After a pilot in Bangalore, Citibank is planning to expand its mobile payments program, using mobile phones with NFC (Near Field Communications), to other cities in India and around the world, a company executive said on Wednesday.
The bank started a trial in July of the use of mobile phones to make credit card payments at retail outlets and other points-of-sale. It branded the service as "Citi Tap and Pay".
NFC is a short-range wireless connectivity standard for communication between electronic devices. It is expected to be used widely for so-called "contactless" transactions such as payment and fast data transfers.
"Our experience during the pilot has been remarkable in terms of the customer adoption and usage which were significantly higher than we had expected," said Vijay Ramchandran , chief marketing officer of Citi South Asia, in a telephone interview on Wednesday.
The number of transactions by customers using the phone were about six times what they would make with a card, which suggests that the contactless payments were replacing either competitors' cards or cash transactions, Ramchandran said.
The 26-week trial by Citibank in Bangalore included 3,000 customers, 250 merchant locations and nearly 50,000 purchases, according to a white paper released on Wednesday by Edgar, Dunn & Company, a global financial services and payments consultancy.
Mobile proximity payments represent latent or unlocked demand that will generate transaction growth for electronic payments, it added.
Citibank is now ready to expand the services to other cities in India. It will however have to first get more merchants to deploy NFC-enabled readers, and also get more handset makers to offer devices that support NFC, Ramchandran said.
For the trial, interested customers had to acquire the NFC-enabled Nokia 6212 mobile handset, and use the mobile service from the Indian joint venture of Vodafone Group.
A complaint that Citibank received from customers during the trial is that there were not enough merchant outlets that had readers supporting mobile payments, Ramchandran said. Some users also said that the handset was not good enough, he added.
Having proven that the technology works, and customer acceptance is good, Citibank is now planning to get other banks, mobile service providers and handset makers involved in setting up a common infrastructure, including getting banks to incorporate NFC in readers at retail outlets.
"We believe that this cannot be done by a single player working alone," Ramchandran said.
As many handset makers are at least 18 months away from offering NFC as a standard feature on their handsets, Citibank is also planning to work with banks, handset makers and service providers to introduce new technologies that will allow current mobile phones to act as NFC-enabled devices, he added.
The technology and card data can for example be programmed into microSD cards that fit into the relevant slots in mobile phones, and would cost between US$7 and $10 at large volumes, Ramchandran said. The card data could also be embedded into stickers that can be stuck on the insides of the back cover of the phone, and would cost much less, he added.
The cost of the cards or stickers would typically be borne by the customers, Ramchandran said.
Of the estimated 30 million cards in India, Citibank expects that about 10 million will be moved to mobile payments using NFC in the next five years. As the current plastic card is not a "broken technology" and still works very well for a lot of users, the transition to NFC may not be rapid, Ramchandran added.
The banks will earn revenue from charges for the use of their cards, mobile service providers will benefit from data charges, while handset makers will earn money from sales of handsets that support NFC, Ramchandran said.
While the rollout across India would depend on banks quickly including support for NFC in the readers they distribute to merchants, and on regulatory issues, the rollouts in countries like Taiwan and Korea and some parts of Europe may be faster, Ramchandran said.
In Taiwan, for example, there are already readers that support NFC at many point-of-sale locations, and deployment of "contactless" services would be faster, once the issue of getting handsets to support NFC is solved, he added.