Nokia forms a joint venture with German company to promote pay-by-phone technology.
Stephen Lawson, IDG News Service
Thursday, March 01, 2007 08:00 AM PST
Nokia Corp., one of the first handset makers outside Japan to turn a phone into a wallet, now wants to sell services that will make these kinds of devices useful.
But the Finnish mobile equipment giant isn't doing so directly. Instead, it has formed what it calls an independent third party, a joint venture with Germany's Giesecke & Devrient, which makes smart cards. The venture, Venyon Oy, based in Helsinki, was launched in December and is about to open a Singapore office to complement locations in Munich and Dallas, according to Chief Executive Officer Lauri Pesonen.
The mobile phone payments Venyon wants to facilitate are based on NFC (near-field communication), which uses an RFID (radio-frequency identification) chip and antenna to exchange information with a payment station from a range of a few centimeters. Typically it would involve tapping the phone against a subway turnstile, a vending machine, a payment device at a checkout stand, or another phone, Pesonen said.
Phones are perfect for payment because people carry them almost everywhere, Pesonen told journalists at an event in San Francisco on Wednesday. NFC is already available on some credit and debit cards, and NFC phones will get cheaper when they no longer need a separate smart card for the feature. Such phones should hit the market next year, he said.
Like 3G (third-generation) mobile data services, NFC first got off the ground in Japan with slightly different technology, in this case Sony Corp.'s FeliCa system. Now big names including Sony, Microsoft Corp., Hewlett-Packard Co., Visa International Service Association and MasterCard International Inc. are backing the technology through the NFC Forum and there are trials taking place in several places around the world. But outside Japan and South Korea, there are few phones equipped to use it.
Venyon isn't aiming at the hardware end of the problem but at the need for an infrastructure through which retailers and financial services companies can work with carriers and handset makers. Although standards bodies are working on specifications for this, Venyon is worried that the market will be in full swing by the time those standards are finished. If each set of partners develops its own technology, fragmentation would slow down adoption, Pesonen said.
Venyon is offering services to support mobile NFC applications that can be downloaded and managed over the air. For example, a service that lets the user prepay for subway rides would involve the transit operator, the mobile carrier, a financial institution and software that needs to be downloaded to the phone. Venyon would provide that service behind the scenes, Pesonen said.
Ovum Ltd. analyst Roger Entner thinks many people eventually will embrace payment by phone for its convenience. The practice might be even more popular in countries where consumers don't yet have credit cards, he added. But Entner is less worried than Venyon about fragmentation. The company wants to jump out ahead and grab market share, but more competitors means better ideas, he said.
"I have great trust in the market forces," Entner said.
NFC could well succeed but faces an uphill battle in the U.S., in the view of analyst Clay Ryder at Sageza Group Inc. Fewer U.S. consumers make small, daily payments on transit systems. Phone payments initially would appeal most to people in their early 20s, he said.
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