Card companies to devise new standard

From...

By Bob Brewin

(IDG) -- Four of the world's largest credit card companies have formed a consortium to jointly develop secure mobile payment standards that they say they believe will help make m-commerce a reality within two years.

Analysts view 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.

American Express in New York, MasterCard International, Visa International and JCB Co. in Japan are to set up something called "the Forum" to develop a cohesive approach to issues such as security and customer authentication, rather than awaiting "fragmented" efforts by the card issuers and mobile carriers that have marked the past two years, according to Joe Chouinard, vice president of new e-commerce channels at Foster City, California-based Visa.

The Mobile Payments Forum, based in Wakefield, Massachusetts, plans to develop a set of standard deliverables to serve as building blocks for security and cardholder verification for use by banks, phone manufacturers and mobile carriers, according to Simon Pugh, vice president of infrastructure and standards at Purchase, New York-based MasterCard.

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The standards could then lead to development of a system allowing consumers to use mobile phones to execute a transaction at a store, with authorization and payment information flowing securely through the cell phone network to wired networks operated by the four Forum partners and then to member banks.

Pugh said that the Forum intends to invite mobile carriers around the world to join, but he declined to say whether any had signed on yet.

Ritch Blasi, a spokesman for AT&T Wireless Services in Redmond, Washington, said that "it still needs to be determined" whether banks and card companies or carriers will be in charge of payments. Cell carriers such as AT&T Wireless already operate sophisticated billing and customer relationship management systems that can be configured to handle mobile payments, Blasi said.

Cell carriers also have a financial incentive to consider keeping control of m-commerce in-house, he said. "Some card companies gets 6 percent of every transaction. What if we could get a quarter percent of that?"

Avivah Litan, an analyst at Gartner in Stamford, Connecticut, said she believes the four credit card rivals formed the Forum in part to develop a united front against cell carriers, who she said want to control the mobile payment process.

"I've talked to one of the major mobile carriers in Europe, and it is very interested in developing its own payment system," she said, adding that a number of carriers are interested in developing their own system for "micropayments" of $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 the past two years, there are only approximately 200,000 m-commerce users from among 123 million United States cell phone customers.

Pugh agreed that Europe -- which uses a single cell phone standard and where carriers have been able to sell services beyond basic voice service -- offers a better opportunity for m-commerce than the United States. 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. "We're not going to require anyone to buy a new phone" to use payment services, Chouinard said.