Monday, September 17, 2007

Payforit update at NOC event - 160 Characters

m-Payment: Payforit For Mobile Purchases

Submitted by Mike Grenville on Fri, 14 Sep 2007 17:02

In development for nearly two years and launched in the UK at the begining of September, the industry hopes that consumers will trust Payforit.

Mobile payment initiative, Payforit came into force across all mobile internet services and UK networks officially on September 1, 2007. The payment system was welcomed by the mobile industry; and now key operators, content providers and API's (Accredited Payment Intermediaries) believe the future success of the initiative will rely on the developments made over the coming months.

Dialogue Communications sponsored a NOC - The Future of Payforit seminar in London to look at what the future holds for this payment mechanism. Dialogue's MD, Guillaume Peersman was joined by Iain McCallum of O2, Jeremy Flynn of video to mobile specialists D2See, (formally of Vodafone,) and Phil Cooke of mobile games company I-Play, to discuss where Payforit is heading.

Positive Feedback

pay for it Since going live with Payforit in January 2007, Dialogue says the feedback has been positive, with statistics from content providers and API's demonstrating a clear increase in conversation rates. Dialogue has seen a rise of up to 27 per cent on conversion compared to premium SMS solutions for its connected customers and I-Play is now approaching a 15 per cent conversion rate for customers visiting its mobile site.

"Payforit was in development for nearly two years and I think that now we have created a clear user interface and single click payment method that will be a success and consumers will trust. I believe Payforit will dominate m-payments for some time to come, but it is by no means the finished product and further developments need to be made, which is something all operators and API's are working to achieve over the coming months," explains Guillaume Peersman.

Customer Experience Improvements

Price points have been one area of debate amongst the operators, with the consensus being that a £5 maximum purchase value is not enough to offer a broad range of content, and this rate should be increased to £10. Operators are already working on solutions to tackle this problem and in only a matter of months some may well raise the limits.

Iain McCallum, Head of Interactive Messaging Products at O2, echoes Guillaume's statements: "Improvements need to be made to the customer experience and that is the key issue that Payforit is trying to address. A lot of work and expense, by Accredited Payment Intermediaries and MNO's working together, has gone into optimising the PFI scheme rules to ensure that they are both robust enough to deliver the best possible subscriber experience and can be implemented by our partners with the minimum hassle and complexity. The next few months will, no doubt, throw up issues of concern and the MNO group will study these and fine-tune the scheme rules accordingly."

Consumer awareness is one of the key issues facing the brand. Simply, consumers are not being told what Payforit is and what its purpose is. Operators need to increase the promotion of the system before it can achieve its objectives.

Data Charge Shocks

Data charges involved in buying the content is another major concern for Payforit. Consumers don't know the final amount they will end up paying for a game or music download, as the purchase price does not include the data charges that come with downloading the content. Two solutions were discussed at the seminar including, listing the size of the download at the point of purchase, so the customer can work out how much extra it will cost to download. Secondly, some operators have introduced "all- you-can-eat" data tariffs that remove the worry of not knowing how much you are paying for a download, as all data downloads are included in the monthly line rental cost. This seems to be the way the industry is heading and would remove the barrier of unknown data charges.

On and Off Portal

"The next stage in the Payforit development process is to ensure that the standard is used not only in the off portal market but also on operator portals. For it to truly achieve its goal, the customer needs to see the standard payment screen wherever they buy content, be that on or off portal," said Jeremy Flynn, CEO of D2See.

Currently, on portal content purchases still make up around 25% of the market, therefore it is very much an active area in purchasing content and needs to incorporate the Payforit standard to ensure the user's buying experience is always the same.

Streamlined Subscription System

Subscription services have been available on mobile for many years but the trust in them has diminished over time as customers are unclear as to what they will be charged, when and how. Phil Cooke, CTO at I-Play explained how Payforit could lead to the revival of mobile subscriptions: "With Payforit taking over off portal buying, subscriptions are set for a rebirth as API's now ensure consumers receive all the payment terms, including details of how to unsubscribe and helpline information at the time of purchase. This will hopefully demonstrate to the customer that a streamlined system is behind the subscriptions and all previous problems have been resolved."

In terms of marketing, opt in boxes are currently left ticked on certain networks and unticked on others and there is a feeling amongst some operators that this is an issue that needs to be standardised across the whole industry. In addition to this, there is the matter of a merchant's memory of consumer choices. Put simply, should consumers have to re-tick a box every time they revisit the same merchant?

Payforit will come up against some tough competition over the coming year from systems such as Google Checkout and Paypal Mobile. However, by making some minor developments, this registration free payment tool, which is quick and easy to use, looks set to become the market leading initiative it has always looked likely to be.

PayPoint partners with Telrock - 160 Characters News

m-Payment: Deal Opens Up SMS Utility Payments

Submitted by Mike Grenville on Thu, 06 Sep 2007 13:26

UK cash and internet payments company PayPoint has taken on Telrock to provide mobile payment and meter reading to its utility services customers and top up their mobile phones via text message.

Telrock will provide its mobile payments system textDebit to PayPoint under an exclusive revenue-sharing agreement. Technology provided by Telrock enables end users to make secure payments to clients of PayPoint using SMS.

PayPoint handles over £5 billion in over 400 million transactions annually for more than 5,000 clients and merchants in the UK and Ireland. It also has recently acquired a Romanian mobile top-up operator to which a bill payment service will be added, emulating the UK branded retail network. Dominic Taylor, Chief Executive of PayPoint, commented: "This partnership with Telrock will enable PayPoint to exploit the increasing popularity of mobile payments while broadening its proposition to existing and new clients and offering customers a further convenient way to pay bills and buy other services."

Founded in January 2002 by Russell Robinson and Tim Crowley, Chief Executive, Telrock specialises in the design, development and integration of solutions using mobile technology for payments, money transfers and other mobile-based transaction services such as fraud alerts and account information requests.

