The sheer scale of mobile payments testing may lift the technology into the fast lane, but it's more likely creating a traffic jam.

From an innovation standpoint, the presence of competing plans is generally considered good, but there is also the risk of creating too much fragmentation, industry executives said this week at the Cartes & Identification conference here.

That fragmentation could make it difficult for any one system to attract the level of consumer adoption that experts say is necessary for a mobile payments system to last.

"The customer must have the opportunity to have the same experience whatever his operator and whatever his bank," Nicolas Houery, the director of the European Mobile Payment Association, said Tuesday during a presentation at Cartes, according to an interpreter.

In the U.S., numerous approaches to enabling consumer phone transactions are taking root. But France's testing of a singular model may prove more practical.

Experts offer as geographically replicable a strategy championed by the association, a consortium of European banks and telecommunication companies. It is testing a mobile payments system based on near-field communication technology embedded inside mobile phones.

In late 2007, the group launched two pilot tests in the French cities of Caen and Strasbourg that involved about 1,000 customers and 500 retailers. Several wireless carriers, including Orange, which is part of France Telecom SA, and Bouygues Telecom are participating, as are financial institutions. That has helped in developing a system that can be scaled nationwide, Houery said.

"Interoperability … is crucial to our operations," Houery said, adding that industry stakeholders have been able to work in concert with Visa Europe and MasterCard Inc. as well as organizations in charge of developing certifications to build standards that encompass all participants.

The group has since started deploying its Payez Mobile system in the city of Nice and plans for a nationwide rollout in 2012.

Patricia Partelow, the vice president of network emerging payments at American Express Co., said consistent standards play a crucial role in consumers' satisfaction, pointing to France as an example of a smart approach.

"What we've heard is that when customers do get a good experience, as they have in France, satisfaction is high," Partelow said during a presentation.

That satisfaction helps companies participating in different systems to build their business case, with "the key factors being ubiquity, ease of use [and] interoperability," Partelow said.

"That really just drives the need … for standards," she said.

Houery said that the association's approach hinges on systems "that are very much already in existence" on the banking side.

"It's true for a dialogue between mobile handsets and payment terminals, that's pretty new," Houery said.

In May 2009, the association published 600 pages of technical documents covering all aspects of mobile payments "using Visa bricks and MasterCard bricks," Houery said.

Ideally, a successful mobile payments system in the U.S. would be able to scale globally, Partelow said.

Because of that, payments networks, banks and other parties need to carefully weigh the speed with which they go to market with new technology and how they devise an approach that is applicable in multiple settings.

In the U.S., much of the development taking place is by "first movers" who are "wanting to come out ahead and capture a certain share, a position, in the market," Partelow said. Ideally, a mobile payments system would be open enough so that if a consumer is "a Sprint customer and an Amex cardmember" they "wouldn't have to choose" a different carrier or card brand to participate.

Partelow said there is a recognition that collaboration is needed between multiple parties, noting that the Federal Reserve banks of Boston and Atlanta have hosted a series of meetings on mobile payments in recent months with payments and telecommunication executives.

Mobile payments in the U.S. are expected to reach $214 billion in gross dollar volume by 2015, up from $16 billion in 2010, according to a report from Aite Group LLC of Boston. The figures include transactions involving mobile bill payments, mobile contactless payments, carrier billing transactions and others.

Mobile contactless payments are expected to account for $22.6 billion of the 2015 projection, according to the report.

But mobile payments, particularly those made with contactless technology, still face several barriers to adoption.

The Federal Reserve Bank of Boston said in a May 2010 report that mass "deployment of NFC-enabled mobile phones, along with the requisite merchant readers, is costly, and the immediate benefits to each party appear to be small, given the widespread adoption and use of credit and debit cards in the United States."

There is evidence that U.S. players are attempting to work together in bringing mobile contactless payments to the masses, though their approaches are limited in their own ways, experts have said.

Visa is working with four U.S. banks — Bank of America Corp., JPMorgan Chase & Co., U.S. Bancorp and Wells Fargo & Co. — on mobile payments trials that involve issuing microSD cards to consumers to use with certain iPhone, BlackBerry and Android smartphones.

Visa on Tuesday said it was making its specifications for the hardware and software needed to offer the system commercially available to its issuing banks. DeviceFidelity Inc. is supplying the microSD cards, which banks would provide to their customers.

Analysts and industry executives have debated whether handsets that come pre-embedded with NFC chips from the onset will eclipse such an approach, but experts agree that the microSD card method allows financial institutions to go to market with a product that works with existing payment terminal technology.

Deepak Jain, the president and chief executive of DeviceFidelity, said during a presentation Tuesday that its microSD approach is compatible with the major mobile operating systems in use today.

While data projections from recent years have predicted an explosion in the number of mobile NFC users and mobile payments transactions, "there has been a disconnect in what some of those numbers project and what is actually happening in the field," he said.

Jain cited a lack of an agreement on a business model that satisfies all players, including wireless carriers, banks and payments networks. For a system to succeed, "you need to have a very large number of developers … that are developing on the" platform "to really inspire adoption," Jain said.

Isis, the mobile payments network being developed by a joint venture that includes AT&T Inc., T-Mobile USA and Verizon Wireless, represents some movement toward cooperation among the various players in the U.S. Isis transactions are to be routed over Discover Financial Services' network. Barclaycard US, part of Barclays PLC, is the first issuer that has agreed to participate.

Competitors to Isis, including the other card networks, say the system will have trouble gaining adoption because of its closed nature, though Isis' operators have said their goal is to collaborate with other carriers and banks.

"The challenge that Isis will have is to re-terminalize all those merchants to a terminal specification that is proprietary," said Geoff Iddison, the group executive for e-commerce and mobile at MasterCard, during a presentation on Tuesday.

MasterCard has done about 100 NFC trials in 38 countries since 2008, Iddison said.

On Tuesday, the Purchase, N.Y., payments network announced it was moving from a pilot test to commercialization with an NFC mobile payments application in Turkey.

It also plans to begin a trial with a major U.S. issuer in the first quarter of 2011 involving microSD cards, MasterCard said in November.

Depending on how Isis moves forward, the system "won't have applicability to our cardmembers," Amex's Partelow said in an interview.

"They would have to have a value proposition that would get [our card members] to migrate" to Isis, Partelow said. "At the end of the day from the data we've seen, people want choice."

Still, the fact that the Isis' participants are working on the system should have a positive effect on efforts to advance mobile payments in general.

"It just helps to reinforce that mobile payments are important and many different players need to be involved," said Dave Wentker, head of mobile products at Visa, in an interview Tuesday.

This story was reprinted with permission from American Banker.

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