Mobile Retailing Blueprint Version 1.0 - Connected World€¦ · Mobile Retailing Blueprint Verbatim reproduction and distribution of this document is pe rmitted in any medium, provided

Mobile Retailing Blueprint

Verbatim reproduction and distribution of this document is permitted in any medium, provided this notice is preserved.

Mobile Retailing Blueprint A Comprehensive Guide for Navigating the Mobile Landscape Version 1.0.0 2010/05/21 A Joint White Paper sponsored by the National Retail Federation


This blueprint is the culmination of research by retailers, vendors, and standards organizations, working together for the benefit of the retail industry. It would not have been possible without the assistance of the following people:

Chairs

Richard Mader, Chairperson ARTS Jonatan Evald Buus, Vice Chair Cellpoint Mobile David Dorf, Vice Chair Oracle Retail Cathy Medich, Vice Chair Smart Card Alliance

Administration

Richard Halter ARTS Bart McGlothin Cisco Systems Inc

Contributors

Andrew Paradise Aisle Buyer Jay Heavilon ARS eCommerce James Schildknecht CellPoint Mobile Kristian Gjerding CellPoint Mobile Nuria Gema Fernandez Fernandez El Corte Ingles Juan Jose Monge Fernandez El Corte Ingles Francisca Vicente-Tamarin El Corte Ingles Miguel Ligero El Corte Ingles Paul Gay Epson Mike Julson Escalate Retail Brian Walker Forrester Wendy Neuberger IBM Sophie Vu Kony Solutions Dana Warsona Motorola George Throckmorton NACHA Debbie Arnold NFC Forum Dennis Stokely Safeway Tim Hood SAP Arish Ali Skava Renee Schaffer Sonic Corp Mickey Haynes The Home Depot Rine le Comte To Increase Dennis Blankenship Verizon Business David Tran Verizon Business Asif Batada Verizon Business Mohammad Khan ViVOtech Tom Zalewski ViVOtech

Copyright © 2010 National Retail Federation. Page All rights reserved. Verbatim reproduction and distribution of this document is permitted in any medium, provided this notice is preserved.

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Mary Scoggan Yum! Brands Eric Dewey Yum! Brands Thomas Powell Yum! Brands

Participants

Ed Johnson BJ Warehouse John O’Dell Darden Will Anguish Darden Tom Reichert Family Dollar Al Garton GS1 Rich Richardson GS1 Ed Gawronski Kohls Nada Aried Limited Brands Steve Miles Massachusetts Institute of Technology Krystal Kolodziejak sasktellabs Bill Klearman Sonic Corp. Gaurav Pant TCS George Shaughnessy Yum! Brands Rajat Agarwal Wincor-Nixdorf Pete Kinkead West Marine Copyright © National Retail Federation 2010. All rights reserved.

This document and translations of it may be copied and furnished to others, and derivative works that comment on or otherwise explain it or assist in its implementation may be prepared, copied, published, and distributed, in whole or in part, without restriction of any kind, provided that the above copyright notice and this paragraph are included on all such copies and derivative works. However, this document itself may not be modified in any way, such as by removing the copyright notice or references to the NRF, ARTS, or its committees, except as needed for the purpose of developing ARTS standards using procedures approved by the NRF, or as required to translate the document into languages other than English.

The limited permissions granted above are perpetual and will not be revoked by the National Retail Federation or its successors or assigns.


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This blueprint was developed with assistance from the following organizations:

The Association for Retail Technology Standards (ARTS) of the National Retail Federation is a retailer-driven membership organization dedicated to creating an open environment in which both retailers and technology vendors work together to create international retail technology standards.

GS1 is a leading global organization dedicated to the design and implementation of global standards and solutions to improve the efficiency and visibility of supply and demand chains globally and across sectors.

NACHA supports the growth of the ACH Network by managing its development, administration, and governance. NACHA brings together payments system stakeholder organizations to encourage the efficient utilization of the ACH Network and develop new ways to use the Network to benefit its diverse set of participants.

NRF's mission is to advance and protect the interests of the retail industry and to help retailers achieve excellence in all areas of their business. As the world's largest retail trade association and the voice of retail worldwide, the NRF’s global membership includes retailers of all sizes, formats, and channels of distribution as well as chain restaurants and industry partners from the United States and more than 45 other countries.

The NFC Forum was formed to advance the use of Near Field Communication technology by developing specifications, ensuring interoperability among devices and services, and educating the market about NFC technology.

The Retail Advertising Marketing Association (RAMA), a division of the National Retail Federation, provides unique networking opportunities, industry research, and educational programming for retail advertising and marketing professionals. NRF members are able to take advantage of the added value of participating in RAMA as a benefit of membership with NRF.

The Retail Solutions Providers Association is the only association dedicated to the retail technology industry. Members include resellers, distributors, hardware manufacturers, software developers, consultants, and service providers who bring retail technology solutions to the marketplace.


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Shop.org, a division of the National Retail Federation, is a member-driven trade association whose exclusive focus is to provide a forum for retail executives to share information, lessons learned, new perspectives, insights, and intelligence about on-line and multichannel retailing.

The Smart Card Alliance is a not-for-profit, multi-industry association working to stimulate the understanding, adoption, use, and widespread application of smart card technology.


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CONTENTS

1. EXECUTIVE SUMMARY ................................................................................................................................ 1

1.1 CONSUMER OPPORTUNITIES ............................................................................................................................. 1 1.2 OPPORTUNITIES WITHIN THE RETAIL ESTABLISHMENT ................................................................................... 3 1.3 HOW THIS DOCUMENT CAN HELP.................................................................................................................... 3

2. INTRODUCTION .............................................................................................................................................. 5

2.1 WHAT IS MOBILE RETAILING? ......................................................................................................................... 5 2.2 MOBILE DEVICES DEFINED .............................................................................................................................. 6 2.3 MOBILE APPLICATION TECHNOLOGY ............................................................................................................... 8

2.3.1 Browser-Based Applications .................................................................................................................. 8 2.3.2 Message-Based Applications ................................................................................................................. 9 2.3.3 Downloaded and Native Applications ................................................................................................. 10 2.3.4 Thin-Client Architecture ...................................................................................................................... 10

2.4 MOBILE RETAIL AND SOCIAL MEDIA ............................................................................................................. 11 2.5 MOBILE RETAIL APPLICATION CATEGORIES .................................................................................................. 12

2.5.1 Mobile Marketing Applications ........................................................................................................... 13 2.5.2 Mobile Commerce Applications ........................................................................................................... 13 2.5.3 Mobile Operations Applications .......................................................................................................... 13 2.5.4 Mobile Application Providers .............................................................................................................. 13 2.5.5 Day-in-the-Life Examples .................................................................................................................... 14 2.5.6 Mobile Market Statistics ...................................................................................................................... 15 2.5.7 Mobile Retailing Ecosystem ................................................................................................................. 20

3. MOBILE MARKETING ................................................................................................................................. 22

3.1 ADVERTISING AND MARKETING..................................................................................................................... 22 3.1.1 Brand Marketing .................................................................................................................................. 22 3.1.2 Digital Signage .................................................................................................................................... 22 3.1.3 Augmented Reality ............................................................................................................................... 23 3.1.4 Example Applications .......................................................................................................................... 23 3.1.5 Technology and Standards Employed .................................................................................................. 24 3.1.6 Benefits and ROI .................................................................................................................................. 25 3.1.7 Implementation Considerations ........................................................................................................... 25

3.2 CUSTOMER SERVICE ...................................................................................................................................... 26 3.2.1 Store Locations/Hours ......................................................................................................................... 27 3.2.2 Example Applications .......................................................................................................................... 28 3.2.3 Wish Lists, Shopping Lists, Gift Registries .......................................................................................... 30

3.3 SHOPPING TOOLS ........................................................................................................................................... 35 3.3.1 Case Studies ......................................................................................................................................... 36 3.3.2 Technology and Standards Employed .................................................................................................. 36 3.3.3 Benefits and ROI .................................................................................................................................. 37 3.3.4 Implementation Considerations ........................................................................................................... 37

3.4 PRODUCT INFORMATION ................................................................................................................................ 38 3.4.1 Transaction Process ............................................................................................................................ 39 3.4.2 Product Information from Friends ....................................................................................................... 41 3.4.3 Transaction Process ............................................................................................................................ 41 3.4.4 Product Comparisons .......................................................................................................................... 42 3.4.5 Transaction Process ............................................................................................................................ 42 3.4.6 Case Studies ......................................................................................................................................... 43 3.4.7 Technology and Standards Employed .................................................................................................. 44 3.4.8 Benefits and ROI .................................................................................................................................. 44 3.4.9 Implementation Considerations ........................................................................................................... 44

3.5 LOYALTY PROGRAMS .................................................................................................................................... 45

vi3.5.1 Transaction Process ............................................................................................................................ 46



3.5.2 Case Studies ......................................................................................................................................... 49 3.5.3 Technology and Standards Employed .................................................................................................. 50 3.5.4 Benefits and ROI .................................................................................................................................. 51 3.5.5 Implementation Considerations ........................................................................................................... 52

3.6 PROMOTIONS AND COUPONS .......................................................................................................................... 53 3.6.1 Approaches to Mobile Offers ............................................................................................................... 54 3.6.2 Case Studies ......................................................................................................................................... 55 3.6.3 Technology and Standards Employed .................................................................................................. 56 3.6.4 Benefits and ROI .................................................................................................................................. 56 3.6.5 Implementation Considerations ........................................................................................................... 57

4. MOBILE COMMERCE .................................................................................................................................. 59

4.1 MOBILE BROWSER-BASED M-COMMERCE ...................................................................................................... 59 4.2 M-COMMERCE APPLICATIONS ........................................................................................................................ 61

4.2.1 Advantages ........................................................................................................................................... 61 4.2.2 Disadvantages ...................................................................................................................................... 62 4.2.3 Future Considerations ......................................................................................................................... 64

4.3 CASE STUDIES ................................................................................................................................................ 64 4.3.1 Mobile Ticketing .................................................................................................................................. 64 4.3.2 Other m-commerce Applications ......................................................................................................... 66 4.3.3 Technology and Standards Employed .................................................................................................. 72 4.3.4 Benefits and ROI .................................................................................................................................. 72

4.4 IMPLEMENTATION CONSIDERATIONS ............................................................................................................. 72 4.5 OTHER KEY CONSIDERATIONS ....................................................................................................................... 74

4.5.1 Easy Payment Solutions ....................................................................................................................... 74 4.5.2 Integrated Order Management and Customer Care ............................................................................ 75

4.6 THE VIRTUAL STORE ..................................................................................................................................... 75 4.7 PARENTAL APPROVAL.................................................................................................................................... 76

5. MOBILE PAYMENT ...................................................................................................................................... 77

5.1 MOBILE REMOTE PAYMENT ........................................................................................................................... 79 5.1.1 How Mobile Remote Payment Works .................................................................................................. 80 5.1.2 Use Case .............................................................................................................................................. 83 5.1.3 Mobile Remote Payment Pilots and Commercial Initiatives ............................................................... 85 5.1.4 Implementation Strategies ................................................................................................................... 87

5.2 MOBILE CONTACTLESS PAYMENT ................................................................................................................. 91 5.2.1 Payment Options and Enhancements ................................................................................................... 92 5.2.2 Retailer Advantages ............................................................................................................................. 95 5.2.3 Mobile Payments Ecosystem ................................................................................................................ 95 5.2.4 Use Cases for Mobile Contactless Payment ........................................................................................ 97 5.2.5 Mobile Contactless Payments Pilots and Commercial Initiatives ....................................................... 98 5.2.6 Implementation Strategies ................................................................................................................. 102 5.2.7 Phased Approach for Implementing Mobile Contactless Payments .................................................. 105 5.2.8 Roadblocks to Mobile Contactless Payment ...................................................................................... 105

5.3 ACH PAYMENT ENABLED BY MOBILE DEVICES .......................................................................................... 108 5.3.1 Use Case for ACH Mobile Payment Enrollment—POS ..................................................................... 108

5.4 OTHER MOBILE PAYMENT PILOTS AND COMMERCIAL INITIATIVES ............................................................. 109 5.5 MOBILE PAYMENTS ROI .............................................................................................................................. 110

5.5.1 ROI Considerations ........................................................................................................................... 111 5.5.2 Benefits of Mobile Payment ............................................................................................................... 111 5.5.3 ROI Model ......................................................................................................................................... 113

6. MOBILE OPERATIONS .............................................................................................................................. 126

6.1 MOBILE POINT OF SALE ............................................................................................................................... 126 6.1.1 Mobile POS Examples ....................................................................................................................... 128

vii6.1.2 Technology and Standards Employed ................................................................................................ 130



6.1.3 Benefits and ROI ................................................................................................................................ 130 6.1.4 Implementation Considerations ......................................................................................................... 131

6.2 WORKFORCE MANAGEMENT ........................................................................................................................ 131 6.2.1 Workforce Management Examples .................................................................................................... 132 6.2.2 Technology and Standards Employed ................................................................................................ 133 6.2.3 Benefits and ROI ................................................................................................................................ 134 6.2.4 Implementation Considerations ......................................................................................................... 135

6.3 INTERNAL COMMUNICATION........................................................................................................................ 135 6.3.1 Internal Communication Examples .................................................................................................... 135 6.3.2 Technology and Standards Employed ................................................................................................ 136 6.3.3 Benefits and ROI ................................................................................................................................ 136 6.3.4 Implementation Considerations ......................................................................................................... 137

6.4 MOBILE APPROVALS .................................................................................................................................... 137 6.4.1 Technology and Standards Employed ................................................................................................ 138 6.4.2 Benefits and ROI ................................................................................................................................ 138 6.4.3 Implementation Considerations ......................................................................................................... 139

7. INTEGRATED IMPLEMENTATION STRATEGY ................................................................................. 141

7.1 DEVELOPMENT CONSIDERATIONS ................................................................................................................ 142 7.1.1 Browser-Based Applications .............................................................................................................. 142 7.1.2 Downloaded Applications .................................................................................................................. 144 7.1.3 Mobile Payment ................................................................................................................................. 146 7.1.4 Other Application Types .................................................................................................................... 147

7.2 APPROACH TO MOBILIZATION/PATH TO MOBILE ......................................................................................... 147 7.2.1 Mobile Governance ........................................................................................................................... 148 7.2.2 Achieving Control of the Mobile Channel ......................................................................................... 149 7.2.3 Privacy, Authentication, and Security ................................................................................................ 150

8. MOBILE STANDARDS ................................................................................................................................ 153

8.1 TECHNOLOGY DETAILS ................................................................................................................................ 155 8.1.1 Wi-Fi and ZigBee ............................................................................................................................... 156 8.1.2 Near Field Communication ............................................................................................................... 157

8.2 CONTACTLESS SMART CARD STANDARDS ................................................................................................... 157 8.3 ASSOCIATION OF RETAIL TECHNOLOGY STANDARDS .................................................................................. 158

8.3.1 Service Oriented Architecture (SOA) Blueprint ................................................................................. 158 8.3.2 Cloud Computing Blueprint ............................................................................................................... 159 8.3.3 ARTS Data Model .............................................................................................................................. 159 8.3.4 ARTS UnifiedPOS .............................................................................................................................. 160 8.3.5 ARTS XML ......................................................................................................................................... 160

8.4 GS1 .............................................................................................................................................................. 161

9. TERMS AND ACRONYMS ......................................................................................................................... 162


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Figures

FIGURE 1: AVAILABLE RETAIL CHANNELS ..................................................................................................................... 2 FIGURE 2: MOBILE RETAILING CLASSIFICATIONS .......................................................................................................... 3 FIGURE 3: THE RETAIL STORE OF THE FUTURE .............................................................................................................. 6 FIGURE 4: U.S. DEVICE TYPE AND OPERATING SYSTEM MIXES ..................................................................................... 7 FIGURE 5: TWO AMERICAN AIRLINES WEB SITES: NON-MOBILE (LEFT) AND OPTIMIZED FOR MOBILE (RIGHT) ........... 9 FIGURE 6: THIN CLIENT ARCHITECTURE ...................................................................................................................... 11 FIGURE 7: WORLDWIDE SMARTPHONE MARKET SHARE .............................................................................................. 16 FIGURE 8: MARKET SHARES OF SMARTPHONE OPERATING SYSTEMS WORLDWIDE AND IN NORTH AMERICA ............. 17 FIGURE 9: RETAILER INTEREST IN DIFFERENT M-COMMERCE CAPABILITIES ................................................................ 18 FIGURE 10: GARTNER APRIL 2009 PROJECTIONS OF MOBILE PAYMENT TECHNOLOGIES ............................................. 20 FIGURE 11: MOBILE RETAILING ECOSYSTEM ............................................................................................................... 21 FIGURE 12: 2-D BAR CODE ON A BILLBOARD .............................................................................................................. 23 FIGURE 14: PROCESS FLOW FOR A DEVICE WITH GEOLOCATION OR GPS CAPABILITIES .............................................. 28 FIGURE 15: WISH LISTS, SHOPPING LISTS, GIFT REGISTRIES ....................................................................................... 31 FIGURE 16: LIST CREATION TRANSACTION PROCESS ................................................................................................... 31 FIGURE 17: LIST CONSUMPTION TRANSACTION PROCESS ............................................................................................ 32 FIGURE 19: REVIEW PRODUCT INFORMATION AT E-COMMERCE SITE TRANSACTION PROCESS .................................... 39 FIGURE 20: REVIEW PRODUCT INFORMATION WITH RETAILER’S APPLICATION TRANSACTION PROCESS ..................... 40 FIGURE 21: RETRIEVE ITEM INFORMATION FROM A PICTURE TRANSACTION PROCESS ................................................ 40 FIGURE 22: READ FRIEND'S RATINGS TRANSACTION PROCESS .................................................................................... 41 FIGURE 23: POST TO MY FRIEND'S SITE TRANSACTION PROCESS ................................................................................. 42 FIGURE 24: PRODUCT COMPARISON TRANSACTION PROCESS ...................................................................................... 42 FIGURE 25: EXAMPLE LOYALTY PROGRAM PROCESS FLOW ........................................................................................ 47 FIGURE 26: MOTOROLA MOBILE LOYALTY SYSTEM ................................................................................................... 48 FIGURE 27: NFC CHIP OPTIONS ................................................................................................................................... 54 FIGURE 28: BEST-PRACTICE MOBILE WEB HIGH-LEVEL ARCHITECTURE .................................................................... 60 FIGURE 29: TYPICAL MOBILE WEB HIGH-LEVEL ARCHITECTURE ................................................................................ 61 FIGURE 30: MOBILE APPLICATIONS HIGH-LEVEL ARCHITECTURE ............................................................................... 64 FIGURE 31: PURCHASING A DSB TICKET BY USING AN IPHONE APPLICATION ............................................................ 65 FIGURE 32: SIMPLIFIED ARCHITECTURE FOR DSB TICKETING APPLICATION ............................................................... 66 FIGURE 33: MOBILE REMOTE AND MOBILE CONTACTLESS PAYMENTS ........................................................................ 77 FIGURE 34: CURRENT MOBILE PAYMENT OPPORTUNITIES ........................................................................................... 78 FIGURE 35: MOBILE REMOTE PAYMENT STORED VALUE PAYMENT FLOW .................................................................. 80 FIGURE 36: SMS TRANSACTION PROCESS .................................................................................................................... 84 FIGURE 37: INTEGRATION OF MOBILE APPLICATIONS USING DIFFERENT SUBCHANNELS WITH THE RETAILER'S BACK

OFFICE ..................................................................................................................................................... 88 FIGURE 38: MOBILE INFRASTRUCTURE THAT HANDLES ESB OPERATIONS .................................................................. 89 FIGURE 39: MOBILE INFRASTRUCTURE MANAGING MNO CONNECTIVITY .................................................................. 90 FIGURE 40: MOBILE PHONE WITH WALLET SOFTWARE ............................................................................................... 92 FIGURE 41: EXAMPLE OF NFC-ENABLED MOBILE PHONE PROVISIONED WITH WALLET AND SECURE ELEMENT ........ 94 FIGURE 42: NFC PHONE WALLET USED IN BART/JACK IN THE BOX PILOT PROGRAM ............................................... 95 FIGURE 43: MOBILE CONTACTLESS TRANSACTIONS: PROVISIONING AND PURCHASE .................................................. 96


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Copyright © 2010 National Retail Federation. Page x All rights reserved. Verbatim reproduction and distribution of this document is permitted in any medium, provided this notice is preserved.

