan, an analyst at Stamford, Conn.-based Gartner Inc., said she believes the credit card rivals want to present a united front against cell carriers, which want to control the mobile payment process.
One of the major mobile carriers in Europe is interested in developing its own payment system, she said, adding that a number of carriers are considering developing their own systems for micropayments of US$100 or less, with big-ticket purchases handed off to the card companies.
Litan said the Mobile Payments Forum faces a more basic problem than developing standards: poor market penetration. Despite hype about m-commerce during the past two years, there are only about 200,000 m-commerce users out of the 123 million U.S. cell phone customers.
Pugh agreed that Europe which uses a single cell phone standard and where carriers have been able to sell services beyond voice service offers a better opportunity for m-commerce than the U.S. Since European phones already use built-in smart cards to authenticate access to networks, Pugh and Chouinard agreed it would be easier and quicker to add payment service in Europe.
They emphasized that standards developed by the forum would allow carriers and banks flexibility in choosing security and authentication services, with a key goal being the need to work on existing phones.