Already Popular With Consumers

To use the service consumers pre-register a debit, credit or pre-paid card which can then be used to pay a variety of bills such as energy, telecommunications or water, or top up a prepaid mobile phone. Telrock's mobile payment and customer account servicing platform is already being used by British Gas, Scottish and Southern Energy (SSE) and Royal Bank of Scotland (RBS) Group.

"It's a bridge between cash and Direct Debit payments" said Alistair Clare, COO at Telrock. "Since launching with their MINT card nine months ago, about 4,000 RBS customers can authorise payment of their credit card. Customers have been pleased with it and MINT are now starting to market the service more widely."

SMS meter reading photo: Mike Grenville

Its a service that is proving popular with consumers. SSE have been including SMS as one of the options in their welcome pack since February 2007 and about 10% send a text message with their opening meter reading. "In house surveys show customers are impressed with it" said Clare, " in fact 90% asked why hasn't SMS been used before."

Slow Education Process

"We are in discussion with some of Paypoint's early adopter clients such as Utility companies and second tier operators with 4-5 million customers" said Clare "and we expect to be able to make specific client announcements in the next few months" said Clare.

Telrock have been working with British Gas for several years already for customers to text in their meter reading. Clare said that Telrock is moving to the second stage with some clients with newer billing systems where users would be prompted by SMS to read the meter, a reply with the bill amount would come back by SMS and the customer would authorise payment.

Progress however has been slow with utilities. "There is a big education process to go through" said Clare. "There is a natural tendency among these organisations to be conservative towards new technology and innovations. We expect that our deal with Paypoint will help inspire confidence and grow the whole market."

Tuesday, September 04, 2007

Gpay - not a big surprise

Now Google targets mobile payments

14:30, Sep 3rd 2007 by Tim Green

Blimey, Google has filed a patent for a mobile payment system being dubbed Gpay.
The patent, filed last year but has only just published, describes how a text message could trigger a “computer-implemented method of effectuating an electronic on-line payment”. That sounds like reverse-billed SMS to us, but no doubt Google will do things differently.

The Gpay patent filing describes a system where a user sends a text message to Google that gives details of a payment to a specified payee. GPay would debit the user’s bank account and credit the payee.

Of course, Google already has its own online payments system called Checkout. It’s a little like PayPal, and was soft launched for mobile earlier this summer.

Monday, August 20, 2007

M-Pesa adds US $8 m to Safaricom's bottom line in first e months!

Is the Future of Mobile Banking and Payments in Kenya?

One of the neat things about innovation in the mobile space is that it is a far more global trend than the previous rounds of PC-based technological advances. Asia, Europe, and the United States are all playing large roles, but even Africa is taking part.

m-pesa-logo.jpgOne recent example comes from Kenya, where Safaricom, the country's leading mobile provider is making waves with its cash transfer service M-Pesa. The popular p2p money-transfer service added almost USD$8 million to the company's bottom line in its first three months of operations.

M-Pesa's sights are now set on becoming the commerce platform of choice in a country where credit cards have struggled to reach the mostly "unbanked" population. The potential stakes are huge for the various players and will be exciting to watch.

Monday, July 30, 2007

Danal gets investment

Sth Korean Payments Company Danal Gets $6 Million Investment, Enters US

By James Quintana Pearce - Thu 21 Jun 2007 01:11 AM PST

South Korean company Danal has convinced investment firm Morgenthaler Ventures to invest $6 million in its U.S. subsidiary, which will mark the entry of the mobile payments company into the US. Morgenthaler holds a minority stake, and Danal has invested $3.5 million in the US subsidiary reports the Wall Street Journal. Danal’s service lets people charge digital items and tangible goods to their mobile phone bills using an authentication code on their PC—they receive the code as an SMS when they want to buy something. It’s targeted at young people without credit cards and is quite a simple service (no special mobile software needed)—but the mobile payments market is getting pretty crowded so it will have its work cut out for it. “One hurdle may be lining up enough online merchants to participate, says Aaron McPherson, a research director at Financial Insights, a Framingham, Mass., research firm that is part of IDC. US merchants will have to give up a small percentage of every online sale to let their customers use Danal’s service. (That fee will be split between Danal and the cellphone carriers.) The fee for credit cards is about 3 percent, but the fee for Danal-brokered transactions will likely be higher, though less than 10 percent. So “cost-wise, it doesn’t really work for the merchant,” says Mr. McPherson. Danal’s Mr. Kim points out that around 16,000 merchants are already working with Danal in Korea.”

Thursday, July 12, 2007

PayPal widget on Facebook

PayPal Really Launches on Facebook

By Jim Bruene on July 9, 2007 10:25 AM

PayPal application shown within a Facebook profile Two weeks ago I heard from PayPal corp communications who felt that my "PayPal launches on Facebook" title was misleading. They had a point. As I explained in the post, the new Facebook app was PayPal-powered but developed by Australia's Yellow Media. The title could have been better.

However, that's moot now since PayPal has now launched its own app on Facebook (here). It appears to have been posted on July 3 and has 218 users as of this morning. The application provides a simple interface to request and track money requests from Facebook friends (see inset above). Additional functionality is said to be on the way.

Wednesday, June 13, 2007

Cellular News on Mobile Banking

Success or Failure for the Re-Launch of Mobile Banking

A series of new mobile reports from Javelin Strategy & Research has uncovers significant product marketing requirements for building banks' consumer usage of mobile services. While consumers are better primed for mobile banking now than they were in 2000, financial institutions (FIs) should not consider the mere availability of mobile banking a guarantee of success. FIs should prepare for measured, rather than widespread and immediate, adoption, even though consumers, handsets and mobile networks have made tremendous advancements.

As Javelin's research shows, mobile banking and payments will grow as banks design products based on consumers' mobile needs for simplicity and immediacy while educating end users to curtail perceived risk factors.

