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Mobile electronic payment systems: Main technologies and options Carl Adams, University of Portsmouth E-mail: Mobile electronic payment systems: Main technologies and options Carl Adams, University of Portsmouth E-mail: Carl. [email protected] ac. uk BCS presentation, 4 th December 2001 m-commerce payment systems: main options

Structure of presentation • • • Overview of mobile commerce The promise and challenges Structure of presentation • • • 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? m-commerce payment systems: main options 2

Overview of mobile commerce m-commerce : Mobile commerce • “Providing e-commerce in a mobile 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. ” m-commerce payment systems: main options 3

 • m-commerce: a convergence of – – mobile phones (and devices) and telecoms • m-commerce: a convergence of – – mobile phones (and devices) and telecoms (digital)+ computing power + Internet technologies + applications and content provision • Convergence coming from different directions • eg MP 3 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 … m-commerce payment systems: main options 4

Predictions and current state of play (‘where we are, and where we are going’) 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 2001 best figures indicated there were 370 M ! – … Also estimated that approx. 28% Internet users in US got 'turned off' e-commerce after initial use! m-commerce payment systems: main options 5

m-commerce payment systems: main options 6 m-commerce payment systems: main options 6

Summary of ‘estimated’ figures • e-commerce is predicted to grow considerably – even after 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 m-commerce payment systems: main options 7

Mobile payments • “m-payments are expected to become an important part of retail payments Mobile payments • “m-payments are expected to become an important part of retail payments …. ” (e-pso) (i. e. B 2 C) • Reasoning: Mobile device is an ideal POS device … m-commerce payment systems: main options 8

Mobile Use • High market penetration (up to 80% in some countries) and growing Mobile Use • High market penetration (up to 80% in some countries) and growing • Existing social/cultural practice (e. g. teens + OAPs) – Including payments m-commerce payment systems: main options 9

Interesting technical features • Embedded chips that can be used to store value or 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 m-commerce payment systems: main options 10

3 rd Generation looks even more promising • Possibility of new products and services 3 rd Generation looks even more promising • Possibility of new products and services o location based services o multimedia services • Access to Internet infrastructure m-commerce payment systems: main options 11

Telcos place in m-payments? (Telecommunication service providers - Telcos) Seems well placed • Already 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. m-commerce payment systems: main options 12

Telcos place in m-payments? Requirements for payment service provider • Legal – have to Telcos place in m-payments? Requirements for payment service provider • Legal – have to operate as a bank – EU directives – EMI (Electronic Money Institute) • Expand 3 rd 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 m-commerce payment systems: main options 13

Requirements for mobile payment system • Robust + Secure - prerequisites • Global, ubiquitous Requirements for mobile payment system • Robust + Secure - prerequisites • Global, ubiquitous - Allow roaming • Profitable - must have a business model • Fit in with existing structures m-commerce payment systems: main options 14

Mobile payment options Types of payment • Prepay + cash • Debit • Credit 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] m-commerce payment systems: main options 15

Mobile payment options … Some technical options/considerations • Card based – Smart cards, double Mobile payment options … Some technical options/considerations • Card based – Smart cards, double cards … • Software based – Thin/fat client • • Bluetooth enabled ‘Pure’ m-commerce or adopted e-commerce Phone, PDAs/handheld devices or PC Tablets Others – eg Biometrics, micro payments, cash, existing structure m-commerce payment systems: main options 16

Card based • SIM card – In GSM, identifies subscriber • WIM (Wireless Identification 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 m-commerce payment systems: main options 17

Software based • Server or client based • Microsoft – Some interesting issues m-commerce Software based • Server or client based • Microsoft – Some interesting issues m-commerce payment systems: main options 18

Bluetooth • Bluetooth – Rapidly becoming a global standard for mobile communication over short 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! m-commerce payment systems: main options 19

‘Pure’ m-commerce or adapted ecommerce • Most ‘pure’ m-commerce payment systems are prototypes – ‘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), Gi. SMO (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 m-commerce payment systems: main options 20

