Deutsche Telekom AG's announcement July 2 of a mobile payments partnership with MasterCard highlights the opportunities for issuers in mobile wallets being developed worldwide, including in the U.S.
Telekom was earlier involved in the continent's Mpass mobile payment initiative announced nearly a year ago with other German telcos.
The Mpass initiative, which initially sought to operate without the backing of banks, appears to have stalled in Europe, says Zil Bareisis, a London-based senior analyst for research firm Celent.
In light of this, Telekom's decision to work with MasterCard is a "victory for the established open-loop schemes," Bareisis says.
Open-loop mobile payment systems, such as the telco-backed Isis venture in the U.S., typically allow issuers to participate even if they did not have a part in designing the mobile wallet. Isis has attracted large issuers such as JPMorgan Chase and Capital One.
MasterCard and Deutsche Telekom are working to offer Near Field Communication-based mobile payments through the smartphones of the Bonn-based telco's 93 million mobile customers across Europe.
Deutsche Telekom will issue the MasterCard products via its subsidiary ClickandBuy, which owns an e-money license. The companies intend to invite issuing banks and other partners as well.
The first consumer tests of this system will occur in Poland this year and in Germany early next year. The mobile wallet will allow consumers to buy train tickets, make purchases at NFC-enabled terminals, cash in rebates and participate in customer loyalty programs when a specific product is purchased several times.
"The payment space continues to be ripe for innovation, particularly at a time when we're seeing an accelerating movement away from cash, driven by technology," Ann Cairns, president of international markets for MasterCard Worldwide, said in a press release.
Telekom intends to integrate the NFC technology into the mobile-phone SIM cards, with each transaction confirmed via a text message.
The MasterCard and Telekom partnership echoes "a similar announcement between Visa and Vodafone not that long ago," Bareisis says.
The Visa Inc. and Vodafone PLC mobile pay partnership, which was announced in March, was followed shortly by moves from Samsung Electronics Company Ltd. toward its own mobile wallet initiative in Europe.
Telekom's work with MasterCard "is a huge step on our way to increase mobile payments," Thomas Kiessling, chief product and innovation officer for Deutsche Telekom, said in a press release. "With MasterCard we have a well-known and experienced partner generating growth in this important market segment."
Some industry observers speculate that mobile wallet initiatives in Europe take longer to develop because the region lacks regulations for NFC and other technologies. As a result, the European Union is closely monitoring the U.K. telcos' Project Oscar mobile payment initiative.