Mobile Commerce

Mobile electronic payment systems: Main technologies and options 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.” 2 Overview of Mobile Commerce  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 e.g. 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 … 3 M-Commerce Overview Wide M-Commerce Information ㆍNews ㆍStock Price ㆍLocation & Traffic ㆍPIM ㆍTelephone & Address management Entertainment ㆍVOD, AOD ㆍOnline Game ㆍFortunetelling ㆍSports game result ㆍContents download Commerce ㆍFinancial ㆍShopping ㆍAdvertising ㆍCustomer Care ㆍInformation • Wide definition of m-commerce is ‘the value exchange on wireless network’ : all kind of electronic trading, such as document exchange, various information providing and games, through wireless device Narrow M-Commerce • More direct and narrow definition of m-commerce is ‘the buying and selling of goods and services through wireless handheld device and mobile network’ 4 Mobile Internet Service Evolution Multimedia service Video communication VOD Transaction-based service AOD Game Online betting E-Salary Advertising Content-based service Auction Broking Instant message Shopping Bell sound download banking Directory service Music download Ticket reservation information SMS 1998 SIM Toolkit 1999 WAP 2000 GPRS 2001 EDGE 2002 UMTS 2003 5 mCommerce Application Wireless infrastructure technologies Mobile Internet Service Evolution Hype Disappointment Growth Current Situation 1998 1999 2000 2001 2002 2003 2004 Business perspective •High fee •Low quality contents& service •Limited CP profit model •Capital investment for infrastructure setup Technology perspective •Inconvenient user interface •Low speed due to narrow bandwidth •Low reliability due to security problem Business perspective •Low fee according to packet based method •Fierce competition to get customer Technology perspective •CDMA 1X, HDR •Java, VOD/AOD multimedia technology •Enhance reliability from higher security technology like WPKI 6 M-Commerce Value Chain Dominant Role Technology Platform Vendors Infrastructure &Equipment Vendors Application Platform Vendors Application Content Developers Providers Content Aggregators Mobile Portal Providers Mobile Network Operators Mobile Service Providers Handset Vendors ㆍOS ㆍME/WAP ㆍMiddleware (Gateway) ㆍNews ㆍSports ㆍGame ㆍStock ㆍContents Packaging ㆍMobile Phone ㆍCommunicator ㆍMicrobrowser ㆍHSCSD ㆍGPRS ㆍEDGE ㆍUMTS ㆍTraffic Service Carriers Financial Facilities 7 Barriers to M-Commerce Market Aspect Customer dissatisfaction Inconvenience according to mobility Weak Profit structure compared to infrastructure investment Technology Aspect Security and Privacy Terminal User Interface Reliability of Network Poor Standardization Bandwidth 8 Poor quality of content High price M-Commerce Application Bank Transportation • Train/Bus ticket • Prepaid card • Air ticket Smart phone • Bank card • Credit card • e-money e-Ticket UIM Contactless IC Card R/W • Concert • Sports event Shopping • Coupon • Shopping point card Governmental Service • ID card • Driver’s license 9 M-commerce service Community Communications Flash Park Chatting Entertainment VOD Life stock [*] book IMS Games A B C D E map Mail G/W diary 10 10 Introduction Mobile commerce – Customer needs  The customer wants to access information, products and services anytime and anywhere on his mobile terminal. He can use his mobile terminal to purchase tickets for events or public transport, pay for parking, gamble, download content and even order books and CDs. Appropriate payment methods have to be provided. They will range from secure mobile micropayment to service subscriptions. 11   Introduction Mobile commerce - Provider’s point of view    The future development of the mobile telecommunication sector is heading more and more towards value-added services. Mobile commerce will constitute a major part of it. Consequently operators as well as third party providers will focus on value-added-services. To enable mobile services, providers with expertise on different sectors will have to cooperate. Innovative service scenarios will be needed that meet the customer’s expectations and business models that satisfy all partners involved. 12 M-Commerce Services  Characteristics of m-Commerce Services A genuine m-commerce service has to make sensible and creative use of the properties of mobile devices such as: Portability - The customer can access services and be reached anywhere anytime. Trustworthiness - Sensitive information can be stored securely on the mobile device, secure transactions can be carried out. Localisation - Information and services can be adapted to the user’s position. Access to user profiles - Information and services can be 13 adapted to the user’s preferences.       Limiting technological factors Mobile Devices •Battery •Memory •CPU •Display Size M-Commerce Services Mobile Middleware •Standards •Distributio n Security •Mobile Device •Network •Gateway Localisation •Upgrade of Network •Upgrade of Mobile Devices •Precision Networks •Bandwidth •Interoperabil ity •Cell Range •Roaming 14 M-Commerce Services Classification of Services Financial  Entertainment  Shopping  Information  Payment  Advertising  15 Financial Services  M-Commerce Services Secure banking services: This service enables the user to perform almost any possible banking transaction, regardless of the type or the amount of money involved. Mobile financial services:This service offers the users information about the stock market. The commands for the service could be given through a voice recognition server, SMS, WAP etc.  16 M-Commerce Services Entertainment Services  Games on Mobile Devices: Users play games provided by the operator, alone or against other mobile users present on the network. Mobile Gambling:Users send their bets using text-based technologies like SMS or WAP and check their status anytime. Mobile Dating: This service simply enables mobile communication between members of a dating service via SMS, e-mail or voice massages.   