Electronic Payment Systems 20 -763 Lecture 13 Mobile

Electronic Payment Systems 20 -763 Lecture 13 Mobile Payments, Virtual Money

Mobile Payment Players User Network Operator Financial Institution Content Provider/ Merchant

Mobile Payment Issues User • Security • Privacy • Ease of Use • Devices Network Operator • Open Standards • Interoperability • Roaming Financial Institution Content Provider/ Merchant • Authentication • Getting Paid • Integrity • User adoption • Non-repudiation • Low Cost • Fraud reduction Issues SOURCE: ARVANI GROUP

Current Business Models Card based (Visa, MC) n Carrier based (Do. Co. Mo) n Third party (Pay. Box) n SOURCE: ARVANI GROUP

Mobile Card Systems MOTOROLA P 7389 TRIBAND WAP PHONE WITH SMARTCARD READER 20 -763

Mobile EMV Chip Debit/Credit Voice or IP Browsing & Offer Request Issuing Bank Wallet forwards address details Merchant Clearing & Settlement WAP, i-Mode Merchant Offer OPTION 1: Multi-app: SIM + EMV (CEC) Shipment Confirmation Gateway Wallet Server SET or SSL/TLS Purchase Request Acquiring Payment Engine Acquiring Bank Authorisation Request / Response M/CHIP transaction with ARQC and ARPC / ARC data classed as “Card Present” Transaction Option 2: Dual slot phone with full size EMV SOURCE: MAOSCO 20 -763 ELECTRONIC PAYMENT SYSTEMS SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS

Wireless Card Authorization SOURCE: SAMSUNG 20 -763 ELECTRONIC PAYMENT SYSTEMS SPRING 2004 COPYRIGHT ©

Mobile Phone Future Millions More handsets than PCs connected to the Internet by the end of 2003 ! Projected cellular subscribers Projected Web handsets Projected PCs connected to the Internet 1996 1997 1998 1999 2000 2001 20022003 2004 2005 20 -763 ELECTRONIC PAYMENT SYSTEMS SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS

Mobile Payment Population Growth SOURCE: CELENT 20 -763 ELECTRONIC PAYMENT SYSTEMS SPRING 2004 COPYRIGHT

Paybox paybox 2 paybox connects transaction partners and rings consumer on mobile phone 1 Consumer has goods in shopping basket and selects “paybox - pay with mobile phone“ on website 4 . . . entering the paybox-PIN on the mobile phone 5 Clearing& settlement is done via electronic direct debit 3 Consumer authorises the payment to the Internet shop by. . . SOURCE: PAYBOX NORDIC AB

Paybox Combines Networks Payment Space Authorization Space Banking Network GSM Network PAYMENT MADE THROUGH BANKING NETWORK AUTHENTICATION AND AUTHORIZATION MADE OVER GSM NETWORK Transaction Space Internet TRANSACTION TRIGGERED OVER THE INTERNET • • • works with any mobile phone any network provider supports WAP via GPRS or UMTS high taxicab penetration 6% of all B 2 C in Germany SOURCE: PAYBOX NORDIC AB 20 -763 ELECTRONIC PAYMENT SYSTEMS SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS

paybox: Payment Procedure paybox 3. Call customers mobile phone 2. Send phone # + amount 4. Confirm recipient + amount (PIN) 5. Confirm payment 1. Send phone number Customer 20 -763 ELECTRONIC PAYMENT SYSTEMS Vendor 6. SPRING 2004 goods Ship COPYRIGHT © 2004 MICHAEL I. SHAMOS SOURCE: ANDREAS KUNZ

Paybox Features • Payment authentication by mobile phone, relies on SIM identification and GSM encryption • Started in May 2000 in Germany, now also operational in Austria, Spain and Sweden with more to come (e. g. Britain) • 50% owned by Deutsche Bank • Amounts: starting at about 1€ • Transfer to other mobile phone (1 -2% or 25 cent fees) or bank account possible • Offline shopping possible 20 -763 ELECTRONIC PAYMENT SYSTEMS SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS

Paybox Cross-Border Mobile Payments Consumer Merchant Provision of Goods and Services Purchase PIN authorization Call on GSM network Paybox: Transaction Instruction Engine Transaction Request and Confirmation via EDI Deutsche Bank´s Network Money Transaction Consumer Account at ANY bank in ANY country Direct Debit Clearing System Crediting Merchant Account at ANY bank in ANY country SOURCE: PAYBOX 20 -763 ELECTRONIC PAYMENT SYSTEMS SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS

