San Francisco — Visa Inc. last week announced its strategy to promote its services to the mobile phone market through developing mobile payment application for the new wireless phones powered by both Nokia mobile handsets and those running Google’s new Android platform.
Additionally, Visa announced a pilot program that allows U.S. Bank Visa cardholders to transfer money using a mobile phone. Its affiliation with a major credit company is a win for Google’s fledgling mobile operating system.
The announcement looks to revitalize the attempts of credit card companies to push consumers toward mobile payments and mobile commerce, the objective of using the mobile phone as a payment device has been around for along time, but floundered in the U.S. following the dot-com bust. With more than 3 billion mobile devices already in the market today, though, Visa sees a big opportunity to extend its reach, according to Elizabeth Buse, global head of product at Visa. Other efforts involving contact-less payment devices in the mid-2000s also failed to gain widespread consumer adoption.
She added that the 3 billion mobile phones offers a huge financial prospect and that fueled the company’s efforts for finding a useful service for mobile phone users.
However, Visa’s announcement could mark a turnaround.
“I certainly see the value in this from a functionality standpoint. Visa has been very calculated in establishing a much more global strategy surrounding the mobile channel. Rather than looking at an individual market and latching on to what is going on there, they are really trying to focus on the different things that are happening in different markets,” Bruce Cundiff, a Javelin Strategy analyst, said in a statement.
For T-Mobile’s Dream phone and also all other devices that will use Android as an OS, Visa so far has developed three services: Alerts, Offers and Locator, all planned to be release by the end of the year.
San Francisco-based Visa said Android users will be able to receive “near real-time” alerts about purchase activity, using the guidelines specified by the cardholder. Offers and Locator would empower users to receive planned offers, using the details of their previous purchases. Users also will be capable of using location-based mapping technology to find ATM machines and nearby stores where they can redeem special Visa offers.
Visa’s partnership with Nokia would allow users to make remote payments with their mobile phones, money transfers, as well as receive alerts and notifications.
Tim Attinger, Visa’s global head of product development, explained that the company is looking to expand the service by reaching agreements with as many phone operators as possible and also other handset makers. “This is the first step in a plan to get on as many platforms as we can,” he said.
The software will be broadly available to U.S. consumers by the end of the year, starting with holders of Chase Visa cards, and Visa says it also plans to add more banks later. Visa is also building payment software that would permit consumers to make mobile payments with Android phones.
Visa’s announcement came two days after T-Mobile USA showed off the G1, the first phone harnessing Google’s ambition to make the Internet easy to use on the go. The T-Mobile device is schedule to hit U.S. stores Oct. 22.
“By developing these mobile services for the Android platform, Visa has taken a major step toward achieving our goal of combining two of the world’s most powerful and ubiquitous consumer innovations, electronic payments and mobile technology,” said Ms. Buse.
The nation’s biggest payment network also entered into a deal with Nokia that is also about making payments possible using the mobile phone. Using the Nokia 6212 Classic-model cell phone, expected to be available starting next month, enable users the ability to make “contact-less” payments in stores just by flashing their phone at an electronic scanner, money transfers, as well as receive alerts and notifications, according to Nokia.
Similar “contact-less” capabilities for Android users are still under development, Visa said.
In its agreement with Google, Visa is obviously banking on some level of success for Android, Cundiff said.
“The Android platform is still very new. There is just one phone out there that T-Mobile announced earlier this week, so that is about it. It is not as though Android has taken over as a viable platform. But, Visa jumping in at this early stage is definitely a leadership role that they need to take," he explained.
Consumers come out on top with both services because they add layers of protection against identity theft and credit card fraud, according to Cundiff.
“The ability to discover fraud and fraudulent transactions or even prevent it before it happens, involving the consumer in that process is paramount. What Visa is doing is really working at the transaction level — has huge implications for mitigating identity theft and fraudulent transactions. It also gives consumers peace of mind,” he pointed out.
Nokia and Visa will first do trials with financial institutions, but for it to really take off the retail sector has to get onboard, and that is currently a blocking point, according to Richard Webb, directing analyst at Infonetics Research.
“Mobile payments are a good thing for the mobile sector, but there is no real gain for the retail sector, which would have to upgrade its systems for payments to work,” said Webb.
Companies such as Nokia and Visa have to give details as to what is in it for retailers, but there are also other aspects that need to be addressed before mobile payments can take off, including security and trust, according to Webb.
Visa also disclosed an agreement with U.S. Bank, lead bank of US Bancorp, to launch a mobile money transfer pilot program. According to Visa’s Website, there are 1.6 billion Visa cards in circulation with nearly $4 trillion transacted among its payment products in the 12 months ended March 31.
Surely, it might take sometime for the service to become popular but it does present the potential and once other companies will get involved, bringing their experience and ideas, the offer will only get better.