Visa has launched an 'open loop' mobile money product

Payment processor Visa has launched a mobile banking product to serve consumers in developing nations. The company said that its Prepaid Mobile offering will provide an open platform for existing mobile money systems.

The product development was led by South African mobile money platform provider Fundamo, which Visa acquired in June 2011. It provides a platform for “closed loop” mobile money services provided by financial institutions and mobile operators, which are confined to their local markets.

“Visa is the largest payment processor in the world, so it’s got a vast global network that connects the financial systems of the world together, and that allows financial firms to process payment transactions across that network seamlessly,” said Aletha Ling, COO at Fundamo.

“Similarly, Visa Prepaid Mobile is an “open loop” system. This product provides a connection between local mobile money services into the Visa network, in order to bring global interoperability and new features into play, and that makes it fundamentally unique to what is being offered locally in these markets.”

She added that the product is aimed at banks and mobile operators that currently work with Fundamo, financial institutions that work with Visa, and other mobile money service providers that want to join the open loop system. Consumers of existing mobile money services will be able to use more features if their mobile money providers sign up to the product, such as withdrawing money from a Visa ATM, transferring funds internationally and performing e-commerce transactions over the web.

African and Middle East mobile operator MTN plans to offer the new Visa product to MTN Mobile Money customers across its markets. As part of the launch, the new product will be available to customers in Nigeria and Uganda.

The product aims to bring financial services to the 2.5 billion people in the world today who are underbanked or unbanked.

“This is the next generation of openness when it comes to mobile money systems,” said Ling. “Mobile money is the one way that we can see that we will be able to serve all of the unbanked and underbanked people in the world.”

Visa is focusing on an m-payment strategy

Financial services provider Visa Europe has invested £24.7m in mobile payments platform Monitise, giving the latter a greater European presence. Monitise is also consolidating its position in the US by buying out its partner in its US operation.

The acquisition of a 51 per cent stake in Monitise Americas, currently held by Metavante Corporation, a subsidiary of Fidelity National Information Services (FIS), will result in Metavante being issued with a 3.3 per cent stake in parent company Monitise plc.

Following the Visa Europe investment and the issue of shares to FIS, Visa Europe’s and FIS’s respective shareholdings in Monitise will be 8.8 per cent and 3.3 per cent. Visa Europe president and chief executive Peter Ayliffe, will join Monitise’s board of directors.

Ayliffe said of the investment, that the growth of mobile phone services and e-commerce, together with the evolution of the mobile handset into the smartphone, present two of the most significant opportunities for the payments technology industry. “We have made a significant investment in Monitise, our mobile payment technology strategic partner, as a demonstration of our belief in the crucial role that mobile has to play in the further development of the payments industry and also of our commitment to delivering the future of payments across Europe.”

Ayliffe said that mobile payments are one of the key pillars of Visa’s future strategy, adding that “We are already investing extensively in NFC, embedding the Visa mobile payment application into the SIM and core chip set in the mobile handset, as well as introducing bridging technologies like the iCarte application, recognising that it will take time for all mobile handsets to have NFC embedded within them.”

In September, Visa Europe announced the launch of Visa Mobile Person-to-Person payments and Visa Alerts, two services designed to help consumers manage their money and make payments using their mobile phones. Monitise was involved in both initiatives.

What's your wallet in?

It’s hard to escape the mobile money land grab at the moment. In the last few weeks I’ve written the word ‘m-wallet’ more than ever before in such a short time. But while the players involved say there’s enough pie to go around, it might not be to everyone’s taste.

In an interview with an Australian paper this week, Scott Thompson, PayPal’s global president, nodded toward the “massive opportunity” around points of sale in retail stores. PayPal, he said, “can now be a tender type, an option for payment at point of sale because that device is essentially a computer when it’s connected to a network.”

Thompson revealed that PayPal is working on three options for retail store payments, including one via mobile phone. It’s all part of the fanfare, since PayPal and parent eBay’s big bust up with Google, but it’s a tune everyone’s singing along to.

At the end of last week I spoke to Bill Gajda, Visa’s head of mobile, following the company’s $110m acquisition of mobile banking specialist Fundamo. Fundamo focuses on the emerging markets, where more than two billion people have a mobile phone but no relationship with a financial institution. This, says Gajda, represents a tremendous opportunity to provide basic and then more advanced financial services to the unbanked, by virtualising a Visa account on a mobile phone.

