smart cards & devices forum 2013 - mobile financial services

May 2013

Co je nového a co nás čeká v oblasti mobilních finančních služeb?

Jan Němec, Petr Šturc

In-shop payment

On-line payment

P2P payment

Membership

Rewards

Place check-in

Ticketing

Gift cards

Mobile Commerce Initiatives

2

Use cases Technologies

Smart Cards & Devices Forum 2013

Presenter

Presentation Notes

Since 2010, we have witnessed a lot of mobile payment initiatives all over the world, such as the Google Wallet in the US, or Orange Cash in UK. Those initiatives can be driven by banks like Barclays or internet players like Google or Paypal, but also by Mobile Network Operators. In developed market, we can name initiatives from consortium of MNOs such as Buyster in France (SFR, Bouygues Telecom, Orange, 2011), Mpass in Germany or Isis in the US, MoCa in Korea (KT, 2013). They can be driven by NFC or started on SMS based solutions, or also using QR codes. Therefore, we are truly witnessing a big mobile payment wave coming in with more and more players. For all Mobile Commerce players, what is at stake is the ownership of the shopping experience of the end-users. They seek to influence the consumers’ purchasing decision. Indeed, when it comes to spending money, consumers are more and more demanding: 1 – They want to discover new products and services at best price Discover (offers & coupons) 2 – They also want to know what they buy and want to make sure they pay the right price Explore (product info) 3 – Then eventually they buy 4 – and then they want to be rewarded for being a good customer Engage (loyalty and rewards)

http://www.youtube.com/watch?v=Y6qVA5SMWQs

Mobile Commerce Framework

MOBILE PROXIMITY PAYMENT

MOBILE REMOTE PAYMENTS

VALUE-ADDED SERVICES

3 Smart Cards & Devices Forum 2013

Presenter

Presentation Notes

Mobile commerce framework can be split into 3 categories Pay on-line – ability to use the mobile phone to buy for digital and physical goods Bridge for Thierry Pay in the physical shops (proximity payment) Associated value-added services like coupons, loyalty, rewards, mobile marketing Today consumers are using Paypal for on-line payment and Visa/MC for physcial payment Tomorrow with mobile payment convergence, consumers will use same service for in-store and on-line payment…the line between the 2 worlds is getting very thin. Players from on-line payment trying to penetrate proximity payment and players from prox payment trying to tackle remote payment There are a lot of initiatives happening in this area, but consumers will end up having multiple choices

Mobile Wallet

MOBILE WALLET SERVICE PROVIDERS CONSUMERS

WALLET PROVIDERS

4

A mobile app that turns your phone into your wallet & stores virtual versions of your existing plastic cards and other services on your phone.


Presenter

Presentation Notes

The mobile wallet is a handset application designed to enable a consumer to view and use digital versions of payment cards, tickets, receipts, loyalty cards and other items typically found in a physical wallet. A mobile wallet also enables a consumer to browse through and then access mobile NFC services. The Mobile Wallets are the materialization of the convergence of cards and mobiles. Physical cards are getting dematerialized and converted into Java applications that are stored locally in secure elements of mobile phones. That’s what we call the virtual cards. They can be payment cards, loyalty cards, transport cards, corporate badges and many more and can be completed by promotions or coupons. The mobile wallet concept requires at least three types of players. The owner of the wallet that can be Google or Mobile Network Operators, the service providers that will accept to be hosted in such a wallet, and finally the consumers to whom, the parties have to provide added value services. Today, there is a true “wallet war” going on between these 3 types of players: all of them are fighting over the ownership of the consumer experience.

3 models emerging for PoS

IN THE DEVICE/SE IN THE CLOUD HYBRID


In the Device:

Over 200 million wireless subscribers

Over 100 million phones sold each year

3 in 4 U.S wireless users Over 20,000 retail

outlets

Tap to pay Save with offers Simplify loyalty cards

Smart Cards & Devices Forum 2013 6

In the Cloud: PayPal


Send money Buy online Collect coupons and offers

In the Cloud:


QR based payment, couponing, loyalty, etc.

