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MOBILE PAYMENTS OOCUR 8 TH ANNUAL CONFERENCE NOVEMEBER 03-05, 2010

MOBILE PAYMENTS OOCUR 8 TH ANNUAL CONFERENCE NOVEMEBER 03-05, 2010. Topics. What is Mobile Payment? Services Case Studies – Japan, Korea & Philippines Risks & Issues Lessons The Future. What Is Mobile Payment?. General Definition

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MOBILE PAYMENTS OOCUR 8 TH ANNUAL CONFERENCE NOVEMEBER 03-05, 2010

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  1. MOBILE PAYMENTS OOCUR 8TH ANNUAL CONFERENCE NOVEMEBER 03-05, 2010

  2. Topics • What is Mobile Payment? • Services • Case Studies – Japan, Korea & Philippines • Risks & Issues • Lessons • The Future

  3. What Is Mobile Payment? General Definition Payment made at a point of sales using a mobile device (Ref: SearchMobileComputing) Any chain of payments that are initiated by use of a mobile device. ( Ref: KPMG: Mobile Payments in Asia Pacific) Estimated Market Value 2009 - $68.7B 2014 - $633.4B

  4. What Is Mobile Payment? Stakeholders • Mobile Operators – new revenues, increase traffic • Financial institutions – reduce transaction costs, reach new customers • Retail Merchants • Content Providers • Payment Platform Hosts

  5. What is Mobile Payment? Types of Mobile Payments Proximity Payment: made at point of sale Technology – Near Field Communications (NFC) Remote payment over wireless network Technology – Short Message Services (SMS), Wireless Application Protocol (WAP) & Unstructured Supplementary Services Data (USSD)

  6. Services • Mobile Banking • M-Wallet • Top-Up and Remittance • Content Download • Touch and Pay

  7. Services Mobile Banking • Simple services offered: account enquires and funds transfer • Limiting factor: perceived security risk • Advantages: (i)“Unbanked Market” access to bank services (high mobile penetration, high cash transaction, low access to banking facilities, large rural population) (ii)Banks can acquire customers at less cost.

  8. Services M-Wallet • Electronic wallet housed in your phone • Used for small purchases ( purchase of coffee, tickets etc.) • Presently Retailer driven model dominant • Used to drive customer loyalty • Carrier Driven m-wallet holds great potential. Would enable customers to use it at different retailers. • Obstacle: interoperability of hardware and security

  9. Services Top-Up And Remittance Used for: • Purchasing prepaid minutes ( Prepaid market estimated at US$100B; cost of prepaid vouchers to MNO $15B annually) • Transferring or gifting of minutes • Money remittance • Purchase of virtual goods or game attributes (Gamers – more often own a phone than a computer )

  10. Services Content Download • Ringtones are very popular • MNO well placed to facilitate the payment service , control the interface and have the billing capabilities

  11. Services Touch and Pay • A chip in a mobile phone enables it to act like a smart card • Payment is executed when card/phone is brought close to point of sale reader • Smart cards very popular in the transportation sector (Oyster – UK; Octopus – Hong Kong; Presto – Toronto) • Credit Card Companies also launching payment using mobile phone ( Visa – pay Wave; MasterCard – Pay Pass)

  12. Case Studies -Japan • More advance m-payments services than the West • NTT DoCoMo and Sony partnered to develop the contactless FeliCa IC chip used in contactless touch-and-pay cards. • DoCoMo used the FeliCa chip to create m-wallet; rents space on m-wallet (20m phones sold) • KDDI and Mitsubishi-Tokyo UFK Bank launched Shinginko (m-wallet phones – 5m sold)

  13. Case Studies - Korea • First attempt of m-payment unsuccessful (numerous menus, POS readers not interoperable, high transaction fees to card issuers) • Third Party Providers: - Saw opportunity in the online gaming and content download market - Targeted youth without credit card, allowing purchases on mobile phone to be charged to customer’s bill - Led to paying for other services ( cable TV, membership fee, subscriptions, etc)

  14. Case Studies - Korea • Bank On: - Mobile Banking , an alternative to ATM and transit card - Launched by LG Telecom and Kookmin Bank - Did not provide m-payment service, but increase customer base for LG Telecom and encouraged others MNO to venture into the market • M-payment Services: - Offered by:- SKT and Visa; KT Freetel and MasterCard - Uniqueness:- chip interoperable between banks and transit applications, capable of migrating to NFC technology • Korea Smart Mobile T Money - Fare payment venture between SKT and Korea Smart Card Company

  15. Case Studies - Philippines • Smart Load - Venture between Smart Communications and Philippine Long Distance Telephone Company (PLDT) - Store owners able to download airtime and resell as top-ups - Uses SMS messaging • Smart Money - Collaboration between Smart Communications and MasterCard - Money transferred to Smart Money Account used to make payments or transfers to other users - Uses SMS messaging

  16. Case Studies - Philippines • Pasa Load - A Smart Communications service - Targeting low income and “unbanked” customers - Subscribers able to buy small units of airtime at low prices and can also roll over airtime to other customers • Remittance Services - Smart Communications partnered with MTC Vodafone and Ahili United Bank of Bahrain to create Smart Services Hub - Customer base was Filipinos workers overseas ( $14B market annually) - Filipinos in the Middle East can send money home to relatives using their mobile phones

  17. Risks • Skimming (Security of personal Information when transmitted over the network) • Phone lost, stolen (unauthorized payments, installation of malicious software) • When a phone or mobile provider is changed what happens to the information on the chip • Vast peak volumes • Information system failure

  18. Risks Mitigation of Risks • NFC enabled phones require PIN to make payment • Security standards being developed by Financial Services Technology Consortium (FSTC) and European Payment Council • Encryption of data on chip

  19. Issues - Interoperability Lack of interoperability across phone devices, mobile carriers and readers Open loop system will allow payments to be processed by open national and international networks

  20. Issues - Regulation • Telecoms and financial sectors regulated to varying extent in most countries • M-payments expected to attract national, international and industry regulators • International Regulations likely to affect m-payment:- - Basel III - Anti-Money Laundering - Know your Customer

  21. Issues - Regulation Question: Should MNOs who offer m-payment services be treated as a Bank? • E-payment regulations in place in some countries, but do not cover m-payments • Europe’s E Money Directive has created Electronic Money Institutions (ELMI) • ELMIs subject to lighter regulations than credit companies • MNOs and m-payments presently exempt from licensing under ELMI

  22. Lessons • Collaboration between stakeholders to provide m-payment services • Business case/drivers vary from country to country • Potential to: - Increase revenues and diverse revenue source - Attract new customers and retain customers (loyalty)

  23. The Future • Brazil and India – lead by Banks • Russia - Mobile Operators • China – Use SMS Infrastructure • Western Countries - Banks, Credit Card companies, MNOs, Retailers

  24. Thank you

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