With their "Project Oscar" mobile payment joint venture remaining uncertain because of a regulator's investigations, major European telcos are turning to traditional payment companies to get back in the mobile payments game. 

MasterCard's new five-year agreement with Everything Everywhere Ltd., a T-Mobile parent known as Orange in the UK, is a case in point. 

This partnership has no connection with Everything Everywhere's role with Project Oscar. The telco chose MasterCard to develop a series of mobile payment products for consumers in the United Kingdom, says Marion King, president of MasterCard UK and Ireland.

"We are planning a number of phases and will be testing consumer response," she says.

In a future phase of the agreement, the companies will embrace development of an open loop mobile wallet in which consumers would have payment cards and bank relationships of their choice included in the wallet, King says.

"Everything Everywhere has a very clear strategy to drive its business and it doesn't compromise anything else they are doing as they forge ahead with this," King says.

Visa Europe secured similar deals with Vodafone and Telefonica Digital in Europe this year, while MasterCard had previously secured partnerships with Deutsche Telekom in Germany and Telefonica in Latin America.

But those deals didn't state an intention to develop a series of new products, which MasterCard and the UK telco are clearly planning for the market.

MasterCard plans to follow a strategic path started with its PayPass contactless card by first establishing the prepaid contactless payment product linked to Orange mobile phones, King says.

The co-branded prepaid option for mobile devices would allow customers to make payments using Near Field Communication technology at more than 100,000 UK retailers, MasterCard says.

A representative of Everything Everywhere was not available for comment by deadline.

Because the European Commission continues to question potential anti-competition aspects of Project Oscar, Everything Everywhere and MasterCard are wise to establish a separate partnership to continue the work they have done together in the past, says Zil Bareisis, a London-based senior analyst for research firm Celent.

MasterCard and Everything Everywhere have worked with Barclaycard to develop the Orange Quick Tap contactless pay option and Orange Cash prepaid card in the UK.

MasterCard touts that the telco partnership allows it to develop mobile payment options for the up to 27 million people currently using Orange mobile phones.

While the 27 million is an impressive number, the question remains how many of them will choose to take up the service, Bareisis says.

If MasterCard and Everything Everywhere allow traditional banks a play in a future wallet concept, they can develop a product similar to the Google Wallet in the U.S., Bareisis adds.

Google recently updated its mobile wallet to allow consumers to register any card they use — but those cards simply fund a virtual MasterCard account, so merchants would see only MasterCard when they accept Google Wallet payments. 

King confirmed any transactions that consumers would complete using a future mobile wallet established through the Everything Everywhere partnership would "go through MasterCard rails … it would be similar to the Google Wallet concept."

The partnership also calls for development of a mobile card reader later in the year. 

"There is no doubt we will develop a product for small-business merchants to accept payments through a mobile device," King says. The companies do not plan to stick to "just one product announcement with one capability," King adds.

Such statements should stir plenty of interest in the payments industry, and should sound the alarms for current mobile reader developers, Bareisis says.

"It raises the question of whether it puts at risk the likes of iZettle and others who have launched in recent months to bring Square-type services to Europe," Bareisis says.

Subscribe Now

Authoritative analysis and perspective for every segment of the payments industry

14-Day Free Trial

Authoritative analysis and perspective for every segment of the industry