PayPal earlier this year announced a partnership with The Home Depot that allowed customers to make point-of-sale transactions with their smartphones in more than 2,000 locations. The e-commerce company on Thursday announced that 15 new national retailers have signed on for PayPal’s in-store mobile payment service. These include, Abercrombie & Fitch, Advance Auto Parts, Aeropostale, American Eagle Outfitters, Barnes & Noble, Foot Locker, Guitar Center, Jamba Juice, JC Penney, Jos. A. Bank Clothiers, Nine West, Office Depot, Rooms To Go, Tiger Direct and Toys“R”Us. “We can’t wait to launch with these great retailers, and help them serve their customers better through PayPal,” PayPal president David Marcus said. “Consumers are relying on technology now more than ever to simplify their lives when it comes to shopping and paying, and retailers must adapt to this shift or risk becoming irrelevant.” PayPal plans to sign up as many as 20 national retailers this year.

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Barclays on Thursday announced the launch of the Barclaycard PayTag, a sticker that can be placed on any handset to equip it with instant NFC compatibility. The PayTag is an extension of a customer’s credit card account that can be used to make payments of £15 and under, though the limit will rise to £20 in June, and it is available at no cost to Barclaycard owners. “Today, we are offering the choice of mobile payments to millions of our customers at no additional cost to them,” David Chan, CEO of Barclaycard Consumer Europe, said. “More than half of us say that the item we’re most lost without is our mobile phone, so we’re giving people the option of using them to make easy, convenient, everyday payments without the need to upgrade their current handset.” The PayTag will be released to a select group of customers in the coming weeks, with mass availability coming later this year. Barclays’ commercial and press release follows below.

Barclaycard today announced the launch of Barclaycard PayTag, a new way to pay with your mobile telephone

Barclaycard today announced the launch of Barclaycard PayTag, a new way to pay with your mobile telephone. Millions of Barclaycard customers will be offered the chance to make payments with any mobile phone by simply sticking a Barclaycard PayTag to the back of their handset.

Available at no cost, and exclusively to Barclaycard Visa cardholders, Barclaycard

PayTag is an extension of a customer’s credit card account. At a third of the size of a normal card, it can be discreetly and simply stuck to the back of any mobile phone. Once attached, it can be used to make payments of £15 and under, rising to £20 in June, by simply being held over a contactless payment terminal.

David Chan, CEO of Barclaycard Consumer Europe, said: “Today, we are offering the choice of mobile payments to millions of our customers at no additional cost to them. More than half of us say that the item we’re most lost without is our mobile phone[1], so we’re giving people the option of using them to make easy, convenient, everyday payments without the need to upgrade their current handset.”

The announcement comes as Visa predicts that the number of contactless point-of-sale terminals in the UK will rise by 50% to 150,000 this year. Major retailers that offer, or are introducing, contactless include Waitrose, McDonalds, Boots, WH Smith and Tesco. By the end of 2012, London buses will also accept contactless payments, followed by the Tube and the rest of the transport network in the Capital in 2013.

Barclaycard PayTag is safe and secure, and comes with the same 100% fraud protection as any Barclaycard. An exclusive group of customers will be invited to receive their Barclaycard PayTag in the coming weeks, before they are offered to millions of Barclaycard customers later in the year.

David Chan, adds: “Barclaycard is developing a wide range of initiatives which will ultimately enable everyone to enjoy the benefits of mobile payments. Barclaycard PayTag is another milestone on our journey to make paying easier, and sits alongside other easy ways to pay with your mobile such as those we offer in partnership with Orange.”

Last week Barclaycard and Orange announced that credit or debit card holders from all UK banks would be able to load money onto Barclaycard’s mobile payments application, in the Quick Tap wallet. This will open up the opportunity for contactless payments to more Orange customers. Orange also confirmed that it would be making Quick Tap available on a range of Android smartphones, with the first to be announced in the coming weeks.

Research carried out on Barclaycard’s behalf predicts that £3 billion worth of purchases will be made with mobile phones in the UK in 2016[2]. Barclaycard PayTag provides customers with the choice of simple mobile phone payments now, without having to wait to upgrade, and at no additional cost.

