chip wickenden trusted service manager pivot point in mobile payments final
TRANSCRIPT
28 April 2010 © 2010 Charles Wickenden [email protected]
The Trusted Service Manager - Pivot Point in Mobile Payments
Near Term Opportunities for Banks
Chip [email protected]
28 April 2010 © 2010 Charles Wickenden [email protected]
NACHA Morning Announcements
• Please turn off all cell phones or mobile devices• All conference attendees will have free access to PAYMENTS 2010
conference session recordings. Attendees that registered onsite will receive details to access the session recordings within 10 days.
• Should you wish to purchase a CD-ROM, a special conference rate is offered to all conference attendees.
• Most of the education sessions at the conference can be counted towards your continuing AAP accreditation. The AAP Documentation of Attendance can be found in the onsite guide.
• Please take a moment to complete session evaluations! Each evening attendees will receive an email link to access session evaluations that are offered each day. Attendees are automatically entered into a daily drawing for a chance to win a $50 gift card.
• We hope to see you all next year at PAYMENTS 2011 in Austin, Texas April 3-6, 2011
• Thanks to all of our track sponsors throughout the conference!
28 April 2010 © 2010 Charles Wickenden [email protected]
Agenda
• Definition and types of Mobile Payments
• How the Mobile Payments space is developing
• What’s changing - the Trusted Service Manager
• What banks need to do now
28 April 2010 © 2010 Charles Wickenden [email protected]
A Working Definition for Mobile Payments
• Digital exchange of value at a point of sale
• At least one party using a mobile device, such as a mobile phone, smartphone or PDA
• Excludes web based purchases using a mobile device
28 April 2010 © 2010 Charles Wickenden [email protected]
M-Pesa is a Widely Used Premium SMS Solution
• Popular mobile solution in Kenya developed by the leading mobile network operator, Safaricom, a Vodafone subsidiary.
• Outgrowth of an informal remittance solution based on transferable and refundable mobile minutes.
• Solution includes P2P, Point of Sale, Remittance, Bill Payment, Mobile top-up, ATM withdrawal
• Customer downloads a simple applet to pay
• Inputs receiver’s mobile phone number and amount
• Receiver can present the SMS confirmation to an M-Pesa agent for cash – over 10,000 agents in Kenya~40% of Adult Population
28 April 2010 © 2010 Charles Wickenden [email protected]
Paypal Uses WAP (Wireless Application Protocol) Technology in its New Mobile Solution
• Extends a very popular notional payment scheme into the mobile space
• Primarily focused on P2P, not necessarily merchant acceptance
• Also an SMS solution available
Wireless Transaction Protocol
Wireless Transport Layer Security
Wireless Datagram Protocol
***Any Wireless Data Network***
Wireless Application Environment
Wireless Session Protocol
WAP
* The iPhone uses a similar technical stack that is proprietary to Apple
28 April 2010 © 2010 Charles Wickenden [email protected]
mFoundry Offers a 2-D Barcode Payment Solution
• Merchant signs up and provisions POS scanners.
• Consumers sign up and download applet to their mobile device
• At the point of sale, the consumer starts the applet, a bar code appears and is scanned to effect payment.
• Linked with value added services to enhance the customer experience
• Key Value Point – No POS hardware upgrade necessary
28 April 2010 © 2010 Charles Wickenden [email protected]
NFC is the Most Widely Recognized Mobile Payment Initiation Method
• NFC or “Near Field Communication” transaction technology is based on standards developed for smart cards and for contactless cards (primarily ISO 14443). The technology can be built into a simple card, token, sticker, or integrated into a another device, such as a mobile phone.
• NFC uses Radio Frequency ID chips to communicate the unique identifiers and other information necessary to do a transaction.
• Integration into a mobile phone can be done through the handset manufacturer, or through a specialized SD card used in an expansion slot, or integrated into the SIM card itself.