FIGURE 44: NFC COMPATIBLE CONTACTLESS STICKER ............................................................................................. 106 FIGURE 45: USING AN NFC MICROSD CARD ............................................................................................................. 107 FIGURE 46: ACH MOBILE PAYMENT ENROLLMENT PROCESS .................................................................................... 109 FIGURE 47: ROI MODEL SECTIONS ............................................................................................................................ 113 FIGURE 48: BENEFIT FACTORS ................................................................................................................................... 114 FIGURE 49: RETAILER’S ANNUAL POS REVENUE ...................................................................................................... 116 FIGURE 50: RETAILER’S PAYMENT PROCESSING COSTS ............................................................................................ 118 FIGURE 51: RETAILER’S ANNUAL TRANSACTION PROCESSING COSTS ...................................................................... 119 FIGURE 52: RETAILER’S TOTAL BENEFITS ................................................................................................................. 120 FIGURE 53: FIVE BENEFIT FACTORS SECTIONS IN THE ROI MODEL .......................................................................... 122 FIGURE 54: COST FACTORS SECTION OF THE ROI MODEL ......................................................................................... 125 FIGURE 58: WORKFORCE MANAGEMENT MODEL ...................................................................................................... 132 FIGURE 60: SIMPLIFIED MOBILE APPROVAL FLOW .................................................................................................... 139 FIGURE 61: IPHONE AND SONY ERICSSON K790I DISPLAY AREAS ............................................................................ 144 FIGURE 62. OVERVIEW OF MOBILE APPLICATIONS BUILT ON A CENTRALIZED MOBILE PLATFORM .......................... 150 FIGURE 63: CONTACTLESS PAYMENTS HARDWARE AND SOFTWARE WITH ASSOCIATED STANDARDS ....................... 153 FIGURE 66: WI-FI AND ZIGBEE ACCESS POINTS......................................................................................................... 156 FIGURE 68: ARTS STANDARDS .................................................................................................................................. 158 FIGURE 69: SOA PLATFORM AND SERVICES ON A CLOUD INFRASTRUCTURE ............................................................. 159


1. EXECUTIVE SUMMARY

Mobile phones have come a long way since their introduction over 30 years ago. Phones are smaller, weigh less, and do more, carrying data as well as voice. Phones not only make telephone calls, they send e-mail and text messages, take and send photographs, play games, and access and browse the Internet. And mobile phones are everywhere. By the end of 2009, mobile cellular subscriptions worldwide numbered approximately 4.6 billion.1 Neither age, nationality, nor economic status represents a barrier to owning and using a mobile phone. The first phones may have been novelties, but mobile phones now are a necessity, especially for the under-35 demographic.

Mobile phones are changing the way retailers conduct business. Because they are always with us—and always on—they connect retailers to current and potential customers regardless of location or time of day. In 2015, shoppers around the world are expected to use their mobile phones to purchase goods and services worth close to $120 billion. That amount represents about 8 percent of the total e-commerce market.2 In addition, payment for goods or services and money transfers initiated from a mobile phone will reach almost $630 billion by 2014, up from $170 billion this year.3 There is no doubt that mobile technology for retail is a hot topic worldwide.

1.1 Consumer Opportunities Retailers have a unique opportunity right now to define how they want to interact with the mobile consumer. Mobile is not only considered the fourth retail channel (Figure 1), it tends to be an enabler for the other three channels as well. Consumers are already using phones and other mobile devices to not only pay for purchases, but also to interact with retailers in a variety of other ways. Mobile retail represents both a new way to shop and a new payment paradigm.

Consumers with a mobile phone can locate the nearest Starbuck’s, browse the available coffees, build a drink to be picked up on arrival, and pay using a Starbuck’s card on the phone. Whole Foods Markets customers puzzled by the use of an ingredient can use their phones to find and display recipes using that ingredient and even restrict their choices to cater to special food allergies or requirements, such as gluten or lactose intolerance. Shoppers headed for Target can search a friend’s gift registry for the perfect gift, locate the nearest store that has that specific item in stock (right down to the department and aisle location of the item within that store), and check the gift off the registry list—all on a mobile phone. Phones can store and display loyalty, reward, and club membership cards (which most retailers scan directly from the screen) and match a health condition with the correct over-the-counter medication.

1 Richard Heeks, "ICT4D 2.0: The Next Phase of Applying ICT for International Development," IEEE

Computer 41 (6): 26–33. doi:10.1109/MC.2008.192 2http://www.abiresearch.com/press/1605-Shopping+by+Mobile+Will+Grow+to+%24119+Billion+in+2015

Copyright © 2010 National Retail Federation. Page 1

3 Juniper Research, "Mobile Payments Markets: Strategies & Forecasts 2010-2014.”

All rights reserved. Verbatim reproduction and distribution of this document is permitted in any medium, provided this notice is preserved.


Copyright © 2010 National Retail Federation. Page 2 All rights reserved. Verbatim reproduction and distribution of this document is permitted in any medium, provided this notice is preserved.

Figure 1: Available Retail Channels Using phones or other mobile devices for payment is advantageous for both consumers and retailers. Payment by phone can be combined with additional services to increase sales, speed up transaction times, and strengthen customer loyalties. Sales can close more quickly when shoppers looking at a product can access product information and reviews (for example, using their phones to read a bar code) and then pay for the product on the spot. Consumers using mobile phones as a payment method enjoy the convenience and security of not having to carry cash or a card. In Denmark, consumers can reserve seats on a train, purchase their tickets, and use those tickets to board the train while carrying nothing but their phones. When consumers pay by phone, payment information that adheres to ARTS standards can be integrated into the retailer’s back-office systems, coordinating all-important inventory, customer relationship, enterprise resource planning, and financial data.

The mobile phone market has moved from pure calling devices to so-called smartphones (capable of processing data as well as voice), providing consumers with more computing power in their purses and pockets than ever before. And just on the horizon are devices enabled for Near Field Communication (NFC), which are capable of short-range wireless interaction. Such phones allow retailers to implement mobile contactless payment and take advantage of attendant opportunities for new payment options. In the Asia Pacific/Japan region, mobile contactless payments are accepted in most taxis and trains and some stores. San Francisco Bay Area residents with NFC-enabled phones participating in a recent pilot program paid for a ride on the rapid transit system or a meal at Jack in the Box® using their phones—no purse or wallet required. Phones can be equipped with a mobile wallet, allowing consumers to carry payment and loyalty cards electronically. Consumers benefit—their cards are not only secure, they are easily cancelled and replaced if lost: one call does it all. Retailers benefit—mobile wallets can help solve the critical problem of wallet share and represent opportunities for new incentives for customers to purchase, new ways for customers to purchase, and new ways for customers to pay.

Cro

ss C

hann

el Brick and mortar

Store within a store Franchise

Store

Catalog Mail order Call center

e-commerce Affiliates Social commerce

Web

Native applications Mobile Web sites NFC hardware

Mobile


To achieve universal consumer acceptance, mobile processing must be standardized around the world. What works in the United States must also work in Asia, the Pacific Rim, Europe, the Middle East, and Africa. There is only one way to ensure that processing is the same everywhere, and that is by creating and adopting global standards. Fortunately, numerous organizations are already working to develop and promote these necessary standards. One product of this effort is this document.

1.2 Opportunities Within the Retail Establishment The emergence of the mobile channel will affect the entire retail organization—distribution, operations, merchandising, marketing, human resources, and customer service. The mobile retailing landscape includes opportunities for associates as well as consumers (Figure 2).

Mobile Retailing


Consumer Employee

Mobile Marketing

Mobile Commerce

Mobile Operations

Figure 2: Mobile Retailing Classifications For example, making the point-of-sale mobile allows customers to avoid lines and retain receipts electronically, while retailers save on labor and materials costs, and sales associates can locate and assist customers anywhere in the store. Sales associates can also use mobile devices to clock in and out and request time away from the floor. Integration with workforce management capabilities, including appropriate labor forecasting, labor scheduling, and labor management and budgeting systems can optimize both daily internal operations and corporate-driven tasks at a store.

The retail supply chain will also benefit from the use of mobile technology, particularly when the manufacturers of specialized mobile devices incorporate new features into mobile phones such as better bar codes and RFID readers. Both data and voice can then be transmitted effectively to receive and pick merchandise and track merchandise movement from warehouses to stores and within stores.

1.3 How This Document Can Help The Mobile Retailing Blueprint is the first phase of the NRF Mobile Retail Initiative. The mission of the Mobile Retail Initiative is to be a catalyst for mobile-inspired innovation that enhances the retail shopping experience and improves internal business processes. This retailer-led initiative will guide and direct the industry in the



maximizing benefits and minimizing implementation

types of

ble using e following questions:

sumers shop?

fficient? field?

tailing and more ideas about how this trend can help the reader’s

s and acronyms used both in this blueprint and in discussions of mobile retail in general.

dissemination of mobile-related best practices and the development of standards and documentation for the purpose ofexpense, ongoing costs, and fees.

The first phase of this effort involves retailers, vendors, analysts, and standards organizations. This blueprint captures the experience of retailers and vendors who have experimented with mobile applications, leverages their experience, and tailors it to retail. The blueprint was created by members of GS1, NACHA, the NFC Forum, the NRF and its ARTS, Shop.org, and RAMA divisions; RSPA, and the Smart Card Alliance to help retailers understand the current mobile retailing landscape, recognize whatapplications are on the horizon, and determine how best to embrace this trend.

Retailers should use this blueprint as a reference to understand what is possimobile phones. The blueprint can help readers answer th

• How can mobile retailing improve my business? • What capabilities do mobile phones currently offer? • What types of mobile applications help con• What are the choices for mobile payment? • What types of mobile applications help associates be more e• What technologies and standards apply in the mobile • What implementation options should be considered?

The reader will hopefully walk away with a better understanding of how mobile phones can and do affect reparticular business.

Section 2, “Introduction,” introduces the topic of mobile retailing in more depth. Section 3, “Mobile Marketing,” and Section 4, “Mobile Commerce,” describe some of the customer-oriented applications to which mobile retailing lends itself and explore options for implementing different applications. Section 5, “Mobile Payment,” explains the different mobile payment methods, their advantages and disadvantages, and the implications of adopting one method rather than another. Section 6, “Mobile Operations,” applies the concepts of mobile retailing to internal retail operations and illustrates how adopting a mobile approach can improve efficiency and reduce costs. Section 7, “Integrated Implementation Strategy,” focuses on implementation, detailing some of the challenges that implementation can entail. Section 8, “Mobile Standards,” describes the technology standards that underlie a successful implementation effort. Section 9 defines the term



2. INTRODUCTION

2.1 What is Mobile Retailing? Mobile phones are ubiquitous, outnumbering credit cards and bank accounts around the world. People depend on their mobile phones, and they carry them everywhere, including into stores. The capabilities of smartphones (phones that handle data as well as voice signals) combined with the ease with which applications (special-purpose computer software) that support retail functions can be downloaded to these phones creates an opportunity to leverage mobile phones for shopping.

The e-commerce revolution did more than just open up an additional channel through which retailers can sell products. It created new capabilities for analyzing shoppers’ behavior. It facilitated new ways to share product information and help customers make purchase decisions, taking advantage of the on-line Internet connection to communicate with the customer by name.

But as mobile phones became more sophisticated, they became capable not only of e-commerce functionality but also of being able to identify customers automatically through proper integration with mobile network operators (MNOs) such as Verizon, AT&T, or Vodaphone. Many e-commerce features, such as detailed product information, product comparisons, and customer reviews, can now be available in stores on a mobile phone, with an additional benefit: immediate customer gratification. Customers take the merchandise home with no shipping or handling costs. Furthermore, the e-commerce features can be augmented with applications that enable mobile payments, targeted promotions, interactive displays, and digital receipts.

Mobile retailing has thus become an important and valuable channel through which retailers can reach consumers. Retailers who ignore mobile retailing risk being ignored in return by current and future generations of shoppers.

Figure 3 illustrates what the retail store of the future could look like: mobile devices such as media shopping cards, consumer phones, associate dashboards, and scales. Mobile devices will play a large part in future commerce.


Bluetooth Wireless POS

Peripheral Scales

Self Serve Cashless Payments

Bottom of Basket Detection

Interactive CustomerDisplays

Biometric Contactless Readers

Employee/MgrDashboards

Access Points Streaming Video

Consumer Phones

RFID ShelfLabels

Media Shopping Carts

Shelf Edge Displays XBOX 360

$399

Self assisted ordering

In-storeback office

RFID

HolographicsIn-store kiosks

Electronic Menu Boards

Location Based Services

RFID GondolaLabels

Figure 3: The Retail Store of the Future

2.2 Mobile Devices Defined While this blueprint focuses on mobile phones, the concepts are applicable to any mobile device connected to the Internet, including, for example, portable music and video players, handheld gaming devices, laptop and ultra-mobile personal computers, e-book readers, and tablets. Consumers are more readily upgrading their smartphones, which have advanced to the point of being handheld computers whose capabilities exceed those of the computers carried on board the first space missions. Figure 4 shows the breakdown between smartphones, feature phones (less flexible smartphones), and other connected devices. It further distinguishes smartphones by their different operating systems (software management systems), or OSs.



Figure 4: U.S. Device Type and Operating System Mixes The typical smartphone includes most of the features described Table 1. Various combinations of these features can be leveraged to provide a richer experience for shoppers.

Table 1: Smartphone Features

Feature Significance

Bluetooth wireless connectivity

Used to connect mobile phones to other devices (such as a headset) without a cable. Bluetooth allows shoppers to be “hands-free.”

Still or video camera Useful for taking pictures of products, receipts, and bar codes.

Compass Useful for directing a person to a store, or for recognizing in which direction a person is facing. This feature is currently available only on the newest mobile devices.

Two-way e-mail messaging

Useful for delivering receipts and coupons.

Interactive display A larger display than that available on a traditional mobile phone that includes the ability to run a browser. Some phones include touch screens or screen-addressable keys.

Internet access To be useful, a mobile device must be connected to the Internet either though the cellular network or Wi-Fi.

Location recognition The ability to determine location using GPS satellites, cell tower triangulation, or Wi-Fi reference.




Feature Significance

Multimedia Messaging Service (MMS)

A message service, useful for sending and receiving rich content, such as pictures or audio.

Near Field Communication (NFC)

A wireless peer-to-peer and reader/writer feature available in selected countries. As a limited number of mobile phones in use have embedded NFC chips, interim solutions that add NFC “stickers” to mobile devices are possible. Nokia has recently announced that they will place NFC chips in all phones manufacture in 2001. Useful for contactless payment and other contactless communication.

Short Message Service (SMS)

A message service, useful for sending text. Most mobile phones can use SMS to send and receive short text messages. Certain mobile devices, however, such as the iPod Touch or iPad, cannot communicate using SMS.

2.3 Mobile Application Technology Mobile applications can be implemented using four methods:

• Browser-based • Message-based • Downloaded to a device • Preinstalled on the device (referred to as native applications)

2.3.1 Browser-Based Applications A retailer often wants to provide information that is available on the retailer’s Web site to mobile consumers or associates. Smartphones equipped with a browser can access these applications; however, their small screen sizes and keyboards provide a less satisfactory experience than when the application is accessed on a computer. In this case, people are better served with a mobile-specific user interface that is optimized for the capabilities of the typical smartphone.

For example, compare the American Airlines Web site that is displayed on a computer (found at www.aa.com), shown on the left in Figure 5, with the mobile version, shown on the right (found at www.aa.com/mobile).

http://www.aa.com/

http://www.aa.com/mobile


Figure 5: Two American Airlines Web Sites: Non-Mobile (left) and Optimized for Mobile (right)

Support for two important technologies, HTML5 and WebKit, is currently emerging in mobile browsers. These technologies allow retailers to create mobile shopping sites that take full advantage of smartphone capabilities without being tied to a specific mobile OS. Mobile Web site developers will be able to provide a rich, “application-like” user experience on mobile Web sites. The technology is currently available in the Apple iPhone OS, Google Android OS, and Palm WebOS devices, as well as in new RIM BlackBerry devices and other smartphones.

2.3.2 Message-Based Applications The second type of application, the message-based application, uses Short Message Service (SMS) or Multimedia Messaging Service (MMS) to exchange messages with the user. While not nearly as easy to use as the other types of applications, message-based applications work on the largest number of mobile phones. It is often more cumbersome to have to start the browser on the phone and then access a URL than to send a simple text message. Almost all mobile phones throughout the world support SMS for short messages. Services like TextBuyIt, used by Amazon, can interact with consumers, who can find and order products over the mobile phone.




2.3.3 Downloaded and Native Applications Mobile applications, typically referred to as apps, can also be either downloaded applications or native applications. That is, a ready-to-run (compiled) application built for a specific mobile device is either downloaded to the device or preloaded and present when the device is purchased. These applications generally afford the user a better experience, because they can take full advantage of the particular mobile device’s unique capabilities. But since these applications are device-specific, a separate application is required for every different type of device, thus increasing development costs exponentially. In addition, a mechanism is required that can deliver new or upgraded applications to devices.

Several vendors, such as Apple, RIM/Blackberry, and Google/Android have created application stores, where users can find and download applications targeted specifically to their phones. New companies are emerging that claim to provide “write once, run anywhere” functionality for mobile phones. These companies allow the developer to create an application once and then deploy it on mobile phones from different vendors.

Handsets with NFC chips also provide a secure and simple application solution. A variety of applications can be downloaded to a secure element in the phone and accessed easily. These phones interact with contactless terminals, other NFC devices, or RF tags, sending and receiving data by tapping. NFC phones are currently available in Europe through various vendors and are being used in pilot projects in the U.S. and Asia.

2.3.4 Thin-Client Architecture One major challenge of mobile retail is how to support a multitude of mobile platforms, screen sizes, input capabilities, and customers who do not have a data plan. One implementation option that can address these issues is a client-server architecture that relies on the phone as the client. In this so-called thin client architecture, a server has the intelligence about the workflow required for the particular service (e.g., the first screen shows a catalog, the second screen product detail, the third screen payment options), and the client (the phone) needs only display-related capabilities and input handlers (Figure 6).


Figure 6: Thin Client Architecture

2.4 Mobile Retail and Social Media Social media marketing is becoming a standard in today’s cross-channel marketing mix, providing retailers with a broad range of offerings that can be used to connect to and interact with customers. Social media tools such as Facebook enable retailers to engage customers and build communities of interest around their brands while delivering targeted and personalized offers.

Retailers understand that customers need a reason to interact with their products and brands. Social networks are the fastest growing engagement point between brands and customers and will grow more quickly than any other form of interactive marketing. Retailers are starting to see the benefits of building up groups of like demographics on social networking sites, such as Facebook, and on mobile social networks, such as Twitter, so that they can communicate more cost effectively with customers, as opposed to using mass media to transport key messages and new promotions out to the market.

A social media strategy and a mobile strategy will be at the forefront of a successful retail market strategy in the coming years. Successful retailers will learn how to adopt both social media and mobile strategies to compete. A collection of social media, such as Facebook, Twitter, and blogs, will be key to customer and prospect interaction.

In addition, social media are a natural fit for mobile, since mobile devices are at the center of how people communicate. The number of active users of mobile social networking sites is expected to rise, from 55 million in 2010 to nearly 730 million in 2013, so retailers must immediately begin to understand how mobile will fit into their social media marketing strategy. More than 56 percent of customers follow a retailer’s




online social media imprint, providing many retailers with a customer following that they can begin to engage with mobile promotions and incentives.

Customers can opt into a retailer’s social media mobile rewards program directly, through the on-line social media environment, through their mobile phones in a retailer’s mobile Web environment, or by texting a unique keyword to a particular short code. The objective is to present relevant messages that encourage customers to sign up for a retailer’s mobile rewards club or program. For example, a prominently placed window (mobile prompt) embedded on a retailer’s Facebook fan page could include a request to join the retailer’s Mobile Rewards Club. Customers would not have to move to a new mobile page but could enter core information, along with their mobile number, directly into the window. Customers would then send the information and potentially receive in return an immediate incentive, such as a mobile coupon or a link to multiple offers on the retailer’s mobile Web page. A similar approach could use a retailer’s Twitter feed; however, because not all customers have unlimited data plans, retailers might instead embed a static link or banner prompting customers to opt into the program by sending a unique alias to a dedicated short code. Both approaches should reward the customer with an immediate incentive.

