Topic: Following the Money
trail…On your Device? – Mobile Payment Landscape – Understanding of
which is necessary for any Enterprise!
Folks,
This week I want to follow the Money and explore the colorful landscape of handling Money in Digital economy. If you think all our discussion around crafting an Enterprise Mobile Strategy was complicated, wait till you see the Mobile Payment Landscape. This weeks post I wanted to focus on Mobile Payments where much works is to be done to address fragmentation and reach a critical mass. But before we jump into Mobile payments let us tie in with my previous discussion on Mobile Ecosystem and mCommerce and mBanking – as that discussion is relevant here.
In my last post (ref: Understanding Mobile Ecosystem is Vital for a MobileFirst Enterprise) I discussed the value of sound understanding of evolving Mobile Services ecosystem and inferred that the growth and expansion of business development, MobileFirst portfolio, therefore, relies on implied understanding on the co-development that provides transient energy (in the form of innovation and value), and cumulative development result will enable the beneficiary of our technology – “our clients," to derive value from our products and solutions.
Some Significant Mobile Payment Statistics:
1. $1.6 Trillion of Mobile Payment in China
2. 46% of all POS transactions b 2017
3. 100% and more year to year growth
4. 225 Mobile Money Services
5. 320 Million NFC enabled devices shipped in 2013
6. 90% growth in P2B & B2P, P2P transactions with payments/transfers worth $1.1 Billion.
And more…
Also in my earlier post (ref: mCommerce or Smarter Commerce) I discussed some of the challenges that mCommerce initiatives face. As a Merchant, the marketing, selling and servicing components involve an integrated strategy around offers and accepting payments. To this effect I discussed the following:
a. Mobile Payment – Today clients have a few choices:
i. Cloud – e.g. GDW – Google Digital Wallet/ISIS, etc. Simple and easy to Implement and integrate into business process
ii. NFC – Near Field Communications – Not all phones are enabled and this technology is still maturing in adoption, security concerns, etc.
iii. Custom processing – This is traditional credit card processing and most commerce platforms provide integration avenues including WebSphere Commerce Server. (Example Amazon.com)
iv. New emerging consortiums – MCX. –We need to understand this. Please take a moment and Google it. It is a huge consortium and gaining much momentum.
b. B2B -- Complete integration with Business partner gateway services. Mobility will need to consider this.
c. Brand management – How do we a Mobile Store front manage a cohesive brand like they do on Web? Think Multi Brand and linkages?
.. and more… These are just glimpse of issues we can encounter and by no means an exhaustive list.
Mobile Payment – A fragmented Landscape
1. Mobile Payment – an Ominichannel experience - Mobile payments, be it Mobile wallets or Digital wallet promises an Omni channel experience incorporating the coupon, loyalty programs, and integrating that with Mobile experience. Mobile payment if not integrated into a complete experience fall short of delivering the holistic digital experience.
2. Non banking players – Mobile Payments opens up new avenues to commerce and Mobile monetary exchange. Be it Bank to person (B2P), Person to Person (P2P), Person to Bank (P2B), and so on, there are many non banking players emerging in Mobile Payment space that enables a seamless transfer of funds between 2 entities either to allow commerce or transfer of funds and remittances.
3. Mobile Wallet vs. Digital Wallet: Mobile Wallet is an application on mobile device that manages access to payment credentials and value added services (e.g., bank, credit or debit accounts, prepaid accounts, transit tickets, coupons and rewards) stored in secure element in the phone to initiate mobile payment
And Digital Wallet is an application on a device that accesses payment credentials stored in cloud using phone number and PIN, or card.
4. On Device technologies – NFC, QR and HCE ( Host card emulation) – these technologies allow proximity payment solution that requires proximity to the POS – Point of Sale system. There are many security, privacy concerns in Mobile payment space and proximity payment solution needs a sound commerce and payment acceptance infrastructure.
5. Monetizing data – There are many Mobile payment players that are not directly monetizing services, but are more interested in the resulting data and analytics from mobile transactions. These services while may provide value in over all mobile payment value chain, the consumers essentially become the product, as they provide data, which is mined for insights. This requires an enterprise to consider security and privacy concerns.
