Mobile payments report ?
?Special comprehensive report on all the latest developments in m-payments, featuring: M-payments gaining critical mass; Standards; NFC; Couponing; Ticketing; Obopay; Data; MasterCard/US bank trials??
Mobile payments gaining critical mass
Act now or miss the cusp, warns GSM Association
Mobile network operators must take the NFC plunge and must take it now if they are going to be included in future mobile payments initiatives.
This is the warning from the GSM Association which reports that operators serving 40% of the world’s subscribers are currently working on contactless mobile payment initiatives.
The GSM Association predicts that mobile payments are set to make a significant impact on the world of banking and commerce within the next five years.
Handsets can now be used to buy online, at the POS using ‘swipe’ points in retail outlets, and mobile-to-mobile. The mobile can also serve as the location for the account, hold all the financial information, and be used as the primary security measure.
Based on predictions that two billion mobile handsets will be shipped in 2012, consultant visiongain predicts that 22.5% of these will be NFC-enabled – meaning 450 million NFC handsets will be shipped in 2012.
“Mobile phones can now be used to buy anything that can be bought with a credit card – and more,” said a spokesperson. With mobile penetration reaching 100% in many developed markets, the mobile phone will soon be in virtually everyone’s pocket.
Payments and banking are currently major areas of growth in the mobile world and these are set to become even more specialised than they are at the moment. Operators to launch NFC-based m-payment services Major step towards a global interoperable mobile payments system
Over the next several months, 12 mobile operators will run trials of contactless mobile payment services in Australia, France, Ireland, Korea, Malaysia, Norway, the Philippines, Singapore, Taiwan, Turkey and the US as a precursor to commercial launches.
The trials form part of the GSMA’s Pay-Buy-Mobile initiative, which is designed to provide a single global approach to enabling contactless payments using a mobile phone. Consumers will be able to use their handsets to pay for goods and services in shops, restaurants and train stations.
But there are some issues still to be resolved. Standards – Single Wire Protocol agreed but discussions continue over the role of the SIM The Pay-Buy-Mobile initiative from the GSMA supports the use of the Single Wire Protocol, which was adopted by ETSI as a standard in October 2007, to link the Universal Integrated Circuit Card (UICC) contained within the mobile handset with the phone’s embedded Near Field Communications (NFC) chip.
Until recently a group led by Nokia and the NFC Forum, and another led by Gemalto and supporting the ETSI standard, have been in disagreement over how much the SIM will be allowed to do with regard to mobile payments and how it talks to other chips in phones and with the application processor of the handset.
In general, NFC, or near field communication, allows mobile phones and other devices to emulate contactless payment and transit cards and also to act as a reader.
The two “host-controller interface,” which addresses the upper layers of communication of the NFC chip, the SIM and other elements in the NFC phone, including the handset processor.
It works with the single-wire protocol, which is a hardware connection and lower-layer protocol that has already been agreed upon by the industry.
Many of the payment, ticketing and other applications that will run in NFC phones run will be stored in the SIM card or another tamper-resistant chip in the phone, and the host-controller interface (HCI) serves as a standard channel for these applications to communicate with the NFC chip and thereby enable contactless payments.
Gemalto, with the backing of many of the big mobile network operators including UK-based Vodafone, Orange of France and Spain’s Telefónica, has been pushing to give the SIM card a say in all communication that the NFC chip has with the other elements of the phone. There are some groups that want to go even further, to give the SIM the authority to reject the download or operation of an NFC application on the phone unless it is stored on the SIM or controlled by it.
They call this the “multipoint” or “multihost” architecture because the NFC chip would communicate with multiple points in the handset – with the SIM kept informed of all this communication.
Nokia, on the other hand has been pushing for most of the HCI to be standardised by the NFC Forum, an organisation it co-founded in 2004. The part of the HCI that applies to communication directly between the SIM and NFC chips could be standardised by ETSI, in Nokia’s view.
Meetings Meetings have been taking place between ETSI and the NFC Forum to sort out the standards problems.
