News : Phone-wallets still years away

By Tarmo Virki

HELSINKI (Reuters) - The new technology which enables small payments from mobile phones by just flashing the handset is likely to reach masses only around 2012, when one phone from five sold will be equipped with the technology.

Consumers will be able to use a phone as a wallet or as an access card simply by waving it over a wireless reader -- and in some cases punching a PIN number into the phone -- similar to how travelers in Tokyo and London access public transport.

The technology is ready and Nokia (NOK1V.HE: Quote, Profile, Research) has introduced four products using it so far -- but the limited offering and high costs are hampering the take-up, which could help transport firms to cut costs and cellphone makers to support prices.

"When the 20 percent level is reached it starts to feed itself. That is the critical point," Jukka Suikkanen, R&D manager at top Nordic telecom operator TeliaSonera (TLSN.ST: Quote, Profile, Research), told an industry seminar in Helsinki.

Research firms Strategy Analytics and ABI Research have forecast the 20 percent penetration would be reached in 2012.

Mikko Saarisalo, a technology manager at the world's top cellphone maker Nokia, declined to comment on the outlook for the technology, but said 30 percent of phones enabled text messaging (SMS) before it took off.

ABI Research has forecast 6.5 million NFC (Near Field Communication) phones would be sold this year, up 10 fold from 2007, but the growth is hampered by costs stemming from an extra chip needed in phones for data security.

Nokia's 6131 model sells for 139 euros in Finland, but for the NFC version of the same phone retailers are asking up to 100 euros more.

TeliaSonera's Suikkanen said additional costs are likely to start falling next year when operators start to add security features to SIM cards, ending the need for an additional chip.

Strategy Analytics said last month that despite support from all quarters of the industry NFC is likely to remain largely limited to the trial phase this year.

"The shortfall is attributed to the slow ecosystem build-out, a half-hearted effort, at best, even though there is visible progress in overcoming the technical and standardization challenges," the research firm said in a statement.

Last year Nokia and large European and Asian carriers -- including KPN (KPN.AS: Quote, Profile, Research), Maxis Communications Bhd MXSC.KL, O2 (TEF.MC: Quote, Profile, Research), Orange (FTE.PA: Quote, Profile, Research), SingTel, SKT and Wind -- joined 14 mobile operators which initiated the project earlier.

The world's biggest payment card company, MasterCard, is also involved in the initiative, which is cheaper and much faster than other wireless payment experiments, like those using SMS text messages.

China Mobile (0941.HK: Quote, Profile, Research), Vodafone (VOD.L: Quote, Profile, Research), Cingular -- owned by AT&T Inc (T.N: Quote, Profile, Research) and BellSouth Corp BLS.N -- and Telefonica already support the common wireless chip format on the mobile phones they distribute for their networks.

Together with chip makers NXP NXP.UL and Sony (6758.T: Quote, Profile, Research), which pioneered the contactless chip called Near Field Communication (NFC), companies plan a global standard for electronic wallets in mobile phones.

(Reporting by Tarmo Virki)