Asia. Pay. Dollar • Pay. Dollar Mobipay – supports i. Paq or Palm • Bank cards • Pay. Dollar Direct (peer-to-peer email) • Pay. Dollar PPS – real-time online debit payments – DEMO SOURCE: PAYDOLLAR 20 -763 ELECTRONIC PAYMENT SYSTEMS SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS

Vending Machine Mobipay OR Internet Merchant Product. . . : REF. 1234 Mobipay System with Access Node router WEB 2 Processor +Issuer/ Acquirer 8 1 4 5 3 GSM 4 7 6 + 8 )))) REF: Delivery 01021234 REF 1500 ptas OPERATOR Store X x Store NETWORK Alternative: PIN: OK + PIN 12345 ----- 4. Data validation 1. User chooses Mobipay payment 5. PIN request If PIN method on merchant site not 2. Merchant sends unique Mobipay 6. PIN response entered 20 -763 ELECTRONIC PAYMENT SYSTEMSreference asociated with amount 7. Authorisation SHAMOS SPRING 2004 COPYRIGHT © 2004 MICHAEL I. User directly 3. User sends reference (+ PIN) 8. Confirmation

International Mobipay Principle: Use existing international payment infrastructure 7 Mobipay International Acquiring Bank MERCHANT Issuing Bank 4 5 6 1 Current international card infrastructure 2 3 Local Mobipay 0 4 CLIENT FROM COUNTRY B Country A 20 -763 ELECTRONIC PAYMENT SYSTEMS GSM Roaming SPRING 2004 Country B COPYRIGHT © 2004 MICHAEL I. SHAMOS SOURCE: MOBIPAY

T-Mobile Micropayment Service 3. Return signed purchase order 2. Sign purchase order Customer: mobile devices 2. Upload application and credentials 1. Send purchase order Mobile Gateway 4. Check signature Merchant: Point of Sale 1. Register a) Send collected purchase orders regularly Content 1. Provide Customer‘s keys and certificate Application Repository Micropayment Public Key Infrastructure Financial Institution Billing Advertising c) Clearing and settlement Location Based Services 3. Create key pair and certificate 2. Certification request Mobile commerce platform 20 -763 ELECTRONIC PAYMENT SYSTEMS b) Check purchase orders SPRING 2004 Customer registration Application and credential upload Clearing and settlement COPYRIGHT © 2004 MICHAEL I. SHAMOS SOURCE: T-SYSTEMS

Digital Wallets • Files or devices containing payment information, possibly representations of money • Used for seamless payments, without significant user intervention SOURCE: LAUDON & TRAVER 20 -763 ELECTRONIC PAYMENT SYSTEMS SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS

Microsoft Wallet 20 -763 ELECTRONIC PAYMENT SYSTEMS SPRING 2004 COPYRIGHT © 2004 MICHAEL I.

How Microsoft Passport Works SOURCE: LAUDON & TRAVER 20 -763 ELECTRONIC PAYMENT SYSTEMS SPRING

Major Ideas • • Mobile payment is expanding rapidly Wallets yield great conveneince Blind digital signatures are possible e. Cash is a minor development 20 -763 ELECTRONIC PAYMENT SYSTEMS SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS

Q&A 20 -763 ELECTRONIC PAYMENT SYSTEMS SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS

m. Commerce: Replacement for Cash & Card Vending, Access, Ticketing, etc. Users Telco network WWW Call Center Internet External Business Systems Data Mobile Payment Platform Financial Institutes / Telco billing SOURCE: SONERA 20 -763 ELECTRONIC PAYMENT SYSTEMS SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS

A Mobile Payment Scheme Mobile Gateway 4. Request PO (API) Mobile PSP 5. Certified PO 1. O ffer 2. Offer (WML) 3. Payment Authorization 6. C (W ML erti fied /HT PO ML 8. Deposit Merchant’s PSP , PF Mobile buyer 0. Routing L) 7. Deposit 0 Merchant SOURCE: NEWGENPAY. COM 20 -763 ELECTRONIC PAYMENT SYSTEMS SPRING 2004 COPYRIGHT © 2004 MICHAEL I. SHAMOS