Early adopters are projected to be current mobile Internet users (MIUs), who represent 12% of US adults who own cell phones (approximately 27.8 million people). In order to appeal to this sizeable market, FIs will need to focus on the mobile preferences of this population first. These individuals require unique product design strategies, due to a distinct preference for how and why they log on.

Institutions must evaluate the tradeoffs of multiple platforms (downloadable app, SMS, browser-based app) in order to garner adoption beyond the mobile Internet users and reach other segments, such as Gen Y, risk-averse and higher-income consumers, who each have their distinct motivations for using mobile banking. According to President and Founder of Javelin Strategy & Research, James Van Dyke, "If 'anywhere, anytime' banking is the benefit of mobile banking, then providing all platforms satisfies the most fundamental consumer preference for 'anywhere.' By taking a targeted product and audience approach, banks and payments firms can finally increase the near-term return on mobile product and marketing investments."

On the other side of this mobile banking adoption equation are the perceived security vulnerabilities. According to the study of over 2,200 online consumers, one in two people (49%) perceives mobile banking to be unsafe, yet analytical review shows that this channel offers important security advantages and minimized risks compared to online banking. Institutions must proactively address the perceived security flaws while unflinchingly touting the relative safety advantages. Resulting from these survey findings is Javelin's call to the industry for an open forum collaboration for security requirements among carriers like AT&T, Cingular, Sprint, T-Mobile, Verizon, etc.; financial institutions; as well as leading vendors like ClairMail, Firethorn, Fronde, mFoundry, MShift, and M-Com.

Tuesday, June 12, 2007

Post Office launch mobile payment service

Post Office launch mobile payment service

Link: Post Office delivers handset payments

Here’s the second story on barcode usage in the UK that I’ve blogged about today. Hopefully with the power of the Post Office behind this one it’ll turn into a popular method for companies to send cash to consumers.

A METHOD of paying out cash by sending barcodes to mobile phones has been launched by the UK’s Post Office. Known as Payout it is now available from any of the Post Office’s 14,000 UK branches. The system will handle amounts up to £100 and is an ideal way of sending small amounts of cash or providing refunds to people who don’t have bank accounts.

There’s no costs mentioned in the article, but one of the trialists - consumer giant Unilever - are quoted as saying ‘raising a cheque is 600 per cent more expensive than using the Post Office payout service’.

Now if the Post Office offer it as a consumer to consumer service, we will be cooking on gas..

Safaricom & M Pesa in Kenya - SMS Text News

Safaricom launches Africa’s first mobile money service

Link: IOL Technology - Kenya pioneers ‘mobile money’ in African first

More than 60 percent of Kenyans have access to banks or microfinance institutions, but a staggering 38 percent - mostly living in rural areas - are entirely unbanked, according to data collected by Financial Sector Deepening Kenya (FSDK).

However, more than half the population either owns or has access to a cellphone, generating a new means by which banking and financial services could be provided, according to Safaricom’s Chief Financial Officer Les Baillie.

Now this is cool - especially given the figures above about how many Kenyans don’t have bank accounts but do have access to a mobile phone.

M-Pesa users can send up to 35 000 Kenyan Shillings (about R3 800) per transaction and keep up to 50 000 Kenyan Shillings in a “virtual account” for later use.

To use the service, senders hand over funds to a Safaricom shop to be converted into “mobile money” that is “transferred” by text to the recipient, who then withdraws it as cash at another Safaricom shop.

The fees for sending and withdrawing run up to 170 shillings, a mere fraction of the cost charged by other money transfer agencies, which ask for up to 10 percent of the amount being sent.

Although you’ve still got to make the trip to pick up the money, it’s a lot more convenient (and cheaper) than the old methods, like Western Union. (Thanks to SMS Text News reader Malcolm for the tip!)

PayPal introduces Mobile Checkout

PayPal today introduced PayPal Mobile Checkout - it gives merchants a way to support mobile checkout on their existing web sites by providing PayPal users a way to easily activate and enroll to make online purchases from their mobile phones. Details here.

Wednesday, May 30, 2007

IP Commerce and PayPal Partner

IP Commerce, PayPal Partner

IP Commerce has announced that it will offer payment services powered by PayPal including an email invoicing solution in PASS Commerce Center and a Sales Ticker, as part of the PASS Gadget which can be placed in the Windows Vista sidebar. According to the companies, "small businesses using PASS Commerce Center and services will benefit from improved cash flow, visibility into their financial standing, best practice security measures that reduce fraud and identity theft, and the ability to extend greater flexibility of payment options to their customers."

The new services for small businesses are now available in PASS™ (Payments as a Secure Service™) Commerce Center. The solutions leverage IP Commerce’s IP Payments Framework™, a single platform that provides the framework to enable disparate applications and services to communicate. PayPal’s technology allows small businesses to create and send their customers payment-enabled invoices over email using the PASS Email Invoicing service. The invoices include an encrypted payment button that is embedded into the invoice, allowing small businesses to accept payment through their PayPal accounts. The Sales Ticker allows PayPal small business users to add an active desktop icon that receives and alerts them to incoming PayPal payments in real-time, without the need to login to their PayPal accounts.

“With the help of firms like IP Commerce, small businesses are able to integrate PayPal in new ways to streamline their accounting processes,” said Gene Alston, business development director at PayPal. “We are excited about being part of this powerful team of industry leaders that is educating the market about the benefits of an open payments marketplace.”

“PayPal is a recognized and respected leader in the payments industry and a valued member of the PASS Consortium,” said Chip Kahn, CEO, IP Commerce. “The consortium has been working closely as a team with Microsoft to ensure that we achieve our common goal of developing a truly open network of payment applications that enables small businesses to be more efficient and more aware of all aspects of their business.”

