Citibank tests out payments using mobile phones

Citibank is starting a large trial of the use of mobile phones to make credit card payments at retail outlets and other points-of-sale in Bangalore, which the company is branding as "Citi Tap and Pay".

The trial will cover 3,000 to 5,000 mobile users and about 500 merchants, it said.

The trial is about more than the technology: it will be a production-scale pilot to find the appropriate business model for payments using NFC (Near Field Communications) and mobile phones, Jeff Semenchuk, executive vice president and head of growth ventures at Citi Innovation, told reporters Tuesday in Bangalore.

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.

There are a number of pilots under way using NFC for a variety of applications. Nokia, for example, is participating in over 50 such trials, including some in the payment area, said G.K. Chakrapani, director of business development at Nokia India.

For the six-month trial in Bangalore, Citibank will work with Vodafone, Nokia, MasterCard and VIVOtech, a vendor of technology and infrastructure for NFC. While Vodafone will be the mobile service provider, Nokia will supply the NFC-enabled handsets for the pilot, and MasterCard will offer its PayPass contactless payment and security infrastructure.

After the trial, Citibank will roll out the technology commercially with multiple mobile service providers supporting handsets from different vendors, Citibank officials said.

The companies partnering the venture will also look at new kinds of services, including accessing information on products, and store promotions and discounts through mobile phones, Semenchuk said.

Until these new revenue streams kick in, Citibank will earn revenue from its charges for the use of its credit cards, Vodafone will benefit from value-added network services, while Nokia will earn money from handset sales.

All four partners are investing in the pilot, Semenchuk said.

Consumers are concerned about security when using NFC and mobile phones for payments, although the technology is far more secure than current magnetic stripe credit cards, Semenchuk said. Once the initial consumer mental block is overcome, Citibank expects to benefit from a larger number of transactions prompted by the ease of use of the technology, he added.

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