Polish banks bypass NFC

Thursday 11 July 2013 | 15:14 CET | Background

Six Polish banks have joined forces to develop a common payment system using mobile phones. The banks want to launch the mobile payment system by Christmas, adopting and adapting a platform from one of them. The service does not use NFC and can be seen as a competitive threat to the contactless service offered by MNO's.

Bank Millennium, PKO BP, Alior Bank, Banco Santander's Bank Zachodni WBK, Commerzbank's BRE Bank and ING Group's ING Bank Slaski combined have 16 million clients, or 70 percent of the banking customers that have access to electronic banking services. Their joint venture will be an independent company, open to new members.

The services will be based on the IKO m-payment service launched by PKO BP this year and supplied by Swedish service provider Accumulate. It’s an online service that uses a web based two factor authentication. No user credentials are stored on the phone. Going without a Secure Element means the service will run on most smartphones, older models included.

The system will allow customers with a smartphone application to generate a one-time transaction code to pay merchants with a special payment terminal.  Accumulate says its platform covers all payment situations (POS, online, man-to-machine, person-to-person, in-app), pairing via OTT, NFC, typing, QR- or barcodes; mobile thin security client app for Android, iPhone, Blackberry, Java and Windows Mobile/Phone. For now, it’s Android and iPhone though.

From the outset, the PKO’s IKO service supports payment at point of sale, including future support for NFC, as well as online payments, for “clicks and bricks” merchants. It also supports offline timed vouchers for shopping payments and ATM cash withdrawals. Users can make peer-to-peer money transfers to beneficiaries identified only by their telephone number.

Each of the banks in the consortium will offer account balance, transaction history and other mobile bank services through their own branded apps.

Accumulate’s partner HP is responsible for the full project at PKO, from requirement and specification, to the implementation, system integration and development of the banks backend systems.

Potential market

An international survey conducted by ING group puts the number of online banking users at 27 percent of the population, and the number of mobile banking users at 41 percent. Both are above the European average of 25 and 37 percent respectively.

Since the launch in March, PKO-IKO has attracted 40,000 users who have done so far nearly 70,000 transactions totaling more than 16 million dollars. The joint venture will expand the user base to around 70 percent of all potential customers. The banks have also said that they will offer lower transaction fees than the usual card rates.

The plans can be seen as a competitive threat for the mobile operators. Both Orange Poland and T-Mobile Poland have launched NFC-based m-payment solutions, in cooperation with MasterCard and several banks – including mBank, one of the members in this new group. The banks in the country have issued large amounts of dual mode cards. The number of contactless point of sale terminals is significant, helped by a lack of legacy systems. NFC-mobile payment is in an early state of play however.

At the end of March 2013, Mobile operator T-Mobile Poland announced that its MyWallet payment system had reached 10,000 users. Launched in November 2012, the system is based on the MasterCard PayPass solution and NFC technology. The service is accessible using cards from Raiffeisen Polbank, mBank, Getin and Noble banks. MasterCard and Morpho also offer the Paypass NFC platform directly to banks, independently from a mobile operator.

Mid-April, Mobile operator Orange Poland reported that the number of users of its Orange Cash NFC service has reached the threshold of 24,000, six months from the launch. The service is accessible using 19 smartphone models.

Growing an NFC ecosystem proves complex and requires investment from all parties in the value chain. The banks now launch a competing service that requires no direct involvement from any mobile operator, works on most smartphones and therefore has lower entry barriers. The banks claim that the project is the first in Europe to be backed by financial institutions, which they believe could encourage take-up among customers and retailers compared with similar ventures set up by mobile phone firms and retailers.

The platform is not dependent on NFC capable smartphones. Combination of banking and transactional functions in one device is a real breakthrough, the banks say. “We are pioneers in mass mobile payments in Poland, and this proprietary solution has realistic chances for becoming a local mobile payments standard in the European market”, says Piotr Alicki, CIO at PKO Bank Polski in a press statement.

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