Mobile electronic payment
systems:
Main technologies and options
Carl Adams, University of Portsmouth
E-mail: [email protected]
BCS presentation, 4th December 2001
Structure of presentation
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Overview of mobile commerce
The promise and challenges for mobile electronic
payment systems
The big challenges: micro payments + cash
Mobile payment options
Main players and stakeholders
A personal view
– Some remaining challenges
– The future?
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options
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Overview of mobile commerce
m-commerce : Mobile commerce
• “Providing e-commerce in a mobile context.”
• “Using mobile technology to sell or buy items,
access business information, conduct a
transaction, perform supply chain or demand chain
functions.”
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• m-commerce: a convergence of
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–
–
–
mobile phones (and devices) and telecoms (digital)+
computing power +
Internet technologies +
applications and content provision
• Convergence coming from different directions
• eg MP3 is a mix of mobile technologies with music content
and technologies
• Interesting to note:
– New alliances across business sectors
– Dynamic market (+ new entrants)
– Balance of power shifting …
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Predictions and current state of play
(‘where we are, and where we are going’)
There are lots of statistics ….
• Some ‘old stats’:
– Global e-commerce market will be worth $1.4 trillion by 2003
(Forester Research, 1999/2000).
– By 2002, wireless subscribers with Internet access will outnumber
the wired subscribers. (IDC research 1999/2000)
• However, don’t always get it right
– There will be 200 million Internet users by 2002. (Intelliquest back in 1999)
– …. In Feb 2001best figures indicated there were 370M !
– … Also estimated that approx. 28% Internet users in US got
'turned off' e-commerce after initial use!
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o By 2005, there will be almost 1.5 billion wireless users. (Strategy
Analytics - end 2000)
o By 2005, 40% of all B2C commerce will be initiated via mobile systems
(Gartner Group)
o “there will be more users accessing the Internet with mobile devices than
those logging on to the Internet from fixed PCs, by 2003” (Nokia, and
other, equally unbiased sources)
less biased sources:
Global numbers of mobile phone users: in 2000, there were 570Million, in
2002/3 est 1Billion and in 2010, est 1.6 Billion (e-pso background paper 2)
[“80% of statistics are made up” (Vic Reeves)]
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Summary of ‘estimated’ figures
• e-commerce is predicted to grow considerably –
even after the e-commerce bubble
• (it is expected that) m-commerce will play an
increasingly important role in this growth and
account for an increasing high proportion of
transactions
• m-commerce is currently in its infancy
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Mobile payments
• “m-payments are expected to become an important
part of retail payments ….” (e-pso)
(i.e. B2C)
• Reasoning: Mobile device is an ideal POS device
…
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Mobile Use
• High market penetration (up to 80% in some
countries) and growing
• Existing social/cultural practice (e.g. teens +
OAPs)
– Including payments
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Interesting technical features
• Embedded chips that can be used to store
value or authorisation and identification
• Provides other functions - communication
– so does not have to rely on modems etc
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3rd Generation looks even more promising
• Possibility of new products and services
o location based services
o multimedia services
• Access to Internet infrastructure
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Telcos place in m-payments?
(Telecommunication service providers - Telcos)
Seems well placed
• Already have contact with customer base
• Already offering limited payment services eg third
party billing for services
• others …still act as communication providers (has
a revenue stream)
• However, to become a payment service provider
need substantial changes.
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Telcos place in m-payments?
Requirements for payment service provider
• Legal – have to operate as a bank
– EU directives – EMI (Electronic Money Institute)
• Expand 3rd party billing services
– Many more partners required (600+ for i-mode)
or
• Develop Pre-pay options
• Integrate with existing payment infrastructures
– Between telcos, services providers, retailers etc
• Review payment models (eg still monthly?)
• Others – address extra risk
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Requirements for mobile
payment system
• Robust + Secure
- prerequisites
• Global, ubiquitous
- Allow roaming
• Profitable
- must have a business model
• Fit in with existing structures
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Mobile payment options
Types of payment
• Prepay + cash
• Debit
• Credit
• Others (tokens, loyalty schemes,LETS)
– [Local Exchange Trading Systems – see
www.gmlets.u-net.com]
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Mobile payment options …
Some technical options/considerations
• Card based
– Smart cards, double cards …
• Software based
– Thin/fat client
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Bluetooth enabled
‘Pure’ m-commerce or adopted e-commerce
Phone, PDAs/handheld devices or PC Tablets
Others – eg Biometrics, micro payments, cash,
existing structure
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Card based
• SIM card
– In GSM, identifies subscriber
• WIM (Wireless Identification Module, or WAP
Identity Module)
– Converts phones into payment devices
– Identifies the buyer to the seller
Options
• Single card (all on one)
• Double card /slot (SIM and WIM)
• Others … Single (Smartcard) + bluetooth
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Software based
• Server or client based
• Microsoft
– Some interesting issues
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Bluetooth
• Bluetooth – Rapidly becoming a global standard
for mobile communication over short distances, eg
within a building.
