Mobile Payment Magazine

Worldwide Mobile Payment Volume Up 76% to Reach $86 Billion in 2011

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Worldwide mobile payment users will surpass 141.1 million in 2011, a 38.2 percent increase from 2010, when mobile payment users reached 102.1 million, according to Gartner, Inc. Worldwide mobile payment volume is forecast to total $86.1 billion, up 75.9 percent from 2010 volume of $48.9 billion.

Despite these strong growth projections, Gartner analysts said the mobile payment market is growing slower than expected.

“In developing markets, despite favorable conditions for mobile payment, growth is not as strong as was anticipated. Many service providers are yet to adapt their strategies to local requirements, and success models from Kenya and the Philippines are unlikely to be translated to other markets,” said Sandy Shen, research director at Gartner. While developing markets have favorable conditions for mobile payments, such as high penetration of mobile devices and low banking penetration, this is no guarantee of success, unless service providers adapt their strategies to local market requirements.”

“In developed markets, companies are trumpeting the prospects of Near Field Communication (NFC) without realizing the complexity of the service model. We believe mass market adoption of NFC payments is at least four years away,” Ms. Shen said. “The biggest hurdle is the need to change user behavior by convincing consumers to pay with mobile phones instead of cash and cards.”

Gartner expects Short Message Service (SMS) and Unstructured Supplementary Service Data (USSD) to remain the dominant access technologies in developing markets due to the constraints of mobile phones. Wireless Application Protocol (WAP) will remain the preferred mobile access technology in developed markets, where the mobile Internet is commonly available and activated on the phone. Mobile app downloads and mobile commerce are the main drivers of WAP payments, and WAP will account for almost 90 percent of all mobile transactions in North America and about 70 percent in Western Europe in 2011.

Money transfers and prepaid top-ups will drive transaction volumes in developing markets. These are seen as the “killer apps” in developing markets, where people value the convenience of sending money to relatives and topping up mobile accounts. This is most obvious in Eastern Europe, the Middle East and Africa, where these two services will account for 54 percent and 32 percent of all transactions in 2011.

“Thanks to the success of mobile application stores, such as Apple’s App Store, and the efforts in driving mobile sales by major retailers, such as Amazon and eBay, merchandise purchases far outweigh other use cases in developed markets, which include North America and Western Europe,” Ms. Shen said. “We predict that in 2011, merchandise purchases will account for 90 percent and 77 percent of all transactions in North America and Western Europe, respectively.”

Additional information is available in the Gartner report “Market Trends: Mobile Payments Worldwide, 2011.”

Widespread Use of NFC Mobile Payments Still Years Away, Says Survey

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Sybase, Inc. subsidiary, Sybase 365, has released the results of its survey about leading inhibitors of widespread adoption of mobile payments.

According to the company, 40% of survey respondents cited the main inhibitor of widespread mobile payment adoption was a lack of coordination between key stakeholders, including mobile operators, merchants, payment processors, banks and developers.

“For mobile commerce to take off, industry stakeholders must harmonize their efforts in the same way that led to proliferation of SMS and MMS technologies,” said Marty Beard, President, Sybase 365. “In markets where multiple parties are working together, such as mpass Germany and paybox Austria, we have successful ecosystems where end users can pay for a multitude of goods and services via the mobile.”

While NFC will help further enable mobile payments, successful and established mobile technologies, including SMS and USSD are already leading the development of the ecosystem today.

“Mobile channels such as SMS, browser and apps are already being implemented by merchants globally. The challenge facing NFC is how to make the consumer payment experience significantly faster and easier than it already is.” added Beard.

Among 251 attendees polled at GSMA Mobile World Congress last week, 76 percent believe mobile proximity payments using NFC (Near Field Communication) technology is still at least two years away. Once again the lack of industry coordination (30 percent) was the cited as the main culprit for delayed NFC adoption. Other challenges included lack of NFC readers at point-of-sale (26 percent) and inadequate handsets (25 percent) were cited as inhibiting rapid deployment of mobile payments.