Phone, PDAs/handheld devices or PC Tablets? • Price – Phones, PDAs- £ 100+ – Phone, PDAs/handheld devices or PC Tablets? • Price – Phones, PDAs- £ 100+ – PC Tablets - £ 500+ • Portability • Sophistication • Security m-commerce payment systems: main options 21

Micro payments • The big challenge – but enormous potential • Minimal transaction costs 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 m-commerce payment systems: main options 22

Electronic ‘Cash’ • Many advantages for users – Limit risk (i. e. only loose 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 m-commerce payment systems: main options 23

 Electronic ‘Cash’ offerings … Avant Balcard Carta facile Cartio Micropayments Cashcard Chipknip Chipper Electronic ‘Cash’ offerings … Avant Balcard Carta facile Cartio Micropayments Cashcard Chipknip Chipper CLIP Cybertarjeta Danmønt (Dancoin) Digi. Gold Duo. Cash e-port Earthport e. Topup. com Euro 6000 Fancredits Fortress GB Geldkarte I like Q i. GEN-Mastercard Internetcash i. PIN Juice Pay K-Wallet (ex Klebox) KLINK LETS Matkahuolto Maximiles Micro. Money mini. CASH MINIpay Mint Mobipay (Movilpago) Modeus Mojo Nation Mondex Monedero 4 B Moneo Netels Octopus Card PACE Paysafecard PMB Portos Proton Qdodge Quick Safetrader Smart creds Splash. Plastic Street Cash Surfmiles Virtual. Cash Visa Buxx Visa Cash [email protected] WWWbon Zakis • m-commerce payment systems: main options 24

Existing structure • Payments need to integrate into existing payments structure – Clearing companies 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) m-commerce payment systems: main options 25

Mobile payment options: Summary “M-commerce needs ubiquitous, compatible, payment systems” • Many options – 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 m-commerce payment systems: main options 26

[Source(s) for payment information • E-PSO database of payment systems (www. epso. jrc. es) [Source(s) for payment information • E-PSO database of payment systems (www. epso. jrc. es) • But lots more …] m-commerce payment systems: main options 27

Example range of mobile payment options… • Electronic purses/wallets • Card based (smart card Example range of mobile payment options… • Electronic purses/wallets • Card based (smart card and pre-pay) and software options m-commerce payment systems: main options 28

Example electronic purses/wallets: (actual systems and systems which support/interface with) • ABN AMRO ewallet Example electronic purses/wallets: (actual systems and systems which support/interface with) • ABN AMRO ewallet • Master. Card e-wallet • Bankpass Mobile • Millicent • Bankpass Web • Minute. Pay • Banxafe • Mondex • Cyber. Cash • Nochex • Cybertarjeta • Odysseo • Digi. Gold • Payhound • Dynacash (ex- Intercoin) • Qpass • ECML • SET (Secure Electronic • EMPS Transaction) • Earthport • Safe. Door • Ecash • Secure Payment Application • Egg wallet • Smart creds • Gi. SMo • W-HA • I-Pay • Win-commerce • K-Wallet (ex- Klebox) • Yahoo! Pay. Direct • MEDEA • i-Minitel, m. Pay • Magex m-commerce payment systems: main options 29

Mobile payment options… Specific mobile issues/challenges – Micro payments • Lots of potential + 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 … m-commerce payment systems: main options 30

Main players/stakeholders • Telcos • Banks • Financial services/Card companies (VISA, Master. Card …) Main players/stakeholders • Telcos • Banks • Financial services/Card companies (VISA, Master. Card …) • Suppliers • Existing payment service providers • Customers/users • Others …Microsoft … m-commerce payment systems: main options 31

Collaboration activity • • • Mobile Payment Forum Me. T – Mobil electronic Transaction Collaboration activity • • • Mobile Payment Forum Me. T – Mobil electronic Transaction Mobey Forum PKI Forum GMCIC: Global Mobile Commerce Interoperability Group • m. Sign - Mobile electronic Signature Consortium (www. msign. org) …. m-commerce payment systems: main options 32