• Uses a tiny microchip, incorporating a radio
transceiver, which can be incorporated into digital
devices.
• Operates within a globally available frequency
band (I.e. compatible world wide).
• Potential to communicate with vending machines,
and vending machines to communicate with you!
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‘Pure’ m-commerce or adapted ecommerce
• Most ‘pure’ m-commerce payment systems are
prototypes
– Still under development or
– Limited roll-out
– examples Movilpago (in Spain), GiSMO (in US),
Sonera Mobile Pay (Finland/Sweden), Telia Payit
(sweden), Mobilix (Demark/ France?), Paybox
(Germany)
• Key elements of the infrastructure are not in place
– Eg Bluetooth terminals
• Different, incompatible, options
- the ‘Betamax’ effect
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Phone, PDAs/handheld
devices or PC Tablets?
• Price
– Phones, PDAs- £100+
– PC Tablets - £500+
• Portability
• Sophistication
• Security
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Micro payments
• The big challenge – but enormous potential
• Minimal transaction costs
• Big technical problems to get integrated
solution (across boundaries/services)
– requires change in infrastructure(s)
• Problem of distributing share of payment
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Electronic ‘Cash’
• Many advantages for users
– Limit risk (i.e. only loose cash value), anonymous, incontrol
• Technical challenges of develop an electronic cash
infrastructure
• Extra risk associated with cash
– not traceable
• Profit for electronic cash providers?
– eg ‘cash’ via pre-pay cards – need to include more than
cash value to account for distribution costs
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Electronic ‘Cash’ offerings
…
Avant
Balcard
Carta facile
Cartio
Micropayments
Cash
Cashcard
Chipknip
Chipper
CLIP
Cybertarjeta
Danmønt (Dancoin)
DigiGold
DuoCash
e-port
Earthport
eTopup.com
Euro 6000
Fancredits
Fortress GB
Geldkarte
I like Q
iGEN-Mastercard
Internetcash
iPIN
Juice Pay
K-Wallet (exKlebox)
KLINK
LETS
Matkahuolto
Maximiles
MicroMoney
miniCASH
MINIpay
Mint
Mobipay
(Movilpago)
Modeus
Mojo Nation
Mondex
Monedero 4B
Moneo
Netels
Octopus Card
PACE
Paysafecard
PMB
Portos
Proton
Qdodge
Quick
Safetrader
Smart creds
SplashPlastic
Street Cash
Surfmiles
VirtualCash
Visa Buxx
Visa Cash
Webc@rd
WWWbon
Zakis
•
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Existing structure
• Payments need to integrate into existing
payments structure
– Clearing companies APACS, CHAPS, BACS
• Clearing technologies and companies
– Tandem Base 24
– Eg Alaric (www.Alaric.com)
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Mobile payment options: Summary
“M-commerce needs ubiquitous, compatible,
payment systems”
• Many options
– Several trials, limited scope
• Several challenges
– eg incompatibilities, some serious
• Need for standards
– No universal standard
• Several players
– Political element
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[Source(s) for payment information
• E-PSO database of payment systems
(www.epso.jrc.es)
• But lots more …]
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Example range of mobile
payment options…
• Electronic purses/wallets
• Card based (smart card and pre-pay) and
software options
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Example electronic purses/wallets:
(actual systems and systems which support/interface with)
• ABN AMRO ewallet
• MasterCard e-wallet
• Bankpass Mobile
• Millicent
• Bankpass Web
• MinutePay
• Banxafe
• Mondex
• CyberCash
• Nochex
• Cybertarjeta
• Odysseo
• DigiGold
• Payhound
• Dynacash (ex- Intercoin)
• Qpass
• ECML
• SET (Secure Electronic
• EMPS
Transaction)
• Earthport
• SafeDoor
• Ecash
• Secure Payment Application
• Egg wallet
• Smart creds
• GiSMo
• W-HA
• I-Pay
• Win-commerce
• K-Wallet (ex- Klebox)
• Yahoo! PayDirect
• MEDEA
• i-Minitel, mPay
• Magex
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Mobile payment options…
Specific mobile issues/challenges
– Micro payments
• Lots of potential + will fuel m-commerce adoption
– Use of existing e-commerce payment systems?
– Limited device capabilities
• Eg PKI – needs to be cut down version
– Higher level of risk
– New players, e.g. Telcos as banks
• Need for Collaboration …
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Main players/stakeholders
• Telcos
• Banks
• Financial services/Card companies (VISA,
MasterCard …)
• Suppliers
• Existing payment service providers
• Customers/users
• Others …Microsoft …
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Collaboration activity
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Mobile Payment Forum
MeT – Mobil electronic Transaction
Mobey Forum
PKI Forum
GMCIC: Global Mobile Commerce
Interoperability Group
• mSign - Mobile electronic Signature
Consortium (www.msign.org) ….
