20 November 2009 News

 

Cartes: wake-up call for the banks?

Fabien Buliard

Unsurprisingly, contactless and mobile payments remained the dominant themes at this year's edition of Cartes, the annual smart card trade show held this week in Paris.

Yet another remarkable aspect of the new initiatives presented on the exhibition floor and at the show's conference is how few of the most innovative projects come from the banking industry. The observation seems to have been shared by the conference organisers, as illustrated by the title of one of the streams: "banks, leaders or followers?"

Indeed, some of the most impressive initiatives in terms of contactless and mobile payment implementations seemed to be the work of new entrants such as retailers, start-ups, or internet players, while traditional banks appear to mainly sit on the fence, with the notable exceptions of Nordic banks and online banking security initiatives.

Regarding payments by mobile phone, questions were again raised around payment application ownership, business models, handset security, and the need for industry standards. And while they are far from new, most of them remain unresolved: should the contactless device reside on the phone's SIM card, on a separate SD card, or be built in the phone's hardware? Will mobile operators run their own payment services or will contactless payments remain the remit of the banks? Is the surge in demand for smart phones a game changer in the payment space?

Some speakers argued banks could not afford to simply wait and see, for they would risk losing ground to emerging players. During a presentation outlining challenges and opportunities around m-payments, Patricia Partelow, VP Network Emerging Payments at American Express, insisted that despite uncertainties on what the winning model will be, banks should be "moving forward and make sure they are a part of it, because when the standard is there, you won't have much time."

Asked if Amex might risk loosening its tie to the cardholder by seeing its branded plastic card disappear into a phone, she argued that serving customers through a mobile device would actually strengthen the relationship, as is the case in the online world, and offer a richer array of services, such as location services, contextual discounts, or direct use of loyalty currency. "You can't do that with a card," she said.

While demos on the Visa and MasterCard stands made it clear mobile payment applications are now mature, with successful pilots galore, the companies remained evasive as to the timeline of a full commercial deployment across Europe.

Real-world adoption is more promising in terms card-based contactless payments, with banks playing a more proactive role, often paired with public transport authorities. But there, too, some of the more promising business models and commercial rollouts come from the fringes of the financial services industry.

For instance, the financial services outfit of retail giant Carrefour started rolling out contactless private label cards nine months ago, featuring MasterCard's Paypass technology, and combining debit, credit and loyalty card functions. 48% of cardholders have already used Paypass for eligible transactions (under €25). 800 of the group's French supermarkets and hypermarkets will be equipped with compatibles terminals by the end of next month, with a plan to soon roll out the same model in other countries.

Among the products most prominently featured at this year's show were NFC stickers, a quick and easy way to make any mobile phone NFC-compliant, while handset manufacturers, telcos and banks get their act together. In Belgium, a mobile micro-payment platform called PingPing has been using SMS payments since 2006, and is now piloting sticker-based contactless payments for mobile phone, with a commercial rollout expected next year. Again, the initiative is driven not by a traditional bank but by a new entrant, owned in part by a mobile operator, Belgacom.

More details and Cartes news in the December issue of Banking Technology.