* Customers scan QR codes with their phones to make payments
* No. 2 U.S. bank’s employees are participating in pilot
* Startup Paydiant also running pilots with other banks
By Rick Rothacker
CHARLOTTE, N.C., Sept 27 (Reuters) – Bank of America Corp
is testing a technology that allows a customer to pay at
a store register by simply scanning an image with a smartphone,
such as Apple Inc’s iPhone or Google Inc’s
Android devices.
The pilot program is being tested in Charlotte, North
Carolina, where the second-largest U.S. bank is headquartered,
and marks the latest effort by a financial institution to come
out on top in the race to determine how people will pay for
things in the future.
With sophisticated mobile phones reaching a growing number
of people around the world, financial services companies,
startups as well as technology giants such as Google and eBay
Inc’s PayPal, are looking for ways to turn phones into
digital wallets that house credit and debit cards, coupons and
store loyalty program details.
At stake is a gargantuan market for global mobile payments,
which the consulting firm Gartner expects to exceed $171 billion
this year.
Bank of America and other banks already rake in hundreds of
millions of dollars in fees for managing payments, making it
imperative for them to come up with the new way for people to
pay their bills – especially when new regulations and a tepid
economy are squeezing revenue.
In the trial, Bank of America has partnered with Paydiant, a
startup that has developed a technology to allow such mobile
payments. It doesn’t require new phones or hardware for
merchants.
In past trials, Bank of America has experimented with Near
Field Communication technology, in which a chip installed in a
phone transmits a radio signal when it is waved or tapped at a
device at the cash register.
Bank of America launched its pilot last week at five
merchants in Charlotte. The test will last three months and only
the bank’s employees have access to the program. They can use
newer iPhones and phones that use the Android operating system.
“The pilots provide us with the opportunity to explore
innovative mobile solutions, engage our customers and utilize
their feedback,” bank spokeswoman Tara Burke said.
Burke declined to comment on whether the bank is still
considering using NFC technology but said it continues to test
and monitor the marketplace. That technology suffered a setback
this month when Apple did not embed NFC chips in its iPhone 5.
[ID: nL1E8KIHBI]“EARLY DAYS”
In the bank’s NFC trials, customers stored their payment
information digitally in a secure area on their phone and then
paid at a merchant who kept a device to read the signal from the
phone. In the latest test, customers store their payment cards
on a computer server and when they pay, they use an application
on their phone that scans a Quick Response code displayed at the
register.
Paydiant is currently running tests with five banks and
financial services companies, said Chris Gardner, one of the
company’s founders. He declined to name the other participants.
“We are in this extended period of test and learn,” he said.
“It’s early days.”
The company’s technology also allows its customers to
control the payment process, rather than acting as another
intermediary like Visa or MasterCard, he said.
The technology currently works with QR codes but could be
adapted to other methods that connect a user’s phone to a
retailer, Gardner said.
In the Bank of America trial, Gardner said, one restaurant
is using codes printed on receipts, allowing customers to pay at
their table and leave.
Paydiant was founded in 2010. It raised $7.6 million in
venture capital funding in February 2011, followed by $12
million in July.
The company makes money from a combination of small
transaction fees, user fees or revenue from advertisements and
offers, Gardner said. Its partners can also generate revenue
from the service.