17 Shopping  M-Commerce Services Purchase of goods: The user could purchase CDs, books, flowers, music and services (eg renew a subscription) using his mobile terminal. Mobile Auctions: Users can subscribe to an auction, check the offers and highest bids and send their own bids through their mobile device.  18 Information Services  M-Commerce Services Maps and Routing Directions: Allows users to search the optimal route for a trip, visualise maps of the area of interest, locate restaurants, hotels and camping sites. Local Information: Users are provided with information dependent on their current location and their user profile. Mobile Alert Service: Notifies users when anything changes or happens that is of interest to them. It offers location based, time based, and threshold based services. 19   M-Commerce Services Payment Services  Payment for public transport using Bluetooth enabled device: Allows the user to pay for his trip by bus or train if his mobile device as well as the ticketing machine for public transport are Bluetooth enabled. Electronic Wallet: The user can turn his mobile terminal into a payment device and pay for goods and services by either using mobile micropayment or secure credit / debit card transactions.  20 M-Commerce Services Advertising  Loyalty Scheme for Department Store or Supermarket: Subscribers to this service can get special discounts at the payment desk by showing an SMS message sent by the store offering the product. The received SMS message can be based on location or upon user request or a combination of both. As soon as the user approaches a shop that sells his favourite products he will automatically get a notification on his mobile device. 21  Intelligent Advertising: Payment for m-Commerce Services “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 … 22 Payment for m-Commerce Services Significance for Mobile Commerce  Mobile Payment can be offered as a stand-alone service. Mobile Payment could also be an important enabling service for other m-commerce services (e.g. mobile ticketing, shopping, gambling):  It could improve user acceptance by making the services more secure and user-friendly.  In many cases offering mobile payment methods is the only chance the service providers have to gain revenue from an m-commerce service. 23  Payment for m-Commerce Services Mobile Use  High market penetration (up to 80% in some countries) and growing Existing social/cultural practice (e.g. teens + OAPs)   Including payments 24 Payment for m-Commerce Services 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  25 Payment for m-Commerce Services 3rd Generation looks even more promising  Possibility of new products and services o location based services o multimedia services  Access to Internet infrastructure 26 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. 27 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 28 Architecture of an m-Commerce Platform Security Regulatory issues Roaming Technical restrictions Players and Components Mobile services are based on a complex technological and organisational infrastructure. Qualified partners with a large span of core competences have to cooperate to make them possible. Customer Mobile devices Point of Sale Merchant Mobile Operator Mobile Gateway Content Provider Content Application Repository Public Key Infrastructure Location based services Billing Financial transactions Application Provider Micropayment Advertising Financial Institution Platform Provider Mobile commerce platform Micropayment Provider 29 Business Models for m-Commerce Key factors for Business Models  Even the most brilliant service will not be commercially successful for the provider if the chosen business model is not appropriate for the service. Therefore the project puts an emphasis on defining criteria for the evaluation of generic m-commerce business models and choosing the right business models for the services mentioned before. The approach followed consisted of considering a business model in terms of actors, roles and business relations such as information, product, service and revenue flows.   30 Business Models for m-Commerce Key factors for Business Models The following core issues for business models were identified and defined:   the concept for a new mobile commerce service the positioning of the mobile operator taking into account its strategic advantages the target market, in terms of market segment and corresponding potential the relationship with other strategic business partners.   31 Business Models for m-Commerce Development Process for new Products and Services Market Pull Concept definition of the product/service Technology Push Business modelling Business analysis Marketing plan Service development and investment analysis Yes Sustainable ok? No Market analysis (interest, sustainability, competition, competitive advantage) Definition and use of market analysis Business plan No Sustainable ok? Yes Stop 32 Business Models for m-Commerce Mobile Micro-payment Services  With this specific micropayment service the customer can turn his mobile terminal into a payment device and use it to pay for items and services at a real or virtual point of sale subsequently.  The micropayment is a perfect enabling service for many other m-commerce services that involve the transfer of small amounts of money (e.g. downloading of ring tones and music files or access to mobile content). 33 Business Models for m-Commerce Mobile Micro-payment Services- Usage Scenario  The user chooses an item he wants to purchase and chooses the micropayment service for payment. He gets a purchase order by the merchant, signs it with his private key and sends it back. The merchant checks the user’s signature and stores the purchase order. Regularly he sends a batch of the purchase orders to the payment service provider for clearing.   