Retailers should integrate their social media mobile strategy with their customer relationship management (CRM) database, to profile customers more accurately based on interests and behaviors, and to help manage future two-way communication. Customers are interacting in a number of socially focused channels. Retailers will be able to understand better which on-line communities and social networks customers are frequenting and through which they are choosing to engage with the mobile offering.

This approach to a social media mobile strategy will enable retailers to extend their current CRM efforts, adding the ability to leverage their community building activities using the social web and automate the conversation process. A retailer can then craft appropriate messages through the different communication channels.

Both social media and mobile have unique communications attributes. Retailers must be aware of these attributes to give customers consistent and coordinated information. Retailers need a single view of each customer to maximize the results of a campaign. Retailers who treat social media and mobile as separate and independent channels, as opposed to coordinated channels, will fail to achieve respectable response rates and weaken their customer relationships rather than building customer communities.

By recognizing these best practices, retailers will be better positioned to improve the customer experience, providing a new touch point for customer acquisition and strengthening loyalty building programs through mobile devices.

2.5 Mobile Retail Application Categories Mobile retail applications can be grouped into three categories:

• Mobile marketing (described in Section 3) • Mobile commerce (described in Section 4), which includes mobile payment

(described in Section 5)



• Mobile operations (described in Section 6)

2.5.1 Mobile Marketing Applications Mobile marketing applications (Section 3) focus on advertising, marketing, and increasing brand awareness and loyalty. They also provide product information and shopping tools that can be used to enhance the retail experience. Mobile retail marketing applications can support the following areas:

• Brand marketing • Customer service information • Shopping tools • Product information • Loyalty programs • Promotions and coupons

2.5.2 Mobile Commerce Applications Mobile commerce applications (Section 4) include mobile payment applications (Section 5). Mobile commerce applications include traditional e-commerce applications accessed from a mobile device. Mobile payment applications encompass all payments made using the mobile device, including remote payments and contactless payments.

2.5.3 Mobile Operations Applications Mobile operations applications (Section 6) are tools used by retailers and associates that can lower costs and increase service for retailers. These applications focus on the following functions:

• Mobile POS • Workforce management • Communications • Approval workflow

Although retailers can choose to implement applications dedicated to implementing the functions in a particular category only, it is more common for applications to support functions in several categories. A low risk approach is to implement the easy functionality first, then add more over time.

Each of these categories is further described in the referenced sections, including detailed examples of real applications as well as future ones.

2.5.4 Mobile Application Providers Once a retailer has settled on the desired functionality and a basic technology, the next decision is whether to develop the mobile capabilities in house or outsource development. Many companies specialize in developing mobile applications. Outsourcing is often the most cost-effective solution, because it allows the retailer to avoid the costs of acquiring the right skill sets, tools, and test environments.



The more complex applications require integration to back-end systems (like e-commerce), so one should not underestimate these costs. If possible, retailers should design their systems using the principles of service-oriented architecture (SOA) so that common functionality can be shared across channels. (For more information, see the SOA Blueprint for Retail4). Additional benefits come from moving the applications/SOA services into the cloud, following the recommendations in Cloud Computing for Retail.5

2.5.5 Day-in-the-Life Examples To illustrate the potential for mobile technology in retailing, the following is a hypothetical example of the day in the life of a consumer, Eric, who uses his NFC-enabled mobile phone to pay at a restaurant and to redeem coupons at a shopping center. Unless otherwise noted, all of the capabilities described are currently possible.

2.5.5.1 Restaurant Transaction

Restaurants in Eric’s office building accept payments at contactless point-of-sale (POS) terminals, and contactless cards are widely used for payment. Eric has enabled several credit and debit card applications in his mobile phone.

In the elevator going up to the restaurant, Eric sees a restaurant poster advertising next week’s special event and “reads” it using his phone. A Web link on the poster gives him more information and a discount coupon to use if he attends. Eric pays for his lunch at the restaurant by touching his NFC-enabled phone to the POS terminal.

The phone provides Eric with additional financial services:

• He can choose the credit or debit card with which to pay, depending on whether his lunch is a business or personal expense.

• He can link to a mobile banking site, to check the balance on a card before making a payment or to view his use and purchase history.

• He can receive messages indicating that the balance on a card is low or indicating that a credit card payment is due.

• Depending on the transaction amount, he can be prompted by his NFC-enabled phone to authorize payment. Authorizations might range from no confirmation, in the case of smaller amounts, to special authentication mechanisms, such as biometrics, for large amounts. He may use a password to start the payment application.

• If the restaurant has chosen to add NFC to its contactless reader, Eric can also receive a receipt transmitted directly to his phone when he confirms the payment. The receipt can be stored in the phone and accessed for expense tracking. Loyalty points or a coupon for a future dinner discount can be added in the same way.

At some time in the future, it may also be possible for Eric, who sells cleaning products in his spare time, to use his NFC-enabled mobile phone as a POS terminal to accept

4Association for Retail Technology Standards, SOA Blueprint for Retail, version 1.2, http://www.nrf-arts.org 5 Association for Retail Technology Standards, Cloud Computing for Retail White Paper, http://www.nrf-

arts.org



contactless payments from his customers’ NFC-enabled mobile phones or contactless cards.

2.5.5.2 Retail Shopping Center Example6

Eric’s NFC-enabled phone provides Eric with additional services in the retail environment. Upon entering the shopping center, he touches his NFC-enabled phone to a conveniently located kiosk and receives the following:

• Shopping center loyalty points for returning to the center • Information linking the current coupons on his phone to stores within the center

offering those goods and possibly additional discounts • Special offers customized to his profile

While walking through the center, Eric notices a “smart poster” offering him a discount on a product that he has been considering. Eric touches his NFC-enabled phone to the poster to retrieve the coupon.

Eric then enters a store to shops for an item he wants to buy. He sees a number of competing products on the shelf but does not know which to choose. He uses his mobile phone to read the products’ contactless tags (barcodes, quick response codes). The phone reads the codes and links provided with the products and displays product information and customer reviews on the retailer’s Web site. Eric also checks an independent Web site that he regularly uses. Armed with this information, Eric selects a product. At check out, he accomplishes the following by simply touching his phone to the POS terminal:

• Automatically redeems coupons matched to the item he is purchasing • Makes the purchase • Receives more special offers for future purchases, customized to his profile

Eric can check the history of purchases and remaining loyalty points on his phone whenever he wants. He can share information and coupons with friends who have NFC-enabled phones, where permitted by the coupon issuer, by touching his phone to theirs.

2.5.6 Mobile Market Statistics In order to make the right decisions, it is helpful to understand the current mobile phone market as well as how a retailer’s own customers use mobile phones. Understanding long-term trends can help retailers avoid investing in technologies that will not survive and can also illuminate the technologies emerging on the horizon. The following sections provide statistics that are current as of this document’s publication date. These statistics include:

• Mobile smartphone market share • Current retail priorities

6 This example assumes that the growing popularity of NFC-enabled mobile phones provides an incentive

for retailers to enhance the functionality of their current contactless POS terminals with NFC, so that they can send coupons, loyalty updates, and receipts to NFC-enabled mobile phones. It is also assumed that retailers, advertisers, and consumer goods manufacturers offer a variety of mechanisms for consumers to obtain special offers, such as by using their NFC-enabled phones to read and store such offers from conveniently placed “smart posters.”


• Mobile payments statistics • Projected growth in mobile technologies

2.5.6.1 Mobile Smartphone Market Share

Figure 7 shows the smartphone market share for 2010. The most popular are those from Nokia, RIM, and Apple, representing 74 percent of the global market. HTC, Motorola, and all others account for the remaining 26 percent. The more impressive statistic is the 67 percent growth in smartphones over the past year.

Figure 7: Worldwide Smartphone Market Share All smartphones must run a mobile operating system. Figure 8 shows the market share occupied by the different operating systems available worldwide. On a global basis (the pie chart) Symbian, the operating system from Nokia, is the clear market leader. However, as the bar chart in Figure 8 shows, the penetration of Symbian in the North American market is much smaller (4 percent as opposed to 47 percent).



Figure 8: Market Shares of Smartphone Operating Systems Worldwide and in North America7

According to Canalys:

• The North American smartphone market will grow by 38 percent in 2010. • Android device shipments in North America will surpass 12.3 million units in

2010. • BlackBerry, iPhone, and Android devices will account for over 80 percent of the

smartphones shipped in North America this year. • The Latin American market will also experience solid growth this year, up 30

percent over 2009. Smartphone shipments in North America totaled 47.2 million units in 2009, an increase of 27 percent over the volume seen in 2008, helped by a strong fourth quarter. This healthy growth is forecast to accelerate to 38 percent in 2010, bringing total shipments in the region to 65.1 million units.

2.5.6.2 Retail Priorities

RISNews teamed with eTail to survey 75 retailers in January 2010. The survey found that different retailers focused on different aspects of mobile retailing, as represented in Figure 9. Retailers should prioritize these aspects based on their own customers.

7 Share of 2009 smartphone shipments by operating system, by Canalys; North American smartphone

market share (2009 shipments, 2010 forecast), Canalys (http://www.fiercewireless.com/press-releases/north-american-smart-phone-shipments-exceed-65-million-units-2010)



Figure 9: Retailer Interest in Different m-commerce Capabilities8

2.5.6.3 Mobile Payments Statistics

Mobile payments are defined as payments for goods or services that are initiated from a mobile phone or similar device (such as a personal digital assistant). Analysts predict significant growth in mobile transactions over the next 5 years:

• Insight Research Corporation estimates that 2.2 billion consumers will generate $124 billion in financial transactions by 2014.9

• A more conservative estimate still predicts huge growth: Mercator Advisory Group estimates that payments from remote devices will grow from an estimated $389 million in 2009 to $8.6 billion in 2014.10

• Frost & Sullivan estimates that the mobile transactions market (non-NFC-based mobile payments, mobile banking, remittance, and NFC-based mobile payments) in Europe will grow to €4 billion–€5 billion by 2013.11

• Arthur D. Little estimates that mobile payments could reach $250 billion in sales volume by 2012.12


8 Joe Skorupa, Shopping Mall in Hand, RIS News, March 2010. 9"Insight Research Says Financial Applications on Cell Phones to Attract 2.2 Billion Users," eNewsChannels,

April 22, 2009, http://enewschannels.com/2009/04/22/enc6821_192943.php 10 “Mobile ACH Payments: Request for Comment,” NACHA, September 9, 2009 11 Money in Mobile —European Transactions, Frost & Sullivan, October 14, 2009.



• Research and Markets (Dublin) predicts that "Global mobile payment transactions are expected to reach $110.1 billion in 2013, at a 105 percent compound annual growth rate."13

• Gartner reports that worldwide adoption of mobile payments in 2009 grew by 70 percent, to 73 million people. Gartner forecasts that 190 million people will adopt mobile payments worldwide by 2013 and estimates that 3 percent of the U.S. population will be using mobile payments by 2012.14

Analysts are also forecasting rapid adoption of NFC-based mobile contactless payments. While adoption of such payments has centered in Asia and Europe, analysts predict global growth as NFC-enabled phones are launched worldwide.

• According to Juniper Research,15 one in every six mobile subscribers globally will have an NFC-enabled device by 2014.

• Juniper Research is forecasting that the global gross value of NFC transactions will exceed $110 billion by 2014. Of this total, global NFC-based mobile payment transaction values are forecast to exceed $30 billion by 2012.16

• Juniper Research predicts that 123 million NFC-enabled handsets, equivalent to 46 percent of today’s U.S. wireless subscribers, will come on line in North America by 2013.17

Driving these forecasts for growth in mobile payments is strong consumer interest.

• Yankee Group (United States) states that "most consumers, 84 percent, are interested in mobile payments."18

• Wired reports that a majority of respondents to a recent survey said they were interested in using their phones to purchase items at a cash register just as they would use a credit or debit card.19

2.5.6.4 Mobile Payment Technology Projections

The mobile technologies most often used for payment include SMS, wireless application protocol (WAP), unstructured supplementary service data (USSD), and NFC. Figure 10 shows Gartner's estimates for the growth of each technology.20 Mobile payments as defined by Gartner include transactions that use banking instruments such as cash, bank

12 "Mobile Payments Surging Ahead with Opportunities in Emerging Markets,” Arthur D. Little, April 2009,

http://www.cellular-news.com/story/37169.php 13 “What paying by cellphone will mean for the marketing world," Advertising Age, October 5, 2009,

http://www.allbusiness.com/marketing-advertising/marketing-techniques/13170333-1.html 14 Gartner, "Wallet of the future? Your mobile phone,” CNN.com, August 13, 2009,

http://edition.cnn.com/2009/TECH/08/13/cell.phone.wallet/index.html 15 Juniper Research, "1 in 6 mobile subscribers to have NFC Mobile Phones by 2014, according to Juniper

Research," press release November 9, 2009, http://juniperresearch.com/shop/viewpressrelease.php?pr=163

16 Juniper Research, "Transaction Complete! NFC Solutions," September 2009. 17 "What paying by cellphone will mean for the marketing world," Advertising Age, October 5, 2009,

http://www.allbusiness.com/marketing-advertising/marketing-techniques/13170333-1.html 18 Ibid. 19 "2010: The Year of Mobile Banking & Payment," Wired, January 30, 2010,

http://www.wired.com/epicenter/2010/01/mobile-banking-payment 20 Gartner, "Dataquest Insight: Mobile Payment 2006-2010," April 27, 2009, ID: G00168197


accounts, or credit/debit cards, and non-mobile operator stored value accounts (such as travel cards, gift cards, or PayPal). The forecast does not include transactions that use the mobile operators' billing systems (such as the purchase of mobile content) or telebanking by mobile to a service center that uses an interactive voice response (IVR) system. The forecast does include IVR transactions when used in combination with other mobile channels (such as SMS) to verify user information.

0

500

1000

1500

2000

2500

3000

3500

2007 2008 2009 2010 2011 2012

Mobile Payment Transactions by Technology (in Millions)

SMS WAP/Web USSD NFC

Figure 10: Gartner April 2009 Projections of Mobile Payment Technologies Early industry trials indicate that all industry stakeholders are interested in mobile payments. For consumers, such payments represent convenience. For merchants, they open up opportunities for new payment types and for applications that leverage payment (e.g., loyalty and rewards programs). For mobile operators, they provide the opportunity to attract customers, improve customer retention, and increase average revenue per user. For financial services providers, they provide a new payment channel and the opportunity for differentiation and increased transactions. Mobile payments have also created opportunities for new service providers to offer value-added services. In their May edition, Digital Transactions describes 21 different alternative payment methods.21

2.5.7 Mobile Retailing Ecosystem As mentioned in the introduction to this section, mobile retail comprises three major functional categories: mobile marketing, mobile commerce (including mobile payments), and mobile operations. Mobile retail therefore represents a complex ecosystem that includes a variety of devices, applications, and standards.


21 Digital Transactions: Trends in the Electronic Exchange of Value, Volume 7, No. 5, May 2010,

http://www.digitaltransactions.net/files/DigitalTransactionsMay10.pdf


Each category in the ecosystem has unique requirements that must be accommodated by an overall integrated architecture. The payment category requires secure interfaces to an authorization system, regardless of whether payment is contactless or remote. Mobile marketing must securely interface with a customer or loyalty system for targeted marketing opportunities. Mobile operations must securely interface with a variety of applications used in operating a store. The supporting applications in all three categories can exist either on the phone or in a data center accessible over the Internet.

Figure 11 is an overview of the mobile ecosystem. This ecosystem is described in more detail in Section 5.2.3.

Figure 11: Mobile Retailing Ecosystem




3. MOBILE MARKETING

Mobile marketing represents a simple first step for retailers who want to embrace and benefit from m-commerce. It can transform the way they interact with their customers.

Mobile marketing activities can be categorized as follows:

• Advertising and marketing • Customer service • Shopping tools • Product information • Loyalty programs • Promotions and coupons

3.1 Advertising and Marketing Not every mobile activity must fall within the traditional boundaries of retail. One of the simplest activities can be drawn from the entertainment realm: an application that advertises or reinforces brand image. This class of application stands alone; no integration is necessary with existing systems. The goal of such applications is to market the brand and refer consumers to other modes of communication with the retailer. This approach is often tightly integrated with social media efforts.

While brand marketing does not require integration, promotions do. For such offers to be truly effective, they should be integrated with the retailer’s customer relationship management (CRM) system to be personalized and targeted. Spamming customers is the fastest way to lose them.

3.1.1 Brand Marketing Every brand wants to be represented on a consumer’s phone. But not every brand deserves that placement. Brands with no obvious reason for phone presence can achieve that presence by sponsoring an application. For instance, Charmin (the toilet paper manufacturer) sponsors an iPhone application called “Sit or Squat” that locates nearby public bathrooms on a map.

3.1.2 Digital Signage Digital displays that advertise products and promotions can facilitate in-place interaction with customers. (For example, scanning a food display might show recipes using that food.) This interaction is typically accomplished using NFC tags or quick response (QR) codes that allow the phone to “read context.” (QR codes are two-dimensional bar codes that can contain a lot of information, including URLs.) A unique number, simple data, or a Web site link is communicated to the mobile phone, through which information specific to the display can be accessed.

One example of such digital signage is the display of bar codes on large billboards (Figure 12). A consumer with a phone can take a picture of the bar code and an action occurs, such as displaying a Web site, sending a message, or requesting a promotion.



Figure 12: 2-D Bar Code on a Billboard

3.1.3 Augmented Reality Phones equipped with global positioning system (GPS) capabilities (to ascertain location), a compass (to ascertain facing direction), and a video camera can add labels to a video with information about what the consumer is seeing. The consumer holds the phone so that the camera in the phone views the landscape. Information is then overlaid on the image. For example, this capability can be used to locate coffee shops, post reviews on storefronts, and display promotions on storefronts to entice shoppers inside.

3.1.4 Example Applications Examples of advertising and marketing mobile applications are described in Table 2.

Table 2: Examples of Advertising and Marketing Mobile Applications

Gucci’s iPhone application allows the consumer to browse current fashion collections, see news and events, and browse the designer’s playlist. Several videos are also available. This application focuses on brand awareness.

Adidas provides an Urban Art Guide for Berlin as an iPhone application. Using maps, the consumer is directed to different sites in the city to view many forms of urban art. A gallery of pictures and the ability to upload new ones is also provided. This application associates the brand with the “street scene.”

The Hugo Boss iPhone application provides videos of fashion shows, including behind-the-scenes footage. It includes a color matching feature that lets the consumer find items that fit the consumer’s wardrobe and a feature that can save items to a wish list.


Google has identified over 100,000 businesses in the United States as "Favorite Places on Google," based on Google user interaction with local business listings. Each business receives a window decal with a unique QR code that can be scanned with a phone to (for example) read reviews or star the business as a favorite. QR reader applications are available for a variety of camera-enabled phones.

Brightkite is social connection application available on several phone platforms that leverages location to determine who is nearby. Brightkite has also been experimenting with advertising within its augmented reality tool.

My Mall is a mobile shopping application that aggregates retailers. The application is available for iPhone, Android, and Palm devices and is based on the affiliate business model, working through affiliate networks such as LinkShare, Commission Junction, and Google. The application allows retailers to establish a mobile presence at no cost by becoming part of a mobile shopping mall through their affiliate network. The application also drives traffic to the retailers’ own mobile sites.

3.1.5 Technology and Standards Employed Several technologies are particularly useful in implementing advertising and marketing mobile applications:

• ISO/IEC Standard 18004 QR codes • ISO/IEC Standard 18092 NFC • Location-based services




3.1.5.1 ISO/IEC Standard 18004 QR Codes

ISO/IEC Standard 18004 is one standard for QR codes. These codes are popular for use with mobile phones because they are easier to read with cameras than are traditional bar codes. They are often used to bridge the physical and on-line worlds: a camera-equipped phone “reads” the QR code in a magazine or poster, then a Web site (identified by the URL embedded in the code) is loaded into the phone’s browser. Mobile phones require a QR code application to read and process the codes.