Gerhard Romen, NFC Forum vice-chairman told Card World that the NFC Forum is directly interacting with the ETSI-SCP (focusing only on the smart card i.e. the SIM ) and is on its way to a formal liaison.
Romen said: “The NFC Forum is an open environment, enabling GSM and CDMA mobile devices, consumer electronics, CE, devices like televisions, gaming, laptops and many more that can interact with the simplicity of a touch.
“Our target is to have a broad interoperability that is not limited to certain environments or providers like GSM or SIM only.
ETSI-SCP focuses by its mission on the SIM only
“Interaction and cooperation between all players needs to ensure a broad ecosystem that enables a big market.”
The secure element, that will be holding the confidential credentials for payment, access, ticketing can and will be available: - as a removable element in e.g. a SD card - as a removable element as e.g. a SIM card and - as a secure element within NFC devices
The NFC Forum with its NCI (NFC Controller Interface) task force is defining this open environment.
ETSI SIM committee chairman Klaus Vedder has vowed to hold votes every month within ETSI until the committee adopts a standard for the HCI. Without it he says, the single-wire protocol won’t get final approval either and that will delay availability of NFC phones that could allow the SIM to store applications. He wants to avoid the same kind of delays that caused the committee to deadlock over the vote for the high-speed SIM interface. USB technology was finally approved for that interface only a year ago.
“I’m not going to have another sort of mess as we had with USB, which took us two years,” said Vedder.
NFC widens global range Progress so far The NFC chip can communicate with existing contactless payment systems to deliver a wide range of secure, interoperable and transparent services, such as credit and debit payments.
There are 35 mobile operators with 1.3 billion customers participating in a new initiative. In a global first, executives from Korean operator KTF paid for goods by passing their NFC-equipped handsets by contactless readers in retail outlets in Korea, Taiwan, and the US in a trial involving real transactions facilitated by MasterCard.
“Just nine months after this programme was launched in Barcelona, the first pioneering mobile operators are preparing for the rollout of commercial services that have the potential to become the foundation of a global, interoperable mobile payment service,” said Rob Conway, CEO of the GSMA, the global trade association for mobile operators. “Mobile payment services, which will enable transactions to be completed faster in shops, restaurants and train stations, will also make it easier for merchants to offer their customers precisely-targeted discounts and other promotional offers.”
Consumers keen to shop by mobile Both consumers and merchants see significant benefits from using the mobile phone as a payment form factor at point of sale, according to research carried out by Serrula on behalf of the GSMA.
Two-thirds of the 2,574 consumers in 17 countries surveyed said that they expect to begin using their mobile phone to pay at point of sale within two years of such services becoming available. Moreover, 50% of the 240 merchants from 10 countries surveyed see promotional opportunities in using the mobile phone as a payment device.
“We are proud to be the first operator in the world to trial this global payment scheme”, said Young-Chu Cho, CEO of KTF, a leading HSPA operator in Korea, “We have been working diligently to deliver more than mobile values to our customers and NFC m-payment is definitely a step forward in realising our vision.”
“By adopting the global standard, experiences and technology, we aim to trigger our domestic NFC-related industries to align with global standards and develop more advanced services and products to energise the telecommunications category. We are glad to join this global payment scheme trial to demonstrate cross-border interoperability,” said Jan Nilsson, president of Far EasTone Telecommunications.
“Australia is experiencing a wireless revolution with the highest growth rates in the world. Telstra is working with one of the country’s leading banks and a global credit card provider to make it easier for customers to pay for goods and services with their mobile phones with a trial to begin early next year,” said Sol Trujillo, CEO of Telstra.
“In Europe, Orange is a pioneer in promoting high-scale trials in association with a large number of banks, major financial institutions and key MNOs to launch interoperable mobile contactless payment services,” said Mung-Ki Woo of Orange, VP payment and contactless. “Orange has announced trials in the UK and a commercial launch in France in 2008, that will include not only payment but also transport ticketing, football stadium ticketing, and interactive billboards with key service partners.”
“SFR, a leading HSPA MNO in France, has already conducted several trials in the field of mobile NFC services, focused both on transportation ticketing and m-payment.
