Deutsche Telekom (DT) has followed in the footsteps of other major European carrier groups in unveiling plans to launch a prepaid card in association with one of the big card-payment networks. The German incumbent – which has 90 million mobile subscribers in Europe through its T-Mobile subsidiary – has partnered with MasterCard to enable payments from a stored-value account linked to both a mobile wallet and a plastic card.
Unlike most of its competitors, DT is able to launch a payment product without the need to partner with a banking intermediary that will cream off most or all transaction revenue. That’s because DT owns an e-money license it acquired with the purchase in March 2010 of internet payments service provider ClickandBuy – which now operates as a DT subsidiary.
As with the other major European carrier groups – namely Orange, Telefonica and Vodafone – DT’s ultimate aim is to play a key enabling role in mobile contactless payments, by authenticating payments through SIM cards and turning its mobile wallet into the must-be place for third parties wanting to target mobile users with NFC services. And like the other carriers, its business model will be to charge third parties a monthly fee per user for each application placed in its wallet and SIM cards. Additionally, it will earn transaction-fee revenue in its capacity as an e-money-license holder.
But the margin made from prepaid-money transactions tends to be small. And there is the risk that such transactions will cannibalise operators’ much higher margin carrier-billing business. DT is aware of that threat, but sees much more market potential in m-wallets than carrier billing – not only because m-wallets can enable much more than just micropayments, but also because they offer a much better user experience.
DT is not making NFC the be all and end all of its m-wallet service. It recognises that conditions are still not ripe in most markets for the widespread adoption of NFC services, so in many places it will be launching with alternative “bridging technologies”, such as QR codes, that also provide a link between mobile phones and the physical world.
Nevertheless, its m-wallet will be debuting in Poland this year because Poland is the country within its footprint where there is the highest penetration of NFC-enabled payment terminals in shops. Together with the wallet, DT will also be issuing stickers incorporating NFC antennae to NFC-enable phones that do not come with the contactless technology preinstalled – which is the majority.
DT will also be targeting another missing piece in the NFC payments ecosystem – contactless-enabled point-of-sale terminals in brick-and-mortar stores. It will be supplying such terminals to retailers on either a rental or purchase basis. But, unlike Japanese carrier NTT DoCoMo, it won’t be subsidising their cost. No Western operator has committed to such a move.
Peter Vesco, senior vice president of DT’s payments business unit, told Informa Telecoms & Media that there is no point in subsidising NFC POS terminals for retailers who are not sufficiently convinced of the business case for contactless payments and buying the necessary infrastructure.