Some of the Standards Bodies involved in NFC:ETSI / SCP : Interface between the SIM card and the NFC chipset.GlobalPlatform : Multi-application architecture of the secure element.EMVCo : Impacts on the EMV payment applicationsNFC Forum : Ensure interoperability GSMA : Common global approach to using NFC technology ISO/IEC/ ECMA : Transport, NFC Interface andProtocol
28 April 2010 © 2010 Charles Wickenden [email protected]
Payment Methods
Bill Through Carrier • Simple and Easy• Carrier holds risk & cost of funds• Merchants must subscribe
Closed Loop Notional Account
• Franchise may go beyond mobile
• Risk is managed based on program specifics
• Program carries cost of funds• Merchants must subscribe
General Use Payment Methods• Franchise extends into mobile• Risks and cost of funds are well
understood and managed• Broad merchant acceptance
• The method of payment is not necessarily linked to the means of effecting payment
• The complexity of implementation for a given payment method is directly related to the level of acceptance
28 April 2010 © 2010 Charles Wickenden [email protected]
Hmmmm – Interesting Perspective
BTW – You can still donate $10 to the Red Cross Haiti relief fund by sending a text to “90999”
28 April 2010 © 2010 Charles Wickenden [email protected]
A 2007 GSMA Whitepaper Defines 9 Entities With a Stake in NFC Mobile Payments – The Many-to-Many Problem
This means that in order for a mobile transaction to occur between a merchant and a consumer 7 other entities need to either coordinate their actions, and have a financial reason to act, or have their needs addressed in some other fashion. This complexity is magnified by multiple real entities for each logical entity represented here.
MobileOperator
IssuingBank
ConsumerMerchant
AcquiringBank
PaymentNetwork
HandsetMfr
SIM/UICCMfr
POSSupplier
28 April 2010 © 2010 Charles Wickenden [email protected]
The Many-to-Many Problem in Developed Markets
If the Bank market is segmented like this:
And the Mobile market is segmented like this:
Ban
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Mobile Network Market Share
The dynamics make it almost impossible to form a critical mass of market share
28 April 2010 © 2010 Charles Wickenden [email protected]
Collaboration Between Two Participants Yields Results, but a Broader Solution is Required for Success
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Mobile Network Market Share
The joint services offered through such binary relationships are typically governed by a Service Manager function.
The Trusted Service Manager has been developed to identify the common governing entity to support market wide adoption.
28 April 2010 © 2010 Charles Wickenden [email protected]
The Role of a Trusted Service Manager
Transaction processing is typically handled through traditional methods not through the TSM
Trusted Service Manager
Consumer
Carrier
Carrier
Carrier
Bank
Bank
Bank
Entity Validation, Security & Permissioning
Telecom servicesServices/Billing
Over-the-airManagement
Service Negotiation & Provisioning
Service Negotiation & Provisioning
• Intermediation between banks, carriers and other service providers
• Cryptographic key management
• Application management
• Value-added services
Airline
App Provider
Merchant
- The TSM role can exist between two parties or many
28 April 2010 © 2010 Charles Wickenden [email protected]
The European Payments Council and the GSMA are Collaborating on TSM Business Component Definition
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Mobile Network Market Share
The industry is coalescing around “Trusted Services Manager” as the title for this entity and defining roles and options
EPC - GSMA Trusted Service Management Requirements and Specifications European Payments Council & GSMA, Jan 2010Whitepaper that defines specific functions and requirements for each role in the ecosystem
28 April 2010 © 2010 Charles Wickenden [email protected]
The TSM Role Becomes a Coordinating Point for the Ecosystem, Addressing the Complexity
MobileOperators
IssuingBanks
ConsumersMerchants
AcquiringBanks
PaymentNetwork
HandsetMfrs
SIM/UICCMfrs
POSSuppliers
TrustedService
Manager
28 April 2010 © 2010 Charles Wickenden [email protected]
Developing Economies Have Fewer Dominant Players - Banks and Telecoms, So the TSM can Occur by Default
Ban
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Mobile Network Market Share
28 April 2010 © 2010 Charles Wickenden [email protected]
There is a Debate Forming Globally About the Form That a TSM Should Take in a Given Market
Trusted Service Manager - The Key to Accelerating Mobile PaymentsFirst Data Corporation, May 2009Whitepaper that discusses market acceleration and the revenue opportunities in the TSM role
Portals and Rails: Coordinating Roles in Mobile Payments- Who Will We Trust? Sept 2009, Federal Reserve Bank of AtlantaWhitepaper that discusses appropriate entities to fulfill the TSM role
The central question is whether a TSM should be a for-profit entity or a not-for-profit entity. There is no single “right answer” – it will be different based on economic, social, regulatory and competitive factors. There may also be multiple solutions in a given market.