Mobile Payment - Players in the Ecosystem
1. Legal framework and Regulators. – This relates to a lack of sound and emerging legal and regulatory framework governing Mobile Payment. Today there is no one law or governing authority that oversees mobile commerce. Regulations and laws applicable to underlying payment methods (credit, debit, prepaid, ACH) govern mobile payments Mobile carriers and alternative payment providers are less familiar with banking laws for consumer protection and privacy, KYC, BSA/data security, money transmission, risk Compliance, etc. Some agencies are trying to create a consortium to better understand and regulate this area, agencies include - FRS, FDIC, OCC, NCUA, CFPB, FCC, FTC. This poses an interesting challenge to enterprise that has a liability around transacting, commerce and payment processing.
2. Industry Association – MCX as an example comes to mind. Merchant Consumer Exchange. MCX is Merchant driven mobile payment platform being developed. It is an essentially a Cloud based wallet app with QR code. Today this consortium has major 40+ retailers in the US out of overall 7 million retailers. This includes potential to incorporate merchant deals and Loyalty programs ( coupon and Loyalty). MCX recently partnered with FIS ( financial services company) to provide an EFT based payment processing and settlement system.
3. Technology and System Vendors – This includes vendors and system such as Banking and processing systems (Visa/MC/Fundamo/Temenos, etc), Wallet and App vendors (Monetize, mFoundry), NFC chip vendors (Sony, NXP, Infinion), SIM based secure elements (Gemalto, etc), MMT – Mobile Money Transfer platform – (Alcatel-Lucent, Telepin, SAP, etc.), and other providers such as an NFC Sticker, MicroSD and even HCE- Host card emulation technology that is included in Android’s kitkat Platform.
4. Payment Processors – This can include a complex set of payment processor value chain ranging from Bank – that acquires and issues Credit card, Payment Processing – Visa, MC, MMT (Mobile Money Transfer) network including service such as Mobile/Digital Wallet, Agent enabled network, Carrier (telco) enablement network. Collectively these form a rich and complex set of value chain players provide a particular value.
5. Service providers – These are a evolving set of ecosystem players that provide a specific set of services. Collectively these form a rich and complex set of value chain players provide a particular service and adding to the overall cost of transaction. Some of these services may have an interest in data and analytics, but that is again a privacy and security concern. The players include a. Card (Payment) acquirers such as - a. Traditional banks and credit card issuers (Chase/BoA, etc.) b. Card processing networks ( Visa, MasterCard, etc.) c. Payment Service Providers ( PSPs)- Another rapidly growing market include vendors such as cybersource, vesta, DataCash, etc. d. Carrier (Telco) Providers – famous concept such as M-Pesa have made this popular, and this concept is growing in Europe and other developed market, as well. e MMT- Money transfer service such as Western Union, Moneyrgam and many small and large regional vendors. f. M-Banking – traditional services providers such as Monitise, FIS, and Fiserv, etc.
6. Couponing and Loyalty services – This is an interesting segment of services that augment the various specific services discussed above. Couponing and Loyalty service integrate with payment services to not only provide a seamless experience but also assist in analytics and settlement. This eco system is growing and becoming integral part of Industry association platforms such as MCX, etc.
7. Proximity Payment Service – These include POSs, Contactless payment terminals and Mobile NFC ( Near Field communications). These provide an integration with Couponing and Loyalty programs, and have quite and emerging eco system. Some examples include – ISIS(Mobile wallet), Veriphone, Verizon, Tagpay, Intuit, etc. Many of these are technology that provides a platform to take advantage of proximity services such as NFC and iBeacon. Apple’s iBeacons and PayPal Beacons both based on Bluetooth Low Energy (BLE) may herald a significant alternative to NFC. Other technologies being deployed include QR codes, SMS and MF Tones and cloud-based services.
8. On-line (e-commerce) and M-Commerce (Omni channel) – The players here include traditional E- and M-Wallet such as Amazon, PayPal, etc. that have a stored value or payment account linked to M-Wallet to make commerce and payment easier.
9. Mobile Money Transfer (MMT) – This includes domestic and international remittance; sole trader, merchant, bill & salary payments. This is fairly crowded space that includes large and small companies trying to grab a slice of Mobile Payment business. Some popular companies include Visa, M-Pesa, Moneygram, Western Union, etc. The service provider in this space include internal remittance of money transfer to person to person, money transfer/based on agent network and enabling mobile money transfer for the ‘Unbanked’ – a population that does not have a valid bank account or affiliation with a financial institution.
