A varied group of industry stakeholders gathered in Orlando earlier this month for the first Social: Mobile: Payments Conference. While opinions varied on what technology would ultimately take hold—the cloud, near field communication (NFC), barcodes, carrier billing, etc.—speakers seemed to agree that the time for mobile payments has come. One big problem, however, is market fragmentation and the plethora of new players looking for their share of the revenue in an already-crowded value chain. “When the music stops, what do you want to be using?” asked David W. Schropfer, head of mobile commerce for the Luciano Group, a product development and advisory firm. “NFC will happen over time—and when it gets here, I think it will win—but in the meantime there’s cloud computing, there’s QR codes.” Ultimately, Schropfer said, any mobile commerce solution “has to reduce costs or drive new sales or it’s not a product that’s going to live. The third rail is security and accuracy—you don’t get a lot of chances to mess up here.” Security problems could set back any business model for years or kill it, he noted. “If there’s one huge security breach, it could kill the [mobile payments] industry,” agreed Kolja Reiss, managing director of carrier billing company Mopay. “You don’t have a security problem yet because you don’t have adoption,” he said of mobile payments at the POS. “If you have a billion people on your system, it’s very likely that [the threat increases].” “If there’s one huge security breach, it could kill the [mobile payments] industry.” —Kolja Reiss, Mopay As the industry grapples with securing the payments ecosystem as it evolves, another key issue is the “friction in the model,” according to Rich Clow, Citi’s managing director, head of consumer global mobile development. “How do you get banks and carriers and associations together?” he asked. “How do you get consumers to adopt? We’ve made a tremendous amount of progress,” he said, but “we’re not at the end or even at the middle. There’s still a lot ahead of us.” Clow acknowledged that banks have not been innovating enough as it relates to mobile payments, but he said banks have an important role to play as stewards of the financial system. Creating a great user experience as well as a solution that’s fully compliant must go hand in hand, according to Clow. “We can’t succeed with a winner-takes-all attitude,” Clow concluded, saying there must be shared risk and reward and collaborative ecosystems.

1. E-print | from Paybefore Update | April 2012 | Volume 6 Issue 7
• The industry resource for prepaid and stored value •
SMP Conference: Excitement High, But Fragmentation
Slows Mobile Commerce
By Loraine DeBonis, Editor-in-Chief
A
varied group of industry stake- “If there’s one huge security breach,
holders gathered in Orlando in it could kill the [mobile payments]
April for the first Social: Mobile: industry,” agreed Kolja Reiss, manag-
Payments Conference. While opinions ing director of carrier billing company
varied on what technology would Mopay. “You don’t have a security
ultimately take hold—the cloud, near problem yet because you don’t have
field communication (NFC), barcodes, adoption,” he said of mobile payments
carrier billing, etc.—speakers seemed to at the POS. “If you have a billion people
agree that the time for mobile payments on your system, it’s very likely that [the relates to mobile payments, but he said
has come. One big problem, however, is threat increases].” banks have an important role to play as
market fragmentation and the plethora As the industry grapples with stewards of the financial system.
of new players looking for their share of securing the payments ecosystem as it Creating a great user experience as well
the revenue in an already-crowded value evolves, another key issue is the “fric- as a solution that’s fully compliant
chain. tion in the model,” according to Rich must go hand in hand, according to
“When the music stops, what do Clow, Citi’s managing director, head of Clow.
you want to be using?” asked David W. consumer global mobile development. “We can’t succeed with a winner-
Schropfer, head of mobile commerce “How do you get banks and carriers and takes-all attitude,” Clow concluded,
for the Luciano Group, a product associations together?” he asked. “How saying there must be shared risk and
development and advisory reward and collaborative ecosystems.
firm. “NFC will happen
over time—and when it What Merchants Want
gets here, I think it will “If there’s one huge security Although merchants were largely
win—but in the mean- breach, it could kill the [mobile absent from the gathering, what
time there’s cloud com- merchants want and are willing to
puting, there’s QR codes.” payments] industry.” invest in came up often during the two-
Ultimately, Schropfer —Kolja Reiss, Mopay day conference. Bill Ready, CEO of
said, any mobile com- e-commerce payments processor
merce solution “has to Braintree, said “solutions coming to
reduce costs or drive new sales or it’s do you get consumers to adopt? We’ve market today aren’t driving simplicity
not a product that’s going to live. The made a tremendous amount of prog- for merchants. They are one-off
third rail is security and accuracy—you ress,” he said, but “we’re not at the end solutions and they’re not integrated.”
don’t get a lot of chances to mess up or even at the middle. There’s still a lot Solon Kandel, chairman and CEO
here.” Security problems could set back ahead of us.” of Payair US, a mobile payment
any business model for years or kill it, Clow acknowledged that banks have solutions provider making its debut in
he noted. not been innovating enough as it the U.S. market, agreed. He likened the
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2. E-print | from Paybefore Update | April 2012 | Volume 6 Issue 7
• The industry resource for prepaid and stored value •
Consumer Preferences MasterCard, American Express),
Q. A number of different kinds of companies could offer compared to 11 percent who selected a
mobile wallet services. If you wanted to use a mobile wallet which peer-to-peer payments company (e.g.,
one of the following would you choose? PayPal), 4 percent who selected a
mobile phone operator and 3 percent
who selected a technology provider
Bank 24 (e.g., Google).