SFR is also currently testing multi-applicative NFC services in Strasbourg, combining a credit card payment application and a transportation application that customers are able to use in the trams and buses,” said Mireille Poggi, mobile payment and m-commerce marketing manager of SFR.
”As we believe strongly that interoperability will be key regarding mobile NFC acceptance by customers and service providers, SFR is in the meantime an active member of Pegasus, a global French initiative, including both major MNOs and banks, aiming at defining an interoperable setup in payment.”
“The popularity of MasterCard PayPass, coupled with the widespread use of wireless technology has created many payment opportunities far beyond that of the simple swipe of a card,” said Shuan Ghaidan, head of product sales and delivery, Asia/Pacific MasterCard Worldwide. “This new NFC-based KTF mobile payment phone shows innovative use of the latest technology to increase convenience by giving consumers the ability to use their mobile phones to make contactless payments anywhere around the world where PayPass is accepted. MasterCard is pleased to contribute to the establishment of global standards that will help push the mobile payment.”
NFC developers fees may be sticking point
The other sticking point that may hold back mobile payments from rolling out in quantity is the fee that developers intend to charge. Currently it is estimated that the price per handset is likely to be around half a US dollar per device, under a licensing fee programme that was announced in June 2007.
Three companies that claim “essential” patents on NFC launched the licensing scheme, which other developers of the technology may join later. Via Licensing is managing the licensing programme for patent holders NXP Semiconductors of the Netherlands, Inside Contactless of France and France Telecom.
Mobile ticketing – customers still not convinced
SMS vouchers less attractive Consumers may want to pay by mobile but they have been less excited about interactive SMS voucher services. In the UK, the television channel ITV failed to sign up any advertisers for an interactive service allowing viewers to text numbers listed in TV ads to receive vouchers redeemable at high-street stores. The broadcaster is believed to be shifting its focus away from the initiative, less than a year after its launch, following a lack of interest from brand owners. Various users, including supermarket Sainsbury’s and retailer TK Maxx have recently axed schemes.
The ITV service delivers an SMS coupon to a mobile that can be redeemed by entering a code into Chip and PIN terminals at retail outlets. Mobile couponing through retail loyalty cards Single Touch Interactive, specialising in Abbreviated Dialing Code (ADC) programmes, and InComm, a provider of stored-value gift and prepaid cards, are partnering to provide customers with mobile coupons through retail loyalty cards.
Consumers complete a one-time signup for the mobile coupon programme via their mobile phone by dialing #SAVE and entering their loyalty card number. Or, they can sign up online at any participating retailer. When the consumer visits a participating retail store, they dial #SAVE on their mobile phone to hear and activate available mobile coupons. At checkout, the consumer swipes their loyalty card to trigger the discount. Customer behaviour at checkout remains the same and the retailer doesn’t need to add point of sale equipment.
“This new mobile coupon platform tied to an Abbreviated Dial Code continues to keep it simple for both retailers and consumers at over 100,000 retail locations,” says Anthony Macaluso, founder and CEO of Single Touch Interactive. “Marrying Single Touch Interactive and InComm technologies brings mobile couponing into the 21st Century.”
“InComm is constantly searching for innovative new products and services to offer our retail partners, and our partnership with Single Touch Interactive allows us to serve consumers, brands and retailers in a new way,” says Brooks Smith, InComm president and CEO. “This programme provides the answer for both retail partners and consumers for mobile coupon redemption.”
Obopay on a BlackBerry
Obopay, a service provider for payments via mobile phones, says its service will be available for BlackBerry smartphones. Obopay takes advantage of the BlackBerry wireless solution’s features. With Obopay, users can send and receive money, check their balance and payment history, and purchase goods and services. The customised application gives users a simple mechanism for sending money to individuals directly from their BlackBerry address book. This service for Obopay users will be available this month from US carriers and at www.obopay.com
Mobile payments data and forecast
The worldwide market for contactless technology in transportation ticketing and contactless payments grew more than 15% in 2007, as the technology made greater inroads into consumers’ lives around the world.
The market now stands at a value of more than US$200m but will reach more than US$820m by 2013, according to the latest market analysis from ABI Research.