• Own transaction data • Bring down payment processing cost

Presenter

Presentation Notes

Own transaction data Bring down payment processing cost

Hybrid soon: LevelUp


Pay with rewards

Presenter

Presentation Notes

"I think the existing four (competitors) are the training rounds for when Amazon (add during content delivery) and Facebook (adds on transaction) decide this is something to actually care about." Priebatsch says his company's payments and loyalty mobile app is well on its way to securing all five of the key elements needed to become a new payments network — customers, merchants, point-of-sale system integrations, relationships with credit card processors and options for software developers to build on the platform. LevelUp has 1 million users, 5,000 merchants, integrations with nine of the 10 largest point-of-sale systems, relationships with card processors Heartland Payments and Merchant Warehouse, and white-label app options for developers (along with plans to open-source its software development kit in coming months), he said.

Hybrid: Google Wallet V2


Peer-2-Peer payments integrated to gMail Instant Buy API for Android apps

NFC Couponing

Presenter

Presentation Notes

Peer-2-Peer payments integreated to gMail – sending money is as easy as attaching a file (2.9% in linked to credit card, free if linked to bank account) Instant Buy API for Android apps

Couponing: PassBook, ShopKick, FourSquare


Innovations: Square, PayPal Here, Intuit GoPayment


Dwolla – another payment network


Offers

Discounts

Loyalty accumulation/redemption

Personalized service (photo/face recognition)

Faster service (place order in advance)

Location-oriented service

Social media

14

New Services for Payment


Gemalto’s 360° Mobile Payment Solution In-Device to cloud based payment

15

Gemalto NFC SIM

Gemalto Secure NFC application

Visa / MasterCard Networks,

open loop payments

MNO TSM

NFC Payment

Payment Transactions

MNO

SP TSM

Gemalto Mobile Wallet e/m-Commerce

Domestic & Intl Money Transfer

Gemalto Mobile Payment Platform

Bank Back-End

Wallet Server (SSP)

NFC Wallet Admin


Bitcoin


Bitcoin in the news

17

Value of 1 bitcoin in US$


Bitcoin is … payment system

Decentralized

Cheap micro-payment

Pseudonymous

No charge-backs

P2P

Alice

Bob To: 1ABtVtjFFC22zgH...... Amount: 1.0 BTC Send

a.k.a. Internet money


http://blockexplorer.com/address/1ABtVtjFFC22zgHrAL8P24xpsiWoUSkXpk

Bitcoin is … application

https://github.com/bitcoin/bitcoin


https://github.com/bitcoin/bitcoin

Bitcoin is … peer-to-peer network

Messages: <addr> - node discovery <tx> - transaction <block> - accounting + 15 others

Alice

Bob


Bitcoin is … experimental monetary system

Limited “cash” supply Deflation No central bank


Bitcoin is … mystery

Who is Satoshi Nakamoto? How single person beat 30yrs of research?* Is he genius? Is it single person? Why he disappeared?

D. Chaum, Blind signatures for untraceable payments, Proc. Crypto, 1982


Address & wallet

ECC crypto - secp256k1 curve

Address = Base58( Network id || RIPEMD160(SHA256(KeyPub) || Checksum )

Checksum = SHA256(SHA256(*))

Example: 1ABtVtjFFC22zgHrAL8P24xpsiWoUSkXpk

Wallet = keystore holding private keys KeyPriv


http://blockexplorer.com/address/1ABtVtjFFC22zgHrAL8P24xpsiWoUSkXpk

Transaction

50BTC originating from [here] goes [there]. 24 Smart Cards & Devices Forum 2013

Transaction security


Transaction inputs / outputs

∑inputs ≥ ∑outputs !

26

Transaction inputs / outputs

input

Output address


How to avoid double-spending?

Private Balance ledger

Bank may spend users’s money (attack) may create money (inflation) only may verify transaction is SPoF (Single Point of Failure)

Alice Bob Carole 0 10 15 5 8 17 7 5 18

2 5

1 2

Ledger cz - účetní kniha fr - livre comptable hu - főkönyv


How to avoid double-spending?

