Emerging Payments

New Zealand Telcos, Paymark Prepare For NFC Venture

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New Zealand telecommunication companies plan to mirror a mobile-payment partnership model used in the United States as they prepare to make Near Field Communication a key technology throughout the country.

The country’s three mobile-network operators announced plans April 2 to partner with Paymark, a bank-owned payments provider that operates New Zealand’s ATM and debit card networks, to form a central trusted service manager network to make NFC available for mobile phones and payment terminals.

Vodafone New Zealand Ltd., Telecom New Zealand International and 2Degrees Mobile Ltd. announced with Paymark the intention to form a joint venture that would allow subscribers to make secure payments, collect loyalty points and pay for public transportation with their mobile phones.

The joint venture appears similar to the collaboration that created the Isis NFC venture in the United States (see story).

The New Zealand companies seek to create a payment system open to all consumers and merchants with a trusted service manager handling distribution of NFC downloads onto mobile phones, the companies stated in a joint press release.

In addition, the joint venture allows the telcos to continue to compete for customers and develop services in addition to the open system the trust service manager provides, the companies added.

One of the major hurdles in propelling NFC is the involvement of many players with competing interests, Richard Oglesby, senior analyst and mobile pay expert with Boston-based Aite Group, tells PaymentsSource. As such, it is necessary to have a joint venture come together to make all of the components of NFC development work properly in a target market, he adds.

“In New Zealand, this works in terms of getting all of the key players working together to make it a success because it is a much smaller market,” Oglesby says. “It gets more complex as markets get larger, so I am not sure there is a direct correlation there.”

Paymark will ensure the software applications provisioned for using the NFC technology adhere to the most rigorous global security standards, Simon Tong, Paymark CEO, stated in the release. "It’s the first time this particular mix of organizations has come together to provide a centralized trusted service manager, which will offer world-class, yet low-cost infrastructure–something New Zealand is well-known for around the world," Tong added.

Paymark plays the key role in what makes this venture different from others around the globe, Zil Bareisis, a London-based senior analyst for research firm Celent, tells PaymentsSource.

“The participation of an entity such as Paymark, a leading New Zealand payments network, should help drive the build-out of the necessary NFC infrastructure, particularly around acceptance,” Bareisis contends.

However, a critical success factor for such partnerships remains the ability of the new company to sign up the issuers of payments credentials, Bareisis adds.

Paymark serves more than 74,000 merchants and has more than 115,000 terminals in its network, processing nearly 127 transactions per second, the release stated.

Telcos in other parts of the world generally seek similar joint ventures as a way to combat the growth of mobile wallets created by newcomers to the payments industry such as Google Inc., the release stated. Telcos involved in the New Zealand venture have indicated their commitment to an open-access system for banks, mobile operators, loyalty schemes and transportation companies suggests they have no desire to control who can or cannot use NFC in the New Zealand market.

The New Zealand telcos view the technology as a business opportunity because they could charge banks and merchants fees when they use NFC to deliver coupons, loyalty rewards or other incentives back to the consumer mobile phones from the terminal reader.

Retailers eventually will start to ask how many middlemen are part of a payments system using NFC because they don’t want more fees, Oglesby warns. “In the New Zealand case, by having Paymark involved, they are going directly to the banks and eliminating some other potential middlemen,” he adds.

The companies did not indicate when the joint venture would be complete and what it would be called. The press release did not indicate whether the proposed joint venture would require any regulatory approval, as is the case in the United Kingdom, where the European Commission rules on whether proposed joint venture proposals follow established business, market competition and product guidelines.

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