3.1.5.2 ISO/IEC Standard 18092 NFC

Near Field Communication (NFC) is a short-range communication technology that is used by mobile phones and standardized as ISO/IEC 18092. NFC is compatible with contactless smart card radio frequency (RF) technology (ISO/IEC Standard 14443); NFC-enabled devices can communicate with existing contactless smart cards and readers. This ability is often leveraged for payment and interaction with NFC-tag-equipped posters. NFC data throughput is slower than Bluetooth’s, and NFC has a shorter range, but it connects more quickly and is compatible with current contactless payment infrastructures to create a better consumer experience overall.

3.1.5.3 Location-Based Services

Location based services (LBS) leverage the ability of a mobile phone to determine its location. Location is determined either using triangulation between cell phone towers or the GPS.

3.1.6 Benefits and ROI Advertising and marketing over a mobile phone increase brand awareness and affinity, but as with other forms of marketing, it is difficult to measure the ROI. The benefits of applications that enforce an image are less tangible (albeit no less real). For applications in which the mobile phone communicates with an in-store device, interactions can be counted, but there is no good way to establish a direct correlation between an interaction and ultimate conversion.

3.1.7 Implementation Considerations Advertising and marketing applications can reside on the device, be accessible over a network connected to a hosted application, or be implemented as a service on the Internet (the “cloud”). Other implementation considerations are listed in Table 3:

Table 3: Advertising and Marketing Application Implementation Considerations

Consideration Implementation

Security n/a

Privacy n/a

Loss prevention n/a




SOA A SOA approach is often warranted so that channels can share the same functionality.

Cloud computing Applications can be connected to a hosted application over a network or as a service in the cloud.

Data source Various data sources can be leveraged.

Store operations n/a

Hardware costs n/a

Application development costs Applications can be written in house, but using one of the many available outside development firms may be more cost effective.

Application integration These types of applications rarely require integration with existing systems.

Ease of use on mobile device To gain mainstream use, applications must be useful and very easy to use. No documentation should be required.

Platform support Supporting multiple platforms is best to extend application reach.

Customer support n/a

PLC management n/a

Software development Outsourcing development can be a cost-effective solution.

Payment options n/a

Application type These applications can be browser-based, message-based, downloaded, or native applications.

3.2 Customer Service Applications making customer service information and capabilities available on a mobile phone enable customers on the move to obtain information from retailers. Customer service information and functions include:

• Store locations/hours • Wish lists, shopping lists, gift registries


3.2.1 Store Locations/Hours A store locations-store hours application gives a consumer the ability to search for stores nearby using a mobile device. This function offers even more benefit to the consumer when used in conjunction with product services such as extended product information and item availability. In many cases, what a customer really wants to do is to “find the stores nearby that have product X in stock.”

Store location is a basic function that is typically displayed on the first screen of the mobile application. The function is typically made available using a browser-based application or a downloaded native application. Locations can also be shown as a map on a smart poster, which can be read by tapping the poster with an NFC-enabled phone and storing the received information about the nearest store locations, hours, and specials.

When security is not an issue, short message service (SMS) is the technology commonly employed. That is, the consumer sends a text message that contains the consumer’s zip code and receives the address of the nearest store.

Two process flows can support this function. One is applicable to devices without geolocation or GPS capabilities (Figure 13); a much simpler one is applicable to devices that have these capabilities (Figure 14).

Figure 13: Process Flow for a Device without Geolocation or GPS Capabilities

As Figure 13 shows, when a device has no geolocation or GPS capabilities, the process is as follows:

1. A customer selects the Find Store option. 2. The customer enters location information, such as a postal code, street address,

city, state, country, or cross streets. 3. The customer initiates the action. 4. The system returns a list of the nearest stores.



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Selects“Find Store”

Send GPS Coordinates

Find Closest Store Locations

Display SelectedStore Locations

Figure 14: Process Flow for a Device with Geolocation or GPS Capabilities

As Figure 14 shows, when a device has geolocation or GPS capabilities, the process is as follows:

1. The customer selects the Find Store option. 2. The device transmits the customer’s location, using GPS coordinates. 3. The system returns a list of the nearest stores. The screen on which the list is

displayed should offer the option of entering a location manually, to enable a consumer to find the stores close to an alternate location.

The list of stores is typically limited to 5–10 stores. The store location information includes operating hours and maps for each store.

3.2.2 Example Applications Examples of customer service mobile applications are described in Table 4.

Table 4: Examples of Customer Service Mobile Applications

myStarbucks can find an open store with a drive through, explore Starbucks whole bean coffees, find nutritional information, and build a drink. It includes integration with Facebook and Twitter (social media).

Using the consumer’s current location, this application can find nearby retail stores, sorted by category, and display maps to take the consumer right to a store.

3.2.2.1 Technology and Standards Employed

Customer service applications can use different technologies and standards, depending on the implementation. For example:




• GPS capabilities add the mobile user’s location to a query. Location information gives consumers more accurate information and allows them to receive answers to questions such as “where is the nearest store?”

• A link to a mapping capability can help consumers get to a store quickly. Web services protocols to invoke/embed the mapping functions are available from many providers, such as Google, Yahoo, and Bing.

• A GS1 Global Location Number (GLN) can identify a location, uniquely where required.

3.2.2.2 Benefits and ROI

Implementing these customer service functions is intended to drive more traffic to a retailer’s physical stores. However, it is very difficult to measure the effectiveness of such functions. There is no measurable link between their invocation and store sales. Measuring marketing effectiveness suffers from a similar problem.

3.2.2.3 Implementation Considerations

Table 5 lists considerations applicable to implementing customer service applications.

Table 5: Customer Service Application Implementation Considerations


Security n/a

Privacy n/a

Loss prevention n/a

SOA Store location services are often shared by multiple channels.

Cloud computing Mapping services are often sourced from the cloud.

Data source Data must be updated on a regular basis.


Hardware costs n/a


Application integration Applications can be integrated using ARTS XML standards, such as Item or Customer.

Ease of use on mobile device Since this is likely to be a customer’s first interaction with the retailer, it is important that the user experience be simple and informative.






PLC management n/a

Software development n/a

Payment options n/a


3.2.3 Wish Lists, Shopping Lists, Gift Registries Consumers commonly make lists of items to be purchased. Mobile devices offer a convenient method for adding items to such lists, as well as for displaying a list during a shopping excursion. Because entering data into mobile devices can be cumbersome, adding an item to a list must be as simple as possible. Once created, the list of items can be stored on the device, to be recalled later or sent through something like a social medium (Facebook, for example) to the consumer’s friends. Consumers typically create three kinds of lists: wish lists, shopping lists, and gift registries.

Wish lists are lists created by an individual that itemize desired future purchases. These lists can be published to friends and family as suggestions for future gift-giving opportunities. Retailers can leverage wish lists to notify the list owner when the price or availability of an item on the list changes. Knowing that consumers have not yet purchased items can help drive changes in the retailer’s business (for example, by assessing demand for future new product introductions, adjusting the size curve for specific locations, or understanding price sensitivity).

Shopping lists are not intended for others to use but, like wish lists, they serve as reminders for future purchases. Shopping lists are common to grocery shopping and are often based on previous purchase history. Some implementations may allow consumers to scan an item’s bar code as the item is consumed at home, resulting in a list of “out of stock” items in the home. Shopping lists can be combined with m-commerce capabilities to provide a complete shopping solution from a mobile device, without requiring a visit to a physical store.

Gift registries are lists put together by an individual and published to friends and family as recommendations for gifts given in honor of a specific event (weddings, a new child, birthdays, graduations).

Figure 15 illustrates the general process used to create all types of lists. In all cases, it is common to use a mobile device to create the list of items and then display the list while shopping.


Figure 15: Wish Lists, Shopping Lists, Gift Registries

A valuable feature is near-real-time list management when items are purchased, to minimize or avoid duplicate purchases. For example, traditionally the POS updates a gift registry as items in the registry are purchased. A slight modification to this feature would enable the POS to send the purchase information to the list on a mobile device (such as a friend’s list).

List capabilities can often be integrated with extended product information capabilities. For example, recipes might be suggested for items included on a shopping list, along with the ability to add any missing ingredients to the shopping list. NFC tags can also be embedded in goods or in permanent shopping lists so consumers can tap a product or product description and create their own lists for storage on an NFC-enabled phone.

3.2.3.1 Transaction Process

Figure 16 illustrates the list creation transaction process.

Figure 16: List Creation Transaction Process

As Figure 16 shows, the process is as follows:

1. The customer registers with a retailer.



2. The list type is defined (perhaps implicitly), and relevant list attributes (event dates and other details) are defined. It is important to include enough detail to enable other shoppers to find the appropriate list.

3. The list is created. • The list can be created by using the mobile device to select items in the store

or at home. An item can be selected by scanning the item’s bar code or RFID tag. Size, color, style, and quantity information can be added. The current in-store price should be displayed (and not the online price if it differs).

• As an alternative, the list can be created based on past purchase history. Figure 17 illustrates the list consumption transaction process.

Figure 17: List Consumption Transaction Process


1. The consumer downloads an m-commerce application or displays a mobile Web site. The consumer can do so anonymously; however, it may be considered a benefit for a retailer to request that the consumer register to enable future direct marketing.

2. The consumer selects a shopping list based on search criteria (e.g. “Jones Wedding,” “Smith Graduation”) or by using a list selection process.

3. The items being purchased are scanned on the mobile device. • The customer is notified if an item has already been purchased. • Otherwise, the list is updated to indicate that that item has been purchased.

Lists can also be updated at the POS.

3.2.3.2 Case Studies

Examples of list creation mobile applications are described in Table 6.

Table 6: Examples of List Creation Mobile Applications

The Target application provides tools to simplify and streamline the shopping experience at Target stores and on Target.com. The application can locate sales, store hours, or “the perfect gift. Putting the power to save money and shop more conveniently at your fingertips is part of our Expect



More. Pay Less promise.”

Using a location or ZIP code, consumers can use the application to find the nearest Target. They can then receive information specific to that store. A Search feature allows consumers to find items in the store in which they are shopping, including specific department and aisle locations.

Consumers can shop by department and category to see what is available both at stores and on line. They can display the weekly advertisement for a store in their neighborhood. They can also search for and view Club Wedd and Target Baby registries and TargetLists, check off items they have purchased, and manage their own registries or lists.

The application lets consumers view images of items, read guest reviews, and check for availability at other Target stores. They can also search for items by gender, age, price, personality, or occasion.

Whole Foods Market Recipes can be searched for recipes featuring natural and organic foods. Consumers can search by ingredients and dietary preferences, such as gluten-free, low fat, or vegetarian/vegan. Recipes include nutritional information and cooking instructions.

The application's store locator can be used to find nearby Whole Foods Market stores. Each store’s page includes links to the store’s Web site and lists the natural and organic foods on sale at the consumer’s local Whole Foods Market.

Beauty.com’s application lets consumers shop for more than 200 prestige brands anywhere, any time. “Read product ratings and reviews to find beauty must-haves, and restock your beauty stash quickly and easily with Your List™.”

3.2.3.3 Technology and Standards Employed

List applications can use different technologies and standards, depending on the implementation. For example:

• Bar code scanning technology embedded in a mobile device • Mobile Web or mobile application • GS1 barcode standards • NFC Forum tag types




• ARTS XML Item Maintenance • ARTS XML Product Content Management

3.2.3.4 Benefits and ROI

The potential benefits and ROI for using a mobile device for wish lists, shopping lists, or gift registries include:

• Increased basket sizes (shopping lists, wish lists) • Increased sales (gift registries) • New customer acquisition (gift registries, wish lists) • Conversions (wish list promotions)

3.2.3.5 Implementation Considerations

Table 7 lists considerations applicable to implementing wish list, shopping list, and gift registry applications.

Table 7: List and Registry Application Implementation Considerations


Security Shopping lists are generally not considered private information, so there is no particular need to protect them (in fact, they are often published for anonymous user consumption). However, the lists are typically linked to customer data that does require a higher level of protection.

Privacy Retailers who wish to use the information gathered from the list function for direct marketing purposes should generally require registered users to agree to such communications.

Loss prevention n/a

SOA These lists are often shared by the e-commerce channel, so using common services makes sense.

Cloud computing Cloud computing might be applicable.

Data source Product information, like price and inventory, must be kept current.


Hardware costs n/a


Application integration These applications are usually integrated with e-




commerce and sometimes with in-store kiosks.

Ease of use on mobile device Typing on a mobile device is cumbersome. So the ease of navigating the site and selecting the items are of paramount importance.


Customer support Interfacing with a retailer’s CRM program would be a nice addition.

PLC management n/a


Payment options n/a

Application type These applications are almost always synchronized with a traditional Web access mechanism (i.e., this solution should not be considered a mobile-channel only solution).

3.3 Shopping Tools Many useful shopping tools are available for consumers from both retailers and third parties. These tools enhance the shopping experience and generally influence consumers indirectly. Adding these tools to a retailer’s application adds value to the application, making it more likely that a consumer will rely on the application. Such tools include:

• Reservations and product holds Reservations and product holds enable a consumer on the way to a store or restaurant to hold a product or table.

• Card aggregation Consumers want to minimize the number of different cards they carry. Mobile phones provide a unique opportunity to consolidate cards—especially loyalty cards, which have become more popular in recent years—on one easily accessible device.

• Nearby search Applications running on phones equipped with GPS capabilities can determine the consumer’s location; the application can search for nearby stores, restaurants, products, and events.

• Recommendations Deciding which product to purchase can be daunting; fortunately, guides are available on the Internet. Mobile applications can provide product recommendations at the time of purchase, which can influence consumer


behavior. Retailers who can become trusted advisors to their customers will establish long-term relationships that can be very profitable.

3.3.1 Case Studies Examples of shopping tools mobile application are described in Table 8.

Table 8: Examples of Shopping Tools Mobile Applications

“Restaurant Reservations – Free, Instant, Confirmed.” OpenTable for iPhone allows consumers to make free restaurant reservations at over 11,000 OpenTable-enabled restaurants in the United States, Canada, and the United Kingdom. OpenTable members also earn Dining Rewards Points, redeemable for Dining Cheques that are good at any OpenTable restaurant.

CardStar lets consumers store and retrieve loyalty, reward, and club membership cards, which can be scanned directly from the screen at most retailers.

“Shop every store with every product on the web from your iPhone.” TheFind: Where to Shop determines which stores carry the products a consumer is looking for, where those store are located, and the on-line prices for those products. TheFind: Where to Shop locates the nearest store that carries a particular item. It can also find and display the prices charged for an item at other nearby stores and on line.

RedLaser uses state-of-the-art bar code recognition that can read virtually any product bar code using the iPhone’s camera, even without autofocus. RedLaser searches for low on-line and local prices from hundreds of thousands of retailers.

PICKKA Med identifies the right over-the-counter medicine for a health condition, based on symptoms and other factors such as age and preferences, and locates the product quickly. The application is an “expert pharmacist in your pocket.”

3.3.2 Technology and Standards Employed


Shopping tools can use different technologies and standards, depending on the implementation. For example:



• Bar-code scanning technology embedded in a mobile device allows products to be identified quickly and uniquely. Identification can be accomplished using specialized bar-code reading hardware or the phone’s camera.

• Shopping tools that adhere to GS1 standards can read all barcodes. • NFC Forum tag types support reading NFC tags on products. • The ARTS XML Item Maintenance schema (see Section 8.3.5) can be leveraged

as the format for retrieving item information from the system of record. • The ARTS XML Product Content Management schema (see Section 8.3.5) can be

leveraged as the format for retrieving extended product information, like images, from the system of record.

3.3.3 Benefits and ROI Tools that help consumers shop can be both beneficial and detrimental. Providing more information than your competitors can provide an advantage. When done well, investments can lead to:

• Increased basket sizes • Increased sales • New customer acquisition • Conversions

3.3.4 Implementation Considerations Table 9 lists considerations applicable to implementing shopping tool applications.

Table 9: Shopping Tool Application Implementation Considerations


Security n/a

Privacy n/a

Loss prevention n/a

SOA Many mobile shopping tools are extensions of existing e-commerce tools. When this is the case, it is best to create a shared service following a SOA model.

Cloud computing Depending on the functionality, cloud computing may be applicable.

Data source Third-party tools often obtain product data from e-commerce sites. It may be better to formalize the partnership and explicitly export data.





Hardware costs n/a


Application integration Integration requirements vary by application type.

Ease of use on mobile device Many of the tools from third parties are limited by their access to information. Providing high quality and timely data can give retailers an edge over the competition.


Customer support Hopefully not applicable.

PLC management n/a


Payment options n/a

Application type These applications can be any of the application types (browser-based, message-based, downloaded, or native applications) but are often more usable if they are native.

3.4 Product Information Since the introduction of e-commerce, customers have come to expect rich product information that includes images, detailed descriptions, product comparisons, and reviews. Such information has traditionally been difficult to provide within a store due to space constraints. However, the mobile phone makes access to this information possible anywhere and at any time.

According to recent studies, a growing number of consumers are using their mobile devices to view product information in stores. A recent Motorola annual research study of holiday shoppers 22 found that more than half (51 percent) of consumers across 11 countries used their mobile phones for in-store activities such as comparison shopping and for obtaining peer feedback, product information, and coupons. Figure 18, from a Gartner report,23 illustrates the frequency of different uses in a retail setting. The same report also shows that the trend is increasing, and more and more shoppers are using their mobile phones for shopping, especially for obtaining product information.

22Motorola Global Holiday Shopper Study, January 11, 2010,

http://85.133.72.103/ImageLibrary/detail.aspx?MediaDetailsID=861 23 Gartner, February 2009.

http://85.133.72.103/ImageLibrary/detail.aspx?MediaDetailsID=861


Figure 18: Likelihood of U.S. Consumers to Use Mobile Phones for Shopping

3.4.1 Transaction Process Figure 19 illustrates the general process customers use to review the product information available on an e-commerce site.

Figure 19: Review Product Information at e-commerce Site Transaction Process


1. The customer uses a mobile phone to access a retailer’s e-commerce application. 2. The customer displays the product information, typically by using the search

function to search for a particular item and then clicking on a product image to obtain more information.

3. The product display page (optimized for mobile) is presented. Figure 20 illustrates a similar process that allows customers to review product information using a retailer’s application.



Figure 20: Review Product Information with Retailer’s Application Transaction

Process

1. The customer uses a mobile phone to log in to the retailer’s application, using an e-commerce login ID and password. (As an alternative, customers can use social networking credentials, such as a MySpace/Gmail ID to sign in or authenticate themselves to the application.)

2. A home page is presented that is optimized for mobile. This condensed page includes all the top-level categories.

3. The customer navigates to a category, selects it, and is then presented with all the products within that category.

4. The customer selects a product image, displaying a product information page optimized for mobile. The item can be added to the customer’s shopping cart, a product comparison list, or a mobile shopping list.

A simpler process, shown in Figure 21, allows a customer to review product information by first identifying the product.

Take picture of item

Identify the item in the photo

Lookup the item information

Display the item information

Figure 21: Retrieve Item Information from a Picture Transaction Process

1. The customer selects an item. • The customer can take a photo of the item with the camera in the mobile

phone. • As an alternative, the customer can select the item by scanning the item’s bar

code (using the phone’s built-in camera) or by reading the NFC tag embedded in the product packaging.

2. The identifying data is analyzed (either using automated algorithms or manually) to determine whether the item is included in the retailer’s catalog.



3. The mobile phone retrieves the product information and displays it to the customer.

4. The product image and a rich set of item information are displayed on the screen and include, for example, additional information about the product, related items, and reviews.

3.4.2 Product Information from Friends Mobile social networking is a growing phenomenon that is extending to retail in the form of social commerce. Shoppers have mobile access to a wide range of digital content created by others, including ratings, reviews, and images. Content can be shared with others over the mobile device. Rich community content can be tied to an item and identified by a bar code that the mobile device reads and displays. Shoppers can share specific information with specific friends.

3.4.3 Transaction Process Two processes can allow friends to share product information. In the first process (Figure 22), a customer displays product information and is given the option to read ratings and reviews posted by other shoppers. (In the social context, this information can be filtered or sorted by friends.)