Positive growth in contactless card rollouts took place during the last half of 2007, while the uptake of contactless capabilities in mobile handsets – dubbed NFC (Near Field Communication) – continued to be stymied by difficulties in bringing the technology to the consumer market. Accordingly, NFC handsets did not ship in any volume toward the end of 2007 and the market will remain limited for the first half of 2008.
ABI Research now believes there will be longer than anticipated delays to NFC deployments and has again adjusted its latest quarter and next annual figures accordingly: the previous forecasts for total NFC device shipments stood at 1.1 million for 2007, and 9.81 million for 2008. The revised forecast stands at 0.65 million and 6.52 million respectively. However, says analyst Jonathan Collins, “Given the strength and interest among carriers around the world for NFC, our long-term forecasts remain unchanged.”
NFC rollout will be supported by the widespread adoption of contactless transportation and payment systems. Last year, saw contactless transportation making greater inroads into public transport systems around the world, with some notable switches to contactless single use ticketing too.
However, the bulk of the growth of contactless demand over the next five years will stem from the uptake of contactless payments from cards and mobile handsets. Europe took its first real steps toward contactless payment adoption in 2007. The initial UK contactless rollout in London that began in the second half of the year will prove a bellwether for the technology in Europe, especially given the scale of the initial rollout and the integration of contactless with the established EMV smartcard payment system.
ABI Research’s “Contactless Commerce Forecasts” provide extensive data on contactless revenues, segmented by application, merchant, and issuer. The database provides information on transponder IC shipments, broken down by frequency and by region. Other breakdowns include operating frequency, application and form factor, and software revenue, sorted by region and by application.
It forms part of the firm’s Mobile and Contactless Commerce Research Service.
MasterCard teams with bank group to develop NFC m-payments system
Dutch banking group ING has partnered with MasterCard Worldwide to develop an NFC-based mobile payments proposition.
ING Payments Retail Europe says the system will focus specifically on consumer convenience and control over the application. ING announced the move at the Amsterdam meeting of the Mobey Forum, an industry group that promotes the use of mobile technology in financial services.
The proposition uses near field communication (NFC) based technology to pay for low value purchases by tapping the mobile phone to a specially-equipped terminal. Consumers use MasterCard’s Tap & Go short range NFC technology to make mobile payments. The proposition will feature a mobile account that gives users access to their balance and enables them to top-up their balance immediately by using ‘Over–the-Air’ (OTA) reload functionality.
Mark Buitenhek, general manager ING Payments Retail Europe, commented: “Along with a wallet, the mobile phone is the second item consumers always carry with them. Uniting these two increases the level of convenience for our customers.
”The ING and MasterCard Worldwide Mobile Payments proposition is the first proposition that makes use of the OTA-functionalities and could be an example for future standards.”
ING and MasterCard Worldwide are developing the system in cooperation with OTA NFC payments platform provider Venyon, Taiwanese NFC technology company Toro, and payments technology companies Collis and LogicaCMG. The companies say more announcements about the next steps will follow in due course.
US Bank to trial mobile payments in Washington US Bank is partnering with handset manufacturer Nokia and MasterCard to test mobile phone payments for purchases under US$25 in Spokane, Washington.
Programme participants receive a new Nokia mobile phone equipped with MasterCard PayPass payment functionality, which allows them to pay for purchases at the checkout with a tap of their mobile phone. MasterCard says that more than 80,000 merchants accept PayPass, including many in the Spokane area, such as Regal Cinemas, McDonalds, Jack in the Box and 7-Eleven.
Gonzaga University will also accept PayPass at vending machines across its campus as part of the pilot. Consumers participating in the trial can protect their payment account information on their phone with a password. Should a customer misplace his or her phone, the payment feature can be disabled remotely with a call to US Bank customer service.
Finnish company Venyon has been contracted to provide secure over-the-air delivery for the US Bank trial. The white-labelled application also allows for remote personalisation and management of the payment feature.
Research released today by hi-tech analyst group In-Stat estimates that between eight million and 30 million consumers in North America will be using NFC-based contactless payments by 2012.