Sources inform ''Globes'' that, within a few weeks, Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) and Israel Credit Cards-Cal Ltd. (ICC-Cal) (Visa) will sign a cooperation agreement to turn the mobile phone into an e-wallet using Near field communication (NFC) technology. The companies already have an agreement in principle, which the boards of Cellcom and Israel Discount Bank (TASE: DSCT) (ICC-Cal's controlling shareholder) are set to approve.
Both Cellcom's spokeswoman and ICC-Cal declined to comment.
NFC technology enables payment without swiping or touching a credit card; it is only necessary to pass the card above the point of sale. Following the Mobile World Congress 2012 in Barcelona in February, NFC technology became the official technology of the electronic wallet. When an NFC chip is embedded in a mobile phone, the phone will become a credit card for paying at points of sale. Today, most payment systems in Israel are not equipped with NFC technology.
ICC-Cal is Israel's third largest credit card company in terms of number of cardholders. Discount Bank owns 71.2% of the company and First International Bank of Israel (TASE: FTIN) owns 28.8%. It has 1.45 million active credit cards, a turnover of NIS 50 billion a year, and a 25% market share. Its CEO is Israel David.
Cellcom's new CEO Nir Stern succeeded Amos Shapira. The mobile carrier has more than three million subscribers, but with the changes in the mobile market, the company is seeking new sources of income. When "Globes" first reported about the venture a few months ago, a Cellcom executive described it as "a long-term strategic move that will be a growth engine."
This is not Cellcom's first attempt to enter the financial industry. Under Shapira, it suffered a bitter failure with Cellcom Direct, a joint venture with Citigroup Inc. (NYSE: C) for transferring money abroad via mobile phones. Launched with great fanfare in the summer of 2010, it turned out to be a negligible service, which was mainly used by foreign workers for sending remittances, and was irrelevant to most of the carrier's customers. Cellcom quietly terminated the service a few weeks ago.
Open questions
Details about the e-wallet that "Globes" has obtained indicate that Cellcom and ICC-Cal will set up a customers club based on Cellcom subscribers, who will be issued ICC-Cal credit cards that will be defined on the basis of the mobile phone. Club members will receive benefits and discounts from participating retailers.
Cellcom plans to leverage its customer database for the customer club and to customize benefits. The contactless credit cards will use NFC technology embedded in the phone's SIM cards, instead of an NFC sticker fixed to the phone, which Isracard Ltd. is using in a pilot with Super Pharm Ltd. and Aroma Café Ltd.
Discount Bank's chief risk officer has approved the e-wallet venture on the basis of Bank of Israel procedures for a new banking product. Since Cellcom is a subsidiary of IDB Holding Corp. Ltd. (TASE:IDBH), which also controls Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS), it cannot be ruled out that either the Supervisor of Banks David Zaken or Antitrust Authority director general David Gilo may have objections to the venture, or may restrict its activity.
Other questions relate to the conversion of points of sale at businesses to NFC technology: who will bear the cost, and which company will carry out the conversion. There are two big companies in the field VeriFone Holdings Inc. (Nasdaq: PAY) and Retalix Ltd. (Nasdaq: RTLX; TASE: RTLX). It is believed that Verifone will carry out the project, although a final decision has not yet been made.
Published by Globes [online], Israel business news - www.globes-online.com - on March 19, 2012
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