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Figure 22: Read Friend's Ratings Transaction Process

The second process (Figure 23) allows a customer to display product information and provides an option for posting a new rating and reviewing the item.



Figure 23: Post to My Friend's Site Transaction Process

3.4.4 Product Comparisons Consumers in the store aisle can use mobile devices to view and compare information about multiple products, as they do on many e-commerce sites. Bringing this type of functionality into the store aisle is only possible using mobile devices. Retailers need to be careful that consumers do not have access to more and better information than store staff.

3.4.5 Transaction Process Figure 24 illustrates a process that allows a customer to compare information about products.

Figure 24: Product Comparison Transaction Process

1. The customer displays the retailer’s home page, optimized for mobile. 2. The customer finds the product category and displays a list of all of the products

in the category. 3. The customer selects two products for comparison. 4. The mobile device displays a condensed comparison page that lists the attributes

of both products in a table. The products can then be compared quickly, based on attributes and price.



3.4.6 Case Studies Examples of product information mobile applications are described in Table 10.

Table 10: Examples of Product Information Mobile Applications

The Home Depot application lets consumers browse products by department, shop the local ad, find stores, obtain project know-how, including videos, and keep a shopping list.

The GAP's StyleMixer application lets consumers beam an outfit onto the consumer’s Facebook wall to solicit a friend’s reaction.

Amazon.com customers can use text messages to find and buy products sold by Amazon. Customers can find a product in less than 1 min and complete the purchase. The customer sends a text message to Amazon that includes product keywords, and Amazon replies with products and product prices. Customers can buy the item simply by replying to the text message. In December 2008, Amazon.com launched an iPhone application that enables customers to search for items using photographs taken on their phones. Amazon tries to match the picture with products in their inventory and returns the results, along with suggestions for other items the customer might like. The application also offers access to other retailers, such as Target, and allows users to buy with one click. The application includes a feature called “Amazon Remembers,” which allows customers to keep track of items they see.




3.4.7 Technology and Standards Employed Product information applications can use different technologies and standards, depending on the implementation. For example:

• A mobile device with a camera can identify products, either visually or by scanning the product bar code.

• A bar-code scanning application can read GS1 barcodes. • NFC Forum tag types can implement product information tags. • OpenID, OAuth, or some other standard supports authentication. • ARTS XML Item Maintenance, ARTS XML Product Content Management, and

ARTS XML Price schema (Section 8.3.5) can be leveraged as the format for exchanging data. All three of these retail-specific standards make it easier to integrate multiple sources of data.

• ARTS XML Video Analytics (Section 8.3.5) can enable communication of content of an image for ease of analysis.

3.4.8 Benefits and ROI Providing additional product information at the time of purchase is one way to increase sales rates, but it can just as easily confuse consumers if they receive inaccurate or conflicting information. When done correctly, retailers who provide additional product information can realize the following benefits:

• Increased basket size • Increased sales • New customer acquisition • Increased conversion rate • Increased retention rate • Increased shopping frequency

3.4.9 Implementation Considerations Table 11 lists considerations applicable to implementing product information applications.

Table 11: Product Information Application Implementation Considerations


Security The social aspects of this type of application require authentication using one or more standards such as Twitter, Facebook, or OpenID.

Privacy n/a

Loss prevention n/a




SOA Many product information tools are extensions of existing e-commerce tools. When this is the case, it is best to create a shared service following a SOA model.

Cloud computing Depending on the functionality, cloud computing may be applicable.

Data source Most product information comes from the e-commerce system, but it is crucial to show in-store prices and not just e-commerce prices (which may be different).


Hardware costs n/a


Application integration Integrations necessary to obtain product information are fairly straightforward. Integrating with social applications can be more difficult.

Ease of use on mobile device The most difficult part is identifying the product. The easiest method seems to be by using a camera to read a bar code. Several libraries of application software are available for this purpose.



PLC management n/a


Payment options n/a

Application type These applications can be any of the application types (browser-based, message-based, downloaded, or native applications) but are often more usable if they are downloaded.

3.5 Loyalty Programs Typical loyalty programs include three major functions. One function allows the participant to sign up for the program; another provides some method of identifying the participant at check out, to award or redeem points; a third, administrative function,



allows consumers to manage their accounts, typically using a Web site. Mobile phones allow all three functions to be combined in such a way that a consumer has constant access to the loyalty program. This convenience benefits both the program participant and the retailer.

The ability to tie a loyalty membership number to a mobile phone not only dramatically increases consumer participation in a loyalty program, it also enhances the data that is collected about that consumer. The average household belongs to 14.1 loyalty programs but is only active in 6.2.24 The main reasons for this discrepancy are typically a lengthy sign-up process, not understanding the program, not being able to quickly redeem the rewards, or simply not wanting to carry multiple cards or key fobs. The mobile phone can address all of these issues while allowing the program owner to develop data in addition to data about what the consumer does at the POS.

3.5.1 Transaction Process Typical examples of current mobile-based loyalty programs range from SMS-based text or mobile applications with bar codes or numeric codes to RF chips attached to cell phones. NFC-enabled phones and terminals allow consumers and retailers to interact directly on loyalty point updates, tracking, and redemption. Figure 25 illustrates one typical loyalty program process flow. Figure 26 illustrates an alternative (this specific implementation is included for illustrative purposes only).

24 Report by Colloquy, 2009, http://directmag.com/crm/news/less-half-loyalty-membership-colloquy-

0413/?smte=wr


Figure 25: Example Loyalty Program Process Flow



Figure 26: Motorola Mobile Loyalty System25

Today’s solutions all provide similar functions. Customers can opt in to the programs from their cell phones by sending a short text message or going to a Web site. Once they have joined the program, customers using a bar-code based system are sent a phone application that contains an image of a unique bar code. As an alternative, the customer can receive the bar code through a multimedia messaging service (MMS) message or be sent something as simple as a text code, delivered using SMS. Follow-on coupons are sent to the customer, who can redeem them by having the bar code scanned at the store’s POS system. (An SMS text code can be entered manually at the POS by a store associate.)

Another solution that works in much the same way uses special codes that are sent to the customer in a text message (avoiding the need to download an application). The customer opts in to the program in the same way as in the bar code system. Text messages are sent with the latest offers, which customers can redeem on line or in the store by providing the code at checkout.

NFC allows terminals to send loyalty points back to an NFC-enabled phone at the time of purchase or redeem them when the phone is held close to a contactless POS reader. Interim alternatives use RF tags affixed to cell phones or integrated into removable microSD cards that include NFC. Weekly specials or coupons are then sent out in a text message or picked up by the consumer touching a smart poster with an NFC-enabled


25 Mobile Marketing Associations, U.S. Consumer Best Practices Guidelines for Cross-Carrier Mobile

Content Programs, V5.0, April 2010.


phone. To redeem the coupon, the customer’s phone is tapped on the POS terminal. While neither the customer’s name nor any personal information is shared with the retailer, the customer’s buying behavior is tracked through an ID number assigned to each phone. Future offers can be tailored to specific items, times of visit, or other purchase data.

3.5.2 Case Studies Examples of loyalty program mobile applications are described in Table 12.

Table 12: Examples of Loyalty Program Mobile Applications

IKEA has implemented a loyalty program that uses SMS text messages and a short code to enroll. Discounts and coupons are sent to the consumer’s phone. The consumer scans the code at a mobile kiosk within the store to print out a physical coupon.

[No logo available]

Super Stop USA is a Minnesota gas station that is using SMS text messages to alert customers when gas prices go up. If the price has gone up by the time they arrive, they can save 5–10 cents per gallon by showing an attendant the text message. A sample text message might read “SUPER STOP GAS ALERT! Prices are rising to $2.99. We will follow soon. If we have already gone up, show us this message and save 10 cents/gal until 1pm tomorrow!”

Kerr Drug supports an application with a unique bar code that is downloaded to the phone. New offers are sent to the application on a weekly basis, and consumers receive a weekly text message reminding them to review new offers. The bar code is scanned at the POS using an image scanner, and all appropriate discounts are applied. This application is implemented by Motorola, using the process flow shown in Figure 26.

[No logo available]

Select quick service restaurants are implementing loyalty program participation that relies on an NFC sticker affixed to the customer’s phone. Weekly specials are sent out in a text message. The NFC chips are read at the restaurant’s POS terminal to redeem the coupon.

NFC stickers can double as two-dimensional (2-D) bar codes, so that retailers who do not have an NFC-enabled POS terminal can scan the bar code instead. NFC stickers are currently being tested by the following quick-service



restaurants: • Dairy Queen • Qdoba (Mexican fast-casual) • Arbys • Hot Box Pizza

Best Buy’s Reward Zone application allows consumers to access their points, purchase histories, and currently available certificates along with exclusive offers. The application lets them “browse all the great benefits that you get as a Reward Zone member and stay up-to-date on program announcements and membership tips.” Members can also shop for Best Buy products, check product availability at stores, read customer reviews, and share favorite products.

Starwood program members can access their Starwood Preferred Guest accounts, including point balances and upcoming stay details, from their phones. Members can also browse and reserve a stay at any of Starwood’s 890+ hotels and resorts worldwide, across nine brands.

Starbucks Card Mobile is a companion to the Starbucks Card. Starbucks Card Mobile allows consumers to check their Starbucks Card balance, reload the card, and view transactions. In 16 Starbucks stores located in California’s Silicon Valley and in Seattle, consumers using an iPhone or iPod Touch can actually pay with their Starbucks Card.

3.5.3 Technology and Standards Employed Currently the primary technology used to support customer loyalty programs is SMS text messaging, which provides for quick, simple, and widely available distribution. RF has also been used by retailers for some time; however, its use is limited. (Only the retailer who provides the customer with the RF chip can use the functionality.)

For use cases that involve scanning a mobile bar code, an image scanner is required; laser scanners are not able to read a bar code off a mobile phone. It is important, however, to assure that the image scanning technology has been optimized for reading a mobile phone, as some image-scan engines still lack the enhancements necessary to assure seamless performance on each scan.




3.5.4 Benefits and ROI Customer loyalty programs that are accessible from a mobile device can benefit the retailer in numerous ways, due to their unique features. Features and benefits include the following:

• Digitized membership cards are less costly than physical magnetic stripe cards. • Automatic coupons and special offer redemptions that are typically on line can be

brought into stores over the mobile phone. Providing such promotions at the time of purchase tends to increase redemption rates.

• Because it is easier to enroll in a loyalty program over a mobile device, membership, participation, and redemption rates increase.

• When a consumer has enrolled in the loyalty program using a mobile device, it is possible to track the consumer’s movements within the store (with their permission). This information can be valuable in understanding how consumers shop.

• When consumers opt in to a program over a mobile device, coupons can be sent to consumers’ phones when they are near stores, increasing the traffic in stores.

Allowing consumers to sign up for a loyalty program from their phones gives them the freedom to sign up at any time and anywhere. This added convenience not only increases the opportunities for someone to join a retailer’s loyalty program, it also enhances data accuracy and increases the efficiency of membership acquisition over current paper processes. Because information on how the program works resides on the consumer’s mobile device (as a mobile app or dedicated mobile Web page), the consumer can access this information and the consumer’s standing in the program at any time.

Consumers can take advantage of their rewards immediately when loyalty programs are available on a mobile device. Loyalty points can be transformed on the device into reward redemptions (such as mobile gift cards, mobile coupons, or even orders for physical rewards), thereby enhancing customer satisfaction and increasing the likelihood that customers will participate in the program.

Tying a loyalty program to a mobile phone assures that consumers will be able to use the program without the need to carry cards or key fobs. Using a mobile application, the consumer builds brand equity with the program and can start a one-on-one dialogue with the retailer. Since the mobile phone is a two-way communication device (both voice and data), a retailer can collect valuable data on a consumer's viewing actions and purchase intentions, allowing the retailer to begin personalizing offers and communications for each member of a program. The ability to scan a mobile bar code, read an NFC-enabled mobile phone at the POS, or type in a mobile phone number will ensure that a consumer's purchases are always recorded. Data will not be missed because the consumer forgot to carry a card or key fob.

The demographic, technological, and behavioral data that the mobile device helps collect provides an enhanced level of information about customers, giving retailers the ability to understand (with customers’ permission) who the customers are, where they are, what they want, and what they do not want at any time.



The ability to collect ”closed-loop“ data allows a retailer to deliver more relevant and personalized one-to-one offers over time at a fraction of the price of using mass market media. When a consumer views, indicates interest in, and ultimately redeems an offer, data points can be collected, analyzed, and used to determine the next offer the consumer sees. The more data that is collected on an individual or across a population segment, the more intelligent a program owner can be about what drives consumer behavior and, therefore, what should and should not be sent in the future.

3.5.5 Implementation Considerations Table 13 lists considerations applicable to implementing customer loyalty program applications.

Table 13: Customer Loyalty Program Implementation Considerations


Security If a phone is stolen, there must be a way to deactivate the loyalty account.

Privacy Certain information must be protected, such as data to be collected at signup and on the mobile device (number of offer views, time, location), and spending patterns.

Loss prevention An application must protect against the use of fraudulent coupons.

SOA Most modern loyalty programs already support SOA for easier integration.

Cloud computing n/a

Data source Loyalty data typically comes from a CRM system, while targeted offers usually come from a promotions systems.


Hardware costs Depending on the technology used (NFC, fingerprint), readers attached to the POS can be expensive.


Application integration Readers must be integrated with the POS, and the POS must be integrated with the back-end loyalty system (as is true for most loyalty programs, mobile or not). ARTS UnifiedPOS can help.




Ease of use on mobile device To achieve widespread use, applications must be useful and very easy to use. No documentation should be required.


Customer support Integration is required with a CRM system, using standards such as ARTS XML Loyalty

PLC management n/a

Software development Customers should be able to access the following on their mobile devices (as opposed to other media): A unique membership bar code Coupons Rewards points Rewards options

Payment options n/a


3.6 Promotions and Coupons The use of mobile smartphones by millions of consumers presents retailers with an opportunity to differentiate through advertising and promotion campaigns, loyalty programs, and merchandizing programs. Consumers typically carry mobile phones with them wherever they are—shopping, eating out, or riding public transportation.

Retailers can now send real-time ads, coupons, and offers to their customers that are personalized based on who the customers are and where they are, creating and delivering better value for consumers and resulting in higher response rates. Retailers can also let consumers with NFC-enabled phones decide which offers are of interest, using smart posters and other media with embedded tags that can be tapped for detailed offers. Paper-based coupons today typically produce a 0.5 percent redemption rate; the maximum rate does not exceed 1 percent. Early results are showing that personalized coupons delivered through mobile phones are achieving redemption rates of up to 30 percent, according to Eagle Eye,26 a mobile coupon company in the UK, and Tetherball, a mobile loyalty company in the United States. Such data clearly show the power of mobile.

Retailers have begun to recognize the power of mobile and are beginning to participate in various types of mobile coupon and promotion programs. Interestingly, some retailers do 26 http://www.nearfieldcommunicationsworld.com/2009/04/03/3928/eagle-eye-solutions-and-vivotech-to-

offer-retailers-nfc-mobile-vouchers/


not want to call such programs coupons or promotions, thinking that the concept of using coupons may not be well received by their typical customers. They are bundling coupons or promotions with their mobile loyalty programs, for which consumers sign up by providing their cell phone numbers and preferences. A consumer is given a contactless sticker on which a loyalty number is coded and asked to put the sticker on the back of the mobile phone. Merchants are seeing better participation from their customers with such loyalty programs (as offered, for example, by Zapa Technologies in Europe or Tetherball in the United States) as compared to traditional programs.

The NFC-enabled phones with built-in contactless technology that are starting to emerge, such as the Samsung Star Smartphone, represent another option. Wallet software can be provided with NFC phones that allow consumers to carry their payment cards and loyalty cards, provision coupons into their phones over the air (OTA), touch smart posters to download coupons of interest, and redeem coupons electronically by tapping the phone to a contactless-enabled POS system. Figure 27 depicts different options for enabling phones with NFC chips.

Figure 27: NFC Chip Options

3.6.1 Approaches to Mobile Offers Multiple approaches are being taken or considered to drive mobile-enabled promotions and coupons:

• WAP-based offers • Text- or SMS-based offers • Loyalty-program-based offers • Smartphone-based wallet • NFC-enabled phone-based wallet


WAP-based offers allow consumers to use the on-line browser and search engines on their smartphones to find ads, coupons, or promotions. Such coupons can be retailer



specific (a discount coupon for Pizza Hut) or product specific (a discount coupon for a six-pack of Coke). The coupon or promotion can be redeemed through a 2-D or three-dimensional (3-D) bar code on the coupon or through a numeric code that is entered manually by a sales clerk. (Some retailers accept such coupons manually.)

Text- or SMS-based offers require a consumer who signs up for a promotion program with a merchant to give the merchant a cell phone number. The merchant then uses text messages or SMS to send coupons and promotions directly to the consumer’s phone.

Loyalty-program-based offers allow consumers who sign up for a loyalty program to receive coupons, instant awards, and real-time redemptions. Coupons are sent by SMS or MMS and redeemed by tapping NFC-enabled phones on a contactless-enabled POS. Coupons and promotions are settled through the back-end server (cloud based).

To receive offers in a smartphone-based wallet, consumers download a coupon management application to the smartphone. Consumers can search for and receive coupons using SMS or MMS. The coupons can be redeemed manually, by displaying the coupon on the screen and showing it to a sales clerk, or automatically, through a back-end server.

Consumers can also receive offers in an NFC-enabled phone-based wallet, downloading personalized coupons and promotions. They can receive a coupon by tapping the phone on a smart poster or shelf tag, or retailers with permission to do so can send them coupons and promotions. Consumers can carry and manage their coupons and promotions at all times and redeem them electronically by tapping their phones on a contactless-enabled POS reader.

One factor that is critical to the success of mobile advertising, coupons, and promotions is that consumers must be allowed to trigger the mobile marketing programs. A consumer should be able to request (or opt in to) anything the consumer wants, whenever the consumer needs it, such as a promotion, coupon, or product information. An SMS-based proactive promotion campaign may be a good way to get started; however, a consumer may not always welcome SMS-based coupons or offers. Retailers want to avoid the spamming problems with which e-mail message campaigns contend. Currently such messages typically end up in the e-mail junk mailbox.

The contactless capability offered by NFC-enabled phones gives the consumer a greater level of control and making it easier for consumers to trigger a promotion or a loyalty or merchandising program by tapping their phones on a shelf tag, smart poster, or POS terminal.

3.6.2 Case Studies Examples of promotions and coupon mobile applications are described in Table 14.


Table 14: Examples of Promotions and Coupons Mobile Applications

Cellfire brings consumers coupons from their favorite brands, allowing them to save money at the grocery store. They can also access deals from multiple grocers and brands. A consumer can view the offers available in the area, select an offer, save it to the grocer’s savings card, and then use that card and check out to receive the discount.

With this application, consumers can access printable coupons, savings card coupons, and local coupons.

This application from Kohl’s displays all of the deals offered by the Kohl’s weekly ad on a phone. Ads can be browsed by category or brand to focus on items of interest. The application can also find the closest Kohl’s store locations.

3.6.3 Technology and Standards Employed Promotional applications can use different technologies and standards, depending on the implementation. For example:

• ARTS XML Loyalty schema • ARTS XML Customer schema • ARTS XML Pricing and Promotion schema • NFC

3.6.4 Benefits and ROI Mobile offers can result in several benefits for retailers.

First, redemption rates are generally higher for mobile offers. This may be because the concept is novel, or it may be because the offers are delivered in context. For example, a coupon can be delivered to a person walking outside a store to entice the person to enter the store. When a coupon is immediately actionable, it provides greater value to the consumer. It should be noted, however, that increased redemption also means loss of margin. The offers must be used to influence behavior in a way that increases the long-term value of the consumer.

In addition, mobile offers increase a retailer’s ability to measure coupon effectiveness.

Finally, the costs of handling paper coupons can be significantly reduced using digital coupons accessible over a mobile phone.




3.6.5 Implementation Considerations Table 15 lists considerations applicable to implementing mobile offer applications.

Table 15: Mobile Offer Application Implementation Considerations


Security n/a

Privacy Promotions delivered over a mobile phone almost always involve participation in a loyalty program, and all personal information must be protected.

