Isracard in pilot to use cell phone as credit card

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A chip in the phone means it can be scanned as a credit card at Points-of-Sale.

Bank Hapoalim (TASE: POLI) unit Isracard Ltd., the largest credit card company in Israel, will take part in a pilot to make phone payments by cell phone using NFC (near field communications) technology. NFC works through a chip that is inserted into a cell phone, which allows the phone to be read by a special scanner.

"This is the future. This technology will serve the entire market in the future," Isracard CEO Dov Kotler told "Globes."

The company announced that in the next few months it will issue to tens of thousands of customers a technologically advanced wireless credit card, or a wireless sticker, that attaches to the cell phone. This will allow them to make payments using Mastercard's contactless system. Customers will be able to make payments by placing the card or sticker (and in the future their cell phone) next to the POS (point of sale) device. Isracard will upgrade the payment process during the second stage of the pilot, at Super-Pharm stores and Aroma cafes across Israel.

Bank Hapoalim and Lifestyle customers (Super-Pharm's loyalty club) will be able to participate in the pilot. They will receive a sticker with the chip, which they will place on their cell phone, or a credit card with an antenna and the ability to transmit secure and encrypted credit card information.

Isracard will subsequently present other applications to provide benefits and discounts through the card or the sticker. Similar pilots are currently being carried out in the UK and in Turkey; in the UK, Barclays Bank allows credit card payments by cell phone, in cooperation with Orange UK.

The transition from pilot to full implementation will require cooperation between Isracard and its competitors - Israel Credit Cards-Cal Ltd. (ICC-Cal) (Visa) and Leumi Card Ltd. - in order to upgrade the points of sale at businesses across the country. The reason for this is that businesses will not want to use three separate clearing devices, especially since the cost of changing these devices is very high.

The credit card companies will also need to sign cooperation agreements with the cellular companies - Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR), Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL), and Pelephone Communications Ltd. - in order to agree upon which economic model for clearing cards using NFC technology by cell phone is most appropriate.

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The credit card companies expect the cellular companies to bear part of the cost of upgrading the point of sale devices.

NFC technology makes it possible to pay without swiping the card or having the card touch the device. The phone or card merely needs to be placed above the point of sale device.

When cell phones will come with these chips pre-installed, the cell phone will be like a credit card, and will allow payment at all point of sale locations.

As of now, all cell phone manufacturers have declared their backing for NFC technology, however they have not yet formulated a unified standard.

The only company that has launched a cell phone that supports the NFC technology is Samsung. It is expected that during the upcoming year, a unified standard will be formulated, and the cellular companies will include the NFC chip in all new cell phones sold. It is also believed that the next generation iPhone will contain the NFC chip.

Published by Globes [online], Israel business news - www.globes-online.com - on June 21, 2011