Cingular-Backed M-Payments Service Could Boost Contactless Market

A mobile payments and banking service backed by Cingular Wireless and CheckFree Corp., announced this week, could pave the way to faster and more widespread adoption of contactless payments, its backers say. The service, which is being tested by an unnamed regional bank and is expected to launch in the first quarter, allows bank customers to check balances, pay bills, transfer funds, and perform other online-banking tasks through their handsets. It follows an unusually active period this year during which players ranging from PayPal Inc. to a slew of startups have launched mobile payments services, and it represents the first serious effort by carrier giant Cingular to bring payment and other financial services to its 58.7 million subscribers. But, if the new service proves popular, it could also give the nascent contactless payment market a boost by conditioning potentially millions of consumers to perform point-of-sale transactions on their cell phones. The idea, its backers say, is to establish consumer confidence by starting with relatively simple transactions like balance inquiries. “This is a progression of behaviors,” says Matthew S. Lewis, executive vice president and general manager for the electronic commerce division at bill-payment processor CheckFree, Norcross, Ga. “I don't think [consumers] will do contactless transactions if they haven't checked their balances.” Indeed, the thinking behind this latest m-commerce gambit seems to betray some impatience with the progress of contactless payment, which allows cardholders to pay with radio waves emitted by specially equipped cards, fobs, phones, or other tokens. So far, about 30,000 merchant locations have installed the readers necessary to accept contactless transactions. “We absolutely believe in contactless payments, it's absolutely going to happen, but we have to start driving consumer behavior today,” says Tripp Rackley, chairman and chief executive of Atlanta-based Firethorn Holdings LLC, which makes the handset-based application that drives the Cingular-CheckFree service. “We can't wait for all merchants to have contactless terminals.” Rackley hopes that enabling millions of cell-phone users to perform payments will create built-in demand that will drive merchants to install contactless gear. Certainly, this latest mobile application is attracting plenty of interest. A presentation made on Wednesday by Cingular, CheckFree, and Firethorn drew an overflow crowd on the exhibit floor at a banking-technology trade show in Las Vegas organized by the Bank Administration Institute. And other providers of electronic-banking services may not be far behind in extending those services to the mobile market. Matthew P. Lawlor, chief executive of CheckFree competitor Online Resources Corp. says his company will introduce a mobile product by the end of next month. Although Cingular, CheckFree, and Firethorn will not discuss the specifics of their partnership, they clearly see potential profits. Cingular looks to be able to bundle payments and banking services into its so-called deck, the screen-based applications that consumers sometimes pay a premium fee to use. CheckFree hopes to drive more bill-payment transactions. Firethorn will receive fees from financial institutions to enable the service for their customers, though Rackley will not discuss pricing. “There's not a vertical industry in the country that's not trying to figure out how to play in the mobile space right now,” says Rackley. Although Cingular is using Firethorn's platform exclusively, Firethorn is hoping to sign up other mobile carriers and will work directly with financial institutions that are not CheckFree clients. Four years in the making, its technology manages the welter of handsets and mobile operating systems in the market by creating a standardized service to deliver online banking programs to consumers on their mobile devices. Its application resides on the phone as part of the deck and downloads key data, such as balances and e-bills, from a Firethorn server, speeding up transactions and allowing users to bypass the often clumsy tinkering necessary to use Wireless Application Protocol (WAP) sites. The application includes a digital certificate linking the phone to the consumer's bank account, and requires a six-digit PIN to use. To the bank, transactions look the same as they do through the online channel. For now, the trio is gearing up to go beyond its current pilot early next year. Lewis says CheckFree is ready for commercial service. “We're turning the horses loose,” he says.