Business Case for Contactless: Made in India, Aimed at U.S.

As part of their efforts to deliver banking services on mobile phones, banks have had to learn to work with wireless carriers.

This still-evolving partnership forced the two players, which had rarely collaborated in the past, to confront such issues as how to deliver the software to users and who is responsible for resolving technical problems. And as banks look to add mobile payments to the equation, they face an even more complicated challenge: persuading carriers to install the chips that are required for phones to support contactless purchases.

Citigroup Inc. is hoping that an upcoming test in India of phones with contactless payment capabilities will help it develop a business case to present to carriers in the United States.

"The mobile phone really has emerged more recently as the big thing that's going to take contactless over the edge," Jeff Semenchuk, the executive vice president at Citi Innovation, said in an interview Tuesday.

He said the goal of the Bangalore test, which could get under way as early as April, is to collect enough data on consumers' use of mobile phones equipped with contactless payment chips to demonstrate to handset manufacturers and U.S. carriers that including the same chips in phones in this country would be worth the investment.

"It's no longer a technology trial or anything like that. It's literally a business model trial," Mr. Semenchuk said.

He said Citi plans to collect data in India through the end of the year, and that if the test goes as expected it would be two to three years before mobile phones with contactless chips are widely available within the United States. But once the wireless industry is sold on the idea, the transition could come rapidly, Mr. Semenchuk said.

The idea of including payment features in phones is "where it used to be with camera phones," he said.

Cameras in phones were initially dismissed as a gimmick, but caught on quickly and are now ubiquitous, he said. "It's inevitable that contactless will be huge."

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