The PASS Consortium, developed by IP Commerce, is a group of leading financial institutions and payment service providers working together to promote secure and efficient open financial transactions within the Windows Vista™ Business operating system. As part of the PASS Consortium’s quest to promote an open payments network, the member organizations’ services are now available via PASS Commerce Center, a comprehensive financial management solution designed to help small businesses using Windows Vista Business succeed. In addition to PayPal, PASS Consortium members include AmbironTrustWave, BankServ, Chase Paymentech, CIT Group, Inc., and Internet Commerce Corporation.

Contactless Technology in the US - Card Technology

Contactless In America: Some Banks Have Yet To Climb Aboard

By Dan Balaban

While the buzz around contactless payment in the United States continues, not everyone is convinced the concept will take off anytime soon, especially when it comes to consumers tapping to pay with their mobile phones.

Among the more skeptical voices is that of John Suchanec, senior vice president of payment technology for giant card issuer Bank of America. The bank’s recent trial of contactless payment using mobile phones that support Near Field Communication failed to inspire, he said. And while the bank plans another NFC trial this summer, Suchanec said he isn’t yet sold on the technology or–for that matter–on contactless payment from other “devices,” including cards and key fobs.

“You’ve really got to provide a place where people will (be able to) pull out a device and use it everyday,” he told Card Technology. You really have to generate a business case to justify it (added cost).”

With rules adopted by the payment card organizations allowing U.S. consumers to make low-value purchases without signing receipts, tapping cards or other tokens to pay is not appreciably faster or more convenient than swiping the cards at the point of sale, said Suchanec. He also spoke last week at the CardTechSecurTech conference in San Francisco.

Bank of America is perhaps the largest but not the only big issuer still sitting on the sidelines when it comes to rolling out contactless cards or tokens. Citibank has largely dabbled in the technology, and Capital One hasn’t taken the plunge. Of the largest banks, only JPMorgan Chase has begun a significant rollout, although it has only put contactless chips on part of its portfolio.

Without more big issuers moving boldly forward on contactless–and none putting chips on all new and replacement cards–vendors predict they will ship only about 25 million contactless cards or fobs this year. That’s up modestly from the roughly 20 million contactless cards or tokens vendors sold in 2006. Contactless backers are targeting the cash-heavy market for purchases of $25 or less.

Bank of America does have some contactless cards on issue, by virtue of its acquisition completed in early 2006 of credit card giant MBNA, which has suited up for contactless payment mainly at American sports stadiums.

On the merchant side, 40,000 or 45,000 locations accept contactless payment in the United States, a growing yet still small percentage of all merchant locations that take card payment.

Some small or mid-tier U.S. banks, such as KeyBank, SunTrust and Wells Fargo, among others, are issuing contactless cards, as is HSBC on a regional basis. The 25 million contactless cards and fobs likely to be issued this year compares with the roughly 300 million credit, debit and prepaid cards U.S. financial institutions will roll out in 2007, nearly all of them simple magnetic-stripe cards. These cost a small fraction of the price of contactless cards, which run about $1.50 apiece in the United States. Issuers in Europe and Asia that have adopted more secure EMV technology for their payment cards would pay at least two to three times more to go contactless because their cards would require dual-interface chips. Relatively few contactless EMV cards are on issue.

Brian Triplett, senior vice president for emerging product development at Visa USA, said five of the top 10 Visa issuers in the United States have introduced contactless and momentum is growing.

He confirmed Visa plans to launch a national advertising campaign in the United States around its new Visa payWave contactless program. The campaign is expected to begin this summer and will try to give consumers a better grasp on contactless payment.

“This is consistent across Visa worldwide. We will continue to work with our issuers and merchants to sell that consistent story,” he said.

While Visa said it has been waiting until there are a sufficient number of contactless cards in circulation and merchants accepting them before launching a consumer advertising campaign, observers note Visa is playing catch-up with MasterCard Worldwide, which has heavily promoted its PayPass contactless brand in the United States. The belated Visa ad campaign is seen by the observers as an attempt to slow MasterCard’s momentum while boosting awareness among consumers and retail clerks, many of whom are completely clueless about contactless.

U.S. banks and payment card organizations that have launched contactless report impressive gains in use of contactless payment by consumers, with more transactions and higher spending per card or token. But these banks and card organizations haven’t yet released actual transaction figures.

For Suchanec, a major obstacle to getting more consumers to tap when they pay is persuading more merchants to accept the new form of payment.

Such big merchants as McDonald’s restaurants and 7-Eleven convenience stores take contactless at their thousands of locations across the country, and some sizable retail pharmacy, cinema and gasoline chains, also have signed on. But overall acceptance of contactless represents less than 5% of card-welcoming merchant locations.

“There are 6 million places where you can use your credit card, 45,000 (contactless acceptance locations) doesn’t excite me,” Suchanec said.

To encourage more U.S. merchants to move on contactless, he agreed the major card organizations might have to lower interchange, the major determinant of the fees merchants pay to banks on card transactions. “I think you have to bite the bullet,” he told Card Technology. “You’ve got to recognize cash transactions are different.”

As Card Technology recently reported, Visa Europe has agreed to lower interchange in the United Kingdom to try to attract more merchants for the planned launch of contactless payment in London this fall. MasterCard is expected to do the same.

Visa, MasterCard and American Express all told Card Technology, however, they have no plans to lower fees in the United States. They’ve subsidized the cost of terminals and readers for some merchants in the past. But they say the increasing card use by consumers and lower cash-handling costs will justify the investment by merchants in contactless.

“We do not intend to lower our discount rate,” Leigh Malnati, vice president for contactless payments at American Express told Card Technology. But he added during a presentation at the CTST conference in San Francisco that he sees the need for more places for consumers to tap their cards or tokens. “Until you have a better merchant coverage, there’s clearly a problem. It’s coming along. We would just like to see it come at a faster pace.”

Suchanec expresses even more doubts that contactless payment using NFC phones will take off anytime soon.

Interest continues to grow around the world in NFC, which embeds contactless chips and short-range antennas into phones and other devices, allowing them to emulate contactless payment, transit or building access cards; or act as contactless readers.

