O2 Wallet Offers Money Messaging And A Lot More

O2, the second-largest mobile telecommunications provider in the UK, launched the O2 Wallet this morning, a new breed of mobile payment service.

It combines secure money transfers, shopping, price comparison and other useful functions, and is available to anyone, not just the existing customers of the company.

O2 Wallet is set to challenge Google Wallet, Barclay’s Pingit, PayPal and other players in the emerging mobile payment market. It does not support Near Field Communication (NFC) yet, but there are plans to work with NFC once it is available on a greater number of phones.

Money messaging

From 8AM today, iOS, Android and Blackberry users could download the O2 Wallet application.

The company may have chosen the perfect time to enter the lucrative mobile payment market. According to research company TNS, the number of people using mobile banking increased from 9.7 percent in 2010 to 20.4 percent in 2011. Shopping on mobile devices is set to increase by 53 percent in the next 12 months, making the British the biggest mobile shoppers in Europe.

O2 Wallet was primarily designed to enable “money messaging”. Using either the app or the website, users can send amounts from £1 to £500 to any mobile number in the UK. Customers with any mobile network can download the app, or even withdraw money sent to them without it, although registration with O2 is necessary. If the money is not claimed in five days, it will simply return to the sender’s account.

To send money, O2 Wallet links to the user’s bank account and credit or debit cards, including the company’s own NFC-enabled O2 Money card. The service has been certified by Visa and MasterCard, and is the first digital wallet to be regulated by the Financial Services Authority. It offers a history of transactions too, which looks much like a regular bank statement.

O2 claims to have tested the system “top to bottom”. It went as far as to hire ethical hackers to look for vulnerabilities. They were helped by an army of “O2ville citizens” – O2’s own volunteer tech enthusiasts. It should be noted that the Wallet stores no information on the phone itself. Instead, all personal and financial details are held on a secure server.

Taking over

And the “money messaging” is just the beginning. For the launch, the company has partnered with around 120 e-tailers including Amazon, HMV and Tescos. The app has an in-built barcode scanner and a search function, which can look through the shop inventory for a particular product, and order results by price and availability.

It works just like any other Internet store. The app knows a user’s address and other details, so it can pre-fill order forms automatically. With O2 Wallet, finding, ordering and paying for items takes just a couple of clicks, according to the operator.

The shopping feature also provides you with daily offers and discounts, encroaching on Groupon territory. In just a couple of months, O2 will launch the dedicated train ticket store, which will be going after the same customers as thetrainline.com.

O2 Wallet is primarily an online service. It does not use NFC, but can be accompanied by a free NFC-compatible O2 Money card. Having an O2 Money card also means you can withdraw money sent to your phone at any ATM. The company has said that support for contactless payments through the phone is definitely planned in the near future.

You might have noticed that there is no app developed for Windows Phone yet. O2 cited the lack of money as the main reason, although it may have more to do with the slow uptake of the Microsoft’s OS. However, since the Wallet is also an Internet service, it can be accessed from any Internet-enabled device, whether a phone, tablet or PC.

What’s the catch?

The service will remain free for at least six months. The company has not made a decision whether it will charge customers for using the Wallet, but the possibility to do this has been built into the system. At the same time, O2 representatives repeated several times that they don’t want to charge customers, and will try charging retailers instead.

“O2 Mobile Wallet is a flagship, feature packed service that has clearly been designed to face the increasing threat of mobile payment services from OTT (over-the-top) players such as Google Wallet and PayPal, and of course other operators. It is promising consumers an awful lot and all eyes will be on the service, which will need to deliver air-tight security and a seamless user experience across the multiple applications contained in the wallet,” said Eden Zoller, principal analyst at Ovum.

O2 has plans to launch the Wallet globally, tailoring the service to each individual country. It is interested in developing markets, and enabling money transfers for people who might not have a bank account.

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