Mobile electronic payment systems Main technologies and options

Mobile electronic payment systems: Main technologies and options Carl Adams, University of Portsmouth E-mail: Carl. Adams@port. 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 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 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 (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’) 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

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 …. ” (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 • 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 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 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 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 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 - 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 • 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 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 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 payment systems: main options 18

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 – 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+ – PC Tablets - £ 500+ • Portability • Sophistication • Security m-commerce payment systems: main options 21

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 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 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 Webc@rd WWWbon Zakis • m-commerce payment systems: main options 24

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 – 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) • But lots more …] m-commerce payment systems: main options 27

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 • 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 + 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 …) • 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 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. 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

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 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 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 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 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 (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 Health Profit m-commerce payment systems: main options 41

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 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 • 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 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 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 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 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. 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