The relatively small but growing base of merchants in the United States that accept contactless would provide a ready infrastructure of readers for new mobile-payment services using the specially equipped phones, say backers. This would enable issuers to deliver their applications over the mobile network to handsets already in consumers’ pockets. They also could tie in electronic couponing and other support services to the payment applications, which their customers could access via colorful menus on their handsets.

Such large issuers as Citibank, Chase, HSBC and retailer 7-Eleven have launched NFC pilots in the United States, mostly involving consumers.

Bank of America began its own, low-profile, NFC trial late last year as part of a larger 5,000-employee pilot held at one of its corporate campuses, in Delaware, home of its MBNA division.

But the NFC portion of the trial flopped for a variety of reasons, says Suchanec, including an undesirable phone model and problems downloading the payment application to the handsets.

The bank gave employees a choice of the contactless form factors they could use and employees chose key fobs to phones by a six-to-one ratio, Suchanec said. The application available for download to the phones was PayPass from MasterCard.

“Active fob users averaged three times more transactions than phone users,” he said. “One of the problems they had with the phone, you can’t do more than one thing at a time; you can’t talk and pay.”

Users didn’t like the Nokia 3220 phone used in the trial, which wrapped up around March of this year. Employees even asked if the bank could download PayPass to their own handsets. The 3220 has been the workhorse of dozens of public and private NFC trials held around the world over the past two years. It has been one of the few NFC models available, after Nokia retrofitted the 3220 with a contactless chip and short-range antenna. But the model offers few other features subscribers would want.

There were other problems besides the unattractive phone. Users had trouble downloading the application. Bank of America’s technical staff had to help debug the code of the over-the-air platform from the beginning, Suchanec said. And the downloading process was confusing for consumers and took a long time–on average about 5 minutes for each download. Some of the delays or unsuccessful downloads were caused by a failure of the phones to receive the SMS messages sent via the OTA platform vendor, he said.

The bank used a platform developed by Germany-based Giesecke & Devrient, which transferred it to NFC platform vendor Venyon, a joint venture G&D formed with handset maker Nokia.

Venyon executives said they are unable to talk in detail about a specific customer project, including any reports of missed messages or time-consuming downloads. But they point out there are typically “issues” that crop up during trials. That’s especially true of trials involving a number of parties and new technologies, they say.

“This is especially important for NFC, as it consolidates a number of different elements, like the NFC mobile phone, secure element, applications, user interface, service provider system, mobile network, over-the-air platform and, of course, the actual contactless infrastructure,” said Venyon CEO Lauri Pesonen in a statement. “Venyon has certainly learned a lot in these trials.”

The Bank of America trial started late last year, just as Giesecke & Devrient was preparing to hand off the OTA platform to Venyon. Venyon senior vice president Andreas Schauer said it was one of the first trials of any kind downloading a bank-issued payment application. G&D had earlier downloaded a PayPass application as part of a trial in Dallas that officially launched in November.

In the Dallas trial, consumers had some problems downloading the applications, but MasterCard attributed them, for the most part, to spotty network coverage and unfamiliarity among most consumers with how to download programs or content to mobile phones.

A survey Bank of America conducted during or after its contactless payment trial showed participants rated the NFC phone as among the most negative part of their experience in the trial.

“You need to only have one bad experience throughout this whole process for people to abandon what they are doing,” said Suchanec.

The bank hasn’t given up on NFC or contactless, however. Suchanec says it plans a new NFC trial this summer among employees, using Nokia’s new 6131 NFC phone and another platform for downloading payment applications. The latter would allow users to make a phone call to request the application, reducing reliance on text messaging. Besides payment, the trial would include an application letting users tap contactless tags in posters to download discount coupons.

Overall, however, Suchanec said he believes it could take years before NFC is ready for roll out, at least in conjunction with contactless payment in the United States. “We’re a long way away from putting phones in the hands of consumers.”

Others might disagree, but what seems clear is it will be some time to come before contactless captures a sizable share of purchases now conducted by American consumers in cash. (2007-05-25)

Tuesday, May 22, 2007

Nonbanks in the Payments System - Conference Papers

Conference papers are best viewed with Adobe Acrobat Reader.
You may download a free version of the reader from the Adobe Acrobat website.

Nonbanks are becoming increasingly prominent in payments systems around the world. What are the implications of this heightened presence for innovation, competition, and risk? This international conference brought together three principal audiences – industry participants, academics, and public authorities – for an exchange of views and thoughts. The following issues were addressed:

  • What activities do banks and nonbanks perform in payments?
  • How has rising nonbank participation affected product innovation and market competition in the payments industry?
  • Do banks and nonbanks compete on a level playing field?
  • Is the current supervisory framework over bank and nonbank payment service providers adequate to control risk?
  • What role should public authorities play in overseeing retail payments in light of changing technologies and changing industrial structures?

The conference was held at the La Fonda Hotel, May 2-4, 2007, in Santa Fe, New Mexico. Preliminary papers for viewing are available below.