10. M-banking –These are traditional banks with a Mobile interaction, account management, bill pay and all related services to the ‘Banked’ customers. In many ways, m-Banking does compete with various payment providers and service providers discussed above. From Bill pay to fund transfers and small trader remittances, they play an important part in Mobile Payment economy due to the fund sourcing and familiarity with global financial systems.
11. Mobile Wallet – As discussed earlier - Mobile Wallet is an application on a mobile device that manages access to payment credentials and value added services (e.g., bank, credit or debit accounts, prepaid accounts, transit tickets, coupons and rewards. This can be any manifestation from a secure SMS (USSD) to a fancy app that links multiple accounts. As a generic concept it is utilized by many players in following ways:
a. Telecommunication sector – These are carriers and many in telecommunications sectors are forming tie up with banks and payment processors to facilitate fund transfers.
b. Payment Processors – These are central to traditional credit card and e-commerce payment processing systems. The implied business understanding provides these with a competitive advantage with mobile payment space. But this space is increasingly evolving and concepts around facebook's social payment and P2P, P2B payment landscape can be disruptive to their domain.
c. Mobile OS and Hardware owners – All Mobile handset and Mobile OS vendor that seek a very high degree to client/user engagement are continually innovating and including the enabling technology such as NFC, iBeacon, HCE – Host card emulation, etc., all with the intention to enable mobile payment capabilities and increase their adoption and dominance in huge global marketplace.
d. Remittance agencies - Money transfer agencies are embracing mobile as a remittance and bill payment channel and partnering aggressively with carriers to deliver international services.
e. Retail banks - These are traditional banks with a Mobile interaction, account management, bill pay and all related services to the ‘Banked’ customers. In many ways m-Banking does compete with various payment providers and service providers
f. ‘Other Agent’ Network – These are ‘agents’ that form the network that is alternative to traditional banking or money transfer network. These are especially dominant in ‘unbanked’ markets and critical to the eco system of the Mobile payments, remittances, P2P money transfer, etc.
While this discussion may present a long list of considerations around the complexity around Mobile payment, Let us try to simply this. Fundamentally, we need to understand how the players and Landscape align, and this will enable us to not only understand the challenges but also formulate a thoughtful strategy around adoption of Mobile Payments as an integral part of Enterprise Mobile Strategy. So basically any Enterprise Mobile strategy that includes Mobile payments, below are 4 sets of considerations where some or any of the Mobile payment players may fit in:
1. On device components – This includes things like, Mobile and/or Digital wallets, Trusted service manager – which includes Mobile wallets and associated secure elements, Cloud management – for use profile, QR code, and Digital Wallet management. The Challenge here to choose from a plethora of choices as an accepted form of payment.
2. Mobile Payment services – This part includes integration with Mobile Money transfer, Mobile payment services, agent network – all aspects of the value chain that are involved in acquiring, accepting and processing payments.
3. Financial Intermediaries –These are financial intermediaries that deal with the merchant regarding rebates, coupons, issuers of gift cards, etc. Essentially any intermediary that ranges from providing consultative selling to fund sourcing.
4. Clearing and settlement - These are financial powerhouses, which are at the terminal end of the Mobile payment value chain and include clearing houses, financial settlement and card processing units ( Digital Wallets, etc.).
Mobile Payment Industry Challenges:
1. Technology Adoption – Technology adoption ( NFC, Mobile and Digital wallets, QR code, HCE, etc.) that handles Money requires trust and ability to track, dispute and manage a transaction. The adoption of these technologies both from a consumer or end user perspective or an enterprise – which may be a part of Mobile Payment value chain is a challenge. While industry standards are still emerging, but lack of current standards and scattered governance and legal framework makes mobile payment an interesting landscape, given the statistics that surround it and adoption in some geographies. Technology companies that play in this space should focus and present a framework that can not only be easily consumed, but provides an enterprise integration that can secured, monitored and audited.
2. Security and Privacy concerns -- Given the diversity and fragmentation in Mobile market place,as we discussed here, there are many touch point along the payment processing value chain, any enterprise that is either a part of value chain or initiates or invokes any part of the value chain, is and should be responsible in ensuring security of the transaction and privacy of their users. This is a challenge due to lack of transparency between these interactions of the transaction as it progresses through these touch points.