AlicePub BobPub CarolePub

0 10 15 5 8 17 7 5 18

2 5

1 2

Public Balance ledger

Bank may spend users’s money (attack) may create money (inflation) only may verify transaction is SPoF (Single Point of Failure)


Public shared ledger = blockchain

“Genesis” block

Root hash Nonce

Hash

Tx 1

Block 1

Root hash Nonce

Hash

Hash Hash

Tx 2 Tx 3

Prev block hash

Block 2

Root hash Nonce

Hash

Hash Hash

Tx 4 Tx 5

Prev block hash

Block 3

Root hash Nonce

Hash

Hash Hash

Tx 6 Hash

Prev block hash

Hash Tx 7 Tx 8

Merkle tree


How does a block looks like?

Satoshi’s solution = Proof-of-Work Creation of block is difficult


Proof-Of-Work

Block hash must be close to zero (DIFFICULTY) Block contains chosen counter – nounce Nounce satisfying condition above is hard to find (DIFFICULTY * 232 hash ops)

DIFFICULTY adjusted every 2016 blocks (to keep block generation speed at 6 blocks/hr)

Current difficulty (28-Apr-13) = 8974296

network hashrate ~ 70x1012 hashes/sec


“I have found [this] to have zeros [here].”

Mining races

Bloc 557 Bloc 558


Mining races

Bloc 557

Bloc 558a

Bloc 558b


Mining races

Bloc 557

Bloc 558a

Bloc 558b

Bloc 559a

Bloc 559b


Mining races

Bloc 557

Bloc 558a

Bloc 558b

Bloc 559a

Bloc 559 Bloc 560


Mining races

Bloc 557

Bloc 558a

Bloc 558b Bloc 559 Bloc 560


Double-spending Attacker must outperform good guys in the mining races

(> 50% of computing power)

Bloc 557

Bloc 558a

Bloc 558b Bloc 559 Bloc 560

Hahah, I’ll change history and

transfer your $ to my address!


Mining in numbers (29-Apr-13)

Block Count 233,806 Blocks avg. per hour 7.83 Blocks last 24h 188 (4700BTC =$658,800)

Network Hashrate Terahashs/s 72.23 Network Hashrate PetaFLOPS 917.33 Energy consumption*) 876 MWh (~$87,000)

*) GPU: 1.8 Mhash/J oule FPGA: 18 Mhash/Joule 44 Smart Cards & Devices Forum 2013

“All the money comes from here!”

Why should anyone do it?

How to mine bitcoins for profit?

Pools


Economy of mining

Miners are rewarded (25BTC per block Apr-13) Miners have incentive to build valid blocks (with valid transactions) … otherwise others will not build on their work, branch will be orphaned and reward not redeemed The reward is halved every ~4years (210,000 blocks) Total nb of BTC 11,097,625 Value in US$ (30-Apr-13) 1,598,058,000


Number of bitcoins over time


Transaction fee

Fee = Sum(tx outputs) – Sum(tx inputs) May be collected by miner

Purpose: Increase motivation - clients give fee for

faster service Keep motivation when all coins minted


Auto-adjustment

More user = more hashing = faster block generation DIFFICULTY raised to keep 10 mins / block If raising too high - profitability of mining drops and miners stops working DIFFICULTY falls equilibrium should be reached (?)


Resources

https://en.bitcoin.it/wiki/Category:Technical http://blockexplorer.com http://blockchain.info https://github.com/laanwj/bitcoin-qt http://people.mozilla.com/~bwarner/bitcoin/


https://en.bitcoin.it/wiki/Category:Technical

http://blockexplorer.com/

http://blockchain.info/

https://github.com/laanwj/bitcoin-qt

http://people.mozilla.com/~bwarner/bitcoin/

Thank you!

Jan Nemec [email protected]

smart cards & devices forum 2013 - mobile financial services

Technology

existing plastic cards

workcreation of block

prev block hashblock

root hashnoncehashhash

hashprev block hashhashtx

userss money attackmay

transaction data

single person