Visa International and Nokia have joined forces to develop technology that will let people make electronic payments using their mobile phones.
The companies will develop secure mobile payment services with financial institutions and mobile phone operators. However, the emerging so-called mobile ecommerce market has major security issues to address before it becomes widely adopted, according to analysts.
Visa International and Nokia will carry out joint market development activities and pilot technical payment alternatives. Nokia said it is also developing and testing various implementations of secure card payments in a mobile environment, including a pilot of Visa card payments through the world's first dual chip GSM mobile phone.
The phone will contain two plug-in microchips, both the size of a subscriber identity module (Sim) card. One chip, with Sim functionality, will be used to identify the subscriber to the phone network and the second will make authenticated Visa credit or debit payments.
This second plug-in chip would be issued by the user's bank, enabling the bank to manage the risk and security of the payment transaction.
Ovum analyst Ann Walsh said the alliance needs to be more focussed on security. "There are a lot of issues surrounding the barriers to the take off of mobile ecommerce applications, the security just isn't there yet," she said.
"This alliance is not addressing the security issue, it's just a payment solution. It's very hard to get a high level of security in a phone."
Bruno Degiovanni, Visa Europe's head of mobile commerce, said: "The security is provided by the chip in the phone and the customer has to type in a pin number to confirm the transaction."
Walsh said Visa has teamed up with a number of companies working on ecommerce applications. "Visa is pretty agnostic on payment and security issues. It's keeping its bases covered. Everyone needs to partner, it can't be done alone," she said.
"At the end of the year, there will be many solutions appearing from several groups. It's not clear which ones will become a standard. It's just a positioning game at the moment."
Nokia retained its number one position in the mobile phone market throughout last year with a market share of almost 27 per cent, according to researcher GartnerGroup.
Worldwide sales of mobile handsets to end users reached 283 million units in 1999, a growth of 65 per cent when compared with 1998, said Gartner.
The researcher predicts that the market will explode by the end of the year 2000, with sales estimated to break the 410 million unit mark.
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