3. Data Ownership - As discussed earlier, there are many Mobile payment players that are not directly monetizing services, but are more interested in the resulting data and analytics from mobile transactions. These services while may provide value in over all mobile payment value chain, the consumers essentially become the product, as they provide data, which is mined for insights. This requires an enterprise to consider security and privacy concerns.
4. Emerging regulatory and legal framework - Today there is no one law or governing authority oversees mobile commerce. Regulations and laws applicable to underlying payment methods (credit, debit, prepaid, ACH) govern mobile payments Mobile carriers and alternative payment providers are less familiar with banking laws for consumer protection and privacy, KYC ( Know your Customer), BSA/data protection, money transmission, risk Compliance, etc. This poses a challenge in not only governance but also settlement processes. This is largely an enterprise policy decision on the level of risk an enterprise is willing to assume with mobile payment transactions.
5. Highly fragmented market – These are a lot of Mobile Payment players in this diverse and largely unregulated market, this makes adoption of these technologies complex and challenging. For instance, how does an enterprise chose between supporting Mobile wallet or Digital Wallet, NFC vs. iBeacon, Mobile Money Transfer (MMT) vs. M-Banking, etc. Lack of standards, single governing authority, many touch points due to many service providers while fostering innovation makes the choices difficult due to accountability and lack of transparency in event of a dispute.
Conclusion:
Mobile Payment landscape is complex, fragmented and diverse. Today there is no one law or governing authority oversees mobile commerce. However, this is an emerging space that no enterprise engaging in any Mobile commerce, ranging from retailers to governments can ignore. Mobile payments promise an Omni channel experience incorporating the coupon, loyalty programs, and integrating that with Mobile experience. Mobile payment if not integrated into a complete experience fall short of delivering the holistic digital experience. While the promises of Mobile payments are immense there are many considerations, challenges and possibilities that an enterprise should consider. What makes Mobile Payments an interesting space is the emergence of new players on a daily basis. For instance, facebook announced it Social Payment ( P2P and MMT patterns) ambitions – if facebook succeeds it will not only lower the cost of transaction of payments and transfers, but will disrupt yet again a landscape that is in constant state of flux. The true challenge is to pick a sustainable platform or a mobile payment strategy that is cost effective, and yet addresses the diversity in this evolving landscape.
Interesting Readings:
1. http://www.ncsl.org/documents/standcomm/sccomfc/MarianneCrowe_PowerPoint.pdf
2. Mobile Payment Industry Analysis - http://www.firstpartner.net/downloads?op=add&id=214
3. http://en.wikipedia.org/wiki/Host_card_emulation
4. http://www.fdic.gov/regulations/examinations/supervisory/insights/siwin12/mobile.html
References:
Ref: Mobile Banking or mBanking
Technical Imperatives :
a. Understanding the security Implications – this includes data on device, data in transit, data in enterprise, but also includes considerations around malware, malicious application ( on same device), wireless carrier infrastructure, availability to tools and fraud control policies. Etc.
b. Payment technology Landscape - Banks do have to consider the payment technology landscape. Today, primary elements of mobile payment technology include (but not limited to) NFC (Near field communication), SE (secure element – cryptographic module), TSM (trusted service manager – handles transactions – sort of like a transacting clearing house) and Cloud based payment services ( Google digital wallets and Passbook based)
c. Risk Mitigation – Measures that can be taken to address security challenges of Mobile Banking and payments. These include Fraud detection and alert, secure notification system, Mobile application design and policy that govern end user action. Understanding, access and fraud detection and alert system in the application design process.
d. Omni Channel Service integration - Enable bi-directional access, and communication across all channels of communication including request for contact center callbacks from all channels.
e. Secure notification Landscape - email/SMS/online msg/app alerts generate automatic fraud alert, offers, promotions, etc. that is sent to customers in real-time. The alert use deep linking to enable things like, direct dial to fraud agent, schedule a callback or even click through to disable the block from the mobile app. Application Design considerations.
f. Mobile Device and Application Landscape – This deals with the policies and technology to provide malware and jail break detection, Spyware and SMS Trojans, Mobile OS and Application runtime vulnerabilities and so on. All this is geared towards preventing privileged access to application and user data that can compromise the integrity of a transaction.
