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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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NOVEMEBER 03-05, 2010


  • What is Mobile Payment?

  • Services

  • Case Studies – Japan, Korea & Philippines

  • Risks & Issues

  • Lessons

  • The Future

What is mobile payment

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

What is mobile payment1
What Is Mobile Payment?


  • Mobile Operators – new revenues, increase traffic

  • Financial institutions – reduce transaction costs, reach new customers

  • Retail Merchants

  • Content Providers

  • Payment Platform Hosts

What is mobile payment2

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)


  • Mobile Banking

  • M-Wallet

  • Top-Up and Remittance

  • Content Download

  • Touch and Pay


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.



  • 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


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 )


Content Download

  • Ringtones are very popular

  • MNO well placed to facilitate the payment service , control the interface and have the billing capabilities


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)

Case studies japan
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)

Case studies korea
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)

Case studies korea1
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

Case studies philippines
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

Case studies philippines1
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


  • 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


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

Issues interoperability

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

Issues regulation
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

Issues regulation1
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


  • 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)

The future
The Future

  • Brazil and India – lead by Banks

  • Russia - Mobile Operators

  • China – Use SMS Infrastructure

  • Western Countries - Banks, Credit Card companies, MNOs, Retailers