wednesday, may 2
Reception and Dinner
Welcome and Opening Remarks
Thomas M. Hoenig
President & Chief Executive Officer, Federal Reserve Bank of Kansas City
thursday, may 3
Session 1: Nonbank Payment Activities: An Overview
Authors: Simonetta Rosati
Senior Market Infrastructure Expert, European Central Bank
Stuart E. Weiner
Vice President & Director of Payments System Research,
Federal Reserve Bank of Kansas City
Paper: Nonbanks in the Payments System: European and U.S. Perspectives
Handout: Nonbanks in the Payments System: European and U.S. PerspectiveS
Session 2: Innovation
Author: Bronwyn Hall
Professor, University of California, Berkeley
Paper: Innovation in Nonbank Payment Systems
Moderator: Lee Manfred
Partner, First Annapolis
Handout: NonBanks in the Payment System: Innovation – Commentary and Questions
Panelists: Benjamin Ling
Group Product Manager, Google
Rene Pelegero
Senior Director of Industry Relations, Strategy & Compliance, PayPal
Handout: Innovation in Nonbank Payment Systems
Margaret Weichert
Senior Vice President, Payments & Strategy, Bank of America
Handout: Payments: An Opportunity for Innovation
Luncheon Address: Modernizing Payments: No Pain, No Gain
Gertrude Tumpel-Gugerell
Member of the Executive Board, European Central Bank
Remarks: ModerniZing payments: no pain, no gain
Session 3: Competition: Vertical Integration
Author: Nicholas Economides
Professor, New York University
Handout: Nonbanks in the Payments System: Vertical Integration
Moderator: Kenneth Posner
Managing Director, Morgan Stanley
Handout: Representative Payment Industry Competitive Landscape
Panelists: Michael Cook
Vice President & Assistant Treasurer, Wal-Mart
Handout: Nonbanks in the Payments System Competition: Vertical Integration
Trey Jinks
Senior Director, Corporate Strategy & Planning, TSYS
Pam Joseph
Vice Chair, U.S. Bancorp
Handout: Vertical Integration
Session 4: Competition: Horizontal Integration
Author: Jean-Charles Rochet
Professor, University of Toulouse
Paper: Some Economics of Horizontal Integration
in the Payments Industry
Moderator: Ken Howes
Director, Edgar Dunn & Company
Handout: NonBanks In The Payments System: Innovation, Competition and Risk
Panelists: Ben Haasdijk
Chairman, Equens
Handout: Consolidation & Integration
Gerard Hartsink
Chairman, European Payments Council
Handout: Horizontal Integration in the Payments Industry
David Yates
President, First Data International EMEA
friday, may 4
Session 5: Risk
Author: Ross Anderson
Professor, Cambridge University
Paper: Closing the Phishing Hole – Fraud, Risk and Nonbanks
Handout: Closing the Phishing Hole – Fraud, Risk and Nonbanks
Moderator: Avivah Litan
Vice President, Gartner Research
Handout: Phishing Attacks Leapfrog Despite Attempts to Stop Them
Panelists: Jean Bruesewitz
Senior Vice President, Visa U.S.A.
Roy DeCicco
Senior Vice President, JPMorgan Chase
Handout: Review and Commentary on Closing the Phishing Hole – Fraud, Risk and Nonbanks
Richard Oliver
Executive Vice President, Federal Reserve Bank of Atlanta
Handout: Review and Commentary on Closing the Phishing Hole – Fraud, Risk and Nonbanks
James Van Dyke
President, Javelin Strategy & Research
Handout: 2007 Trends In Financial Risk & Fraud
Remarks: What Rigorous Research Tells us about Risk in Payments and Financial Services
Session 6: Central Bank Perspectives
Speakers: Thomas M. Hoenig
President & Chief Executive Officer, Federal Reserve Bank of Kansas City
Philip Klopper
Executive Director, De Nederlandsche Bank
Handout: Nonbanks in the Dutch retail payments system: a central bank perspective
Philip Lowe
Assistant Governor, Reserve Bank of Australia

Mastercard + RBS + Paypass = Contactless Card

MasterCard hoping to launch Oyster-style payment card in London this year


mastercardMasterCard is aiming to launch the first contactless payment system in London later this year. The payments giant plans to beat rivals Visa and Apex by launching credit and debit cards with Royal Bank of Scotland using its PayPass system in the autumn.

The new card will allow customers to pay for their goods without the need to swipe a card or sign a receipt, in a way similar to the Oyster card system operated by Transport for London (TfL).

The London MasterCard launch covers the London corridor – north and south of the Thames, running from Waterloo to Canary Wharf. The cards, which will retain the existing chip and pin and magnetic stripe functions, will be issued through RBS, NatWest, MINT and Ulster Bank.

TfL has already signed a deal with Barclaycard and Visa to launch a range of Oyster-branded credit and debit cards, which are also expected in the autumn.

The cards are suited to transactions at fast food restaurants, coffee shops, newsagents, off-licences, bars, pubs, parking facilities and vending machines.

MasterCard UK country manager John Bushby says that consumers will love the convenience, simplicity and security of contactless cards when paying for everyday things.

It has already launched Paypass in the US and it also launched the first scheme in Europe with fast food chain McDonald's last month (MW April 12).

UK banking industry body APACS today confirms cross-industry plans to roll out the technology from September. It says there will then be a national upgrade in 2008.

Business Week chimes in Mobile Payments & Banking

Let the Phone Pick Up the Tab

Imagine having your very own mobile ATM—otherwise known as your cell phone—in the palm of your hand

Cheryl Bussani's son was grown up enough to move out of their Daly City (Calif.) home into his own place. But he still needed the occasional quick infusion of cash, and his new home in Pacifica, Calif., was far enough away that it wasn't convenient for Bussani to just drive over and drop off a few dollars. "It wasn't worth the gas," she explains.

So Bussani makes loans to her son via cell phone. She uses a service provided by Obopay, in Redwood City, Calif., that lets her transfer funds by dialing a few numbers on her wireless handset. The professional housecleaner also collects her own payments and pays bills with the service.

Bussani is part of the vanguard of U.S. mobile-phone subscribers who are doing their banking with wireless handsets. The practice is expected to gain traction in a matter of months when the likes of bigger, more established companies including banking powerhouse Citigroup (C) and wireless behemoth AT&T (T) kick off ad campaigns extolling the low cost and high convenience of paying over a mobile phone.

Following the Money

They may have a point on price. EBay's (EBAY) PayPal Mobile, which lets people wire funds and donate to charity through a phone, is free for many transactions. Obopay charges 10¢ to send money (see, 5/14/07, "Souping Up Your Cell Phone"); contrast that with Western Union (WU), which charges 11% for transfers within the U.S.