Visa argues that while mobile financial services in developing markets have become a core service offered by many mobile operators and financial institutions, these services are often limited in scalability and reach and are not interoperable with other regional payment services or global payments networks. Fundamo’s strategy is for m-banking and m-wallet to co-exist. Where the m-wallet offers a full accounting system and is far more cost effective way to reach emerging markets where bank accounts are not commonplace, while m-banking offers more advanced and connects to an existing bank account. The idea is to build up a user base with one service and expand it with the other in the future by expanding the utility of closed-loop systems.

Visa is taking advantage of the fair amount of fragmentation that still exists within this sector. “Relatively small companies have led the pioneering technology in this space. But as banks and operators move out to reach millions of people you need a roadmap that’s scalable and reliable with added features and benefits like a standards based approach with interoperability,” Gajda says. “The land grab started years ago but now accelerating and we are participating in land grab. We’re going to existing mobile money schemes and offering a Visa overlay to open up their system and allow for new kinds of transactions and interconnectivity between these closed loops.

“What we want to do in medium term is create a mobile payments ecosystem the same way we created a physical payments ecosystem,” he says.

With his long history at the GSMA, where he served seven years as chief commercial officer, Gadja sees a lot of similarities in his new role. To open up the value for everybody, you need to open the m-finance sector up to a broader ecosystem. “It’s like starting with voice connections on one network only, then interconnecting between networks. SMS in the US didn’t explode until we had inter-standard roaming. We’ve seen the same in the payments industry and will see the same in mobile payments,” Gajda said.

And his relationship with the operator community should help Visa out, as the finance firm sees operators as a key method of distribution and customer facing trusted brands.

But as we’ve seen with the launch of Orange’s mobile payments service, Quick Tap,, the business model for an m-wallet is an indicator of a radical change in the mobile operators’ positioning in the value chain. The operators are taking a step aside in order to remain relevant. There’s nothing to stop a company developing services running on top the connectivity provided by the operators. So they have to be smart to remain relevant.

As Gajda puts it: “There’s always a bank in the background, but many customers view operators as the issuer of an account. So it might not be that they play a diminished role in the future, it’s just that there’s more players coming in, and it may be a bigger ecosystem. So we intend to work with banks and carriers to make it an inclusive ecosystem.”

For a firm like Visa, this means tying its portfolio together across different markets. While on one hand it’s targeting the unbanked with a mobile wallet platform, via a new agreement with mobile money provider Monitise it is virtualising existing Visa accounts on mobile phones and offering a new array of payment types for things like mobile top-up, utility payments, and transit ticketing – all applications that can be pitched to what are less developed markets now, in the future.

The endgame is about much more than mobile payments or mobile banking. It’s a combination of the two, where the frontiers between m-commerce and e-commerce are blurring. “It’s the start of a digital money society,” says Gajda. “Closed loops cannot do the transactions we all take for granted if we have a card and computer. But by linking a Visa card with all these closed loops you enable people to perform other e-commerce transactions. You accomplish convergence. It’s the start of the mobile digital money society.”

O2UK will be launching its new m-payment service in the second half of 2011

UK carrier O2 has announced the companies it will be partnering with to deploy its mobile wallet service in the second half of 2011. O2, the UK arm of Spanish incumbent Telefónica, said it would be working with Wave Crest, FIS, Intelligent Environments and Visa Europe on the payments and processing systems for the next state of its financial offering, which will enable m-commerce, over the air top-ups, contactless payment and peer to peer transactions.

The UK operator, which had 22.3 million customers at the end of Q1 this year, according to data from Informa’s WCIS Plus, will also be relaunching the prepaid cash card it offers in conjunction with Visa, with the addition of contactless technology.

O2 said that Wave Crest will supply and operate the core banking platform, FIS the transaction processing element, Intelligent Environments will develop the m-wallet app, which O2 said will be compatible with a range of devices and Visa Europe. will provide access to its payment network.

“These partnerships take us another step closer to the launch of commercial mobile wallet services,” said James Le Brocq, managing director of Financial Services at O2. “We are working with the best partners in their respective fields to bring a high quality service to market under the O2 Money banner. We look forward to unveiling additional partners in the coming months.”

Isis looks to have done a U-Turn on its relationship with card providers

Isis, a mobile payments joint-venture between AT&T, Verizon and T-Mobile in the US, has scaled back its initial plans to roll out its own mobile payment network in favour of an m-wallet-style offering.

