The success of m-payments in the UK has been put into question following the decision by O2 UK and its banking partner NatWest to end their relationship. O2 has announced that it will start the process of finding a new banking partner and had already issued a formal request for proposals.
This failure by O2 and NatWest to launch their joint service has significant ramifications for m-payments in the UK with observers becoming worried that this will leave only Barclaycard and Orange planning to launch an m-payment service. This could see a single player facing a battle to gain widespread acceptance of m-payment services by both consumers and merchants.
According to Datamonitor analyst Gilles Ubaghs, the widely expected move into NFC and m-payments would now be delayed for O2. "And, with the banking industry still under pressure, convincing a new player to make the required outlay could prove difficult."
While it might take O2 over 12 months to find and agree to terms with a new partner, NatWest said it would continue to power O2 Money services, namely Cash Manager and Load & Go, until a new provider is appointed, which O2 said would maintain services for existing customers.
Attempting to downplay the damaging news, an O2 spokesperson said the deployment of potential NFC products was unaffected by the decision to part company with NatWest. The agreement with the bank only covered the two existing financial products and the operator's strategy had always been to go to tender to find the most suitable supplier for other services.
The reasons behind the split would seem to have come from NatWest following instructions from within that it was to focus on its core banking activities. However, a joint statement said the decision to part ways was due to different strategic priorities at both companies.
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