28 April 2010 © 2010 Charles Wickenden [email protected]
2010 2011 2012 2013 2014
An Idea of How the Mobile Payments Market Could Evolve
TSM Deployment, Rationalization
Developed Economy Pilots, PoCs
Developing Economy Production Deployments – Telco & Bank
Developed Economy Telco Production Deployments
Developed Economy Bank Production Deployments
Market Disruptors, Value Add 3rd party Provider Deployments
28 April 2010 © 2010 Charles Wickenden [email protected]
As Mobile Payments Emerge, Banks Need to Anticipate the Challenge to Their Payments Business
While the market is adjusting to the emergence of Trusted Service Managers and banks are determining their relative position in that regard, there are a number of tactical steps that can be taken to add value and strengthen banks’ market position.
Mobile Payments
28 April 2010 © 2010 Charles Wickenden [email protected]
Any stakeholder interested in participating in mobile payments should put together a business program to associate and validate these two data elements. As well as a foundation for mobile payments, capturing this intersection provides a foundation for delivering related services and maintaining market position.
Broader View of the
Customer
The Intersection Between Identity from the Bank and the Mobile Operator’s Point of View is Critical
Mobile Phone Number
Account Number
Mobile IdentityBank Identity
28 April 2010 © 2010 Charles Wickenden [email protected]
Key Value Points of Mobile Technology
• Networked– Mobile devices are an absolute model of cloud
computing delivering as much functionality as needed at the point of service
• Intelligent – Mobile devices carry their own storage and processing
capability as well as being connected to the cloud• Locationally Aware
– Mobile phones provide locational information which can be a powerful tool for customer insight and marketing, as well as risk management
• Versatile – At a minimum, mobile devices have keypad and voice
input and screen and sound output. Cameras and expansion capability offer even more flexibility
The key to understanding mobile technology is to comprehend the power that this unique combination feature and function delivers
Mobile Technology is:
28 April 2010 © 2010 Charles Wickenden [email protected]
Banks Have the Opportunity to Surround Future Mobile Payment Offerings with Value Now
Deliver Transaction Information
Mobile Payments
Expand theD
evice
Deliver Locational Value
Leverage theC
loud
- Preemptively protecting the franchise in payments
- Let’s look at some of the opportunities and ideas
28 April 2010 © 2010 Charles Wickenden [email protected]
Leverage the Intelligence of the Device to Enhance the Experience
Deliver Transaction Information
Leverage theC
loud
Expand theD
evice
Mobile Payments
DeliverLocational Value
- The device does not have to transact to interact
28 April 2010 © 2010 Charles Wickenden [email protected]
Wells and Visa are Leveraging Alerts
28 April 2010 © 2010 Charles Wickenden [email protected]
Orange Barclaycard Mashup
28 April 2010 © 2010 Charles Wickenden [email protected]
Leverage the Intelligence of the Device to Enhance the Experience
Mobile Payments
TransactionBlocking
SpendingThreshold A
lerts
Large PurchaseValidation
Transaction Alerts
- The device does not have to transact to interact
28 April 2010 © 2010 Charles Wickenden [email protected]
Deliver Transaction Information
Leverage theC
loud
Expand theD
evice
Mobile Payments
DeliverLocational Value
Create Value from the Mobile Device’s Locational Awareness
28 April 2010 © 2010 Charles Wickenden [email protected]
Mobile Technology is Already Changing the Way We Shop
Context aware ads sent to groups of people based on
matching between their profiles and context of the ads
Customer starts web based research on a given product, either through browsing or by
scanning a barcode
Customer has agreed to locationally aware advertising which triggers offers based on
lingering in a given position
Customer transitions from advertising to interacting with
a product specialist on the mobile device
Customer continues research through social media – blogs,
rating engines, friends and advisors
Retail search solution identifies best product
matches with locational information
Easier to examine the item in the store and then buy in on
line? Shopping can be mixed mode.