And more…
Folks,
This week I want to follow the Money and explore the colorful landscape of handling Money in Digital economy. If you think all our discussion around crafting an Enterprise Mobile Strategy was complicated, wait till you see the Mobile Payment Landscape. This weeks post I wanted to focus on Mobile Payments where much works is to be done to address fragmentation and reach a critical mass. But before we jump into Mobile payments let us tie in with my previous discussion on Mobile Ecosystem and mCommerce and mBanking – as that discussion is relevant here.
In my last post (ref: Understanding Mobile Ecosystem is Vital for a MobileFirst Enterprise) I discussed the value of sound understanding of evolving Mobile Services ecosystem and inferred that the growth and expansion of business development, MobileFirst portfolio, therefore, relies on implied understanding on the co-development that provides transient energy (in the form of innovation and value), and cumulative development result will enable the beneficiary of our technology – “our clients," to derive value from our products and solutions.
Some Significant Mobile Payment Statistics:
1. $1.6 Trillion of Mobile Payment in China
2. 46% of all POS transactions b 2017
3. 100% and more year to year growth
4. 225 Mobile Money Services
5. 320 Million NFC enabled devices shipped in 2013
6. 90% growth in P2B & B2P, P2P transactions with payments/transfers worth $1.1 Billion.
And more…
Also in my earlier post (ref: mCommerce or Smarter Commerce) I discussed some of the challenges that mCommerce initiatives face. As a Merchant, the marketing, selling and servicing components involve an integrated strategy around offers and accepting payments. To this effect I discussed the following:
a. Mobile Payment – Today clients have a few choices:
i. Cloud – e.g. GDW – Google Digital Wallet/ISIS, etc. Simple and easy to Implement and integrate into business process
ii. NFC – Near Field Communications – Not all phones are enabled and this technology is still maturing in adoption, security concerns, etc.
iii. Custom processing – This is traditional credit card processing and most commerce platforms provide integration avenues including WebSphere Commerce Server. (Example Amazon.com)
iv. New emerging consortiums – MCX. –We need to understand this. Please take a moment and Google it. It is a huge consortium and gaining much momentum.
b. B2B -- Complete integration with Business partner gateway services. Mobility will need to consider this.
c. Brand management – How do we a Mobile Store front manage a cohesive brand like they do on Web? Think Multi Brand and linkages?
.. and more… These are just glimpse of issues we can encounter and by no means an exhaustive list.
Mobile Payment – A fragmented Landscape
1. Mobile Payment – an Ominichannel experience - Mobile payments, be it Mobile wallets or Digital wallet promises an Omni channel experience incorporating the coupon, loyalty programs, and integrating that with Mobile experience. Mobile payment if not integrated into a complete experience fall short of delivering the holistic digital experience.
2. Non banking players – Mobile Payments opens up new avenues to commerce and Mobile monetary exchange. Be it Bank to person (B2P), Person to Person (P2P), Person to Bank (P2B), and so on, there are many non banking players emerging in Mobile Payment space that enables a seamless transfer of funds between 2 entities either to allow commerce or transfer of funds and remittances.
3. Mobile Wallet vs. Digital Wallet: Mobile Wallet is an application on mobile device that manages access to payment credentials and value added services (e.g., bank, credit or debit accounts, prepaid accounts, transit tickets, coupons and rewards) stored in secure element in the phone to initiate mobile payment
And Digital Wallet is an application on a device that accesses payment credentials stored in cloud using phone number and PIN, or card.
4. On Device technologies – NFC, QR and HCE ( Host card emulation) – these technologies allow proximity payment solution that requires proximity to the POS – Point of Sale system. There are many security, privacy concerns in Mobile payment space and proximity payment solution needs a sound commerce and payment acceptance infrastructure.
5. Monetizing data – There are many Mobile payment players that are not directly monetizing services, but are more interested in the resulting data and analytics from mobile transactions. These services while may provide value in over all mobile payment value chain, the consumers essentially become the product, as they provide data, which is mined for insights. This requires an enterprise to consider security and privacy concerns.