According to reports in the Wall Street Journal, the telcos have decided that setting up a separate payments network would be too difficult and time-consuming.

US-based carriers have been slow to gain traction in the mobile financial services market, where innovation has been hindered largely by the inability of the banks and carriers to agree to share the customer. The formation of Isis was geared towards taking a slice out of market share held by Visa and Mastercard, with the telcos setting up their own NFC-based payments network and collecting fees on transactions conducted using mobile devices.

In what looks to be a complete U-turn, the carriers are now said to be in talks with the card issuers to roll out mobile wallet services that operate around the storage and exchange of account data on subscribers’ credit cards.

When it launched last November, Isis announced that it was partnering with Discover Financial Services and Barclaycard in what was seen by many as an effort to play the banks and card issuers – many of which had been piggy-backing on handsets using MicroSD cards – at their own game. An Isis spokesman told the WSJ that Discover continued to be the venture’s partner but said it was open to forming new alliances.

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Cross-border services should be avialable by the end of next year

NTT DoCoMo, Japan’s leading cellular carrier, has teamed with Korea’s KT Corporation to develop cross-border near field communication (NFC) solutions that will work in both countries. The services, which will include mobile payment, mass-transit ticketing and promotional coupons, are due for launch in both markets from the end of 2012.

The two firms are developing NFH specs for devices, networks and charging platforms, with current plans calling for contactless IC chips to be embedded in certain Android handsets. The project emerged from the carriers’ joint Business & Technology Cooperation Committee.

DoCoMo, which has often sought to popularise the fruits of its own development on the wider world stage, has also said that it plans to submit an outline of the common specifications to various industry associations and standardisation bodies, including the GSMA.

“With the ultimate goal of building an international environment for compatible NFC services, DoCoMo has formed strategic tie-ups with payment technology company Visa, NFC chip and mobile handset manufacturer Samsung and SIM card vendor Gemalto,” the Japanese carrier said in a statement.

NFC comes to Malaysia

Malaysian mobile operator Maxis launched what it claims to be the world’s first commercial mobile payment system based on NFC (Near Field Communications) technology on Thursday.

Maxis FastTap is an integrated mobile payment service established under a partnership with Nokia, Visa, Maybank and Touch ‘n Go.

Available on the Nokia 6212 classic device, the NFC system allows users to purchase goods and services at more than 1,800 Visa payWave merchant locations as well as pay for toll, transit, parking and theme park charges at over 3,000 Touch ‘n Go points nationwide by waving their device over a reader at the point of sale.

The quick payment system is geared up for small item purchases up to a maximum of RM150 (Eur31) per transaction, as well as for ticketing and transportation payments.

Payments and banking are long time partners in one of mobile’s most enduring ‘will they, won they?’ romance stories. This is by no means the first time that either Wells or Visa have tested the waters.

This pilot has three phases to help the firms better understand how consumers will use mobile payment and service options on mobile devices equipped with near field communication (NFC) technology.

This pilot is by no means unique. M-banking and m-payments solutions have received fresh impetus with the resurgent interest in NFC.

NFC, like location-based services, biometrics and motion sensitivity, is a technological solution oft labeled as an ‘enabler’ in the mobile industry. For ‘enabler’ read ‘quite cool tech in search of market’.

Payments and NFC teamed up with notable success in Japan. NTT DoCoMo’s e-wallets service using Sony’s FeliCa contactless technology, launched in 2004. Though DoCoMo definitely differentiated itself by offering what is still a unique service – which drove an estimated $900m worth of payments during 2006 – the growing availability of NFC capability in devices from the likes of Motorola, Nokia and Samsung as well as efforts by credit card companies to push contactless terminals into merchant outlets, means almost any operator will potentially be able to offer payment programmes similar to FeliCa.

“Mobile devices have become an integral part of everyday life, just as electronic payments have,” said Peter Ho, product manager in Wells Fargo’s Card Services division. “Our customers expect the flexibility and convenience that mobile payments and services provide. Visa’s mobile platform delivers what we need to develop secure, mobile solutions.”

Options to be tested include secure, over-the-air delivery of payment account information to the mobile device; mobile payments in stores and restaurants accepting Visa payWave technology; receiving and redeeming mobile coupons; and account management services.