International Practices on Mobile Payments

SCOPEEvolution of Mobile Payments.Status Report.Future Direction.

Mobile Payments- Currently PrevalentM-Commerce: Mobile phones linked to credit/debit cards can be used to make payments typically for transportation, vending machines etc. E-Money:Cash loaded in the mobile phones at service provider outlets. Consumers use this virtual cash as real value for all types of transactions. Banking Channel: Mobile phone used for accessing the bank accounts. All payments are routed through the bank.

Mobile Payments: Different PerspectivesDeveloped World Complimentary to the traditional payment systems.Flexibility, Ubiquity and Convenience.Enabler for wide range of M-Commerce Services.m-ticketing, m-retail, m-banking etc.Suitability for any payment amount levels.Payment systems linked to individual Bank Accounts.Markets reflect technology orientation.Driven by the industry.

Mobile Payments: Different PerspectivesDeveloping WorldLack of alternative solutions.Accessibility and affordability.Limited micro payments.Concept of E-Money is very popular.Micro-Financing.Driven by MNOs.

Industry InitiativesMobey ForumMET ForumNFC ForumPayCircleIrDA

Mobey ForumPreferred Payment Architecture (2003)Remote PaymentsServer based WalletLocal PaymentsBank issued EMV cardRequires dual chip phones

EUROPEEC draft blueprint (2003).SimPay service (2005).Pan-European Universal Mobile Payment System (UMPS).Applicable to Any Payment ScenarioSuitability to any payment amount levelAvailability for every mobile phone userEmployment of existing standardsEC Sponsored many developmental projects.

SEMOPSA Pan-European effort for cross-border secure mobile payment service funded by eTEN Program.Cooperation of Banks and MNOs essential.Built on real-time credit push concept.Users (customers or merchants) interact only with with its trusted bank or MNO.Banks and MNOs interact through the Data center.

SEMOPS Transaction Flow

SEMOPSCommercially launched in HungaryPilots have been completed in Greece and Italy. Commercial rollout in Greece and Italy planned in 2009.

EUROPEPayBox (2004)- AustriaOperator Driven (Mobilkom) and e-money based.

PosteMobile (2007)- ItalyBank as Mobile Virtual Network Operator (MVNO)Projected as early example of second-generation remote payments, coupling payments with mobile digital signature infrastructure to support new, advanced mobile services.

Paste MobileEUROPEPayPal Mobile (2006)- UK

Telco CentricE-Money InstituteBank CentricMVNOThird Party DrivenPayBoxPayPal Mobile

Asia-PacificMost advanced M-Commerce market in the world (Test bed for majority of m-Commerce & m-Payments/ Trials)

JapanMainly proximity paymentsNTT DoCoMo M-Wallet (FeliCa chip) - 20 million subscribersKDD M-Wallet - 5 million subscribersTwo Years ahead of the rest of the world in contact less adoption.m-Payments penetrated almost all sectors.(Transportation, Retail, Hospitality, Finance and Government)

Asia-PacificSouth KoreaEarly initiatives by the carriers and banks fell apart due to mutual distrust.Payment gateway service providers became prevalent.Move towards Contact less technology in 2007.SKT - Visa, KT Freetel Mastercard.Solutions were designed to migrate from USIM to NFC when it is widely available in 2008.m-Payments penetrated almost all sectors(Transportation, Retail, Hospitality, Finance and Government)

Asia-PacificHongkong & SingaporeSmartcards with Sonys Contactless FeliCa chipTaiwanSmartcards : VMA, PaypassChina (Biggest in subscriber base)China Union MobilePayIndiaPaymate, mCheck, Obopay, atom

USAMobile Payments were slow to take off because of availability of other alternatives.PayPal Mobile (2006).M-Banking.Moving towards NFC based contact less Mobile Payments (m-ticketing, m-retail).Stands Third (after Japan and South Korea) in adopting contact less technology.Latin AmericaM-Banking (Brazil, Argentina)

NFC enabled Mobile PaymentsForecast for Next 12-24 Months (NFC Forum)

PopulationASIA67%EMEA57%AMERICAS54%

Mobile Payments in Developing World(Philippines)Smart Money(2001)SMART Communications & Branco De Oro (BDO).Cash-In and Cash-Out at SMART and BDO offices and at a range of accredited retailers.Maximum limit of P50,000 (US$950) maintained. G-Cash(2004)Globe Telecom.Cash-In and Cash-Out at G-Cash partner merchants.