Mobile Payment - Players in the Ecosystem
1. Legal framework and Regulators. – This relates to a lack of sound and emerging legal and regulatory framework governing Mobile Payment. Today there is no one law or governing authority that oversees mobile commerce. Regulations and laws applicable to underlying payment methods (credit, debit, prepaid, ACH) govern mobile payments Mobile carriers and alternative payment providers are less familiar with banking laws for consumer protection and privacy, KYC, BSA/data security, money transmission, risk Compliance, etc. Some agencies are trying to create a consortium to better understand and regulate this area, agencies include - FRS, FDIC, OCC, NCUA, CFPB, FCC, FTC. This poses an interesting challenge to enterprise that has a liability around transacting, commerce and payment processing.
2. Industry Association – MCX as an example comes to mind. Merchant Consumer Exchange. MCX is Merchant driven mobile payment platform being developed. It is an essentially a Cloud based wallet app with QR code. Today this consortium has major 40+ retailers in the US out of overall 7 million retailers. This includes potential to incorporate merchant deals and Loyalty programs ( coupon and Loyalty). MCX recently partnered with FIS ( financial services company) to provide an EFT based payment processing and settlement system.
3. Technology and System Vendors – This includes vendors and system such as Banking and processing systems (Visa/MC/Fundamo/Temenos, etc), Wallet and App vendors (Monetize, mFoundry), NFC chip vendors (Sony, NXP, Infinion), SIM based secure elements (Gemalto, etc), MMT – Mobile Money Transfer platform – (Alcatel-Lucent, Telepin, SAP, etc.), and other providers such as an NFC Sticker, MicroSD and even HCE- Host card emulation technology that is included in Android’s kitkat Platform.
4. Payment Processors – This can include a complex set of payment processor value chain ranging from Bank – that acquires and issues Credit card, Payment Processing – Visa, MC, MMT (Mobile Money Transfer) network including service such as Mobile/Digital Wallet, Agent enabled network, Carrier (telco) enablement network. Collectively these form a rich and complex set of value chain players provide a particular value.
5. Service providers – These are a evolving set of ecosystem players that provide a specific set of services. Collectively these form a rich and complex set of value chain players provide a particular service and adding to the overall cost of transaction. Some of these services may have an interest in data and analytics, but that is again a privacy and security concern. The players include a. Card (Payment) acquirers such as - a. Traditional banks and credit card issuers (Chase/BoA, etc.) b. Card processing networks ( Visa, MasterCard, etc.) c. Payment Service Providers ( PSPs)- Another rapidly growing market include vendors such as cybersource, vesta, DataCash, etc. d. Carrier (Telco) Providers – famous concept such as M-Pesa have made this popular, and this concept is growing in Europe and other developed market, as well. e MMT- Money transfer service such as Western Union, Moneyrgam and many small and large regional vendors. f. M-Banking – traditional services providers such as Monitise, FIS, and Fiserv, etc.
6. Couponing and Loyalty services – This is an interesting segment of services that augment the various specific services discussed above. Couponing and Loyalty service integrate with payment services to not only provide a seamless experience but also assist in analytics and settlement. This eco system is growing and becoming integral part of Industry association platforms such as MCX, etc.
7. Proximity Payment Service – These include POSs, Contactless payment terminals and Mobile NFC ( Near Field communications). These provide an integration with Couponing and Loyalty programs, and have quite and emerging eco system. Some examples include – ISIS(Mobile wallet), Veriphone, Verizon, Tagpay, Intuit, etc. Many of these are technology that provides a platform to take advantage of proximity services such as NFC and iBeacon. Apple’s iBeacons and PayPal Beacons both based on Bluetooth Low Energy (BLE) may herald a significant alternative to NFC. Other technologies being deployed include QR codes, SMS and MF Tones and cloud-based services.
8. On-line (e-commerce) and M-Commerce (Omni channel) – The players here include traditional E- and M-Wallet such as Amazon, PayPal, etc. that have a stored value or payment account linked to M-Wallet to make commerce and payment easier.
9. Mobile Money Transfer (MMT) – This includes domestic and international remittance; sole trader, merchant, bill & salary payments. This is fairly crowded space that includes large and small companies trying to grab a slice of Mobile Payment business. Some popular companies include Visa, M-Pesa, Moneygram, Western Union, etc. The service provider in this space include internal remittance of money transfer to person to person, money transfer/based on agent network and enabling mobile money transfer for the ‘Unbanked’ – a population that does not have a valid bank account or affiliation with a financial institution.