To find out more and to register interest in Barclaycard PayTag, please visit barclaycard.co.uk/paytag.

Google’s mobile payment service has gotten a fair amount of attention from the media, but user and partner adoption has been slow since the service was unveiled nearly a year ago. Google Wallet is the Internet giant’s eWallet offering, which incorporates NFC technology and allows users to pay for purchases using their Android smartphones rather than physical credit cards. According to Bloomberg, Google is now rethinking its service in an effort to bolster adoption. Citing multiple unnamed sources, the site claims Google is currently weighing the possibility of implementing a revenue-sharing model that would give wireless carriers like Verizon Wireless and AT&T a cut of Google’s fees when subscribers make purchases using their Google Wallet-enabled devices. “They are in a bit of a re-evaluation pattern right now,” Aite Group analyst Rick Oglesby told Bloomberg. “It’s going much slower than anticipated.”

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PayPal on Thursday unveiled “PayPal Here,” a small accessory similar to the solution offered by Square, that can be used to accept credit card payments on an iPhone. The reader is a large blue triangle that connects to the top of an iPhone through the headphone jack. With the help of the “PayPal Here” iOS app, a merchant can input a sum and have a consumer swipe his or her credit or debit card to make payments. PayPal’s app also features a “Scan Card” feature, which uses the iPhone’s camera to record a credit card number or even a check. The app can track invoices and cash payments, and be used with checks, credit cards and debit cards. PayPal Here comes on the heels of the company’s unveiling of an upcoming digital wallet service that looks to compete with Google Wallet.

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During the annual South by Southwest conference in Austin, Texas on Tuesday, PayPal finally showed off its upcoming digital wallet product that will compete with the likes of Google Wallet and other digital payment platforms. The EBay-run eBay Ink blog also posted a pair of videos on Tuesday in which PayPal vice president of global product and experience Sam Shrauger walks us through a number of the new eWallet product’s capabilities. PayPal’s digital wallet has a simple desktop interface and of course it features mobile compatibility and a number of now-common features, but there are also a few intriguing features that aren’t common among rival offerings. One such feature allows the user to pay for something with PayPal’s digital wallet while on the go, and then log in to his or her account at a later time and choose which credit card or bank account should supply the funds for the purchase. This feature and more are explained in a pair of videos from eBay and PayPal, which follow below.

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Apple on Tuesday was granted a significant patent by the United States Trademark & Patent Office, Patently Apple reported. The technology, which is supported by 23 Patent Claims, allows credit card companies to send statements directly to a user’s iTunes account for purchases made using an NFC-enabled iPhone. Account holders will also be able to allow a secondary account holder, such as a child, to make purchases on the same card while allowing the primary account holder to control spending and implement various limits. Even though NFC technology has been featured in a number of Android devices, some believe that the technology won’t go mainstream in a number of markets until an iPhone is equipped with a mobile payment solution.

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Google announced at the Mobile Money: Delivering Innovative Mobile Payment Services panel during Mobile World Congress that Sprint will introduce “at least 10 additional phones” with Google Wallet support in 2012, Fierce Mobile Content reported on Thursday. The Samsung Nexus S 4G is the only smartphone currently offered by the carrier that supports Google’s NFC mobile payment system. Both the Galaxy Nexus and the LG Viper will launch with Wallet support later this year, however, and Osama Bedier, vice president of Google Wallet and Payments, said Google is continuing talks with other carriers, device manufacturers, banks, financial service providers and point-of-sale technology vendors to further extend the company’s Wallet network.