Source: Sybase 365

Verrus Mobile Payment

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Founded in 2000, Verrus was an early pioneer in pay by phone services beginning with North America’s first pay by phone parking installation in 2001, and the “OrderUp” mobile phone food and beverage ordering system used at Safeco Field launched in the Summer of 2005.

Today, the company’s service is available in over 90 cities and towns throughout North America and Europe making it the most widely-used pay by phone system. Using state-of-the-art IT infrastructure supporting payments via SMS, IVR, and Web, Verrus processes millions of transactions each year.

More information: Verrus Mobile Payment.

Indian Banks Introduce Instant Mobile Retail PaymentsIndi

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A new mobile retail payment system backed by some large banks in India will allow fund transfers between different banks and the use of SMS to make transactions from even low-end phones — features that are expected to make the system popular with consumers.

Because the Interbank Mobile Payment Service IMPS from National Payments Corporation of India NPCI can support transactions from even low-end phones, the service will be accessible to a larger number of Indian consumers, A.P. Hota, managing director and CEO of NPCI, said on Tuesday.

via Indian Banks Introducing Instant Mobile Retail Payments – PCWorld.

Mobile Payments: Introduction

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Mobile payment, also referred to as mobile money, mobile money transfer, and mobile wallet generally refer to payment services operated under financial regulation and performed from or via a mobile device. Instead of paying with cash, cheque, or credit cards, a consumer can use a mobile phone to pay for a wide range of services and digital or hard goods.

Although the concept of using non-coin-based currency systems has a long history, it is only recently that the technology to support such systems has become widely available.

In developing countries mobile payment solutions have been deployed as a means of extending financial services to the community known as the “unbanked” or “underbanked,” which is estimated to be as much as 50% of the world’s adult population, according to Financial Access’ 2009 Report “Half the World is Unbanked”. These payment networks are often used for micropayments.

There are four primary models for mobile payments:

Some mobile payment solutions are also used in developing countries for micropayments.

Source: Wikipedia

SMS, USSD Based Mobile Payments

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The consumer sends a payment request via an SMS text message or an USSD to a short code and a premium charge is applied to their phone bill or their mobile wallet. The merchant involved is informed of the payment success and can then release the paid for goods.

Since a trusted delivery address has typically not been given these goods are most frequently digital with the merchant replying using a Multimedia Messaging Service to deliver the purchased music, ringtones, wallpapers etc.

A Multimedia Messaging Service can also deliver barcodes which can then be scanned for confirmation of payment by a merchant. This is used as an electronic ticket for access to cinemas and events or to collect hard goods.

Transactional payments have been popular in Asia and Europe but are now being overtaken by other mobile payment methods such as mobile web payments (WAP), mobile payment client (Java ME, Android…) and Direct Mobile Billing for a number of reasons:

  1. Poor reliability – transactional payments can easily fail as messages get lost.
  2. Slow speed – sending messages can be slow and it can take hours for a merchant to get receipt of payment. Consumers do not want to be kept waiting more than a few seconds.
  3. Security – The SMS/USSD encryption ends in the radio interface, then the message is a plaintext.
  4. High cost – There are many high costs associated with this method of payment. The cost of setting up short codes and paying for the delivery of media via a Multimedia Messaging Service and the resulting customer support costs to account for the number of messages that get lost or are delayed.
  5. Low payout rates – operators also see high costs in running and supporting transactional payments which results in payout rates to the merchant being as low as 30%. Usually around 50%
  6. Low follow-on sales – once the payment message has been sent and the goods received there is little else the consumer can do. It is difficult for them to remember where something was purchased or how to buy it again. This also makes it difficult to tell a friend and friend.

