O2 UK Launches ‘O2 Wallet’ NFC Trial in London

| Nov 30, 2007 | Wireless Services - Europe | Competitive Intelligence Report
| Analyst: Emma Mohr-McClune

Current Perspective: Positive/Neutral
Vendor Importance: High
Market Impact: Moderate

Event Summary

On November 28th O2 UK launched its six-month O2 Wallet pilot, with 500 O2 UK user participants, with Transport for London, TranSys, Barclaycard, Visa Europe, Nokia and AEG. This trial is the first large-scale pilot of NFC (near-field communications) technology on mobile phones. Each trial list has been given a Nokia 6131 NFC handset installed with the O2 Wallet application for making purchases in selected retail outlets and travelling on London tubes and buses.

Analytical Summary

• Current Perspective: Slightly positive on O2 Wallet, because this is arguably the largest and most comprehensive NFC trial by a mobile operator in Europe ever, with significant learning opportunities for the future. However, it is difficult to see how this trial will extend into a national commercial service in the short-to-mid term; few areas in the UK, or even Europe, boast the high level of human traffic or existing NFC-ready infrastructure as the London Transport System. The high financial incentives on offer also risk skewing pilot results for user behaviour and take-up.

• Vendor Importance: High to O2 UK, as this is the largest and most significant trial the operator has undertaken in the field of NFC to date. The longer-term future business cases for NFC aligned with mobile advertising, value-added loyalty, joint-venture retail partnerships and secondary branding opportunities are fathomless, and this trial assures O2 UK a high-profile, first-mover advantage.

• Market Impact: Moderate on the UK mobile market, as this O2 Wallet trial is unlikely to develop into a major, nationwide competitive challenge in the short-to-mid term. The success of NFC is largely dependent on the existence of legacy ISO 1443 smartcard readers and the willingness of third parties to invest and participate in such initiatives, and it is difficult to see how O2 UK could extend this pilot to multiple cities with diverse and less-evolved public transport fare payment systems.

Recommended Competitor Actions

• The Vodafone Group and Orange should both approach O2 UK for a collaborative study into NFC user behaviour, arguing that joint learning and experience-sharing will accelerate services to market, for the benefit of all. Both Vodafone and Orange can argue that they have solid experience from other markets to share (Germany for Vodafone, France for Orange).

• The London Transport System has every incentive to open its Oyster payment card process to as many mobile operators as possible, and competitors should be building similar trials in London. The Oyster volumes are too impressive to ignore; competitors must not allow O2 UK a unique selling point.

• Competitors should note the way this trial ‘thinks big.’ In the past, NFC trials – and even commercial services – have tended to target specific sectors of users, such as football club members (e.g., Manchester City’s small-scale trial of November 2006 or Vodafone Germany’s service in Hanau [just 95,000 residents] launched earlier this year). By contrast, O2 UK is clearly partnering with big-brand retail partners with a considerable, nationwide presence; O2’s NFC goals are definitely ‘mass market.’

• All competitors should be keenly attuned to the implicit loyalty and mobile advertising business opportunities an NFC service such as O2 Wallet presents. A commercial launch of O2 Wallet is likely to be about so much more than allowing customers to pay for tickets and goods by mobile phone.

CLIENTS ONLY

Current Perspective

Competitive Positives

Competitive Concerns

Recommended Vendor Actions

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