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Visa on Monday announced a “one-stop” mobile payment solution that looks to compete directly with Google Wallet and the carrier-backed ISIS payment system. After a consumer purchases a “Visa-certified” NFC-equipped smartphone, he or she can contact the company and activate the handset for mobile payments. The device will be securely linked with a user’s bank account and can then be used to make mobile payments anywhere Visa’s payWave system is accepted. “In the same way we have enabled the secure provisioning of payment cards for decades, we are now using mobile technology to securely provision mobile payment accounts over the air,” Visa’s Head of Mobile Products Bill Gajda said. “Financial institutions, mobile network operators, and even transit operators now have a simple, secure process to activate payment applications at scale and make mobile payments part of everyday life for consumers around the world.” The company announced that Intel Atom-powered smartphones and tablets will be the first Visa-certified devices to allow mobile subscribers to securely make NFC purchases. Read on for the company’s press release.

New Visa Service Provides Secure “Over the Air” Provisioning of Mobile Payment Accounts

Global service transforms smartphones into Visa payment devices. “One-stop” solution enables financial institutions to wirelessly link Visa accounts with NFC-enabled devices

Mobile World Congress 2012
BARCELONA, Spain–(BUSINESS WIRE)–Visa Inc. (NYSE:V) today announced a new service that provides financial institutions and mobile network operators with a one-stop solution to securely download payment account information to smartphones enabled with Near Field Communication (NFC) technology. The new service was developed in collaboration with Oberthur Technologies, a leading Trusted Service Management (TSM) company whose software and platforms are used to manage the provisioning and activation of payment accounts on cards and mobile devices.

The new offering by Visa brings together the necessary parties in the mobile payments ecosystem and lays the foundation for financial services providers and mobile network operators to securely and efficiently link Visa payment accounts to smartphones, while also offering a solution to manage those accounts post activation.

“In the same way we have enabled the secure provisioning of payment cards for decades, we are now using mobile technology to securely provision mobile payment accounts over the air,” said Bill Gajda, Head of Mobile Products, Visa Inc. “Financial institutions, mobile network operators, and even transit operators now have a simple, secure process to activate payment applications at scale and make mobile payments part of everyday life for consumers around the world.”

Working with Oberthur Technologies gives Visa access to technology that delivers Visa payWave, Visa’s contactless payment technology, and other payment applications “over the air” to a consumer’s NFC-equipped smartphone, along with the secure credentials needed to authenticate the consumer.

“The combination of Oberthur Technologies advanced technology with Visa’s global secure network will deliver a powerful tool for financial institutions and mobile network operators to move quickly into the growing market for mobile payments,” said Arnaud de La Chapelle, General Manager, Convergence & Solutions, Oberthur Technologies. “We’re extremely pleased to extend our relationship with Visa in this innovative area.”

The new solution addresses a crucial need for Visa account issuers, mobile operators, and others who want to enable mobile payments at scale. The next stage of the product, an interconnectivity “hub”, will enable frictionless “many-to-many” interactions avoiding the need for parties to form bilateral commercial and technical relationships, even for entities using other TSM solutions.

How It Works

For consumers the service will include support for Visa and non-Visa payment, loyalty or mass transit applications on their smartphone. Because of the flexible and global nature of the technology, consumers could, for example, use their mobile phone to download the appropriate mass transit application to pay for a subway ride in a distant city. A typical consumer experience to provision a smartphone for payments may include the following steps:

• The consumer purchases an NFC-equipped mobile phone that has passed Visa’s compliance testing, from their choice of operator
• The consumer contacts the financial institution that issued their Visa account, or responds to an offer from a service provider or operator, asking to activate mobile payments with their smartphone
• Visa’s mobile provisioning solution links the appropriate parties and begins the process of provisioning the mobile phone for payment:
  • Authenticates the account holder by requesting the user enter a passcode
  • Facilitate the exchange of secure “keys” among the various parties that unlock the NFC-enabled chip on the smartphone
  • Initiates the secure download of payment account information to the smartphone

Intel, with its new Intel® Atom™-based smartphones and tablets, has agreed to use Visa’s global provisioning service to enable mobile subscribers to securely download payment account information to NFC-enabled devices.