Loss prevention In some cases, digital coupons are easier to counterfeit, so care must be taken to ensure that coupons are redeemed as the program intended.

SOA Coupon applications fit nicely as an SOA service.

Cloud computing Moving coupon applications into the cloud allows for the variability of the retail sales cycle by allowing for expansion and contraction of hardware and software needs as required.

Data source n/a

Store operations Mobile offers move the management of coupons to the digital arena and reduce the cost of managing paper coupons.

Hardware costs Modern scanners are able to read a bar code directly from the mobile device, resulting in no impact on the hardware infrastructure.


Application integration Applications can be integrated with the customer loyalty system using ARTS XML loyalty schema.



Customer support Mobile offers are a great way to interact with the customer to increase customer loyalty. The only requirement is an interface between the loyalty or coupon application and the scanner.

PLC management n/a





Payment options n/a

Application type These applications can be browser-based, message-based, downloaded, or native applications. Message-based (SMS) seems to be the most popular, due to the general availability of SMS on both smart and feature phones.



4. MOBILE COMMERCE

Mobile commerce (m-commerce) refers to the sale of products and services over handheld devices and wireless networks. m-commerce activities can be grouped into two categories:

• Mobile browser-based m-commerce, which delivers Web sites optimized for mobile devices with which the consumer interacts using the mobile device’s Web browser. Customers browse, search, research, select, save, and purchase from a retailer in much the same manner as through the retailer’s e-commerce Web site. The major difference is that the interface is optimized for the resolution and display space available on the mobile device.

• Application-based m-commerce, which relies on applications (special-purpose software) that are downloaded to and run natively on a smartphone or other mobile device. Customers browse, search, research, select, save, and purchase from a retailer using the application and within the environment created by the application. The application is tied to the retailer’s IT systems through an application programming interface (API), through which content and shopping information is communicated to the consumer and order and customer information is integrated with the retailer’s systems.

In either case, m-commerce involves the exchange of money for goods and services using a mobile device.

4.1 Mobile Browser-Based m-commerce The mobile Web is how many consumers interact with commerce opportunities over their mobile devices. Unlimited data plans are available from certain wireless carriers, so the costs to consumers of using the mobile Web can be low, and use of the mobile Web is becoming increasingly common. For smartphone owners, using the mobile Web is almost the same as using a PC-based Web browser to surf the Web. But the typical mobile Web user today is probably frustrated. Mobile Web access currently suffers from interoperability and usability problems. These problems stem from the fragmentation of mobile device platforms and mobile operating systems and the variety of Web browsers found on different devices. Challenges are raised by screen resolution, screen size, speed of content delivery, and the wide variety of user input methods, which cover the map from touch screen to stylus to buttons.

It is currently difficult for a retailer to design and manage the variety of mobile Web templates that render well on all browsers on all different platforms and phones. In some cases, it may be just as hard to support all browsers as it is to support native applications for different mobile operating systems. Standards exist with which most or all mobile phones comply (specifically, XHTML MP and WCSS) that are very useful for


implementing cross-platform sites. Additionally, some vendors offer technology capable of further optimizing the browsing experience.

Figure 28 and Figure 29 contrast two popular approaches for enabling m-commerce. Figure 28 illustrates an approach that leverages common e-commerce services that are optimized for the consumer’s particular mobile device. This approach is considered a best practice.

Figure 28: Best-Practice Mobile Web High-Level Architecture27

Figure 29 illustrates an approach in which specific content is provided for each mobile device type. While this approach is effective, it is not efficient and can lead to inconsistencies. Therefore, the approach is not recommended as a long-term design.


27 Forrester Research.


Figure 29: Typical Mobile Web High-Level Architecture28

4.2 m-commerce Applications Much of the excitement about m-commerce currently centers on the use of m-commerce applications. Such applications have both advantages and disadvantages in comparison to mobile Web-based m-commerce.

4.2.1 Advantages The use of m-commerce applications offers some key benefits over mobile Web-based m-commerce:

• Enhanced customer experience and performance • Additional shopping features • Ability to leverage key device capabilities • Offline browsing

A retailer who relies on applications can enhance a customer’s experience. Much of the content required to create the customer experience can be preloaded with the application and even refreshed periodically (for example, when the presence of a Wi-Fi connection is detected). The retailer can develop a richer interaction with the customer, and the customer can have a more engaging experience without waiting for pages to refresh and content to download. Relying on applications enables the retailer to use rich content such as video, large zoomable images, or virtual catalogs freely.

The additional shopping features available through applications can include elements such as search auto complete, search refinements, sorting, and social networking. These


28 Forrester Research.



features are bandwidth intensive and difficult to implement on the mobile Web but can be executed seamlessly within an application.

The ability of applications to leverage key device capabilities can enable the provision of location-aware content, such as store locators or promotional offers, map integrations, and push notifications that inform a customer of changes and offers. Cameras in mobile devices can play a key role in mobile applications, scanning bar codes and QR codes and taking pictures of products to share socially. Application ability can extend to include features such as integration with a list of contacts or an address book, giving consumers easy access to address information while shopping.

Offline browsing is key for users of devices that do not have cellular access, such as the iPod Touch, or users who may want to interact while not on a network. Being independent of a network for key portions of the customer experience allows the customer to shop and interact and then place an order when connected to the network.

4.2.2 Disadvantages Some retailers are reporting very strong growth from mobile applications. eBay, for example, expects to generate $1.5 billion in sales using mobile applications in 2010.29 However, as exciting as mobile applications are to retailers, there are barriers to be considered, including:

• Platform selection • Maintenance in a shifting environment • Content- and commerce-services integration • SOA and cloud computing

Platform choices depend on the retail market and the customer demographics, and choosing to support multiple platforms may be problematic from a cost and support standpoint. Currently, for example, choosing a platform may involve any or all of the following considerations:

• Apple’s iPhone operating system (OS) is now on version 3.2, with 4.0 to be available in the near future.

• Google’s Android OS is less than 3 years old. • Multiple versions of the Research In Motion (RIM) OS are in distribution,

powering a diverse assortment of devices. • Symbian, while powering the largest number of devices in the world, lacks an

effective software development kit and marketplace for distribution. • Windows Mobile 6.5.1/Windows Phone 7.0.0/Windows 7 appears to be taking the

same approach as Apple, building a closely controlled ecosystem.

29 “We clearly see that people want to shop on the go – last year we saw $600 million in eBay merchandise

volume come through mobile devices and we expect to more than double that this year with $1.5 billion.” Steve Yankovich, vice president of mobile at eBay, San Francisco, CA. http://www.mobilecommercedaily.com/ebay-expects-to-generate-15b-in-merchandise-via-its-mobile-platform-in-2010/

http://www.mobilecommercedaily.com/ebay-expects-to-generate-15b-in-merchandise-via-its-mobile-platform-in-2010/

http://www.mobilecommercedaily.com/ebay-expects-to-generate-15b-in-merchandise-via-its-mobile-platform-in-2010/



Table 16 summarizes the current situation with regard to applications running on the most common platforms.

Table 16: Mobile Application Stores Market Shares

Store or catalog iPhone Android Blackberry Windows Palm Nokia Samsung

Launched 7/2008 11/2008 4/2009 11/2009 6/2009 11/2009 1/2009

No. apps > 185K >30K >3K < 1K <1K <1K <.5K

No. apps downloaded

> 3B > 100M N/A N/A >1M n/a

Approx. device mkt. share

18% 3.5% 21% 9% (WM) 2% 46% (Symbian) n/a

Source: Gizmodo, Distimo, jkontherun.com, Morgan Stanley Research, GetElastic.com, Forrester Research

Maintaining applications in a shifting environment can be a challenge. The device landscape and overall ecosystem will continue to evolve over the next few years. While Apple currently has a considerable advantage, Google is gaining market share, and RIM seeks to solidify their market position in the business segment. By delivering applications, retailers in essence become software companies, even though they are shipping simple and (in many ways) standardized software. Keeping up with the evolution of devices and the quality assurance requirements associated with keeping up may prove problematic and costly.

Integrating content and commerce services is also an issue. Many applications have been developed quickly, by leveraging the feeds from on-line retailers to affiliate providers and marketplaces (such as eBay and Amazon Marketplace). While using existing feeds is an effective shortcut, this form of integration can lack the real-time content provision, refresh, and management controls required by a retailer to serve consumers effectively. Interactive functions such as in-store inventory lookup are impossible using this model. Integration that effectively supports order management, customer service, price, and promotion consistency will also prove problematic and may not produce the experience desired by customers.

Service-oriented architecture (SOA) in a variety of styles (such as SOAP, REST, JSON, and POX) that exposes e-commerce functions is required to support effective m-commerce applications and represents an additional investment (Figure 30). Ideally, the services should expose the same business logic and data entities used by the traditional e-commerce system to avoid building new information silos in the retailer’s environment.


Figure 30: Mobile Applications High-Level Architecture30

4.2.3 Future Considerations The distinction between the mobile Web and downloadable native mobile applications is expected to blur as mobile browsers achieve direct access to contemporary mobile device hardware, standards such as HTML5 and OMTP mature and are adopted, and the performance of browser-based applications improves. Persistent storage using HTML5 specifications and access to user interface functions may further reduce the need for the development of platform-specific native applications. These changes will improve retailers’ ability to support mobile-based shoppers on mobile Web browser-based sites.

4.3 Case Studies Examples of m-commerce can be found that are supported by browser-based and other mobile applications.

4.3.1 Mobile Ticketing DSB, the national Danish Railroad, is launching an iPhone-based mobile ticketing application that allows customers to purchase tickets for regional trains and make seat reservations.

Figure 31 provides an overview of the customer experience:


30 Source: Forrester Research.


Figure 31: Purchasing a DSB Ticket By Using an iPhone Application

The application is designed to require minimal user input by providing intelligent defaults for most choices. For example, the application uses the iPhone’s GPS feature to determine the customer’s current location. Tickets can then be purchased by specifying the destination and authenticating the purchase with a user-defined password.

The application is fully integrated with DSB’s back office, ensuring that purchases are registered correctly in all relevant back-office systems. Payment is handled through PCI-compliant payment software that allows the consumer to pay with a payment card. Cards can be stored for future use. Access to stored cards is based on two-factor authentication to provide an appropriate level of security. Tickets are delivered both as an image and as UIC-918-3 compliant 2-D bar codes in AZTEC format.

The application integrates with several systems through HTTP(S), to access the necessary data and comply with standard certifications such as PCI. Figure 32 is an architectural overview of the data exchange between the different systems.



Figure 32: Simplified Architecture for DSB Ticketing Application

By using a mobile payment platform integrated with their e-commerce payment service provider (PSP), DSB ensures that PCI compliance is pushed to the PSP while maintaining an optimal user experience during the payment process. Strong integration between the mobile payment platform and relevant back-office systems ensures that all transactions are completely transparent.

Payment is handled using a card or stored card scheme that enables spontaneous use of the ticketing application but ensures the lowest available transaction cost and provides the traveler with the ability to sign up for the service using a mobile device. This service enables tourist access to the payment application.

4.3.2 Other m-commerce Applications Table 17 shows selected portions of the interface with the consumer (screens) and indicates the functionality provided by other current m-commerce applications.



Table 17: Examples of Other m-commerce Applications

Application Type/Retailer Sample Screen Key Functionality

Browser-based/ Nordstrom

Mobile optimized Web-based e-commerce site





Browser-based/ Columbia Sportswear


Browser-based/ American Eagle Outfitters


Browser-based/WAP/ Moosejaw

Wireless application protocol (WAP) site versioned from an e-commerce site, accessible on mobile phones




Downloaded application/ Tommy Hilfiger

• Search and browse the product assortment

• Check out • Persistent cart with Web-site based e-

commerce site • Account integration with Web-based e-

commerce site

Downloaded application/ eBay

• Pay with PayPal • Share items on a social network • Set alerts to notify users when they are

outbid, an auction is ending, or they are making offers on an item

• View sold and unsold completed listings • See eBay messages • Call a customer support agent • Leave feedback for a seller

Downloaded application/ Amazon

• Access to a customer’s Amazon cart, account, wish lists, payments, shipping settings, order history, and to 1-click and Prime services

• Entire Amazon product catalog • Full product catalog search • Product information, content, and

pricing




Hybrid native and browser-based/ Target

• Full-sized browser site handles transactions

• Daily timed promotions • Entire product catalog for on-line and

brick and mortar assortments • Full catalog search • Access to gift registries and lists • Ability to check balance, manage, and

purchase stored value cards • Review local promotions on products • Product UPC bar code scanning to

locate deep product information • Store locator

Native application/ Bestbuy

• Access to product search, browse, cart, account, and checkout

• Weekly deals • Both on-line and brick and mortar

assortments • Advanced search • Store locator




Hybrid native and browser-based/ Home Depot

• Full-sized browser site handles transactions

• Weekly ads • Do-it-yourself videos • Deep product content • Both on-line and brick and mortar

assortments • Advanced search • Store locator • Shopping list

Native application/ JCPenney

• Promotional information • Weekly ads • Store locator • Favorites list from promotional ads • SMS promotions and coupons

Native application/ Macy’s

• Access to product search, browse, cart, account, and checkout

• Promotion codes/coupons • Both on-line and brick and mortar

assortments • Advanced search • Find it in store with product availability • Store locator



4.3.3 Technology and Standards Employed Currently, a wide variety of applications implement their own unique interfaces to the mobile device. The use of standardized application-device interfaces is mandatory for a successful, cost-effective mobile implementation. Many standards currently exist, each covering a different aspect of the mobile ecosystem:

• Several Web standards, such as HTML, Java Script, and CSS for browser-based applications

• ARTS XML POSLog, for managing all data captured at the POS • ARTS XML Payments • ARTS XML Digital Receipt • ARTS XML Item Description and maintenance information • ARTS XML Customer • ARTS XML Price • ARTS XML Product Content Management, for managing images • ARTS UnifiedPOS, for interfacing devices to POS terminals • ARTS Data Model, for complete relational data design, data names, and

descriptions

4.3.4 Benefits and ROI m-commerce is emerging as a new channel similar to e-commerce that could achieve significant sales. But whether to support m-commerce often depends on the type of retail business. For now, retailers should experiment to see whether their customers really need m-commerce solutions.

Cost efficiency is critical to launching and supporting a mobile commerce solution. While the ROI associated with m-commerce for a multichannel retailer is increasing, it is still relatively small. And although consumer adoption rates are increasing rapidly, the volume of direct mobile transactions is also likely to be small. There may be an intuitive justification that mobile commerce capability will be of benefit to the multichannel customer experience, but the benefits may be difficult to measure. The average mobile commerce project has a small budget, often in the range of $15,000–$40,000, and that amount does not buy a lot of unique and custom features.

4.4 Implementation Considerations Table 18 lists considerations applicable to implementing m-commerce applications.

Table 18: m-commerce Application Implementation Considerations


Security n/a

Privacy Promotions delivered over mobile phones almost always involve participation in a loyalty program, and all personal




information must be protected.

Loss prevention In some cases, digital coupons are easier to counterfeit, so care must be taken to ensure that coupons are redeemed as the program intended.

SOA SOA enablement is an efficient approach for utilizing only the services one needs.

Cloud computing Because of elastic scaling and virtualization, cloud computing becomes a very cost effective deployment strategy.

Data source The m-commerce site must contain up-to-date inventory, price, and promotional data, but it must also contain fresh product data, assortment taxonomy, and brand assets such as Web content. Inability to provide such content can be one of the prime limitations of an agency approach, due in part to the requirement to work through a third party to keep the site up to date (a key opportunity in working with your platform provider). Many agencies and specialty firms are taking advantage of a retailer’s affiliate or marketplace feeds to power mobile sites, but such feeds represent a limitation, as they typically offer only a subset of a retailer’s total inventory and lack catalog management features.

Store operations By allowing the customer to select and purchase items using a mobile device, m-commerce can have a significant impact on store operations.

Hardware costs n/a


Application integration A number of different standards will be necessary to make m-commerce cost effective.



Customer support Normal customer support activities are required to manage m-commerce (such as keeping the site up, making sure connectivity is maintained).

PLC management In part because m-commerce makes a small revenue contribution, and because most e-commerce teams are




already running very lean, management of the m-commerce site must be tied to a retailer’s current site merchandising and management tools. Management needs are among the most important reasons to consider using a platform solution provider as opposed to a specialty mobile commerce firm. To be sustainable, content management, category management, product content, site content, and order management need to be supported through current Web channel tools.


Payment options Either mobile remote or mobile contactless or both will be necessary to pay for the items purchased.

Application type Retailers must consider whether to adopt the mobile browser-based or mobile application-based approach to implementing m-commerce. Retailers are naturally drawn to the user experience and branding capabilities inherent in mobile applications. For the foreseeable future, however, the prime customer use case for mobile interaction will probably rely on the browser-based approach: using the browser on a smartphone to interact with a retailer’s Web site. Supporting a site optimized for mobile must be the primary m-commerce consideration today. The retailer’s Web site is going to be most cost efficient and easiest to support through the retailer’s e-commerce platform environment. Downloaded applications are important; however, they are not the low hanging fruit on the m-commerce tree. A loyal customer may love your application but is very unlikely to download it on the way to the mall or store.

4.5 Other Key Considerations Key to selecting an approach to m-commerce are the following:

• Easy payment solutions • Integrated order management and customer care • Phone platform support

4.5.1 Easy Payment Solutions Among the most effective tools for enabling m-commerce can be integration with a quick-order system, customer account, or software wallet that enables the consumer to perform transactions quickly and easily using secure and PCI-compliant Web services. Such tools are one of the reasons Apple has had so much success with the iPhone and iPod-Touch, and these tools make it easier for Amazon’s customers to complete transactions using Amazon’s applications on smartphones or Kindle. Significant innovations in mobile payments are anticipated from Apple, Amazon, and PayPal and



new solutions are emerging from the banking and telecom industries. (For more information about payment, see Section 5, “Mobile Payment.”)

4.5.2 Integrated Order Management and Customer Care The m-commerce solution should integrate with the retailer’s e-commerce and direct channel order management and customer care capabilities. Otherwise, costs will increase and customer satisfaction will be significantly affected. Enabling a persistent and “portable” cart that allows a consumer to shop not only over the Web or on a mobile device (and, in the future, through other interfaces) but also over other channels simplifies the customer experience and provides benefits for the consumer. Such a capability also helps retailers measure the multichannel effect of m-commerce. This capability requires a consistent customer authentication capability.

4.6 The Virtual Store One of the goals of this blueprint is to suggest how things can be done in a mobile world. Virtual reality is one area that will lend itself to use of mobile devices, extending the way teenagers shop.

Teenagers shop by first going to a store with their friends. There they spend hours trying on clothes, looking at items, and getting their peers’ approval. They then return with their parents, find the items they chose previously, and get their parents to purchase the items. The virtual world extends this shopping experience beyond the physical store to wherever teenagers are.

Virtual goods represent an over-$2-billion global market. Currently, virtual worlds such as Farmville, YoVille, WeeWorld, and Imeez, are destination sites where people congregate, meet new friends, dress their avatars, and buy virtual goods using virtual currency. These worlds are built around social elements. A game like Farmville (for example) allows players to post their achievements to their Facebook profiles and compete against friends, creating a massive loop.

Companies acting as aggregators bring high-value copyrighted materials into these virtual worlds and social networks to sell. Virtual goods may include clothing, celebrity likenesses, consumer products, jewelry, or fashion items. The presence of these virtual goods, which are available throughout over 80 virtual worlds (some of which reach over 10 million unique visitors each month), may constitute an argument for retailers with recognized brands to license their properties to the virtual worlds. In other words, virtual worlds present a unique marketing opportunity for targeting a highly desirable demographic.

Imagine a player in one of these virtual worlds being able to use a mobile device to “enter” a real store (such as Abercrombie and Fitch) to buy virtual clothing items for an avatar. Or imagine a denizen of Farmville, where over 11 million players congregate each day to manage a virtual farm, entering a Home Depot storefront on the site to buy products for a farm. These virtual products could represent real opportunities, presenting registered consumers with special offers or discounts at stores chosen on the basis of the consumer’s location.



