Tight Deadline for New Effort to Standardize Mobile Payments

Two organizations that serve major U.S. banks are studying diverse mobile-payments projects around the world and hope to issue within the next 60 days recommendations for financial institutions to follow in this country. The effort, spearheaded by representatives of The Clearing House Payments Co. LLC and the Financial Services Technology Consortium, follows months of pilot projects and processor startups in both proximity payments and person-to-person payments based on mobile phones. The two groups, both based in New York, hope to speed bank-sponsored programs to market by identifying common technical specifications and business models that will work in the U.S. market. The 60-day timetable, however, means the time for study is short. “There's a fair amount of urgency among our members,” says Rick Leander, executive vice president at.The Clearing House. Leander says that urgency stems in part from banks' need to find out quickly whether, at the current stage of evolution in mobile-payment technology, a common blueprint can be hammered out for all or most banks. If not, he says, banks will launch proprietary programs for their customers. “They're not going to get left [at the station], they're not going to not play,” says Leander. The two organizations are examining existing projects in Europe and Asia, most particularly in South Korea, where an initiative involving banks, card associations, and mobile carriers recently got under way. For each project, they are interested in technical specifications for device interfaces with networks as well as in the business case the sponsors have developed, Leander says. They are hoping to build recommendations suitable for the U.S. market from what they learn. These recommendations may or may not contain technical standards for mobile payments. “What we're hoping to get to is a standardized process, a way forward for the industry,” says Leander. “That may take a number of routes, one of which may be a standard.” Not only could these recommendations speed time to market for banks, they may also help address issues holding back mobile payments. One of these is the current debate between banks and their card associations, on the one hand, and wireless network operators, on the other, over control of contactless payments via near-field communication. Network operators have been clear that they must control these transactions to justify investment in NFC, but banks are loath to pay what amounts to a toll to carriers for each transaction. While not speaking directly to this issue, Leander says the two groups “are interested in the role various constituencies will play.” The Clearing House, a bank-owned company that runs the country's largest check-image exchange as well as the only private-sector automated clearing house operator, began early this year working with the FSTC on mobile payments. The FSTC, a group that allows competitive financial institutions to work out knotty technical issues, has many members in common with The Clearing House and had already begun discussing a standardized approach to mobile payments. Some 13 member financial institutions from The Clearing House are participating in the project, including Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., US Bancorp, and Wachovia Corp. MasterCard Worldwide has launched mobile-payments pilots in New York and Dallas. Visa USA concluded a six-month pilot in Atlanta last spring. Meanwhile, a raft of new companies have emerged to process P2P payments via handsets, while PayPal Inc. last year launched PayPal Mobile to allow accountholders to pay each other via their cell phones.