Source: Wikipedia

Mobile Web Payments (WAP)

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The consumer uses web pages displayed or additional applications downloaded and installed on the mobile phone to make a payment. It uses WAP (Wireless Application Protocol) as underlying technology and thus inherits all the advantages and disadvantages of WAP. However, using a familiar web payment model gives a number of proven benefits:

  1. Follow-on sales where the mobile web payment can lead back to a store or to other goods the consumer may like. These pages have a URL and can be bookmarked making it easy to re-visit or share with friends.
  2. High customer satisfaction from quick and predictable payments
  3. Ease of use from a familiar set of online payment pages

However, unless the mobile account is directly charged through a mobile network operator, the use of a credit/debit card or pre-registration at online payment solution such as PayPal is still required just as in a desktop environment.

Mobile web payment methods are now being mandated by a number of mobile network operators.

A number of different actual payment mechanisms can be used behind a consistent set of web pages.

Direct Operator Billing

A direct connection to the operator billing platform requires integration with the operator, but provides a number of benefits:

  1. Simplicity – the operators already have a billing relationship with the consumers, the payment will be added to their bill.
  2. Instantaneous payments giving the highest customer satisfaction
  3. Accurate responses showing success and reasons for failure (no money for example)
  4. Security to protect payment details and consumer identity
  5. Best conversion rates from a single click-to-buy and no need to enter any further payment details.
  6. Reduced customer support costs for merchants since customers will complain to the operator.

It has however a drawback, the payout rate will be much lower than with other payment providers. Examples from a popular provider :

  • 92% with Paypal
  • 84 to 86% with Credit Card
  • 45 to 91.7% with Operator billing in the US, UK and different smaller european countries, but usually around 60%
  • However, there is in the world one exception to this rule, in UK it might give more payout percentage for a merchant to bill through the Payforit system than with a credit card.

Credit Card

A simple mobile web payment system can also include a credit card payment flow allowing a consumer to enter their card details to make purchases. This process is familiar but any entry of details on a mobile phone is known to reduce the success rate (conversion) of payments.

In addition, if the payment vendor can automatically and securely identify customers then card details can be recalled for future purchases turning credit card payments into simple single click-to-buy giving higher conversion rates for additional purchases.

Online Wallets

Online companies like PayPal, Amazon Payments, mHITs and Google Checkout also have mobile options. Here is the process :

First Payment

  • User registers, inputs his phone number, the provider sends him a SMS with a PIN
  • User enters the received PIN, authenticating the number.
  • User inputs his credit card info (or another payment method) if necessary. (Not necessary if account already existing) and validates payments

Subsequent payments :

  • The user re enters his PIN to authentify

Requesting a PIN is known to lower the success rate (conversion) for payments. These systems can be integrated with directly or can be combined with operator and credit card payments through a unified mobile web payment platform.

Source: Wikipedia

New Mobile Banking via SMS in Jamaica

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Anyone with a mobile phone can now bank on the go, thanks to FirstCaribbean International Bank’s Mobile Banking service. Customers of FirstCaribbean can do their banking via SMS text messaging and immediately receive their account information via return SMS text.

After a successful launch of this new service in Barbados, Cayman, and the Eastern Caribbean Islands, FirstCaribbean is making this service available to Jamaica customers starting today.

With FirstCaribbean Mobile Banking, customers can:

  • Request their account balance
  • Request the last 5 transactions that occurred during the past 30 days.
  • Transfer funds between their accounts
  • Set up weekly account balance alerts
  • Set up threshold alerts.  For example, they can set an alert to come to them if their account balance falls below a certain amount or if it goes above a certain amount.

FirstCaribbean’s Chief Marketing Officer, Peter Steenveld, noted that the new service means the bank’s customers can now do their banking anywhere, at any time and on the go. “What’s so exciting about our service is that you can access it on any type of mobile phone. You don’t need to have one of the latest models of smart phone to be able to use our mobile banking service. Any phone that can send or receive text messages will put your latest account information right in the palm of your hand. Our service is safe, convenient, and it’s fast, so there’s no waiting for web pages to download.”