Mobile payment joint venture ISIS, a partnership between Verizon Wireless, AT&T and T-Mobile, on Monday announced launch partners and availability. The service will become available in mid-2012 starting with locations across Salt Lake City, Utah and Austin, Texas. Chase, Capital One and Barclaycard have entered into agreements to offer credit, debit and prepaid cards alongside the service. “Today’s announcement is testament to the vision and commitment of Chase, Capital One and Barclaycard to make mobile commerce a real and positive experience for their customers,” said Michael Abbott, CEO of ISIS. “Mobile commerce is more than a new way to pay; it’s about extending the relationships consumers enjoy with their banks and merchants into a powerful and convenient new form factor.” Read on for the company’s press release.

Chase, Capital One and Barclaycard First to Place Their Cards in the Isis™ Mobile Wallet

Starting This Summer, the Isis Mobile Wallet Will Be Available to More Than 100 Million U.S. Card Holders

BARCELONA, Spain – February 27, 2012 – Isis™, the mobile commerce joint venture created by AT&T Mobility, T-Mobile USA and Verizon Wireless, today announced that Chase, Capital One and Barclaycard have entered into agreements with Isis enabling their credit, debit and prepaid cards to be placed into the Isis Mobile Wallet. Starting in mid-2012, consumers will be able to load their eligible Chase, Capital One and Barclaycard cards into their Isis Mobile Wallet and shop at participating merchants, starting with locations across Salt Lake City and Austin, Texas.

“Today’s announcement is testament to the vision and commitment of Chase, Capital One and Barclaycard to make mobile commerce a real and positive experience for their customers,” said Michael Abbott, CEO, Isis. “Mobile commerce is more than a new way to pay; it’s about extending the relationships consumers enjoy with their banks and merchants into a powerful and convenient new form factor.”

The Isis Mobile Wallet will provide consumers with a convenient and secure way to pay, redeem coupons and present loyalty credentials, all with the tap of their phone. Chase, Capital One and Barclaycard will tailor their cardholder service experience within the Isis Mobile Wallet to reflect their respective brands and ensure a seamless and secure experience across physical cards and mobile platforms.

“Chase is committed to making mobile commerce a reality,” said Richard Quigley, president, Chase Card Services. “By working with Isis, we are excited to help pave the way for innovation in the mobile payments space and to provide cardmembers with a secure option for easier and faster payments on the go.”

Last July, Isis announced relationships with the top four U.S. payment networks: Visa, MasterCard, Discover and American Express. Isis’ relationship with the four U.S. payment networks provides banks with the freedom to enable any major network payment card and provide consumers with ubiquity and freedom of choice when deciding which of those cards to load into their Isis Mobile Wallet.

“Our customers have embraced digital and mobile banking and are demanding new and easier ways to manage their financial lives,” said Jack Forestell, executive vice president, Digital, Capital One. “Our relationship with Isis creates an exciting opportunity for our customers to begin to fully experience the power of mobile commerce.”

Today’s announcement underscores Isis’ inclusive approach, providing all stakeholders – banks, merchants and consumers – with the freedom and choice necessary to foster a robust new industry. Isis is building an ecosystem to provide consumers with a ubiquitous and positive experience across all participating carriers, phone models, payment networks, merchants and banks.

“We believe Isis is strongly positioned to bring the convenience, value and simplicity of mobile commerce to consumers,” said Stewart Holmes, senior director-mobile commerce strategy, Barclaycard US. “We’re excited to build this offering for customers and our card partners with Isis and look forward to shaping the future of payments.”

The Isis Mobile Wallet will initially launch in Salt Lake City and Austin in mid-2012 and is planning a national rollout to follow.

“While mobile wallets may look and smell the same from afar, Isis is setting itself apart by patiently building an ecosystem of issuer, network and merchant partners, offering an open platform that leaves partners in control of how they will communicate with their customers, and leaving the partners in control of sensitive payment and marketing data transiting over the platform,” says Gwenn Bézard, research director with Aite Group. “Isis’ new announcement sends a clear signal: it is serious about scaling mobile payments.”

