Sprint, eOne Global to develop mobile payment network

But don't expect wide-scale mobile commerce for at least another two years.

Sprint Corp. and eOne Global LP have formed a partnership to develop the first interoperable mobile payments network in the U.S., a key architectural element for development of highly touted but slowly realized mobile commerce systems. Once in place, the systems should allow consumers to make purchases via a digital credit card wallet contained in their cellular phones.

The deal, announced yesterday, makes Sprint PCS Group the first U.S. cellular carrier to join the global mobile payments network developed by Napa, Calif.-based eOne. eOne is a subsidiary of Greenwood Village, Colo.-based First Data Corp., which provides conventional payment processing at 2.8 million merchant locations worldwide.

Last month, Newbury, England-based Vodafone Group PLC and the T-Mobile International AG unit of Bonn, Germany-based Deutsche Telekom AG agreed to work with eOne to develop a similar network for mobile payments in Europe.

Jennifer Walsh, a spokeswoman for Sprint PCS, said her company and eOne are looking to enlist other U.S. cellular carriers in their alliance. The two companies plan to develop an end-to-end secure payment system that will make it easy for consumers to make purchases with a mobile, wireless device.

Sprint, Vodafone, T-Mobile and eOne are all members of the Wakefield, Mass.-based Mobile Payment Forum, which was established last year by four of the world's largest credit card companies to jointly develop standards for mobile payments. The four founding members of the Mobile Payments Forum are: American Express Co., MasterCard International Inc., Visa International Inc. and JCB Co.

Joe Chouinard, vice president of new e-commerce channels at Foster City, Calif.-based Visa and co-president of the Mobile Payments Forum, hailed the Sprint/eOne agreement as "as a catalyst for mobile payment services in the United States." But he quickly noted that retailers and restaurants shouldn't expect to start handling mobile payments anytime soon.

Chouinard said it will take at least two years to develop the building blocks for such a service in Europe, and even longer to do so in the U.S., which doesn't have as advanced or cohesive a mobile-phone infrastructure as Europe.

Before mobile payments can become a reality, financial institutions and card issuers need to develop standard, secure methods for authenticating mobile users -- as well as figure out ways for mobile devices to communicate with merchant terminals, Chouinard said. He described that process as difficult as figuring out a Rubik's Cube.

The Mobile Payment Forum envisions consumers who eventually store credit card numbers digitally on their phones, authorizing payment in a number of ways: by beaming the data to a terminal via infrared or Bluetooth wireless links, by using the phones to display bar codes that could be scanned by retailers or by using the phones to send Short Message Service messages.

Mobile payments also face another sizable hurdle: customer acceptance, said Chouinard. "It has to be easier than reaching in your wallet and having your card swiped," he said. After that threshold is crossed, card issuers and merchants need to figure out what goods and service consumers will actually buy with their mobile digital wallets.

John Duncan, managing director at eOne's mobile business unit, was more optimistic than Chouinard. He believes mobile payments could start as early as the first quarter of next year, albeit on a small scale. Duncan said that consumers would first use mobile payments to buy "digital content" over their cell phones, such as the customized phone ring tones highly popular in Europe.

He added that these "micropayments" would open the door for other types of payments by phone, which he said offer more utility than credit cards.

"You can't communicate with a piece of plastic, but you can with a mobile device," he said. The capability could eventually lead to location-based promotions and sales, where retailers in a mall, for example, could transmit information about sales to a wireless phone -- with the transaction quickly executed via mobile payments.

Alan Reiter, an analyst at Wireless Internet & Mobile Computing, in Chevy Chase, Md., said that although the wireless industry has been trying to develop mobile commerce for years, it has always come up short. He views the Sprint/eOne partnership as part "of a long-haul effort. There is no killer app here."

Reporter Matt Hamblen contributed to this article.

Copyright © 2002 IDG Communications, Inc.

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