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Visa's plan to spur NFC mobile wallet adoption may hit a snag

Visa and Samsung agree to embed Visa PayWave technology into several new NFC-enabled phones, making it easier for newcomers to offer a mobile wallet app. But will U.S. carriers put the kibosh on their plans in the States?

Marguerite Reardon Former senior reporter
Marguerite Reardon started as a CNET News reporter in 2004, covering cellphone services, broadband, citywide Wi-Fi, the Net neutrality debate and the consolidation of the phone companies.
Marguerite Reardon
4 min read

Visa's new partnership with Samsung to embed its PayWave technology directly into Samsung devices could help kick-start NFC-enabled payments around the world. But U.S. wireless subscribers may be left out of the frenzy.

Bill Gadja, head of mobile for Visa, makes a payment with his Galaxy S III at the Olympics. Visa

Samsung and Visa announced the partnership, which is part of a new partner program for Visa, at the Mobile World Congress tradeshow in Barcelona today. Specifically, Samsung will incorporate Visa's PayWave mobile payment applet into future Samsung devices such as the upcoming Samsung Galaxy S4. Visa will also make it easier for customers to tie their Samsung phones to financial institutions and their personal Visa accounts.

The move should make it easier for companies looking to create a mobile wallet app to integrate their services into mobile devices and Visa's payment network. And anything that will make it easier for other companies to develop their mobile wallets could spur adoption of the much-hyped NFC (near field communications) payments market, which has been talked about for years, but has been slow to take off.

But there's one potential snag in this plan that could derail NFC-payment adoption, especially in the U.S. Since wireless carriers in the U.S. still have a say in what features are available on devices and which aren't, there's a chance that the Visa PayWave technology may only be available on Samsung devices sold internationally and not on most Samsung smartphones sold in the U.S.

U.S. operators have resisted allowing NFC-based mobile payment technology on devices sold on their networks in the past. Take Google Wallet as an example. Google introduced its NFC-based mobile wallet about 18 months ago, but the app is still only supported on smartphones with embedded NFC on one major carrier network in the U.S., Sprint.

Google already licenses Visa's PayWave technology, so tying it into the Visa network shouldn't be an issue regardless of network operator. But the truth is that the wireless carriers have deliberately kept Google Wallet off devices that operate on their network. While carriers such as Verizon deny they block the Google Wallet app, they do prevent access to the secure element on the device.

All NFC-enabled digital wallets require access to a secure element on the device, which stores credit card information, coupon and loyalty program information, and tracks a customer's payment usage. This means that Google Wallet or any other mobile wallet service that uses NFC must have access to the secure element on the devices.

According to the deal with Samsung, Visa will preload its PayWave mobile payments applet onto embedded secure elements on some of Samsung's upcoming devices. Financial institutions would then be able to use the Visa Mobile Provisioning Service to securely download customers' payment account information onto the embedded secure element over a wireless network.

The way this has played out in practical terms when it comes to Google Wallet is that certain phones like the Samsung Galaxy S3, which is offered by all four major U.S. carriers, only has access to Google Wallet on Sprint. Meanwhile, AT&T, T-Mobile, and Verizon subscribers with the Samsung Galaxy S3 cannot access Google Wallet. The same thing could happen to the Samsung Galaxy S4, which is supposed to have the Visa PayWave technology preinstalled and available for other mobile wallets to access.

Are carriers stalling NFC mobile wallets until ISIS is ready?

Why would these wireless operators want to deny access to Google Wallet or some other NFC-based mobile payment solution? The main reason is likely because the three major U.S. operators that have already blocked Google Wallet are investors in a joint venture called ISIS, which is building its own NFC-based mobile wallet.

ISIS launched a beta trial of its service in Salt Lake City and Austin, Texas last year. While the company says that the test has gone very well so far and the current crop of NFC-enabled handsets should be ready to handle the service, ISIS won't likely launch nationwide until sometime next year at the earliest.

So far neither the carriers backing ISIS nor Samsung are saying whether the Visa PayWave technology will be activated on Samsung devices sold in the U.S. Visa said that it can't comment one way or another about whether carriers will allow third-party NFC wallets to operate on Samsung devices running over its networks.

Instead the company said: "Visa believes in an 'open' approach to enabling mobile payments, allowing consumers to make mobile payments with whatever device/mobile network/payment account they choose."

Google and ISIS already have a license for Visa PayWave, and Samsung is the first to preload the Visa PayWave applet in its next-generation mobile devices.

It's too soon to say for certain what the carriers will do. But if past behavior is any indication, wireless operators may not be keen on enabling a wide array of competing NFC-based mobile wallets on their devices.