10. M-banking –These are traditional banks with a Mobile interaction, account management, bill pay and all related services to the ‘Banked’ customers. In many ways, m-Banking does compete with various payment providers and service providers discussed above. From Bill pay to fund transfers and small trader remittances, they play an important part in Mobile Payment economy due to the fund sourcing and familiarity with global financial systems.
11. Mobile Wallet – As discussed earlier - Mobile Wallet is an application on a mobile device that manages access to payment credentials and value added services (e.g., bank, credit or debit accounts, prepaid accounts, transit tickets, coupons and rewards. This can be any manifestation from a secure SMS (USSD) to a fancy app that links multiple accounts. As a generic concept it is utilized by many players in following ways:
a. Telecommunication sector – These are carriers and many in telecommunications sectors are forming tie up with banks and payment processors to facilitate fund transfers.
b. Payment Processors – These are central to traditional credit card and e-commerce payment processing systems. The implied business understanding provides these with a competitive advantage with mobile payment space. But this space is increasingly evolving and concepts around facebook's social payment and P2P, P2B payment landscape can be disruptive to their domain.
c. Mobile OS and Hardware owners – All Mobile handset and Mobile OS vendor that seek a very high degree to client/user engagement are continually innovating and including the enabling technology such as NFC, iBeacon, HCE – Host card emulation, etc., all with the intention to enable mobile payment capabilities and increase their adoption and dominance in huge global marketplace.
d. Remittance agencies - Money transfer agencies are embracing mobile as a remittance and bill payment channel and partnering aggressively with carriers to deliver international services.
e. Retail banks - These are traditional banks with a Mobile interaction, account management, bill pay and all related services to the ‘Banked’ customers. In many ways m-Banking does compete with various payment providers and service providers
f. ‘Other Agent’ Network – These are ‘agents’ that form the network that is alternative to traditional banking or money transfer network. These are especially dominant in ‘unbanked’ markets and critical to the eco system of the Mobile payments, remittances, P2P money transfer, etc.
While this discussion may present a long list of considerations around the complexity around Mobile payment, Let us try to simply this. Fundamentally, we need to understand how the players and Landscape align, and this will enable us to not only understand the challenges but also formulate a thoughtful strategy around adoption of Mobile Payments as an integral part of Enterprise Mobile Strategy. So basically any Enterprise Mobile strategy that includes Mobile payments, below are 4 sets of considerations where some or any of the Mobile payment players may fit in:
1. On device components – This includes things like, Mobile and/or Digital wallets, Trusted service manager – which includes Mobile wallets and associated secure elements, Cloud management – for use profile, QR code, and Digital Wallet management. The Challenge here to choose from a plethora of choices as an accepted form of payment.
2. Mobile Payment services – This part includes integration with Mobile Money transfer, Mobile payment services, agent network – all aspects of the value chain that are involved in acquiring, accepting and processing payments.
3. Financial Intermediaries –These are financial intermediaries that deal with the merchant regarding rebates, coupons, issuers of gift cards, etc. Essentially any intermediary that ranges from providing consultative selling to fund sourcing.
4. Clearing and settlement - These are financial powerhouses, which are at the terminal end of the Mobile payment value chain and include clearing houses, financial settlement and card processing units ( Digital Wallets, etc.).
Mobile Payment Industry Challenges:
1. Technology Adoption – Technology adoption ( NFC, Mobile and Digital wallets, QR code, HCE, etc.) that handles Money requires trust and ability to track, dispute and manage a transaction. The adoption of these technologies both from a consumer or end user perspective or an enterprise – which may be a part of Mobile Payment value chain is a challenge. While industry standards are still emerging, but lack of current standards and scattered governance and legal framework makes mobile payment an interesting landscape, given the statistics that surround it and adoption in some geographies. Technology companies that play in this space should focus and present a framework that can not only be easily consumed, but provides an enterprise integration that can secured, monitored and audited.
2. Security and Privacy concerns -- Given the diversity and fragmentation in Mobile market place,as we discussed here, there are many touch point along the payment processing value chain, any enterprise that is either a part of value chain or initiates or invokes any part of the value chain, is and should be responsible in ensuring security of the transaction and privacy of their users. This is a challenge due to lack of transparency between these interactions of the transaction as it progresses through these touch points.