SMART MONEYCash deposits and withdrawals.Transfer of credit to prepaid accounts (SMART Load).Transfer of cash to and from users.Transfer of airtime credit to and from another user. (SMART Pasa Load)Cashless purchase at wide range of shops where retailers have SMART Money account.Direct credit from employer payroll.Bill payment.Inward international remittance from overseas (SMART Padala).Cashless purchases at at wide range of shops with MasterCard debit card.

SMART MONEY - NumbersRetailer Partners - 700,000Transactions volume - US$100 million per month.International remittance - US$50 million per month.Added cash float in BDO - US$10 million.

Mobile Payments in Developing WorldM-PESA- Kenya(2007)

WIZZIT- South Africa(2006)

Celpay- Zambia (2004)- DR Congo

Mobile Payments in Micro-FinanceCARD NGO Project (February 2005)Based on G-Cash Platform.Cash-in and Cash-out at authorized G-Cash retailers.G-Cash retailers authorized for disbursement of loans and collecting re-payments.

BENEFITSImproved efficiency by reducing field collection effort and costs.Reduction in risk faced by the officials carrying cash.Savings to the borrower who has to travel far to make payments over-the-counter in some cases on weekly basis.

Mobile Payments in Micro-FinanceRBAP TAP ProjectJoint venture of RBAP-MABS and Globe Telecom.Based on G-Cash Platform.Rural Green Bank of Caraga (April 2005).Training provided to 87 rural banks (October 2005).

KenyaThe Success of M-PESA in handling bulk disbursements of payments from organizations to employees led to the trails for disbursement and repayments of micro loans.

Examples of Financial Inclusion ProjectsCountry Provider ModelAfghanistan Roshan (mobile operator) M-bankingBrazil Caixa Economica Federal (bank) Card-basedBanco Bradesco (bank) Card-basedChile BancoEstado (bank) Card-basedColombia Banco Caja Social (bank) Card-basedDR CongoCelpay (bank) M-bankingIndia SKS Microfinance (MFI)M-bankingState Bank of India (bank) M-bankingKenya Safaricom (mobile operator)M-bankingEquity Bank (bank)M-bankingMalawi Opportunity International (bank)Card-basedFirst Merchant Bank (bank)Card-basedMexicoBanamex (bank) Card-based

Source - CGAP

Financial Inclusion Projects Contd.Country Provider ModelMongolia XacBank (bank) M-bankingPakistan Tameer Bank (bank) M-bankingPeru Banco de Crdito (bank) Card-basedPhilippines SMART (mobile operator)M-bankingGXI (mobile operator)M-bankingRussia Tavrichesky Bank (bank) M-BankingSenegal Ferlo (third-party) Card-basedSouth Africa MTN Banking (bank-MNO JV)M-bankingWIZZIT (third-party)M-bankingTanzania Vodacom (mobile operator) M-bankingUganda Uganda Microfinance Ltd. (MFI) Card-based

Source - CGAP

Conclusions

Perception of Mobile Payments is different in different parts of the world.

The Developed world is moving towards NFC enabled contact less Mobile Payments, with industry consortia (GSMA, Mobey Forum) advocating replacement of SIM with multi application UICC to support NFC.

Cross-border payment services like SEMOPS continue to prevail as remote payment services.

Conclusions

E-Money will continue to be the driver for Mobile Payments in under developed nations.

Mobile Payment solutions for Financial Inclusion needs to be affordable and operationally simple to have maximum acceptance form the communities.

With its mixed population, India requires different mobile payment solutions to different communities.

The role of MNO is critical in implementing Financial Inclusion through mobile payments.

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