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Collaboration activity continued …
• ECBS – European Committee for Banking
Standards (www.ecbs.org)
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Mobile commerce expert team
WAP Forum
Global Platform
EMV (Europay-MasterCard-Visa)
CEPS (Common Electronic Purse Specifications)
Lots of collaborative activity?
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Collaborative activity or
Protecting own interests?
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Mobile Payment Forum
(http://www.mobilepaymentforum.org)
[Started October 2001]
“The Mobile Payment Forum is a global, crossindustry organization dedicated to developing a
framework for standardized, secure, and
authenticated mobile commerce using payment
card accounts.”
• Members: American Express, MasterCard, Visa
and JCB Card (- A cross-industry group?)
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MeT – Mobil electronic
Transaction
(www.mobiletransaction.org)
• Aim “to create a common technology framework
for secure mobile transactions that ensure a
consistent user experience, independent of device,
service and network”
Members: Mainly mobile handset manufacturers
(Ericsson, Motorola, Nokia, Siemens, Panasonic,
Sony), plus ‘associate members’ from Financial
institutions
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The PKI Forum
(http://www.pkiforum.org/)
• “foster support for standards-based,
interoperable public-key infrastructure
(PKI) as a foundation for secure
transactions in e-business applications.”
• Members? PKI industry (Verisign etc)
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Mobey Forum
• Aim
(www.mobeyforum.org)
• a)to encourage the use of mobile technology in financial services such
as payment, remote banking and brokerage
• b) to focus on the business needs of the financial institutions and their
customers to develop secure financial services in the mobile world
• c) to provide requirements to standardisation bodies and promote open,
non-proprietary technology standards’
Or to develops a ‘Preferred Payment Architecture’
Members: Mainly financial Institutions (VISA
International, ABN AMRO Bank, Bank of Ireland,
BBVA, Barclays Bank, Deutsche Bank, HSBC
…, Mobile handset manufacturers (Ericsson,
Nokia, Siemens), plus ‘associate members’ from
service providers.
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options
CEPS (Common Electronic Purse
Specifications)
(http://www.protonworld.com/press/releases/press67index.htm)
• “define requirements for all components
needed by an organization to implement a
globally interoperable electronic purse
program, while maintaining full
accountability and auditability"(CEPSCO).
– but mainly based in Europe.
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Views from different
stakeholders …preferred options?
• Telcos
• Banks
• Financial services/Card companies (VISA,
MasterCard …)
• Suppliers
• Existing payment service providers
• Customers/users
• Others …Microsoft …
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Challenges for mobile electronic
payment systems
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Legal
Technical
Cooperation
Higher risk
Social
Health
Profit
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Challenges: Legal
A minefield of legal jurisdiction.
• EU directives:
– Electronic signature, Electronic money,
Distance selling, Data protection, Copyright,
….
(eg www.ccls.edu/eclip2news/whatsnewineurope)
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Challenges: Technical & Cooperation
• Roaming
• Financial agreements
• Partnerships, different technologies and
interests
• No one wants the ‘Betamax’
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Challenges: Higher risk, social
• Need for different payment models
– Particularly for Telcos
• Need for monitoring/risk management
– Particularly for Telcos
– Examples ‘Alaric’
(www.alaric.co.uk)
• Social practices change (and impact on)
• New entrants – global systems?
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Challenges: Health risks?
The Stewart report on mobile phones, May 2000
• On balance mobile phones are safe.
• But lots still unknown, suggests:  adopting a cautionary approach to use (eg
restrict children use)

need more research with a wider remit

placing of cellular network masts under local
planning rules
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Challenges: Profit
• Payment service providers need to make a
profit to be able to provide the service
• Profits are still based on credit/debit cards
• Electronic cash – little/no profit
– Provided by governments?
• Micro-payments - ditto
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The future?
• Massive investment in mobile technology:Approx 80+, 3rd Generation licenses worldwide.
Business (and governments) will want to recoup costs.
• Mobile payment systems are a prerequisite to mcommerce
• Expect a few winners (and loosers)
– But which ones?
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References
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e-pso forum – database of several payment methods and discussion papers:
•
www.epso.jrc.es
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For “Study on the implementation of Recommendation 97/489/ECconcerning
transactions carried out by electronic payment instruments …”
http://europa.eu.int/comm/internal_market/en/finances/payment/instrument/stu
dy.htm
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Electronic newsletters covering m-commerce:
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http://www.internetworld.co.uk/mcomm/index.cfm
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http://www.epaymentsnews.com/
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http://epso.jrc.es/newsletter/
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References continued
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Forester Research reports see http:/www.forester.com
Nokia reports see http://www.nokia.com
EU reports and directives see http://europa.eu.int
ITU reports and details of international agreements see http://www.itu.int
UK Oftel, see http://www.oftel.gov.uk
Palm/enterprise systems and case studies, see http://www.palmgear.com,
or http://www.palmpilot.com/enterprise/studies/study17.html
National Radiological Protection Board (NRPB) web site http://nrpb.org.uk
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