The return from virtual goods is primarily based on a revenue share model. For each virtual good sold, a certain percentage goes to the copyright holder, a certain percentage goes to the distribution platform (for example, Farmville), and a certain percentage goes to an aggregator, if one is involved. (Depending on how expensive the products are, there may also be cases where dollar advances are involved.) This space is a relatively low margin–high volume space, but one that involves a large population, which in turn may create a unique distribution and promotional outlet alongside incremental revenue streams.

Payment for virtual goods can be made by consumers registering their credit cards, using their profiles, or by mobile payments, which is a relatively new method that is implemented by placing a “pay by mobile” button next to the virtual goods. Buyers indicate how many credits they want to purchase, type in their mobile number, press send, and receive a message requesting purchase validation; if they reply to the message in the affirmative, the purchase is added to their mobile phone bill. Those credits are then applied to a user’s profile, making the purchase of virtual goods safe, easier to accomplish than with a credit card, and much faster.

4.7 Parental Approval Another interesting potential for mobile retail involves allowing a parent to manage a teenager’s purchases. For example, a teenager arrives at the checkout stand with a shopping basket. The associate scans the items. The teenager needs parental approval before being allowed to use a mobile device for payment. The teenager therefore sends a request to a parent with the items and amount. The parent responds with an approval of the purchase.


5. MOBILE PAYMENT

Payment for goods or services initiated from a mobile phone or similar device (such as a personal digital assistant or smartphone) is mobile payment. Juniper Research has estimated that the "total value of mobile payments for digital and physical goods, money transfers and NFC (Near Field Communications) transactions will reach almost $630bn by 2014, up from $170bn this year, representing the gross value of all purchases or the value of money being transferred."31 Juniper further forecasts that by 2014, the mobile payments market for physical goods will be $100 billion.

According to the Federal Reserve Bank of Boston, mobile payments generally fall into two categories (Figure 33):

• Mobile remote payments, which are payments made to a retailer who is remote from the mobile consumer

• Mobile contactless payments (also referred to mobile proximity payments), which are payments made to a physical retailer with the consumer present at the POS

Figure 33: Mobile Remote and Mobile Contactless Payments

A wide variety of mobile payment approaches and technologies are currently available in both commercial and pilot deployments. Figure 34 illustrates current mobile payment approaches by technology, payment size, mobile payment type, and typical purchase type.


31 Juniper Research, "Mobile Payments Markets: Strategies & Forecasts 2010-2014.”



Figure 34: Current Mobile Payment Opportunities32

The mobile phone's power and flexibility can enhance the payment process, supporting applications that are coupled with payments (e.g., loyalty, coupons, rewards) or providing the consumer with additional payment choices through mobile wallet software running on the phone. A mobile wallet or a connection to an online wallets allows the consumer to pay for purchases using a wide variety of payment types:

• Network-branded credit and debit cards • Private label credit cards • Prepaid cards • Stored value cards • Automated Clearing House (ACH)/electronic checks • Gift cards • Loyalty points • Coupons

It is important to note that such payments can be implemented as either mobile remote payments or mobile contactless payments. How the payment accounts are provisioned for consumer use and how the consumer accesses the accounts will depend on the mobile payment type and technology.

32 Smart Card Alliance, "Proximity Mobile Payments: Leveraging NFC and the Contactless Payments

Infrastructure," September 2007.



The following sections describe mobile remote payments and mobile contactless payments in more detail. The focus is on mobile payments from a consumer to a retailer, including the use of ACH for mobile payments; the area of person-to-person payments, an emerging mobile payment area, is beyond the scope of the document.

5.1 Mobile Remote Payment Mobile remote payment combines traditional payment methods with the 21st century consumer’s favorite gadget: the mobile phone. It offers retailers the opportunity to sell goods to consumers who are not physically present in a store and delivers the capability to communicate one-on-one, providing an up-sell mechanism.

Mobile remote payment can be an integral part of any retail initiative focusing on reaching consumers outside of a store and therefore must be enabled through one of the three mobile subchannels:

• Messaging • Browser-based • Application-based, including native applications

Consumers switch seamlessly between the three subchannels to match their need to the specific scenario. For instance, a consumer can use messaging technology to order an item displayed on a billboard or a display, and browser-based technology to surf to the retailer’s mobile Internet site. Retailers will also need to provide application-based mobile remote payment options for certain demographics, such as iPhone users. Native applications generally provide a superior user experience to browser-based solutions but reach a smaller audience.

The business motivation for m-commerce is similar to the motivation for e-commerce: retailers need to reach consumers outside the store and provide a simple and convenient method for consumers to purchase goods. The difference between m-commerce and e-commerce is scope: e-commerce is only relevant when the consumer is in front of a computer, while m-commerce is relevant anytime, anywhere. The biggest challenge to deploying a successful m-commerce solution is usability. Retailers must ensure that for all m-commerce initiatives, the shopping experience is optimized for the mobile phone, targeted to the individual consumer, and personalized to the consumer’s preferences.

Because retailers cannot release goods until payment has been made, mobile remote payment is the core of m-commerce. The mobile remote payment solution must optimize the payment experience for the mobile phone. Optimization entails automatically recognizing the consumer and storing the consumer’s payment methods securely, in order to provide a “1-click” experience similar to what is available from Amazon or iTunes. Mobile remote payment supports spontaneous remote sign up, top up, and dynamic switching between client front ends. It can also be integrated with prepaid/stored value accounts, ACH/bank accounts, credit/debit cards, stored credit/debit cards, and premium billing SMS (PSMS).

Practical use cases for mobile remote payments include making purchases from a Web retailer over a mobile phone, paying a retailer who does not have traditional acceptance


capabilities for physical goods, paying a retailer for a purchase of digital goods, or paying at a vending machine. Mobile remote payments can be implemented using either the existing financial payments infrastructure (e.g., for payment to a Web retailer) or a closed-loop mobile payments system.

Mobile remote payments are ideal for use in markets that use person-to-person payments and for under-banked consumers and retailers who are not part of the normal POS acquirer payment process, such as flea market vendors and seasonal outside vendors.

Figure 35 shows the flow for a mobile remote payment stored-value transaction. ARTS Digital Receipt schema can be delivered through any of these subchannels, thus reducing the need to print a physical receipt.

Figure 35: Mobile Remote Payment Stored Value Payment Flow

5.1.1 How Mobile Remote Payment Works Mobile remote payment involves three separate systems: the payment (database) schema, the mobile payment infrastructure, and the client (consumer) front end. The payment schema can be owned by the retailer, provided by an ACH provider, or based on current card or operator infrastructures. The mobile payment infrastructure provides the business logic required to link the front end with the payment schema and allows the consumer to choose a specific method of payment. The front end can be based on messaging, a browser, or an app.




Mobile remote payments can use a variety of mobile phone data channels to initiate a transaction.33 Most mobile phones deployed over the last 5 years are equipped with the functionality to enable remote mobile payments.

Mobile remote payment applications typically employ one of three approaches: SMS messages, a mobile browser that accesses a mobile Web site, or an Internet-based alternative payment provider. These approaches are described in more detail in the following sections.

5.1.1.1 Message-Based Payment

SMS is the technology used most often for mobile payment, mainly because of its ubiquity and ease of use. A consumer sends a payment request to a common short code, or CSC (a telephone number), and a premium charge is applied to the consumer’s phone bill or mobile wallet. Several SMS or MMS exchanges with the retailer are usually required to complete a transaction. The retailer is informed that the payment has succeeded and can then release the item purchased to the consumer. Ordering and confirmation use SMS; delivery of rich content uses MMS or a link through which content is downloaded. MMS can also deliver bar codes to the consumer, which can then be scanned to confirm payment and match the consumer to the item purchased.

The advantages of an SMS implementation are that it requires no investment in a mobile network or user devices and can be completed within a short time. The disadvantage is that users need to memorize a command and a short code (which can vary by transaction), and the level of encryption is defined by the mobile network and therefore typically minimal.

Items purchased using SMS implementations are usually digital, because typically a trusted delivery address has not been given. Commonly purchased items include music, ringtones, and wallpapers.

SMS payments were popular in the early stages of mobile payment. However, they may not provide the best long term option for the following reasons:

1. Poor reliability. Payment can easily fail if messages are lost.

2. Slowness. Sending messages can be slow, and it can take hours for a retailer to receive a payment. Consumers do not want to wait for more than a few seconds.

3. Lack of security. SMS encryption ends at the radio interface, resulting in a plain text message.

4. High costs. Many high costs are associated with this method of payment, including the costs of setting up short codes and paying for the delivery of media, and the customer support required to account for messages that are lost or delayed.

5. Low payout rates. The high costs to operators of running and supporting transactional payments result in payout rates to retailers as low as 30 percent.

33 Candidate data channels use SMS, WAP, or USSD protocols.



6. Low follow-on sales. Once the payment message has been sent and the goods received, there is little else the consumer can do. It is difficult for consumers to remember where something was purchased or how to buy it again, which also makes it difficult to tell a friend.

7. Poor risk management and no protection for consumers or retailers. Operators provide no risk management for purchases made using a mobile billing system, and retailers are not guaranteed to receive their money, despite confirmation from the operator billing systems that the charge has been applied. Consumers receive no purchase protection and must contact the mobile operator to dispute any charge. Merchant settlement typically takes place after the consumer pays their mobile bill, which can delay payment for 30–90 days.

Even with these shortcomings, it is predicted that SMS will maintain its position as the most popular technology for delivering mobile payments through 2012.34

5.1.1.2 Browser-Based Payment

Browser-based payment relies on a consumer using the mobile phone's browser to access a Web page to make a payment. Sensitive data can be communicated securely over SSL. The mobile experience is very similar to the computer-based experience, with the resulting benefits:

1. Follow-on sales. Mobile browser-based payments can lead the consumer back to the retailer's URL, making future access or sharing with friends easier.

2. Familiar user interface. Consumers appreciate the quickness and predictability of the payment pages. In addition, a mobile payment is as easy to make as a PC payment, because the Web pages and processes are familiar.

This approach involves several implementation challenges:

• Gartner estimated in 2008 that mobile Web users account for only 16 percent of mobile users in North America and 28 percent of mobile users in Western Europe.35

• Mobile Internet is perceived by consumers to be expensive. • In research conducted by Nielsen Mobile in April 2008, 23 percent of respondents

cited air-time charges as a reason for not engaging in mobile commerce.36 • Small devices make entering payment information tedious.

5.1.1.3 Payment Using Internet-Based Alternative Payment Providers

Alternative payment providers, such as PayPal, BillMeLater, Amazon, and Secure Vault Payments, were originally developed to facilitate Internet purchases and bill payment. However, the leading alternative payment providers already include mobile purchase capabilities, and it is likely that all providers will support mobile payments in the near

34 Gartner, “Dataquest Insight: Mobile Payment 2007-2012,” April 27, 2009, G00168197. 35 Ibid. 36 Ibid.



future. Adoption rates for alternative payment methods have continued to increase, and industry analysts project an even higher market share in the next 3 years.

The traditional business case arguments for Internet retailers to offer multiple payment types include lower shopping cart abandonment rates, additional sales, and lower transaction costs. These same arguments apply to mobile purchases. The consumer with an Internet-capable phone can browse the Web to shop at optimized Web sites that provide simple navigation for the mobile device, or in some cases, retailers can push product information using SMS. The consumer can select a link that leads to a check-out screen. The payment provider commonly offers a more convenient form of authorization. This authorization usually takes the form of a shorter pass code or account identifier, which is issued to the consumer on request.

Risks can be associated with these types of payments and, as a result, larger ticket items or those that tend to be subject to higher fraud rates may not eligible for alternative payments. In addition, using these payment types for POS purchases can require a consumer to perform several actions to complete the payment request. However, it is likely that as the mobile infrastructure continues to develop, and with the introduction of new roles such as the trusted service manager (TSM), hybrid solutions will be developed that offer consumers several alternative payment options.

5.1.2 Use Case A project currently in progress uses mobile remote payment for consumable goods. The objective of the service is to offer customers the ability to order and pay in one process, such as for a drive-through pickup transaction, for a delivery, or to avoid a line at a POS. Actions such as sign up, top up, and presetting favorite menus/combos can be done using the Web, WAP, or a native application, enabling spontaneous use. (Customers who use WAP, browser-based, or native app transaction processes for ordering and payments have more options available to them than customers who use the SMS-based payment process.)

The service offers coupons and split-tender payments among coupons, as well as stored-value, credit, and debit payments. At signup, the consumer creates a password and selects various payment settings (e.g., additional phone numbers assigned to the account). The customer can initiate the process by using SMS, reloading a WAP page, or launching a native app.

There are no metrics as yet, nor is the messaging text used final. The implementation uses CellPoint Mobile mPoint, and Mobile Enterprise Framework (MEF) technology, coupled with a third party PSP. The system is installed at the client data center and integrated with the business intelligence (BI), enterprise resource planning (ERP), finance, and POS systems.

5.1.2.1 SMS Transaction Process

The SMS-based transaction process is typically appropriate for transactions of $30 or less. A mobile originator (MO) message designating the order and location/delivery address is sent to the common short code. A confirmation mobile terminated (MT) message is returned to the customer, detailing the order, price, and location, and


including a final confirmation request. The customer sends an MO message confirming the order and payment (the word “yes). The transaction is completed and an MT message is sent confirming payment and conveying an estimated pickup/delivery time.

Figure 36 illustrates the exchange.

Figure 36: SMS Transaction Process

The transaction includes the following steps:

1. MO “Plenty” sent to 30100. 2. MT: “Your order for one family size xxxx, 2 sides of xxxx, one small xxx for

delivery has been received. Total is $28.45. Please respond ‘YES’ to this message to complete order and submit payment. Your order ID is xxxxxxxx.”

3. MO: “YES” 4. MT: “Your payment has been received; estimated delivery time for your order is

30 min. Thank you for your business. For questions regarding this order, please respond to this message with ‘HELP’ or click on the link or phone number below. Your transaction ID is xxxxx.”

If the order value exceeds $30, a WAP link is embedded in the MT message. The link loads a secure page on which a password can be entered to verify payment.

5.1.2.2 WAP- or Browser-Based Transaction Process

The WAP- or browser-based transaction process is appropriate for any transaction. An MO message containing the keyword “ORDER” is sent to the common short code. An MT message is returned that contains a WAP link (or a WAP push, depending on the carrier and handset; the iPhone does not support WAP push), which loads a selection page. The customer makes the desired selections and finalizes the order by selecting a payment method and entering a password. The order is confirmed both in the browser and by SMS.

As an alternative, a previously received WAP link or push can be reactivated to initiate ordering.




5.1.2.3 Native Application Transaction Process

The native application transaction process is appropriate for any transaction. The customer launches the application, and selection and payment are performed from within the application. Payment pages are embedded, and no payment data is stored on the device.

5.1.3 Mobile Remote Payment Pilots and Commercial Initiatives Table 19 summarizes examples of commercial mobile payment initiatives.

Table 19: Remote Mobile Payment Pilots and Initiatives

Location Participant Status Description

Sweden SL Commercial Mobile ticketing using PSMS.

Denmark DSB Commercial Mobile ticketing using PSMS and iPhone.

Denmark CellPoint Mobile Commercial Mobile payment using SMS, WAP, and native app, based on PSMS, WAP billing, stored payment card, and stored value account.

Denmark Den Blå Avis (e-Bay) Commercial Mobile payment using PSMS.

Denmark Nordjylland Trafikselskab

Commercial Mobile ticketing using PSMS.

Denmark Saxo.com Commercial m-commerce using WAP, including card-based mobile payment.

Europe DIBS Commercial Mobile payment based on stored payment card accessible using WAP.

Scandinavia EasyPark Commercial Mobile parking using an IVR.

Europe PayEx Commercial Mobile payment based on stored payment card, stored value account, or premium SMS accessible using WAP.

Northern Europe

Siemens Commercial Mobile parking using an IVR.

United States Verrus Commercial Mobile parking using an IVR.

Austria SyBase365 (Paybox) Commercial WAP.

Netherlands RaboBank Pilot SMS.

Norway/UK LUUP Commercial International remittance using SMS; launched in a number of markets, including Germany and Dubai.




United States OboPay Commercial Person-to-person and person-to-merchant using SMS based on a closed-loop stored value account.

India Nokia Commercial Deposit and withdraw money from a network of agents using Nokia Money (based on OboPay technology), with an initial launch in India.

United States Starbucks Pilot Mobilization of prepaid loyalty card for the iPhone using 2-D barcode technology.

Kenya mPesa Commercial Deposit and withdraw money from a network of agents.

Tanzania mPesa Commercial Deposit and withdraw money from a network of agents.

Afghanistan mPesa Commercial Deposit and withdraw money from a network of agents.

Global Apple Commercial App Store/iTunes based on stored payment card.

Spain La Caxia Commercial Mobile ticketing based on payment card using the iPhone.

Italy PosteMobile/Telepark Commercial Mobile parking.

United States PayPal Commercial service

Ability to check accounts and transfer funds to other PayPal accounts (PayPal Mobile and PayPal iPhone application). PayPal Bump application allows iPhone users to transfer funds by "bumping" devices. Primarily a consumer-to-consumer payment method.

United States 1-800-Flowers Application Special selection of best-selling items (from flowers to gourmet foods), streamlined browsing and checkout, full-sized images, complete descriptions, and integration with the customer's address book. Application also delivers exclusive offers for mobile users, secure local wallet and transaction processes, and integration with the customer's account. The app was built for three operating systems: iPhone, Blackberry and Android.*




United States Tommy Hilfiger Application Browse collections, use search and filters to find the latest styles by category, size or price range. Pan and zoom images to view details, add to a shopping cart, and check out with quick-fill capabilities for entering shipping and billing information.*

* Retail Info Systems News, "Four Retailers Win RIS Mobile App of the Year Awards," April 9, 2010, http://www.risnews.com/ME2/dirmod.asp?sid=&nm=&type=MultiPublishing&mod=PublishingTitles&mid=2E3DABA5396D4649BABC55BEADF2F8FD&tier=4&id=9E8F423FE882470CBB8D24F7BFE6D92F

5.1.4 Implementation Strategies Mobile remote payment options are generally a core component of the m-commerce portion of a retailer’s mobile strategy. m-commerce optimizes services for the mobile phone and extends accessibility to a retailer’s goods, as consumers typically have their mobile phones within easy reach. Like e-commerce, m-commerce focuses on allowing a consumer to purchase goods from a retailer when the consumer is not in the retailer’s store. And like e-commerce initiatives, m-commerce initiatives must be properly integrated into the retailer’s back-office environment, to facilitate complete visibility into all payment transactions.

m-commerce (and mobile remote payment) offerings should therefore be launched on a centralized platform dedicated to handling, aggregating, and abstracting all communication in the mobile channel. This approach will not only bring mobile applications to market quickly, it will also ensure that m-commerce applications in particular benefit from the central mobile platform’s integration with core back-office systems.

For example, m-commerce applications developed for each of the mobile channel’s three subchannels (messaging, browser-based, and applications), which are three very different operating environments based on a central mobile platform, can all benefit from the central platform’s integration with core systems such as POS, finance, and CRM. This approach means that each application will only need to integrate with the back-office systems specific to that particular application, thereby reducing development time and lowering the total cost of ownership.

5.1.4.1 Integration Points

It is feasible to base mobile applications on a centralized infrastructure that handles common tasks across the subchannels. For m-commerce applications in particular, the central platform should include a mobile remote payment module that can handle common payment-related operations, including:

• Connecting to the retailer’s payment service provider for card-based payments • Connecting to the ACH clearing systems for ACH transactions • Connecting to the retailer’s loyalty system for stored-value account-based

payments or offering its own stored value account


The central mobile platform should ensure compliance with regulatory requirements (such as the Payment Card Industry Data Security Standard [PCI DSS]) for each of these payment methods to minimize the PCI overhead. It is not reasonable to expect each of a retailer’s m-commerce applications to handle PCI compliance. Figure 37 illustrates the integration points for mobile applications developed for the different subchannels.

