2. Critical Factors for Mobile Payments
1. Development of “Open Mobile Wallet.”
2. Use of Near Field Communications (NFC) contactless
technology resident in a smart phone and merchant terminals.
3. Use of existing rails, including the ACH network for non-card
payments, for mobile payments platform(s).
4. Dynamic data authentication for security and fraud mitigation.
5. Industry certification program to ensure both domestic and
global interoperability.
6. Development of regulatory oversight model and compliance
responsibilities by bank and non-bank regulators.
7. Creation of Trusted Service Managers that would oversee the
provision of interoperable and shared security elements used
in the mobile phone.
3. SWOT Analysis Reveals Many Obstacles
STREAGTHS WEAKNESSES
Contactless mobile technology resident on the cell phone High cost of deploying of software and hardware
chip reduce payment fraud
Adopting existing systems to changing and new standards
Mobile payments may reduce PCI compliance cost for
merchants Risk of making the wrong costly business decisions in the
new and evolving industry
Some POS are already equipped with NFC technology
Limited experience dealing with banking and payments
NFC is compatible and interoperable with other current rules
systems existing hardware and communication protocols
(e.g. security) Until common industry standards developed, firms must
make relationship specific investments
Company’s brand recognition and many location in the US
Relationships with Mobile Network Operator(s)
OPPORTUNITIES THREATS
18 percent of US households do not have a bank account Well defined payment & banking infrastructure
Most large U.S banks offer customized banking applications Pilots failed to produce evidence of sustainable biz case
34 percent of US consumers now own a smart phone Different payment methods available to consumers in US
Smart phone market is growing at compound annual growth Currently uncertain consumer demand
rate of 17 percent
Unbanked will not be innovators and early adopters of
Opportunity to reduce merchants’ royalty and rewards mobile payments
program management costs
Robust fraud analytics around mag-stripe technology
New marketing opportunities for couponing, targeted
advertisements Stakeholders are reluctant to invest in terminals & handsets
15-20 percent of all gift cards are never redeemed – Potential conflicts and barriers to development of a
component of new value proposition to customers ubiquitous, interoperable solution for mobile payments due
to different ideas by industry stakeholders
Banks are conservative and less eager to invest in M-
Wallet
4. Business Models Are Undefined
OPERATOR-CENTRIC MODEL BANK-CENTRIC MODEL COLLABORATION MODEL
Description: The mobile operator Description: Issuing bank owns the Description: Model involves
acts independently to deploy mobile relationship with customer and is collaboration among banks, mobile
payment applications to NFC-enabled responsible for getting payment into operators and other stake-holders in
mobile devices. The customer may customers' hands in much the same value chain, including a potential new
prepay, or the operator may add way as bank cards are distributed. third party to manage the deployment
charges to the customer's existing The merchant relationship is owned of mobile applications.
wireless bill. by the acquiring bank.
Pros: Comparable models exist in the
Pros: Sufficient profits can be Pros: 4 Players in the payment credit card industry for customer
recognized and allocated to all transaction model can be modified for acquisition and marketing fees
parties. M-Payments easier. The value chain between partners. Model supported
for each participant is relatively clear by all stakeholders. Stakeholders
Cons: Does not adequately address and easily understood. A merchant focus on their own core
all business concerns. Mass adoption gets faster transaction times and competencies. Creates new revenue
from merchants and consumers will increased spend. from incremental services.
be difficult.
Concerns of risk, privacy, and fraud. Cons: Small chance for reducing Cons: The amount paid and collected
Billing and customer service merchants’ transaction fees. by each stakeholder is the source of
requirements challenge to mobile Partnerships and revenue sharing considerable contention. Slow
operators. Lack of business with mobile operators would be adoption due to the number of players
relationships between merchants and impossible to avoid. Multiple wallets who must agree on standards and
operators. on consumers’ phones and hence business models. No comment
slower adoption. Banks are reluctant platform or standards.
to invest into new technology.
PROBABILITY OF ADOPTION
LOW HIGH
5. Value Chain is Complex
P T
A R S
M A T H
Y A O
O C I R A
M D F
B Q S U C N
E E T
M I U S S A D
N W
E L I U T R
T A A
R E R I E D S
I S R
C N D E
C P S E
H N G B T
A R O
A G S R
R O C V
N B E A M
R C I E
T B A R N A
I E A N
S A N V D K
E S T D
N K I S E
R S I O
K S C R
S O O R
S E S
R N S
S S
Unless disintermediated, everyone must derive benefits. Otherwise, the chain will break down!
6. Multigenerational Plan for Industry
GENERATION
I-STEP II-STRETCH III-LEAP
Create a Mobile Payment platform that
Smart phone use NFC technology is
capitilizes on existing mobile capabilities
VISION used as a new channel for existing True Open M-Wallet
at POS in order to perform rudimentary
credit and debit cards schemes.
"riskless" mobile transfactions.
Partner with 3rd parties and existing Establish infrastructure to NFC Develop partnerships among banks,
partner FI's to leverage their and payments initiated through credit and insurance, and ancillary product
merchant's POS infrastructure and debits cards issued by conventional companies. Establish 3rd party entities
STRATEGY
financial resources to offer rewards and players. Develop consortiums of non- to promote certification program to
offers redeemable by M-payments. Use competing merchants to fund joint ensure both domestic and global
existing rails, including the ACH. product/service development. interoperability.
▪ Loyalty & rewards programs
▪ Loyalty programs with other firms ▪ Prepaid and gift cards
▪ Gift/prepaid cards redeemed through ▪ CASA (Checking/Savings) ▪ Integrated banking services with full
M-payment ▪ Virtual debit and creadit cards residing suite of products
PRODUCTS
▪ UPC/Bar Codes used to redeem on a chip in the smart phone ▪ P2P M-payments
coupons or existing reward programs ▪ Diversification into consultative selling ▪ Cash disbursements
▪ Promotional coupons in addition or to other merchants
instead of email blasts or direct mail