And there's reason to expect mobile-phone payments will become easier. While some early versions require a software download onto a phone, AT&T will begin including software on devices in the fourth quarter. Cell-phone makers like Nokia (NOK) and Kyocera, along with Visa and MasterCard (MA), are trialing phones with embedded chips that allow for contactless payments. Simply wave your phone in front of a reader to pay for purchases. That should cut checkout time by 50% to 70%, studies have found.

By 2012, 292 million phones sold worldwide will contain these so-called near-field communications chips, according to consultancy ABI Research. "Consumers tell us they are ready," says Pam Zuercher, vice-president of product innovation and coordination for Visa USA. The credit card association's March survey of 800 U.S. consumers showed that 57% would be interested in buying such a phone. And among 18- to 42-year-olds, 64% said they'd switch wireless carriers for it. "We believe mobile banking will be one of the bigger applications," says Greg Latour, senior vice-president of technology development at wireless carrier Cellular South, which, like carriers Amp'd Mobile and Helio, already offers Obopay.


If optimists like Latour are right—and considering the success of contactless payments in places such as Korea, there's reason to think they will be—the increased reliance on mobile payments is likely to have a ripple effect on financial services. Wireless service providers will demand their cut of financial transaction fees. Mobile payments are also expected to crimp demand for cash and checks, which still account for more than half of all consumer purchases.

At stake is $1.4 trillion in small payments of under $25 made in the U.S. each year. By 2010, about 10%, or $140 billion, of all payments under $25 will be made with contactless cards, estimates Dan Schatt, an analyst with consultancy Celent. Of those, 10% could be paid with mobile phones, he estimates.

Established players such as Visa, MasterCard, and First Data (FDC) will continue to angle for the business of processing payments and the right to collect the fees that amount to as much as 2% of purchases. But use of checks, printed by companies such as John H. Harland, could be affected. So could demand for ATMs, run by companies like First Data, recently purchased by an affiliate of private equity firm Kohlberg Kravis Roberts for $29 billion, Schatt says.

Plenty of Players

A number of upstarts stand to benefit. Schatt lists companies like Gemalto, which makes Smart Cards for contactless payments. Companies such as Atlanta-based Firethorn and Sausalito (Calif.)-based mFoundry, which power mobile banking and payments applications could profit from this move. So could outfits like ViVOtech, which sell related hardware such as in-store scanners. "We can get a bank up and running [on mobile phones] in six weeks," says Drew Sievers, co-founder and CEO of mFoundry.

Wireless service providers tend to keep tight reins on the applications they give users access to, and they will want a share of the transaction fees. Yet, unlike such carriers as Japan's NTT DoCoMo, U.S. wireless service providers are expected to stop short of offering financial services on their own. "We don't see any operators we deal with even considering this strategy," says Tripp Rackley, CEO of Firethorn.

And, of course, the service providers themselves could gain handsomely. Obopay is making a push with funding from investors like wireless powerhouse Qualcomm (QCOM). Web giants like Google (GOOG), already offering payment services online through Google Checkout, could potentially enter the fray. Cell-phone makers like Nokia could step into the market as well.


To prevent any business disruptions, processors have been among the first to jump into mobile payments. First Data doesn't see mobile payments as a threat: "We see it more as an extension of consumer choice," says Brian Friedman, vice-president of innovation for First Data financial institution services. It's not taking chances, though, and is ramping up mobile efforts. On May 2, First Data invested in ViVOtech and has committed to using the startup's hardware in offering contactless payments.

Visa and MasterCard are conducting near-field communications trials. Visa, for one, has developed its own mobile payments software. "Today, $17 of every $100 of spend is spent on a Visa card," says Visa USA's Zuercher. "We are looking at mobile as a way to shift [even more of this] spend." To that end, the company will be adding more capabilities, such as person-to-person money transfers and ticket purchases, later this year. Visa is also trying to address issues such as ease-of-use and security, which plague contactless payments in other countries (see, 11/21/06, "Contactless Payment Comes to Cell Phones").

And banks aren't sitting still. Citibank, for instance, is piloting Obopay with select customers. It's also trialing near-field communications in New York with Nokia and Cingular/AT&T. And then there's Citi Mobile, launched in April in California and expected to roll out nationwide by the end of May. Based on software from mFoundry, the service lets users search for ATM and branch locations, reach customer service, and check balances. "The uptake is within our expectations," says Steve Keitz, Citi Mobile Director. "We think this is the next step."

Kharif is a reporter for in Portland, Ore.

Mercator report on Micropayments

Solving the Micropayment Problem: Online and at the POS


Mercator Advisory Group is pleased to announce that its review of its latest report, Solving the Micropayment Problem, Online and at the Point of Sale. The report reviews both the history and challenges of electronic micropayments and examines how the existing rails have evolved to address under $5 electronic payments at both the point of sale and for online transactions.

In particular, the report examines the evolution of multiple micropayment models and how they have shifted the economics of micropayments, especially online. The ad-supported revenue model, powered by Google AdWords and other sponsored advertising sources, has significantly altered the need for a ubiquitous online "coin purse" for digital products below $0.75 in value. At the point of sale, micropayments have been successfully addressed by lower interchange rates for selected merchant categories and, in some markets, by contactless payments.

The Solving the Micropayment Problem report includes a review of market participants including PayPal, BSG Clearing Group, ClickandBuy, PaymentOne, and Peppercoin/Chockstone.

Highlights of the report include:

  • Online micropayments has been an unkind market segment for payment processors aggregating multiple small transactions as a pureplay processing service.
  • The early Internet dream of nearly frictionless purchases of sub $0.75 content has been made irrelevant by free content and the ad-supported revenue growth that powers the best free content sites as well as the growth of search giant Google.
  • Online, it is per transaction charges, not interchange, that eats up excessive margin for sub $1.50 digital content.
  • Given lower interchange rates for low-risk, high volume merchant categories such as QSRs, transit, parking and others where micropayments are common, barriers have dropped for the electronification of under $5 payments.
  • The markets for micropayments at the POS overlap with those for contactless payments.