Checkout can happen anywhere – which can
completely change the front of the store concept
Analytics
28 April 2010 © 2010 Charles Wickenden [email protected]
Banks Can Use Locational Information to Improve Loyalty and Cross-sell
Special rates just for this dealership!
MyBank
Due to size and complexity, consumers often shop separately for mortgages and auto loans .
28 April 2010 © 2010 Charles Wickenden [email protected]
Mobile Technology used to Track Bank Robbers
Wouldn’t it just be easier to track the robber’s cell phone?
28 April 2010 © 2010 Charles Wickenden [email protected]
Create Value from the Mobile Device’s Locational Awareness
Mobile Payments
Location BasedCustomer Insight
Deliver Insight &
Offers for Locations
Location SpecificC
ouponing
Locational AwareFraud Alerts
28 April 2010 © 2010 Charles Wickenden [email protected]
What Value can be Delivered by Combining Consumer Interaction, Location and Analytics?
Deliver Transaction Information
Leverage theC
loud
Expand theD
evice
Mobile Payments
DeliverLocational Value
28 April 2010 © 2010 Charles Wickenden [email protected]
Shortcuts.com is a New Program to put CPG Coupons on a Card – Easily Translates to Other Devices
28 April 2010 © 2010 Charles Wickenden [email protected]
Blippy – Customer Insight Turned Sideways
This is an application from one of the founders of Twitter that lets your friends follow what you are buying.
. . . However recent investigations have found some security flaws, even by social media standards.
28 April 2010 © 2010 Charles Wickenden [email protected]
Bundle.com Examines Comparative Spending Data – and There’s iPhone App
28 April 2010 © 2010 Charles Wickenden [email protected]
Mint.com Helps Consumers Manage Spending Too – and There’s an App . . .
28 April 2010 © 2010 Charles Wickenden [email protected]
What Value can be Delivered by Combining Consumer Interaction, Location and Analytics?
Mobile Payments
Shopping Lists & Budgets
SociallyFocused Spending
InteractiveC
ouponing
Tools for Financial Management
28 April 2010 © 2010 Charles Wickenden [email protected]
Smart Phones are Expandable – How Can That Change the Equation?
Deliver Transaction Information
Leverage theC
loud
Expand theD
evice
Mobile Payments
DeliverLocational Value
28 April 2010 © 2010 Charles Wickenden [email protected]
Devices That Combine Mobile Technology and Merchant Acceptance Have Debuted Recently
iPhone credit card swipe war heats up
- This has the potential to change the merchant landscape significantly from a customer profile, risk and acquiring perspective
28 April 2010 © 2010 Charles Wickenden [email protected]
Tyfone – Ingenious NFC Workaround
Tyfone creates value by providing a turnkey infrastructure (software on the phone, middleware platform, and a memory card based token for the secure element/contactless payments/NFC). Tyfone’s patented technology combines a smart card chip (secure element), an NFC chip, and a miniature antenna provisioned to a memory card that works in any standard memory card slot. This comprehensive solution enables device independence in an issuer-centric model allowing the issuer to control both the channel and customer.
28 April 2010 © 2010 Charles Wickenden [email protected]
Biometric Authentication
At a minimum, any mobile phone can do some level of biometric voice authentication.
StoredBio print
Biometric Applet
Requests Speech
Matches?Y/NInput
Result
Handset
StoredBio print
Biometric Applet
Requests Speech
Matches?Y/N
Input
Result
Handset ValidationServer
Voice match
Facial recognition
Fingerprint
Self contained Network based
• All Phones have a microphone • Smartphones have cameras• Fingerprint readers can be added
28 April 2010 © 2010 Charles Wickenden [email protected]
Smart Phones are Expandable – How can That Change the Equation?
Mobile Payments
Shopping Lists & Budgets
Biom
etricA
uthentication
Work-A
round For N
FC
Mobile CardAcceptance
28 April 2010 © 2010 Charles Wickenden [email protected]
A Further Suggestion for Your Reading List
One of the best articles that looks at the broad view of where money and the world of payments is headed
28 April 2010 © 2010 Charles Wickenden [email protected]
Thank You
Chip [email protected]: 1-904-387-0106Mobile: 1-904-422-1321http://www.linkedin.com/in/chipwickenden