N ew technology offers new opportuni-ties to simplify everyday payments. With contactless solutions, which are gaining momentum in a number of

European countries, consumers do not need to use cash or put a card in a terminal and enter a PIN code for small transactions. A quick tap on the terminal with their card or mobile phone registers the purchase – quickly, securely and efficiently.

“We’re convinced this ‘electronic wallet’ is the payment method of the future for small purchase transactions. A future where, for example, you land at Heathrow in London, take the Heathrow Express into the city and then buy a beer in the local pub – just by a few taps on your mobile phone. I believe 2014 and 2015 will be pivotal years in the move from current payment methods to contactless,” says Karl-Richard Floer, Director of Cards and Payments at Eika Kredittbank.

LoCAL pILoT pRoJECTEika Kredittbank is part of the Eika financial

services group, which is owned by OBOS (the larg-est Nordic cooperative building association) and 79 local banks in Norway. That makes them the third-largest banking group in Norway, and they have been working on implementing contactless solutions for the last three-and-a-half years. Nets has assisted them on their journey with product set-up and certification of the product with Visa. The local

connection gave the bank a unique opportunity to launch a special pilot project.

“We chose the little village of Geilo and its local Skue Sparebank (formerly Hol Sparebank and Nes Prestegjelds Sparebank) as the beacon for our test, and we involved the entire village in the pilot scheme. All the merchants and all the bank’s credit card customers were invited to test our contactless payment solution, and the feedback has been very

Towards the electronic wallet

New contactless payment solutions using a card or mobile phone offer obvious advantages for banks, merchants and consumers alike: faster, cheaper and simpler transactions with less cash and greater security. Now it is a matter of getting the whole value chain to see the utility value of pulling in the same direction, according to Karl-Richard Floer, Director of Cards and Payments at Eika Kredittbank, one of the first banks to implement these solutions in Norway.

Words

NILS RAgNAR LøvhAug,

NuCLEuS

image

MoRTEN BRAkESTAD

Karl-richard Floer

66

Digital values

positive. Merchants and consumers want this, but we soon realised we would have to bring these solutions across from credit cards to debit cards to boost the volume of the transactions. These are the cards people mostly use for minor purchases. So we’ve now entered a new test phase, bringing in even more of Norway’s local banks. By the middle of 2014, we hope to have 50,000 debit cards and 10,000 credit cards equipped for contactless payment out in the market,” Floer explains.

STARTINg wITh CARDSEika Kredittbank has deliberately chosen to start

with card-based solutions because this shortens the learning curve for consumers. However, they are also busy putting in place the infrastructure for and testing mobile phone based contactless solutions and are in close dialogue with the telecom sector in this work.

“We must quickly move across to mobile phones – people will use their mobiles to make payments, ▶

new solution mAy be lAuncheD in 2014

Nets and eika kredittbank are currently working on a pilot project with a view to introducing contactless payment solutions that use smartphones during 2014.

“The purpose of the pilot project is to identify areas of agreement and to describe how to put payment cards and credit cards inside smartphones. if we proceed, we will start by working to create an infrastructure for our future payment solutions using smartphones. We expect to have a pilot project ready in the market during 2014,” according to Karl-richard Floer.

“nets’ strength is their ability to handle transactions and payment infrastructure, and it is positioned close to the end-user. They have long been a reliable business partner to us for payment solutions, so it is only natural for us to see whether nets is able to offer a competitive solution now that we are looking to introduce an electronic wallet for our customers,” he continues.

An open, flexible solutionThe intended solution is based on a Trusted Service Manager (TSM) and a Mobile Wallet. The Wallet will enable contact-less payments to be made using payment cards or member-ship/loyalty cards stored electronically in the wallet.

in the future, consumers will not need to carry a physical wallet but will be able to pay using a smartphone, and will still have the benefit of all their existing customer loyalty concepts.

The TSM part of the solution will be generic, and will be open to all issuers that want access to secure, effective handling of means of payment using smartphones. The platform enables issuers to create and design a customised solution to suit their customers.

67

Cashless soCiety

going forward. We believe the key to success is to start with cards so that customers can see how things work in the contactless world and get used to that. But mobiles present new challenges which still need to be dealt with. What happens, for example, when customers upgrade or lose their mobile phone?”

youNg pEopLE AT ThE FoREFRoNTThe Nordic countries are usually at the cutting

edge of implementing new payment solutions, but this is not the case with contactless. Countries such as Poland, Turkey and the United Kingdom already have a widespread adoption of contactless solutions. However the gap is not hard to close in the Nordic region, as many minor transactions are already completed using payment cards.

“The fact that we’re accustomed to paying by card rather than in cash is an advantage here – lots of people pay for newspapers and soft drinks by card. We’ve also come a long way in terms of innovative, modern mobile solutions. I believe this will make contactless easier to implement, and young people especially will be quick to adopt this. They’re already living in the digital world and paying small amounts by card. And where some lead the way, others will follow. Then it will be important for banks and merchants to position themselves ready to deal with future payment structures, and to appear innovative and up to date.”

JoINT SoLuTIoNSFloer is concerned that, if contactless is to succeed, the solutions will need to be user-friendly, secure and non-proprietary. That means the mobile apps being developed must be usable with cards issued by any bank at all, just as customers make their own decisions about which cards they want to carry around.

“The whole value chain needs to work together to create joint, unified and supplier-independent solutions that make it easy for users to link into and out of the infrastructure. Proprietary solutions would make operation, maintenance and further development more difficult. Basically, we have to make things easy for the end-user. We’re already seeing major players, such as grocery chains, getting ready for new solutions. But some will always trail behind – it was the same when we made the transi-tion from cheque books to ATMs. I really wouldn’t have dared to be among them,” Karl-Richard Floer concludes. •

this is how it works• The technology used for mobile contactless payments

is called nFC. Both contactless and mobile contactless payments (nFC) specialised forms of rFid.

• in a contactless transaction, the payment terminal will search for a contactless card or mobile phone within a range of approx. 4 cm. a chip in the card/mobile phone communicates with the corresponding chip in the pay-ment terminal.

• For every payment made, or when the total amount exceeds a predefined limit (e.g. nOK 200), the consumer has to provide authentication via a pin code. The consu mer also has the option of making the use of pin mandatory for any purchase amount, if he or she chooses so.

68

Digital values

We must quickly move across to mobile phones

– people will use their mobiles to make payments, going forward.