Customers signing up for FirstCaribbean Mobile Banking can access up to 6 of their Checking or Savings accounts, and is available to customers of any mobile phone service provider. SMS charges will be the same as what any customer would pay for their cellular service provider for text messages.

Apart from being convenient and easy to use, FirstCaribbean’s Mobile Banking service is safe.  Stringent security measures are in place to protect their customers’ financial information and details.  Text messages will only be sent to the mobile phone number that is registered with the bank by the customer, who must verify his/her identity at the time of registration. Account details or any financial information will not be sent to any third party.  Account numbers are never sent to the mobile phone.

Director, Retail, Wealth & Small Business Banking in Jamaica, Christopher Denny added: “Our staff participating in the pilot this new service, loved it. We received many positive comments about the speed and convenience of the service. One feature that was particularly well received was the balance threshold alerts. People testing the service were pleased to be able to get an alert when they received a deposit – for example when their salaries were deposited to their accounts – or if their balances went below a certain limit, and then to be able to transfer from one account to the other – all without setting foot in the bank!”

FirstCaribbean is not charging any fees for the Mobile Banking service.

Source: FirstCaribbean

Cellfire

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Cellfire connects brands to shoppers using a variety of digital communication means. Shoppers can access offers via mobile applications, mobile web, and text messaging, and can also interact from the computer or through a digital TV (from Verizon FiOS TV service).

The companys provide consumers with savings directly on their grocery loyalty cards as well as through retailers via a 2D barcode and other scannable codes; and enables brands and merchants to increase their reach and engage the mobile-savvy consumer—especially the elusive 18-34 year-old demographic—by providing a measurable, direct call to action in the form of digital promotions, discount offers and coupons.
[Read more…]

Phone-Based Authentication Sees Strong Adoption in 2010

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Usage of PhoneFactor’s products offer a good insight into adoption of phone-based authentication. The company offers phone-based two-factor authentication solutions to companies worldwide–users simply respond to a phone call or SMS text message from PhoneFactor to authenticate.

The company has more than doubled its user base in the first three quarters of this year with key sales in Banking, Government, Healthcare, and Enterprise. This, combined with the recent announcement by Google that it will be adding support for phone-based authentication to its Google Apps platform, validates a shift in the authentication market which has been expected for some time.

“I think it is great news for the market as it shows that a major player with massive influence is adopting the technology,” said Alan Goode of Goode Intelligence. Goode’s firm published a report on “The Mobile Phone as an Authentication Device – Analysis and Forecasts 2010 – 2014” which forecast significant growth in the phone-based authentication market.

“Our research shows that the introduction of mobile phone-based two-factor authentication will not only result in phone-based two-factor solutions taking market share from the previously dominant hardware token solutions, but also that new markets will be opened up as a direct result,” said Goode. “Strong authentication is no longer the preserve of an enterprise or corporate banking user; everyone who owns a mobile phone can now benefit from strong, agile authentication that is cost-effective and quick to deploy.”

“A new paradigm for user authentication, which reflects evolving standards for security and scalability, is driving adoption of phone-based authentication to unprecedented levels,” said Steve Dispensa, PhoneFactor CTO and co-founder. Single factor authentication based on user names and passwords has proven ineffective against today’s threats, yet multi-factor systems based on security tokens and smart cards have failed to become ubiquitous. The resulting gap is being filled by phone-based authentication methods.

“We’ve been seeing this shift on the banking and enterprise side over the last 12-18 months,” said Dispensa. “The demands of an increasingly mobile workforce, shift toward cloud computing models, and evolving threat landscape are forcing organizations to rethink their current authentication practices.”

Phone-based authentication can be quickly and cost-effectively enabled for large numbers of geographically diverse users, with out-of-band solutions offering protection against malware, such as keystroke loggers, and MITM/MITB attacks which have become prevalent in particularly high risk industries like banking.

Source: PhoneFactor