O2 Tube trial takes mobile payments underground

O2 has today launched a six-month pilot of NFC (near-field communications) wallet phone technology in London, describing it as the "largest and most comprehensive trial in Europe" of a technology that's already big in Japan.

But even as the 500 guinea pigs get their hands on the Nokia 6131 NFC clamshell handset being used in the trial, O2 admitted there's no prospect of an imminent rollout of mobile wallet NFC as a business model.

The 500 mobile wallet testers will be able to use the phones to pay for travel across London, as well as for other services such as accessing smart posters at The O2 to download information or ringtones. A smaller number - 225 - also have access to a Barclaycard Visa application preloaded with £200, which they can use to pay for low-value goods at selected retail outlets.

O2's partners for the trial include AEG, Barclaycard, Nokia, Transport for London, TranSys - the consortium that runs the Oyster card - and Visa Europe. Visa has already launched a contactless payment system known as payWave which is available in some areas of London and enables customers to wave a credit or debit card in front of a reader to pay for low value goods without needing to enter a PIN. Barclaycard has launched a contactless credit card called OnePulse that also has Oyster card functionality built in.

O2's vision is all these different cards will end up being apps in your phone, turning it into a virtual wallet that can be used to pay for travel, goods and services - in addition to doing all the other things a phone can do.

However, the Barclaycard and Visa representatives at the launch were keen to stress they see mobile wallets as "entirely complementary" to plastic. Sandra Alzetta, senior vice president, innovation and acceptance at Visa Europe, said the wallet phone "just gives customers more choice" and is a "natural follow on" from Visa's contactless card system.

The earliest possible rollout date for wallet phone technology is late 2008, said Cath Keers, customer director, O2 UK and the company said it's likely to be two or three years before mobile NFC becomes mass market in the UK.

Banks, retailers and mobile operators all need to buy-in to the ecosystem and join forces to make it happen. Customers are also key to the future of NFC and the trial aims to find out how they use the technology and whether they actually want to use it. Before any commercial launch, the various businesses in the contactless payments ecosystem need to work out where the money will be made, O2 added. The trial is the first step in a "very long journey towards mobile phones replacing wallets", it said.

Asked about the size of fee a retailer would be charged on a £10 contactless transaction, Colin Swain, head of research and development at Barclaycard said it would vary depending on the retailer and the card being used.

Other questions raised at the launch included security concerns over what would happen if a wallet phone was lost or stolen. O2 said "the vision" is that one phone call would be all that is needed to "cut the cord" for everything on your phone.

No NFC handsets are being launched yet and O2 said it doesn't anticipate phones being available until next year. But hardware may end up being irrelevant to NFC, according to Richard Humbach, head of Nokia's Emerging Business Unit who said in future the applications would live on the SIM rather than the handset.

A recent report by Juniper Research predicts mobile wallet payments will account for $11.5bn globally by 2011 - the majority of which will be made in Japan, South Korea and the US, where NFC payments are already much better established, according to the analyst.

Speaking last month, Juniper senior analyst Alan Goode said: "In the UK, we see signs that NFC will be widely available. Looking at things like transport hubs, the infrastructure is in place."