Last week, two exploits concerning Google Wallet left users questioning the service’s security. One of the exploits allowed hackers to bypass PIN protection, but it was only present on rooted devices. A second exploit, however, did not require a handset to be rooted, leaving all Google Wallet users exposed. The company maintained that the service was secure but as a precautionary measure it disabled its prepaid card services, but Google announced on Tuesday that it has patched Wallet and has fixed the vulnerability. Security firm zVelo, however, is not satisfied with Google’s efforts. While the Mountain View-based company has suggested that users with rooted handsets don’t use Google Wallet, zVelo insists that a person can steal an Android phone and then root, thus performing the exploit to bypass the PIN. As an extra layer of security, it is recommended that users configure a passcode to protect their devices from unwanted access.

Read [Google] Read [zVelo]

Ed McLaughlin, MasterCard’s head of emerging payments, sat down with Austin Carr of Fast Company to discuss the future of credit cards. “We’re rapidly moving to a world beyond plastic,” said McLaughlin. “In many ways, plastic is just convenient packaging.” The future of on-the-go payments may lie in the hands of near-field communication but unfortunately, adoption and availability have been extremely slow and limited. While NFC technology has been featured in a number of Android devices, MasterCard seems to think it won’t go mainstream until an iPhone is equipped with the mobile payment solution. Read on for more.

“The timeline is always as rapid as it makes sense for consumers,” McLaughlin said. “That’s a combination of having a critical mass of the merchants, which is what you’re seeing right now, and getting devices into the hands of consumers. I don’t know of a handset manufacturer that isn’t in process of making sure their stuff is PayPass ready.” When asked specifically if Apple was one of these manufacturers, McLaughlin stuttered. “Um, there are…like I say, [I don't know of] any handset maker out there,” he said. “Now, when we have discussions with our partners, and they ask us not to disclose them, we don’t.”

Apple has repeatedly shown that it is one of the few consumer electronics companies right now with the ability to transform and create entire industries. Prior to iTunes and the iPod, virtually no one paid for digital music, and media tablets were a non-factor until the iPad. Does the mobile payment industry need Apple to become a mainstream phenomenon? “Well, anytime someone with a major base moves forward, it advances what you’re doing. So of course,” McLaughlin said. “I think as merchants provide these better interfaces for consumers–a better way of transacting–I think any consumer-focused technology provider would want to take advantage of it.”

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Office Depot, the second-largest retailer of office supplies in the U.S., is testing PayPal’s new point-of-sale system in a limited number of locations according to Reuters. “It’s at this point in a small number of stores … because there are still some rough spots in that experience,” said Kevin Peters, president of Office Depot’s North American unit. “There are some limitations on who can use it, service carriers that support that.” PayPal’s new payment method, known as the wallet in the cloud, lets shoppers who have PayPal accounts pay by typing their mobile numbers and PINs at checkout counters. Customers will also be able to pay by swiping a PayPal card and entering a PIN. PayPal started testing in-store payments at 51 Home Depot locations with plans to offer the service at 20 major retailers by the end of the year, however no additional participants have been named. Peters said the company is eager to experiment with anything that helps with faster checkouts, although nothing will be widely available without further testing. “At this point, we are walking very, very slowly. The last thing we want to do is to roll out technology that doesn’t appreciably change the customer experience,” he said.

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Visa is accelerating its efforts to dominate the mobile payment space, Reuters reported on Monday. Visa is no stranger to mobile payments. It began trialing an iPhone NFC payment solution in Europe early this year, has plans to work with Samsung on a system for the 2012 Olympics, and recently announced that it has partnered with ISIS for the development of a mobile payment network in the United States. “As mobile payments and other chip-based emerging technologies are poised to take off in the coming years, we are taking steps today to create a commercial framework that will support growth opportunities,” Visa’s global head of product Jim McCarty told Reuters.

