Citibank innovates with Mobile ‘contactless’ payment program
By Ankit Sharma
Mar 4, 2010
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After getting a good response from its pilot study in Bangalore, Citibank is planning to expand its mobile payment service to other cities of the country as well as abroad.

The bank has arrived at this decision on the basis of the study conducted at Bangalore in July. The bank had started using mobile phones for credit card payments at retail joints as well as other points of sale.

Point of sale refers to the card swapping machine/ place used at retail outlets for making payments using credit or debit card.

The service has been branded as "Citi Tap and Pay". The bank worked on the use of mobile phones with NFC (Near Field Communications). NFC is a wireless connectivity service for short range that establishes communication between electronic devices. Since it enables wireless communication, so the service is coined ‘contactless'.

"Our experience during the pilot has been remarkable in terms of the customer adoption and usage which were significantly higher than we had expected," said Vijay Ramchandran, chief marketing officer of Citi South Asia.

The study showed that the number of transactions by customers using mobile phones was six times of that done using credit cards, which suggests that the contactless payments were replacing either competitors' cards or cash transactions, Ramchandran said.

The trial was performed for a time frame of 26 weeks and included 3,000 customers, 250 merchant locations and nearly 50,000 purchases, according to a white paper released on Wednesday by Edgar, Dunn & Company, a global financial services and payments consultancy.

Citibank is now ready to expand the services to other cities in India. It will however need more NFC supported devices and handsets and thus have to first get more merchants to deploy NFC-enabled readers, Ramchandran said.

During the trial phase, customers had to use NFC-enabled Nokia 6212 mobile handset, and use the mobile service from the Indian joint venture of Vodafone Group.

But the major complaint received was that there were not many outlets that had NFC enabled readers.

Citibank now plans to get other banks, mobile service providers and handset makers involved in setting up a common infrastructure, including getting banks to incorporate NFC in readers at retail outlets.

"We believe that this cannot be done by a single player working alone," Ramchandran said.

The cost of the cards or stickers would typically be borne by the customers, Ramchandran said.

Of the estimated 30 million cards in India, the bank expects that about 10 million will shift to mobile payments using NFC in the next five years. As the current plastic card is not a "broken technology" and still works very well for a lot of users, the transition to NFC may not be rapid, Ramchandran added.

The banks will earn revenue from charges for the use of their cards, mobile service providers will benefit from data charges, while handset makers will earn money from sales of handsets that support NFC, Ramchandran said.


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