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New VISA system to turn mobile phones into wallets will further erode mobile service providers control over handset manufacturers, says Logan Orviss

Visa, the world's biggest credit card payment system administrator, has launched a global system to turn mobile phones into wallets for millions of customers in a deal with the world's top handset producer, Nokia. Users can pay for groceries and other purchases by swiping a phone over a reader that electronically communicates with a microchip on the phone. Phone owners confirm the purchase with the push of a button and the deal is complete.

The service will bring together NFC (Near Field Communication) chip technology and standards developed by the Mobile Payment Forum, and will also allow users to manage their accounts and make peer-to-peer payments.

Brendan Logan, managing director of telecommunications industry consultancy Logan Orviss, commented: “This is further evidence of the erosion of the control that mobile service providers have historically had over the handset manufacturers as 3rd party payment and content providers seek to leverage their branded assets more effectively.

“The restructuring of relationships started with the development of SmartPhones, with much greater multimedia storage capability and WiFi connectivity. The mobile network ceased to be the only – or even the primary – access channel to the customer’s handset for high bandwidth content.”

“It will be interesting to see how Apple’s relationships with the mobile industry develop as they own ‘both ends’ of the relationship: software/content and hardware/handset. In the US Cingular was an obvious choice for Apple to be its exclusive US carrier partner of its iPhone, both because of their prior relationship (with Motorola) over the ROKR, and because, unlike Sprint & Verizon, Cingular does not have its own branded mobile download service. Unsurprisingly, the announced technologies to be adopted (GSM/EDGE, WiFi and BlueTooth) fit with Apple’s iTunes synch strategy like a glove. How tenable their US tactics will be in Europe later this year, and in the Far East in 2008, remains an open question.”