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141.1 million people around the world will make mobile payments this year, a 38.2% increase from last year, Gartner said in a new report issued on Friday. Global mobile payment volume is expected to hit $86.1 billion in 2011, up 75.9% from the $48.9 billion recorded last year. Gartner says mobile payments are not growing as fast as originally projected due to slower than expected uptake in developing countries. In addition, the “complexity of the [NFC]” service model has impeded its ability to takeoff in developed countries. “The biggest hurdle is the need to change user behavior by convincing consumers to pay with mobile phones instead of cash and cards,” Gartner research director Sandy Shen said, noting that mass market adoption of near-field communications (NFC) is at least four years away. Mobile payments will be driven by prepaid top-ups and money transfers, the research firm said. “Thanks to the success of mobile application stores, such as Apple’s App Store, and the efforts in driving mobile sales by major retailers, such as Amazon and eBay, merchandise purchases far outweigh other use cases in developed markets, which include North America and Western Europe,” Shen said. “We predict that in 2011, merchandise purchases will account for 90 percent and 77 percent of all transactions in North America and Western Europe, respectively.” Read on for the full press release.

Gartner Says Worldwide Mobile Payment Users to Reach 141 Million in 2011

Mobile Payments in Developing Markets Growing Slower Than Expected

Worldwide mobile payment users will surpass 141.1 million in 2011, a 38.2 percent increase from 2010, when mobile payment users reached 102.1 million, according to Gartner, Inc. Worldwide mobile payment volume is forecast to total $86.1 billion, up 75.9 percent from 2010 volume of $48.9 billion.

Despite these strong growth projections, Gartner analysts said the mobile payment market is growing slower than expected.

“In developing markets, despite favorable conditions for mobile payment, growth is not as strong as was anticipated. Many service providers are yet to adapt their strategies to local requirements, and success models from Kenya and the Philippines are unlikely to be translated to other markets,” said Sandy Shen, research director at Gartner. While developing markets have favorable conditions for mobile payments, such as high penetration of mobile devices and low banking penetration, this is no guarantee of success, unless service providers adapt their strategies to local market requirements.”

“In developed markets, companies are trumpeting the prospects of Near Field Communication (NFC) without realizing the complexity of the service model. We believe mass market adoption of NFC payments is at least four years away,” Ms. Shen said. “The biggest hurdle is the need to change user behavior by convincing consumers to pay with mobile phones instead of cash and cards.”

Gartner expects Short Message Service (SMS) and Unstructured Supplementary Service Data (USSD) to remain the dominant access technologies in developing markets due to the constraints of mobile phones. Wireless Application Protocol (WAP) will remain the preferred mobile access technology in developed markets, where the mobile Internet is commonly available and activated on the phone. Mobile app downloads and mobile commerce are the main drivers of WAP payments, and WAP will account for almost 90 percent of all mobile transactions in North America and about 70 percent in Western Europe in 2011.

Money transfers and prepaid top-ups will drive transaction volumes in developing markets. These are seen as the “killer apps” in developing markets, where people value the convenience of sending money to relatives and topping up mobile accounts. This is most obvious in Eastern Europe, the Middle East and Africa, where these two services will account for 54 percent and 32 percent of all transactions in 2011.

“Thanks to the success of mobile application stores, such as Apple’s App Store, and the efforts in driving mobile sales by major retailers, such as Amazon and eBay, merchandise purchases far outweigh other use cases in developed markets, which include North America and Western Europe,” Ms. Shen said. “We predict that in 2011, merchandise purchases will account for 90 percent and 77 percent of all transactions in North America and Western Europe, respectively.”

Additional information is available in the Gartner report “Market Trends: Mobile Payments Worldwide, 2011.” The report is available on Gartner’s website at http://www.gartner.com/resId=1714114.

MasterCard announced earlier this week that it would partner with with ISIS to help foster the growth of NFC-based mobile payment solutions in the U.S. ISIS, formed in November last year by Verizon Wireless, AT&T and T-Mobile, intends to deliver a complete mobile wallet solution that ambitiously aims to replace cash, credit cards, debit cards, coupons and more with one comprehensive mobile solution. So we know about ISIS and now we know MasterCard is on board, but MasterCard is hardly a newcomer in the contactless payments space. BGR recently had a chat with MasterCard’s Senior Vice President of Mobile, James Anderson, to discuss the past, present and future of mobile payments here in the U.S. Of course NFC-based contactless payment solutions are at the forefront of discussions surrounding the mobile payment space right now, and who better to discuss NFC with than the man recently named Vice Chairman of the NFC Forum? Our full Q&A with Anderson can be found below.

