An NFC deal between BT and an undisclosed large UK retailer have broken down because of disagreements over revenue costs and the expense of infrastructure.

Agreeing on revenue costs between MNOs, banks and retailers, as well as the costly infrastructure is causing problems for parties interested in developing mobile payment solutions, and is challenging the adoption of mPayments across Europe.

“Operators are coming into the financial world and neither party are sure how to negotiate with the operators and vice versa,” said Saadi Hussain, head of commercial propositions, BT. “Understanding the operator business and the finance business are very rare skills and at this moment each party doesn't understand the value of each other.”

While disagreements over revenue share are hindering the progression of NFC, the costs surrounding infrastructure are also causing set-backs. Ken Mages, co-founder of NFC Data, Inc. points to MacDonald’s as the only brand which is globally equipped to accept NFC devices. “MacDonald’s made that commitment 5-10 years ago, they knew NFC would happen, they had to be prepared,” he told mobile^SQUARED.

mobile^SQUARED research shows that implementing contactless technology would cost around $500 per till system. MacDonald’s has 31,000 restaurants worldwide and we can estimate that each restaurant has an average of five till points; which suggests that the company may have spent $77.5 million on enabling NFC technology.  

The prevention of NFC adoption could be hindered for a number of years, with Christian Kantner, head of IT and services, Paybox Bank AG in Austria pointing to the cost of unique payment terminals, as well as issuing plastic cards. “So in the end the costs are higher and the question is whether it is an advantage for the customer, and whether they will pay for it,” he asked.

Malin Holmerg, group director of products, Tele2, agreed with Hussain regarding the difficulties of sharing costs. She described a Swedish Joint Venture which has been started up among all MNOs to enhance the adoption of NFC and mobile payments. “One of the key principles to get this Joint Venture started has been to look at sharing costs with a very open view,” she explained. “It took two years to put in place and in the end we settled on a pragmatic, equitable split by operator.

“Now the discussion has come to when are we going to launch, and do we invite the banks? And in terms of the vendors we want them definitely to take part in payments,” said Holmerg.

In June 2011 three of the UK operators, Everything Everywhere, O2 and Vodafone also began a Joint Venture to encourage mobile commerce, NFC payments, digital coupons and mobile advertising. The three operators intend to handle the sales, delivery and payment on top of each carrier’s individual services.

However, Kantner argued that operators do not need to be involved at all. “There isn't a direct need for MNOs but there is a technology shift going on which provides a big opportunity,” he explained.

Hussain agreed, saying that MNOs are looking at NFC as a new market to enter not because they are crucially needed. “If you look at the voice revenue - that is slowing down,” he said. “So MNOs are looking at the opportunities available and obviously everyone carries a mobile phone – what else can you do with it? Once you’ve got a platform, new opportunities and business cases arise, which is how they see it. But in terms of do you need a MNO? No you don’t.”

Mages has little faith in MNOs adopting contactless payments for mobile, “Frankly in the US there’s been no adoption,” he told mobile^SQUARED. “Ninety nine point nine percent of Americans barely know how to read mobile statements. They’d be the last people I’d want to bill me stuff.  They’re not a very trusted entity in terms of billing, but I’m comfortable with Visa for example billing me. My vision is that those sorts of things will happen in your car key fob much sooner than will your mobile phone.”

caroline@mobilesquared.co.uk