Mobile phones replace credit cards…science fiction or reality?

Last summer, 250 Oslo-residents participated in the Near Field Communications (NFC) pilot project, “Tap2Pay”, run by Telenor and DNB, Norway’s largest bank. They used special NFC-enabled Samsung phones to make purchases at a few convenience stores in Oslo. With the trial complete and the results in hand, Telenor is banking on a bright future for mobile payment in Norway and beyond.

What the Tap2Pay users say about paying with their phones

Response to the Tap2Pay trial was largely positive, with 84 percent of the test group reporting that it was easy to use. They found it faster to pay by mobile phone and liked not having to use a pin code. One participant noted that it felt “futuristic, like science fiction” to pay with the mobile phone. An overwhelming 97 percent of the participants said that they want to use this type of service when it’s launched.

More merchants and more phones key to success of NFC

“What we learned from our pilot project was that mobile payment is something that people want and will use, if the solutions are adequate,” explained Viktoria Erngard, Vice President, Financial Services in Telenor Group. “But in order to succeed in the long run, we need to get as many merchants on board as possible and offer more NFC-enabled phones.”

One person in the test group responded that “if it was available on a smartphone” he would have used mobile payment all the time and not used a bank card at all.

Merchants have more time for customer interaction

Store merchants were largely positive as well. Most felt that the speed and simplicity of the service was convenient, as it gave them more time to pay attention to the customer instead of the transaction.  The service created a “buzz” among customers, and one merchant reported that the mobile payment solution became “the talk of the town”.

Purchase history

The average test group user made a total of six purchases during the May to August trial, resulting in a total average spending of 400 Norwegian kroner per person. Most of the transactions occurred at the convenience store Deli de Luca, a chain that sells food, beverages and other small items for people on-the-go.

Technical difficulties

Approximately half of all users did experience some technical issues during the trial, typically regarding software installation or lack of contact between the phone and the terminal in the shop. There was a dedicated customer service team available during the trial period, and 86 percent of the people who sought support reported that they received adequate assistance.

Addressing securing concerns

One of the main concerns voiced by the test group users revolved around the issue of security. Testers were concerned that if their phone was stolen, there would be no barriers to fraudulent use of the phone for payment, as there is no pin code.  However, most believed the addition of a pin code to be the answer to this concern.

Feedback critical to future launch plans

Telenor is taking all of the feedback from the trial to heart, and incorporating it in future launch plans.

“Security is a very important issue to address going forward, and we will. People were skeptical when bank cards were first introduced, so there’s also a learning curve involved with any new technology,” said Erngard. “This trial also told us that we shouldn’t be too quick to target a certain demographic with NFC. We initially assumed it would be young people who want to try new things, but we actually found that this is interesting for everyone. There is just a cool factor, as well as level of convenience, that’s appealing when paying with a phone.”

More operators, more banks and more merchants

According to Erngard, in order for NFC to become an everyday part of our lives, Telenor cannot go at it alone. It is a payment solution that requires more operators, more banks and more merchants to be on board in order for it to spread and become truly convenient for users.

“We need new merchants, new offers, new things all the time, or else it dies. This can’t only be Telenor and DNB; everyone needs to be on board,” said Erngard.

Telenor is aiming for a full roll-out of NFC services in Oslo and surrounding area(s) sometime in 2013, and foresees NFC as a viable option in many of its markets in the years to come.