BGR Interview is a series of interviews and conversations with executives, influencers, tastemakers and innovators, covering the mobile and consumer electronics industries.

You’ve recently been named Vice Chairman of the NFC Forum and you’re becoming a recognized figure in the space. Do you think mobile contactless payments are ready to take off in the U.S.?

I really feel that it’s less a matter of whether the U.S. will be receptive but rather when the technology will hit critical mass. Right now the United States is leading the industry in mobile innovation, and as part of that, payments are becoming very interesting to a number of players. A recent study by Juniper has forecasted that NFC payments will reach $50 billion by 2014. They also predicted that the United States and Western Europe would represent the majority of the market.

Our own research shows that U.S. consumers are ready now. A recent survey MasterCard commissioned revealed that 63% of respondents between 18 and 34 years old were ready to make payments with their cell phones. US consumers are already making purchases via the internet on their mobile phone; contactless will be an extension of that action.

As of March 2011, the CTIA said cell phone penetration now sits at 96% in the U.S. Why has it taken so long for companies to focus on phone-based contactless payments here?

MasterCard has been at the forefront of making mobile phones into contactless devices. Over a decade ago, we worked with Nokia to embed a PayPass chip into phones. We conducted the original contactless payment trials in Orlando and Dallas, working with national merchants at over 80 locations.

Since then we’ve been working, through our own efforts, and through bodies such as the NFC Forum, to line the right players up, behind a common technical approach, supported by open and global standards. We believe now that the right pieces are in place. One of the biggest drivers of interest in the last few years has been the rapid adoption of smartphones. Back in 2001 futurists were talking about the coming power of mobile devices accessing the Internet, but the actual user experience was a long way from the vision. Now in 2011, with the launch of iPhone and the rapid adoption of the Android Operating System, the dreams are turning into a an everyday reality and people are used to the idea of being able to do almost everything on their mobile devices. That creates a very healthy environment to introduce mobile payments, because there is a ready consumer appetite for doing more on the mobile device.

Are cell phone companies adding a layer of complication by coupling NFC with software solutions? How are these solutions better than integrating something like MasterCard’s PayPass, which doesn’t require a battery or on-board software, into cell phones?

I think I’d position that question this way, “How do you compare the advantages of mobile contactless versus card-based contactless payment?” Card-based contactless payments add speed and convenience to the existing user experience of paying with cards. MasterCard has been the leader in deploying PayPass cards to consumers with more than 90 million in circulation. Mobile contactless takes the speed and convenience to the next level, by embedding the capabilities into a device consumers have with them at all times and places. In addition, since it is a computing and communications platform in one, developers and providers can create much richer payment experiences for their customers when they are working with the mobile platform, than is possible with cards.

How do we get around the dead battery issue? Is it overblown?

This is an area where a contactless card currently has an advantage over a phone. A card does not need power because it receives power from the POS terminal. A phone could be configured to perform in the same way — but you would lose many of the features that make it desirable to do a transaction on the phone, such as the control that comes from entering a code before a transaction is completed. Since these control features are important to consumers, MasterCard’s current recommendation is that phone be configured not to perform a transaction when the battery is dead. This recommendation might be modified as consumers gather more experience with the technology.

Security seems to be a major concern. Why do you think this is the case?

Security should always be a concern of consumers when they think about payments. After all — we are talking about money. The good news is that we’ve developed mobile contactless payments with security right at the center; we are not retrofitting it to an existing system. If we were not confident that the system is secure we would not be associating the MasterCard brand to it.

The security can be thought of as layers that protect the integrity of the transaction, and by extension protect the consumer.

(i) We chose NFC technology as the basis for mobile contactless payments because of its very short range (less than 4cm). We wanted to make sure that consumers still made conscious decisions to pay — we don’t want payment happening accidentally.

(ii) We built into the PayPass protocol technology that generates dynamic data every time a transaction is made. This dynamic data means that in the event transaction data is captured by a bad actor, the data has no value.