34 Business Models for m-Commerce Mobile Micro-payment Services 2. Upload application and credentials 2. Sign purchase order 3. Return signed purchase order 4. Check signature Customer: mobile devices Merchant: Point of Sale 1. Send purchase order 1. Registration process Mobile Gateway a) Send collected purchase orders regularly Content Application Repository 1. Provide Customer‘s keys and certificate Billing Micropayment Advertising c) Clearing 2. Certification request b) Check purchase orders Financial Institution Public Key Infrastructure Location Based Services 3. Create key pair and certificate Mobile commerce platform Customer registration Application and credential upload Payment and clearing 35 Business Models for m-Commerce Mobile Micro-payment services - Players The main players that could participate in the payments value chain are: The Customer, who wants to make a payment  The Merchant providing the goods and/or services  The Payment Service Provider (PSP) supporting the financial transactions and  The Mobile Operator that provides the network or could even play the role of the payment service provider.  36 Mobile Micro-payment Services – Mobile Operators and the value chain Business Models for m-Commerce Mobile operators have an established customer base, effective micro-billing systems (handled by prepaid accounts or monthly phone bills), authentication capabilities and established business models for splitting revenues with other market players. In order for Mobile Operators to become payment service providers they need strong alliances with merchants 37 Requirements for mobile payment system     Robust + Secure - prerequisites Global, ubiquitous - Allow roaming Profitable - must have a business model Fit in with existing structures 38 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] 39 Mobile payment options … Some technical options/considerations  Card based   Software based  Smart cards, double cards … 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 40 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 41 Software based Server or client based  Microsoft   Some interesting issues 42 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! 43 „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 44  Different, incompatible, options - the „Betamax‟ effect Phone, PDAs/handheld devices or PC Tablets?  Price Phones, PDAs- £100+  PC Tablets - £500+  Portability  Sophistication  Security  45 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 46 Electronic „Cash‟  Many advantages for users  Limit risk (i.e. only loose cash value), anonymous, in-control    Technical challenges of develop an electronic cash infrastructure Extra risk associated with cash  not traceable eg „cash‟ via pre-pay cards – need to include more than cash value to account for distribution costs 47 Profit for electronic cash providers?  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)  48 Mobile payment options: Summary “M-commerce needs ubiquitous, compatible, payment systems”  Many options     Several challenges   Several trials, limited scope Need for standards Several players  eg incompatibilities, some serious No universal standard Political element 49 [Source(s) for payment information  E-PSO database of payment systems (www.epso.jrc.es)  But lots more …] 50 Example range of mobile payment options… Electronic purses/wallets  Card based (smart card and pre-pay) and software options  51 Example electronic purses/wallets: (actual systems and systems which support/interface with)                   ABN AMRO ewallet Bankpass Mobile Bankpass Web Banxafe CyberCash Cybertarjeta DigiGold Dynacash (ex- Intercoin) ECML EMPS Earthport Ecash Egg wallet GiSMo I-Pay K-Wallet (ex- Klebox) MEDEA Magex                 MasterCard e-wallet Millicent MinutePay Mondex Nochex Odysseo Payhound Qpass SET (Secure Electronic Transaction) SafeDoor Secure Payment Application Smart creds W-HA Win-commerce Yahoo! PayDirect i-Minitel, mPay 52 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 … 53 Main players/stakeholders        Telcos Banks Financial services/Card companies (VISA, MasterCard …) Suppliers Existing payment service providers Customers/users Others …Microsoft … 54 Collaboration activity       Mobile Payment Forum (http://www.mobilepaymentforum.org) MeT – Mobil electronic Transaction (www.mobiletransaction.org) Mobey Forum (www.mobeyforum.org) PKI Forum (www.pkiforum.org) GMCIC: Global Mobile Commerce Interoperability Group mSign - Mobile electronic Signature Consortium (www.msign.org) …. 55 Collaboration activity  continued … ECBS – European Committee for Banking Standards (www.ecbs.org)  Mobile commerce expert team     WAP Forum Global Platform EMV (Europay-MasterCard-Visa) CEPS (Common Electronic Purse Specifications) Lots of collaborative activity? 56 CEPS (Common Electronic Purse Specifications)  http://www.irisa.fr/vertecs/Equipe/Rusu/FME02/functionalrequirement s6-3.pdf  “define requirements for all components needed by an organization to implement a globally interoperable electronic purse program, while maintaining full accountability and audit-ability“ (CEPSCO). – but mainly based in Europe. 57 Views from different stakeholders …preferred options?        Telcos Banks Financial services/Card companies (VISA, MasterCard …) Suppliers Existing payment service providers Customers/users Others …Microsoft … 58 Challenges for mobile electronic payment systems Legal  Technical  Cooperation  Higher risk  Social  Health  Profit  59 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 m-commerce Expect a few winners (and loosers)  But which ones? 60