The survey also found that consum-
Credit Card Company
(e.g., Visa, MasterCard, ers were most interested in linking a
21
American Express) mobile wallet with existing debit (27
percent) and credit cards (22 percent).
P2P Payments Company 11
(e.g., PayPal) Only 8 percent of consumers said they
were interested in using a new credit
Mobile Phone Network 4 card from the mobile wallet provider;
Operator n Percentage
11 percent were interested in a debit
Technology Provider 3 card from the mobile wallet provider.
(e.g., Google) Eighteen percent expressed interest in
0 5 10 15 20 25 30 using a third-party payment service,
Source: Cisco ©2012
e.g., PayPal, with a mobile wallet and
11 percent cited a prepaid account (e.g.,
mobile commerce market today to a or debit card secured “in the cloud,” Starbucks Card Mobile) as preferable.
group of auto parts dealers. according to the company. Whether Interestingly, 47 percent of respondents
“People are selling car parts,” he online or offline, including in retail, selected unsure/none of the above.
told attendees. “This person has digital restaurant, entertainment and other To Farah, this points out that “a lot
receipts, this person has a wallet, that shopping environments—even from a of consumers don’t understand exactly
person has a checkout basket, etc., but billboard, coupon or television—mer- what we mean by the mobile wallet
what a merchant wants is an integrated chants can offer a fast, convenient and concept.”
platform that supports the entire flexible mobile shopping experience, That said, the survey found that a
shopping experience and has an according to Kandel. company “I know and trust” (31
integrated loyalty component. There percent) as well as strong privacy and
hasn’t really been anything in the What Consumers Want security policies (46 percent) were
marketplace, until now, that provides Philip Farah, principal, financial important factors when considering
[everything].” services, IBSG, Cisco Systems Inc., which mobile wallet provider consum-
Moreover, Kandel said merchants presented new research on day one of ers would want to use. Thirty percent
are looking for something that is the conference showing that consumers said wide acceptance was an important
technology-agnostic. “They don’t want still trust banks more than other factor, while only 20 percent cited
to make a bad bet [in terms of technol- players in the mobile wallet arena. loyalty/rewards. When asked about the
ogy], and they don’t want to pay for “This is a business for the banks to most important potential benefits of
hardware or software to get there.” lose,” Farah said. using a mobile wallet, however, the
Payair’s technology platform, which In a survey of more than 1,000 number interested in coupons and
has been operating in Sweden for the online U.S. consumers representative of offers gets a bump. Twenty-four percent
past year—and which Kandel said, the overall U.S. population, Cisco said redeeming coupons and special
delivers the whole package—will be found that 24 percent of consumers offers was the most important potential
rolling out stateside in May. In as little would choose to use a mobile wallet benefit of using a mobile wallet, while
as 10 seconds, consumers can put an from a bank and 21 percent said they 16 percent chose receiving coupons and
item in their shopping cart, self-check- would choose a mobile wallet from special offers when you are close to
out and pay with their preferred credit their credit card company (e.g., Visa, your favorite stores and restaurants.
©2012 Paybefore. All rights reserved. Forwarding or reproduction of any kind is strictly forbidden without the prior consent of Paybefore.

3. E-print | from Paybefore Update | April 2012 | Volume 6 Issue 7
• The industry resource for prepaid and stored value •
The most popular answer after “unsure/ solve any pain for consumers.” While vice president of sales and marketing
none of the above” (39 percent), was he noted that ShopSavvy, which for payments processor i2c Inc., tells
faster payments at retail checkout (32 provides a shopping app for consumers Paybefore. “While NFC still remains at
percent) and one-click payment for to compare products and pricing and a distance in the absence of merchant
online purchases (29 percent). receive relevant offers, would be happy POS adoption, mobile payments are
While NFC proponents say that to use NFC, he believes that providers clearly growing at a rapid pace,” says
Ackerson, who participated in a
Paybefore panel on the future of plastic
“[Merchants] don’t want to make a bad bet [in cards.
“Today, we’re expanding the
terms of technology], and they don’t want to plastic card relationship with mobile
pay for hardware or software to get there.” applications associated with cards.
—Solon Kandel, Payair US Cardholders increasingly are select-
ing and demonstrating preference for
this channel, enabling them to
speed is one of its advantages, experts will have to answer an important immediately access current card
say there still is a long way to go before question before the market will shift in balance, history of spending, remote
we reach critical mass for NFC accep- a big way toward NFC: “How are you check capture, card-to-card transfers,
tance terminals, at least in the United actually making shopping better?” location of reload network sites,
States. For ShopSavvy founder John “It’s clear payments innovation is access their coupon offers and more.
Boyd, the value proposition for NFC significantly accelerating and reaching To differentiate one’s program from
hasn’t been clearly defined. “Why out across merchants and consumers to others’, consumer engagement
should consumers change their create incremental benefits for all (including loyalty, rewards and
behavior?” Boyd asked. “NFC doesn’t stakeholders,” Jim Ackerson, senior communication) is key.”
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