(iii) We require that the PayPass application on the phone be housed within a tamper-resistant chip known as a Secure Element. It’s the same type of chip that is found on EMV Chip and PIN cards in many parts of the world, and has proven to be a very robust way to protect valuable assets in a highly distributed system.

(iv) Developers of wallet software on the phones often provide an option for consumers to enter a code prior to accessing the wallet.

(v) Once a transaction is made it traverses the MasterCard network, the same network that supports billions of card transactions today, and the consumer is afforded the same protections (e.g., zero liability guarantee) as card-based transactions.

Bottom line: we’re glad when people want to talk about security because MasterCard’s been working on making mobile payments secure for more than 10 years.

Are security concerns the biggest barrier to widespread adoption?

I don’t think so. Today, the fact that consumers can’t walk into a store and buy an NFC phone is the biggest barrier. The great news is that with announcements from industry leaders like Samsung and RIM, that story is going to change very quickly in the next year.

Google used an NFC chip from NXP with built-in security in its Nexus S 4G smartphone. Will similar solutions become an industry standard?

Different companies have taken different approaches to enabling a phone with a Secure Element. In general, network operators prefer to install the payment application in the SIM card. This is the architecture that we just deployed with Orange and Barclaycard in the United Kingdom. Other companies have opted to use an embedded Secure Element (where the Secure Element is added to the phone and is not removable like a SIM. We support that architecture as well as you have seen with the Google program. We embrace solutions that meet our security requirements and that deliver a good user experience. We expect both architectures to continue into the future.

Tell us about MasterCard’s involvement with Google Wallet. Is Google’s product going to be a catalyst in the U.S.?

The founding partners of the Google Wallet — MasterCard, Google, Citi, First Data and Sprint — are in a unique position. With Android, Google has the largest market share for smartphone operating systems in the United States, they have a vast database of information, amazing partnerships and now, working with Citi, MasterCard, First Data and Sprint — a real ecosystem to make contactless mobile payments a reality. All of us understood that we needed to collaborate to make this happen. For MasterCard, we already bring an existing expertise and an infrastructure that has been built on 45 years of transactions and the MasterCard PayPass acceptance network. By using that, consumers will be able to tap and pay at more than 125,000 merchants in the U.S. and more than 300,000 globally. We believe that the combination of our network with the other founding partners’ expertise will help speed up the mobile payments industry in the United States.

It has been rumored for quite some time that Apple is preparing to enter the contactless payment space, perhaps as soon as September when it is expected to launch its next-generation iPhone. As much power and momentum as Apple has, do you think it will become an instant market leader?

Apple is a major technology player with a lot of influence and if they adopt NFC it would be further validation of the technology.

Have you had any discussions with Apple regarding contactless payment solutions?

MasterCard has a 45 year history of innovation in payments and are confident that we will be at the center of delivering the next generation of mobile payments to consumers around the world.

We have partnered with mobile carriers, handset manufacturers and financial institutions globally to launch numerous NFC-payment trials, PayPass mobile payment tags, person-to-person money transfer services, and iPhone/Smartphone Apps that are helping deliver a rich mobile commerce experience for consumers.

Talk to us a bit about interoperability standards. Are we in a place where POS systems and other components are standardized to the point where compatibility of upcoming solutions is a non-issue?

MasterCard is a strong advocate of globally interoperable standards which is why we have invested in PayPass. All existing PayPass merchants around the world are able to accept payments from an NFC phone loaded with a PayPass application. We are working closely with all involved stakeholders (payment terminal vendors, merchants) to increase the number of point of sale terminals able to accept PayPass payments — be they from a card or a phone.

Last but not least, of course: is plastic dead, and are cell-phone based contactless payment systems its executioner?

Plastic is far from dead. We see co-existence of the different form factors for a long period of time. Cards have served the payments industry very well in providing a low-cost platform for the delivery of electronic payment services to a mass market, and displacing cash. The good news is that we are able to carry forward all the strengths of card payments, and make the experience better by embedding it in the mobile phone.