Collaboration activity continued … • ECBS – European Committee for Banking Standards (www. ecbs. Collaboration activity continued … • ECBS – European Committee for Banking Standards (www. ecbs. org) – Mobile commerce expert team • • WAP Forum Global Platform EMV (Europay-Master. Card-Visa) CEPS (Common Electronic Purse Specifications) Lots of collaborative activity? m-commerce payment systems: main options 33

Collaborative activity or Protecting own interests? m-commerce payment systems: main options 34 Collaborative activity or Protecting own interests? m-commerce payment systems: main options 34

Mobile Payment Forum (http: //www. mobilepaymentforum. org) [Started October 2001] “The Mobile Payment Forum 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, Master. Card, Visa and JCB Card (- A cross-industry group? ) m-commerce payment systems: main options 35

Me. T – Mobil electronic Transaction (www. mobiletransaction. org) • Aim “to create a Me. T – 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 m-commerce payment systems: main options 36

The PKI Forum (http: //www. pkiforum. org/) • “foster support for standards-based, interoperable public-key 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) m-commerce payment systems: main options 37

Mobey Forum • Aim (www. mobeyforum. org) • a)to encourage the use of mobile 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. m-commerce payment systems: main 38 options

CEPS (Common Electronic Purse Specifications) (http: //www. protonworld. com/press/releases/press 67 index. htm) • “define CEPS (Common Electronic Purse Specifications) (http: //www. protonworld. com/press/releases/press 67 index. 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. m-commerce payment systems: main options 39

Views from different stakeholders …preferred options? • Telcos • Banks • Financial services/Card companies Views from different stakeholders …preferred options? • Telcos • Banks • Financial services/Card companies (VISA, Master. Card …) • Suppliers • Existing payment service providers • Customers/users • Others …Microsoft … m-commerce payment systems: main options 40

Challenges for mobile electronic payment systems • • Legal Technical Cooperation Higher risk Social Challenges for mobile electronic payment systems • • Legal Technical Cooperation Higher risk Social Health Profit m-commerce payment systems: main options 41

Challenges: Legal A minefield of legal jurisdiction. • EU directives: – Electronic signature, Electronic Challenges: Legal A minefield of legal jurisdiction. • EU directives: – Electronic signature, Electronic money, Distance selling, Data protection, Copyright, …. (eg www. ccls. edu/eclip 2 news/whatsnewineurope ) m-commerce payment systems: main options 42

Challenges: Technical & Cooperation • Roaming • Financial agreements • Partnerships, different technologies and Challenges: Technical & Cooperation • Roaming • Financial agreements • Partnerships, different technologies and interests • No one wants the ‘Betamax’ m-commerce payment systems: main options 43

Challenges: Higher risk, social • Need for different payment models – Particularly for Telcos 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? m-commerce payment systems: main options 44

Challenges: Health risks? The Stewart report on mobile phones, May 2000 • On balance 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 m-commerce payment systems: main options 45

Challenges: Profit • Payment service providers need to make a profit to be able 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 m-commerce payment systems: main options 46

The future? • Massive investment in mobile technology: Approx 80+, 3 rd Generation licenses The future? • Massive investment in mobile technology: Approx 80+, 3 rd 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? m-commerce payment systems: main options 47

References • • • • • e-pso forum – database of several payment methods References • • • • • e-pso forum – database of several payment methods and discussion papers: www. epso. jrc. es 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 Electronic newsletters covering m-commerce: http: //www. internetworld. co. uk/mcomm/index. cfm http: //www. epaymentsnews. com/ m-commerce payment systems: main options http: //epso. jrc. es/newsletter/ 48

 • References continued • • • • Forester Research reports see http: /www. • References continued • • • • 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/study 17. html National Radiological Protection Board (NRPB) web site http: //nrpb. org. uk m-commerce payment systems: main options 49