"Under $5 micropayments online have been a persistent source of pain for content creators and distributors," comments George Peabody, Director of Mercator Advisory Group's Emerging Technologies Advisory Service. "Evolution of payment models such as ad-supported content creation and distribution have largely erased that pain. Coupled with subscriptions and payment aggregation, the online picture is clearer but still requires better solutions. Ironically, electronic micropayments work better at the POS than they do online."

One of the seven Exhibits included in this report.

This report is 23 pages long and contains 7 exhibits, 5 tables and a Glossary of Terms.

Members of Mercator Advisory Group have access to this report as well as the upcoming research for the year ahead, presentations, analyst access, and other membership benefits. Please visit us online at

For more information call Mercator Advisory Group's main line: 781-419-1700 or send email to

Javelin research on Mobile Banking

Javelin Studies Product Marketing Requirements for Mobile Banking

Javelin Strategy & Research has announced new research that it says "uncovers significant product marketing requirements for building banks' consumer usage of mobile services. While consumers are better primed for mobile banking now than they were in 2000, financial institutions (FIs) should not consider the mere availability of mobile banking a guarantee of success. FIs should prepare for measured, rather than widespread and immediate, adoption, even though consumers, handsets and mobile networks have made tremendous advancements."

As Javelin's new research shows, mobile banking and payments will grow as banks design products based on consumers' mobile needs for simplicity and immediacy while educating end users to curtail perceived risk factors. Early adopters are projected to be current mobile Internet users (MIUs), who represent 12% of US adults who own cell phones (approximately 27.8 million people). In order to appeal to this sizeable market, FIs will need to focus on the mobile preferences of this population first. These individuals require unique product design strategies, due to a distinct preference for how and why they log on.

Institutions must evaluate the tradeoffs of multiple platforms (downloadable app, SMS, browser-based app) in order to garner adoption beyond the mobile Internet users and reach other segments, such as Gen Y, risk-averse and higher-income consumers, who each have their distinct motivations for using mobile banking. According to President and Founder of Javelin Strategy & Research, James Van Dyke, "If 'anywhere, anytime' banking is the benefit of mobile banking, then providing all platforms satisfies the most fundamental consumer preference for 'anywhere.' By taking a targeted product and audience approach, banks and payments firms can finally increase the near-term return on mobile product and marketing investments."

On the other side of this mobile banking adoption equation are the perceived security vulnerabilities. According to the study of over 2,200 online consumers, one in two people (49%) perceives mobile banking to be unsafe, yet analytical review shows that this channel offers important security advantages and minimized risks compared to online banking. Institutions must proactively address the perceived security flaws while unflinchingly touting the relative safety advantages. Resulting from these survey findings is Javelin's call to the industry for an open forum collaboration for security requirements among carriers like AT&T, Cingular, Sprint, T-Mobile, Verizon, etc.; financial institutions; as well as leading vendors like ClairMail, Firethorn, Fronde, mFoundry, MShift, and M-Com.

For additional information, all of Javelin's Mobile Banking research is available along with other similar Javelin reports and custom mobile research by visiting or by calling (925) 225-9100 x 26.

Obopay partners with AIM

Obopay Introduces Mobile Payments for AOL's AIM Users

Obopay has announced the availability of a new AIM Obopay plugin for users of AOL's AIM service, the largest instant messaging community in the U.S. According to the company, "this new plugin allows eligible AIM users to launch Obopay and use it to make payments directly from the AIM Buddy List feature. Users can sign up for Obopay and download the free AIM Obopay plugin at"

PayPal becomes a bank...'twas inevitable

PayPal Obtains Bank Charter for European Union

PayPal has announced it has been granted a banking license for the European Union by the Commission de Surveillance du Secteur Financier (CSSF) in Luxembourg, effective July 2, 2007. According to PayPal, "under this new charter, PayPal will be able to continue its European expansion by offering its services to more online merchants across Europe. In addition, PayPal will be moving its European headquarters to Luxembourg."

Wednesday, May 09, 2007

Inside Contactless + Mobile Distillery - Mobile Marketing Magazine

Partnership Targets NFC Interoperability

INSIDE Contactless, which provides advanced, open standard contactless chip technologies, and NFC (Near Field Ciommunication) technology solutions, has announced a partnership with Mobile Distillery, a Java mobile porting software company, to develop an interoperable Java ME solution for NFC developers. The companies are aiming to design a software solution for the development of portable NFC/Java mobile applications across multiple NFC phones. Based on Mobile Distillery’s Celsius architecture, the solution is aimed at mobile software developers, who will need to cope with multiple implementations of NFC technologies, adding more complexity to the development of Java ME applications across multiple handsets.
By using the NFC Celsius module, the developer will be able to work on the NFC/Java ME application once, and run it across all NFC phones without any further modifications. The key benefits of the NFC Celsius module, the companies say, will be accelerated time-to-market, reduction of costs and an easy transfer to upcoming NFC phones.
The partnership is divided into two phases: firstly in the short term, the two companies will be develop a Celsius NFC prototype by the end of Q3 2007. The second step, planned for Q1 2008, will consist of the joint development of the NFC Celsius module, a complete set of Java ME NFC tools covering the commercially available NFC handsets, and ones for the near future.
“As a reference mobile execution platform, Java ME enjoyed tremendous success over the past five years, and is widely recognised by the mobile developers community, but it also undergoes an irresistible trend to fragmentation, with significantly different implementations in handsets from various vendors” says Philippe Martineau, INSIDE’s Executive Vice President of the NFC Business Line. “As an NFC pioneer and market leader, INSIDE believes that interoperability is a key success factor in delivering NFC-based services. We have a role to play and the proper expertise to bring the full benefits of the NFC standard to the NFC developers community.”