3. Data Ownership - As discussed earlier, there are many Mobile payment players that are not directly monetizing services, but are more interested in the resulting data and analytics from mobile transactions. These services while may provide value in over all mobile payment value chain, the consumers essentially become the product, as they provide data, which is mined for insights. This requires an enterprise to consider security and privacy concerns.
4. Emerging regulatory and legal framework - Today there is no one law or governing authority oversees mobile commerce. Regulations and laws applicable to underlying payment methods (credit, debit, prepaid, ACH) govern mobile payments Mobile carriers and alternative payment providers are less familiar with banking laws for consumer protection and privacy, KYC ( Know your Customer), BSA/data protection, money transmission, risk Compliance, etc. This poses a challenge in not only governance but also settlement processes. This is largely an enterprise policy decision on the level of risk an enterprise is willing to assume with mobile payment transactions.
5. Highly fragmented market – These are a lot of Mobile Payment players in this diverse and largely unregulated market, this makes adoption of these technologies complex and challenging. For instance, how does an enterprise chose between supporting Mobile wallet or Digital Wallet, NFC vs. iBeacon, Mobile Money Transfer (MMT) vs. M-Banking, etc. Lack of standards, single governing authority, many touch points due to many service providers while fostering innovation makes the choices difficult due to accountability and lack of transparency in event of a dispute.
Conclusion:
Mobile Payment landscape is complex, fragmented and diverse. Today there is no one law or governing authority oversees mobile commerce. However, this is an emerging space that no enterprise engaging in any Mobile commerce, ranging from retailers to governments can ignore. Mobile payments promise an Omni channel experience incorporating the coupon, loyalty programs, and integrating that with Mobile experience. Mobile payment if not integrated into a complete experience fall short of delivering the holistic digital experience. While the promises of Mobile payments are immense there are many considerations, challenges and possibilities that an enterprise should consider. What makes Mobile Payments an interesting space is the emergence of new players on a daily basis. For instance, facebook announced it Social Payment ( P2P and MMT patterns) ambitions – if facebook succeeds it will not only lower the cost of transaction of payments and transfers, but will disrupt yet again a landscape that is in constant state of flux. The true challenge is to pick a sustainable platform or a mobile payment strategy that is cost effective, and yet addresses the diversity in this evolving landscape.
Interesting Readings:
1. http://www.ncsl.org/documents/standcomm/sccomfc/MarianneCrowe_PowerPoint.pdf
2. Mobile Payment Industry Analysis - http://www.firstpartner.net/downloads?op=add&id=214
3. http://en.wikipedia.org/wiki/Host_card_emulation
4. http://www.fdic.gov/regulations/examinations/supervisory/insights/siwin12/mobile.html
References:
Ref: Mobile Banking or mBanking
Technical Imperatives :
a. Understanding the security Implications – this includes data on device, data in transit, data in enterprise, but also includes considerations around malware, malicious application ( on same device), wireless carrier infrastructure, availability to tools and fraud control policies. Etc.
b. Payment technology Landscape - Banks do have to consider the payment technology landscape. Today, primary elements of mobile payment technology include (but not limited to) NFC (Near field communication), SE (secure element – cryptographic module), TSM (trusted service manager – handles transactions – sort of like a transacting clearing house) and Cloud based payment services ( Google digital wallets and Passbook based)
c. Risk Mitigation – Measures that can be taken to address security challenges of Mobile Banking and payments. These include Fraud detection and alert, secure notification system, Mobile application design and policy that govern end user action. Understanding, access and fraud detection and alert system in the application design process.
d. Omni Channel Service integration - Enable bi-directional access, and communication across all channels of communication including request for contact center callbacks from all channels.
e. Secure notification Landscape - email/SMS/online msg/app alerts generate automatic fraud alert, offers, promotions, etc. that is sent to customers in real-time. The alert use deep linking to enable things like, direct dial to fraud agent, schedule a callback or even click through to disable the block from the mobile app. Application Design considerations.
f. Mobile Device and Application Landscape – This deals with the policies and technology to provide malware and jail break detection, Spyware and SMS Trojans, Mobile OS and Application runtime vulnerabilities and so on. All this is geared towards preventing privileged access to application and user data that can compromise the integrity of a transaction.
And more…
