CMB, HTC reveal new mobile-payment product

The public caught its first glimpse on Tuesday of a commercial mobile payment service that is expected to meet the central bank's standards, which have yet to be published.

China Merchants Bank Co Ltd, or CMB, and the Taiwanese cell phone manufacturer HTC Corp together released the mobile-payment product called "CMB wallet", which will allow consumers to spend money by placing their phones near a device known as a point-of-sale machine.

The "wallet" can be used to make payments in small sums, and CMB is planning to make it capable of processing large payments - those involving as much as 50,000 yuan ($7,900), for example - next year, said Liu Jianjun, director of the bank's retail finance headquarters.

In the fourth quarter, people will be able to use their credit cards to directly recharge the "wallet" through their mobile phones, he said.

"Mobile payments have become a new way that banks can promote the use of integrated circuit cards," said Lu Shuchun, deputy director of the technology department of the People's Bank of China, the country's central bank.

"This cooperation between CMB and HTC will surely set an example for other participants, especially since a new standard is about to be published to guide banks on the best ways to conduct mobile payments."

The central bank is expected to publish new mobile payment standards for financial institutions at the end of December, and the "CMB wallet" will be the first product to meet the new standard, said Hu Tao, deputy general manager of retail banking at CMB, which is helping to draft the rules.

Chinese lenders have been looking at the mobile payment market as a possible additional source of revenue in recent years, a time when they have been required to hold more capital and have seen interest rate spreads narrow.

China Construction Bank Corp, the world's second-largest lender measured by market value, joined the bank card organization China UnionPay Co Ltd last September to introduce a mobile-phone payment business.

In June, Shanghai Pudong Development Bank Co Ltd announced it would cooperate with the mobile carrier China Mobile Ltd, which owns 20 percent of the bank's shares, on a mobile-payment project.

"Banks cannot afford to lose our position in the mobile-payment market," said Liu Jialong, general manager of CMB's credit card center. "That would have a profound effect on future deposits and the lending business."

Ma Weihua, president of CMB, said the company would like to "diminish" its credit card business in the coming years and promote mobile payments.

"As the mobile-payment technology develops, there is a danger that clients will 'abandon' banks," he said. "Even though the credit cards we issue are the most popular among Chinese cardholders, we believe we should be the first to throw those cards away."

By 2013, 200 billion yuan worth of mobile payments are expected to be taking place in China annually, up from 48 billion yuan last year, Ma said.

"That would be an explosive increase."

Chai Hongfeng, executive vice-president of China UnionPay, said the company will install as many as 1 million point-of-sale machines that can process "mobile wallet" payments by the end of October. And 1.2 million of those machines and 105 retail clusters will be accepting payments from the product by the end of the year.

The agreement between CMB and HTC over the "wallet" project is not an exclusive one, and both companies are in negotiations with other lenders or handset manufacturers such as Samsung Group and Apple Inc, said Liu Jianjun, adding that CMB is also in talks with mobile carriers to incorporate the "wallet" function directly into SIM cards.

Except for HTC and Nokia Corp, many other handset sellers, including Apple, are reluctant to make products that use near-field communication technology, which allows mobile phones and similar devices to communicate with each other once they are brought into close proximity.

"We haven't found that we can sell more of these devices than our rivals simply by saying we have near-field communication technology," said Ray Yam, president of HTC China.

"Only by taking steps early on can we seize more of these opportunities."