Figure 37: Integration of Mobile Applications Using Different Subchannels with the

Retailer's Back Office

As illustrated in Figure 37, the central mobile infrastructure acts as an intermediary between the different subchannels in the mobile channel and the mobile applications. The mobile infrastructure receives all requests from the different clients and converts them to a simplified format before forwarding each request to the correct application. Additionally, the central infrastructure is integrated with relevant parts of the retailer’s back office, such as CRM or finance systems, providing complete visibility into all transactions. Finally, the mobile infrastructure handles the connection to the retailer’s PSP, providing m-commerce applications with a secure, PCI-compliant standard approach to handling mobile remote payment. The m-commerce applications integrate with other relevant parts of the retailer’s back office, probably through an enterprise service bus (ESB) (as illustrated in Figure 37) to retrieve and update relevant data. The back office systems with which m-commerce applications will most likely be integrated



include supply chain management systems (to update stock availability), CRM systems (to update customer information), and ERP systems (to retrieve product information).

The mobile infrastructure must be able to handle ESB operations for legacy environments when there is no centralized service bus, as illustrated in Figure 38.

Figure 38: Mobile Infrastructure that Handles ESB Operations

5.1.4.2 Centralized Mobile Infrastructure

The centralized mobile infrastructure must handle a number of tasks common to communication in the mobile channel. The tasks listed below exemplify the wide range of requirements:

• Mobile connectivity for sending and receiving SMS or MMS messages with automatic failover between carrier connections to provide full redundancy, either through an aggregator or direct MNO connectivity (Figure 39).



Figure 39: Mobile Infrastructure Managing MNO Connectivity

• Routing of incoming and outgoing requests across the different subchannels. Routing can be based on a number of different variables, including keyword, carrier, sender, URL, and operation.

• Subchannel cross enablement to enable the transition between mobile subchannels. In other words, if a consumer initiates contact using a messaging service, the infrastructure should be able to leverage available browser-based or native-app based services or both. Furthermore, the infrastructure must be able to “down-grade” in situations where the MNO network loses data service, defaulting to messaging as the lowest common denominator

• Storing mobile device characteristics (in a device repository), such as supported image, sound, and markup formats, supported J2ME version, and CLDC/MIDP versions.

• Capability detection for ensuring that the device repository is automatically updated with information for new device models.

• Optimizing capabilities for tasks such as automatically preloading and resizing images and in-lining CSS files.

• Cache control that provides automatic support for HTTP caching features to ensure that the same image does not need to be fetched multiple times.

• Life-cycle management to ensure that the consumer downloads the correct mobile application.

• Version control so that the infrastructure can serve as a mobile configuration management database (mCMDB) that stores different versions of each application and associates them with the supported devices.




• Complete audit trail tracking across all mobile applications, for both messaging and data communication.

• Billing to associate transactions with the relevant application, thereby providing finance with a complete traffic report organized by each of the retailer’s departments.

• Statistic recording, to further increase the level of detail by associating transactions with a specific application, carrier, and price.

• Transformation between different data formats to simplify integration with the retail environment.

• Integration into the retail environment, including integration into security and surveillance systems as well as standard back-office applications such as CRM and finance.

To support mobile remote payment in particular, the platform should support several of the following features:

• Carrier billing, such as premium SMS or WAP billing, through integration with the wireless carrier’s billing systems.

• Payment card-based billing, to allow the retailer to benefit from the payment infrastructure that is currently commonly used and trusted for e-commerce.

• Stored payment cards, to ensure that an optimal user experience can be offered and to enable familiar e-commerce features such as one-click shopping.

• Stored value accounts, to offer retailers improved cash flow by allowing consumers to create prepaid accounts as an integrated part of the payment flow.

• Loyalty points, to allow retailers to provide returning customers with a powerful incentive to make additional purchases.

• Integration with legacy retail systems such as loyalty systems or retailer-branded card systems.

5.2 Mobile Contactless Payment Mobile contactless payment leverages the financial industry’s contactless payment infrastructure and NFC technology. The NFC-enabled phone is provisioned with a version of the payment application and account offered by the consumer’s payment account issuer. To pay, the consumer simply brings the phone to within a few inches of the POS system. The payment account information is sent over a radio frequency from the phone to the POS, and the transaction occurs. The process is the same as that used by the contactless credit and debit cards currently being deployed.

Mobile contactless payments can be made at both attended POS locations (such as stores) and unattended locations (such as vending machines). NFC-enabled mobile contactless payment uses the existing payments processing infrastructure. There is no need to set up payment processes or accounts with a third party, and the mobile contactless payment data is linked directly to a consumer payment account from a trusted issuer. Payment processing remains unchanged, with the payment data being sent though existing networks and following existing arrangements for the payment type used.


5.2.1 Payment Options and Enhancements Implementing mobile contactless payment by leveraging NFC-enabled phones offers great potential for new payment options.

To encourage widespread use of the NFC phone as a payment device, the phone can be equipped with a mobile wallet. A mobile wallet allows a consumer to download, organize, and use multiple payment accounts and cards—either bank- or merchant-branded—from the mobile phone. Consumers carry their payment choices on the phone and choose a payment option from the mobile wallet at the time of purchase, just as they do using a physical wallet or purse. Mobile wallet software can be preloaded on the phone or downloaded from an application store or from a bank-recommended site. Figure 40 illustrates a mobile wallet.

Figure 40: Mobile Phone with Wallet Software

The payment accounts and cards on an NFC phone can be thought of as “soft cards." The images of the soft cards displayed by the wallet software can incorporate the card issuer’s branded look and feel, as on a plastic card. The images can be displayed at the time of a purchase, to allow consumers to choose a payment account or card using the mobile wallet.

A mobile wallet gives consumers flexibility in choosing a payment option and can support a variety of use cases. For example:

• The wallet can be set up with a consumer-defined default payment card that is used unless the consumer selects a different card. To use the default card to complete a transaction, the consumer simply holds the mobile phone close to a contactless POS terminal.

• The wallet can be set up to support issuer-defined rules for when to require additional consumer authentication (e.g., a pass code). The requirement for additional consumer authentication can be determined transaction by transaction,




using the two-way communication capability between the POS and the mobile phone.

• The wallet can be set up to allow the POS terminal to prompt the wallet to use a specific payment card in the wallet (e.g., a store-branded card). The consumer would still have to confirm that selection.

The payment application, issuer’s secret key, and consumer's financial information, such as an account number and expiration date, are stored in the NFC phone's secure element (which provides hardware-based cryptography for data security37). Depending on the implementation, the secure element can be:

• A secure smart card chip (similar to the one used for contactless payment cards or EMV contact smart cards)

• The memory of the phone’s subscriber identity module (SIM), enhanced with further security to meet payment industry requirements

• An add-on accessory, such as a sticker, microSD card, or phone sleeve Location of the secure element in a phone is still being debated by the financial industry and may vary by mobile network type (SIM-based vs. non-SIM based).38 Regardless, the secure element is certified by the payment brands and ensures that the consumer's payment account information and issuer data are stored securely and can only be used for authorized applications. Vendors are starting to offer SIMs with additional cryptographic capability that allow for secure storage of not only the consumer's payment account information, but also the branded contactless payment applications being supported by the financial industry (such as MasterCard PayPass or Visa payWave).

Figure 41 is an example of an NFC-enabled mobile phone provisioned with wallet software and a secure element.

37 While the secure element may vary by mobile network, in most cases it will be implemented as a smart

card chip. Smart or "chip" cards are used globally in payments, identity, security, and telecommunications applications. The subscriber identity module in a GSM phone is a smart card, and the EMV ("chip and PIN") credit and debit cards being issued in Europe, Asia, Latin America, and Canada are smart cards. Smart cards have built-in tamper resistance and the unique ability to store large amounts of data securely, carry out their own on-card functions (e.g., encryption and digital signature), and interact intelligently with a smart card reader.

38 "Alternatives for Banks to Offer Secure Mobile Payments," Mobey Forum white paper, March 2010, http://www.mobeyforum.org/?page=white-paper-alternatives-for-banks


Figure 41: Example of NFC-Enabled Mobile Phone Provisioned with Wallet and

Secure Element

Consumers could request that soft cards be issued OTA by clicking a few buttons on their NFC-enabled phones and identifying themselves to the issuers as the correct account holder. The soft cards would then be downloaded over the mobile network from the card issuer, facilitated by a TSM, and stored in the mobile phone's secure element. Enhanced OTA management capabilities could enable issuers to activate cards or cancel lost, stolen, or over-limit cards. (Section 5.2.3 provides additional details on the mobile contactless payment flow and the participants in a payment transaction.)

Pilots implementing mobile contactless payment have focused on implementing credit and debit card payment that leverages the current contactless payment acceptance infrastructure. However, mobile contactless payment is not limited to this infrastructure. For example, an NFC pilot, conducted in the San Francisco Bay area in January–May 2008 by Sprint, First Data, and ViVOtech, tested an NFC phone wallet loaded with a BART transit card and a Jack in the Box prepaid card. Both coexisted in the wallet and could be used to ride BART trains and pay for meals at Jack in the Box restaurants. Figure 42 illustrates the wallet used in this trial.



Figure 42: NFC Phone Wallet Used in BART/Jack in the Box Pilot Program

5.2.2 Retailer Advantages NFC solves one of the most critical problems retailers face today with magnetic stripe-based retailer cards: wallet share. Once a retailer motivates its customers to download a retailer-branded card to their NFC phones, customers will always carry that card with their phone. Based on early NFC field trials and multiyear data from Japan (where 67 percent of all mobile subscribers own payment-capable phones39), customers tend to use their mobile phones to pay for purchases more often than a physical wallet. Moreover, NFC phones can offer consumers more choice and convenience in selecting different payment methods.

In addition, NFC-enabled phones work with the existing contactless POS infrastructure, and transactions are treated in the same way as transactions that use contactless credit and debit cards. However, greater opportunities are available to the retailer when NFC technology is added to the contactless POS reader. NFC enables true two-way interaction, allowing the POS terminal to “send back” information to the mobile handset. Retailers can use this information for a variety of new applications—for example, to return or redeem coupons, update loyalty point totals that can then be displayed on the phone, target promotions to individual consumer tastes, and send receipts. The business case for eliminating or reducing paper versions of coupons and receipts may be enough to justify any additional costs to the reader hardware. The retailer also sees value from perceived eco-friendly practices, avoiding paper-based solutions.

5.2.3 Mobile Payments Ecosystem40 Mobile contactless transactions require collaboration among payment account issuers, the MNO, and other stakeholders in the mobile payments ecosystem, including a trusted third party who manages the deployment of mobile applications (the TSM).

5.2.3.1 Information Flow

Figure 43 illustrates the information flow when an issuer provisions a consumer’s payment account information to an NFC-enabled phone and the consumer uses the phone


39 Impress, "K-tai White Paper 2010." 40 Smart Card Alliance, "Security of Proximity Mobile Payments," May 2009


to make a mobile contactless payment. The solid arrows indicate payment-related transactions; the hollow arrows indicate actions related to consumer personalization. A consumer can choose to download wallet software to create a better user interface for managing and using payment options.

As the figure shows, the payment account issuer prepares the account data and sends the payment account information to a TSM. The TSM delivers the consumer's payment account information OTA through the mobile network to the secure element in the mobile phone. Once the payment account data is stored in the phone, the consumer uses the phone for payment at any retailer who accepts contactless payments. Payments are processed over established payment networks, with credits and debits to the appropriate accounts.

Figure 43: Mobile Contactless Transactions: Provisioning and Purchase

5.2.3.2 Transaction Participants

Each party to the transaction has specific responsibilities, described here generically. Payment types can include a variety of payment methods, including network-branded credit and debit cards, private label credit cards, prepaid cards, gift cards, loyalty points, coupons, and ACH/electronic checks.

Payment Account Issuer The payment account issuer provides a consumer's payment account information to a TSM for provisioning in the consumer's phone. The issuer determines what procedure is used to activate the account by the consumer.

Trusted Service Manager A TSM can offer a single point of contact with one or more mobile operators for issuers and retailers who want to provide a payment or other application to customers with NFC-enabled mobile phones. TSMs can provide life-cycle management services




(provisioning/deprovisioning) for NFC applications managed OTA to the mobile phone and also aggregate, send, and load personal consumer data OTA. (This role parallels the role played by card personalization service providers for credit and debit payment cards.) The TSM can be a trusted third party, financial institution, MNO, or some combination of these players. Because the TSM does not participate in processing the payment transaction, existing payment processing business models can be maintained.

For branded credit and debit transactions, both MasterCard and Visa have strict requirements for entities that wish to act as TSMs. All TSMs are subject to security audits before being authorized to process the delivery of payment card data to a mobile device. An important TSM responsibility is to communicate payment information from the financial institution to the consumer's mobile device securely. Without proper key management and security, the entire system can be exposed to attack and systemic fraud.

Mobile Network Operator The MNO can assume multiple functions and responsibilities in the mobile payment ecosystem. One of the functions is to make approved NFC-enabled handsets available to the MNO’s subscriber base. The MNO assumes the role of secure element issuer, in the case of the UICC secure element, and can also assume the role of secure element issuer for other secure element form factors.

As the secure element issuer, the MNO assumes the responsibility for ensuring the security of the secure element, a function it can delegate to the TSM assigned to manage the secure element. This security responsibility also involves the communications channel between the TSM and the secure element. If the MNO has chosen to fulfill the role of the TSM, it also implements the TSM functions.

Retailers Consumers pay with their NFC-enabled mobile phones at a retailer's contactless POS. The information is communicated over a radio frequency from the phone to the POS, using ISO/IEC standard 14443, and then processed through the appropriate payments processing network for the type of payment chosen (e.g., credit, debit, gift card, ACH).

5.2.4 Use Cases for Mobile Contactless Payment During the last two decades, retailers have struggled with the wallet share represented by their cards. Customers simply do not carry all of the plastic cards issued to them. They have learned to carry only the payment cards that they can use at a variety of retailer locations. Thus, the wallet-share war has mostly been won by open-loop branded payment cards as opposed to closed-loop retailer-branded cards.

The NFC-enabled mobile phone can change the consumer's wallet. The ability to reduce transaction fees by offering alternative (nonbranded) payment options using NFC mobile contactless payment may represent a business case for retailers. Various payment options can be carried in NFC-enabled mobile phones to help retailers reduce their transaction costs, including:

• Alternate payment options, including ACH and prepaid cards • Private label credit, prepaid, or gift cards



• Cobranded retailer cards • PIN debit cards • Lower fee-based branded cards

Retailers may therefore be able to drive higher acceptance rates of their preferred payment options than is possible with plastic cards. Once a retailer-preferred payment card is issued to a customer's NFC-enabled mobile phone, the customer always carries that payment card with the phone.

NFC mobile contactless payment can deliver additional value propositions to retailers:

• Reduced paper costs and printer maintenance costs; digital receipts and coupons are delivered to the mobile phone electronically

• Reduced operational costs and sales loss; time in line is decreased because the retailer offers a simpler way to pay

• Increased customer participation in loyalty programs, especially if such programs are integrated with the retailer's preferred payment card

• Stronger one-on-one marketing and promotion programs driven through integration with a preferred payment card

• Higher sales and improved customer service driven by offering innovative merchandising programs through the mobile phone

All of these value propositions will enrich the business case beyond transaction cost savings for retailers who accept payments from NFC-enabled mobile phones at the POS.

5.2.5 Mobile Contactless Payments Pilots and Commercial Initiatives Table 20 lists selected NFC mobile contactless payments pilot programs.

Table 20: NFC Mobile Contactless Payments: Selected Pilots41


United States Sheetz, Wright Express, ViVOtech

Pilot completed in May 2009

Drivers used Sheetz Fleet Business Advantage Card loaded onto NFC-enabled mobile phones to make fuel and convenience store purchases at Sheetz locations. http://www.progressivegrocer.com/progressivegrocer/content_display/supermarket-industry-news/e3i7ee3d207fbb1fda3276468ecc9b11b2b

41 NFC and Contactless Mobile Projects Resource, http://www.nfctimes.com/nfc-projects, lists 118

pilot projects

http://www.progressivegrocer.com/progressivegrocer/content_display/supermarket-industry-news/e3i7ee3d207fbb1fda3276468ecc9b11b2b






United States (Washington)

US Bank, McDonald's, Jack in the Box, 7-Eleven, Vending at Gonzaga University, Venyon, MasterCard, Nokia (6131)

Pilot completed; launched in Jan. 2008

6-month trial with US Bank associates and students at Gonzaga University using MasterCard PayPass payment application in NFC-enabled phone http://www.nfctimes.com/project/us-us-bank-tests-paypass

United States (California)

Sprint, BART, Jack in the Box, ViVOtech, Samsung, Cubic, Western Union, NXP, Acumen Transit, BAH, First Data


4-month NFC pilot. Consumers could use stored value accounts to pay at Jack in the Box, pay transit fares, and tap smart posters to get special offers and directions to the nearest Jack in the Box. http://www.nfctimes.com/project/us-multiapp-trial-involves-transit-agency-fast-food-restaurant

United States (Mississippi, Tennessee)

Cellular South, Bank of America, MasterCard, ViVOtech, Obopay, Kyocera

Pilot completed; launched in June 2007

3-month NFC pilot with 50 retailers; MasterCard PayPass application on NFC-enabled mobile phone. http://www.nfctimes.com/project/usa-small-telco-handset-maker-trial-nfc

United States (New York)

Cingular, Citi, G&D, Venyon, ViVOtech, MasterCard, NXP, Nokia


6-month pilot with MasterCard PayPass application on NFC-enabled mobile phone. Consumers could use phone at contactless-enabled retailers and on the NYC Transit subway. http://www.nfctimes.com/project/us-citi-tests-tapping-subway-fares-nyc Citi is reported to be launching a sticker-based product in 2010.

United States First Data, Tyfone, Visa, DeviceFidelity

Prepilot Organizations are announcing support for NFC microSD cards to enable mobile contactless payment prior to NFC-enabled phones being available.

• First Data announced plans to offer Tyfone's NFC microSD cards for mobile contactless payments. http://www.nearfieldcommunicationsworld.com/2010/03/16/33237/first-data-to-offer-tyfones-sidetap-nfc-microsd-cards-will-run-first-trials-in-us-from-mid-2010/

• Visa and DeviceFidelity announced plans to offer the Visa PayWave contactless payment with DeviceFidelity's NFC microSD card. http://www.theinquirer.net/inquirer/news/1592422/visa-sticks-nfc-microsd-card.

http://www.nfctimes.com/project/us-us-bank-tests-paypass

http://www.nfctimes.com/project/us-multiapp-trial-involves-transit-agency-fast-food-restaurant

http://www.nfctimes.com/project/us-multiapp-trial-involves-transit-agency-fast-food-restaurant

http://www.nfctimes.com/project/usa-small-telco-handset-maker-trial-nfc

http://www.nfctimes.com/project/usa-small-telco-handset-maker-trial-nfc

http://www.nfctimes.com/project/us-citi-tests-tapping-subway-fares-nyc

http://www.nfctimes.com/project/us-citi-tests-tapping-subway-fares-nyc

http://www.nearfieldcommunicationsworld.com/2010/03/16/33237/first-data-to-offer-tyfones-sidetap-nfc-microsd-cards-will-run-first-trials-in-us-from-mid-2010/




http://www.theinquirer.net/inquirer/news/1592422/visa-sticks-nfc-microsd-card

http://www.theinquirer.net/inquirer/news/1592422/visa-sticks-nfc-microsd-card




Canada Rogers, Royal Bank of Canada, Visa, Gemalto, Motorola

Pilot completed, Sept. 2009

Pilot with RBC, Visa, and Rogers using SIM-based NFC mobile phones with Visa payWave credit card application. Consumers made everyday purchases at local merchants. http://www.nfctimes.com/project/canada-royal-bank-canada-and-rogers-wireless-test-paywave

Canada Bank of Montreal, MasterCard, G&D, INSIDE Contactless, RIM Blackberry

Pilot in process; launched in Nov. 2009

Pilot with BMO, MasterCard, and RIM associates using contactless PayPass stickers attached to a Blackberry smartphone. Users can pay with the sticker and get confirmation e-mail messages for each transaction sent to their phones. http://www.nfctimes.com/project/canada-mastercard-and-bank-tests-paypass-sticker-blackberrys

Canada Bell Canada, Rogers, Telus, EnStream, Peoples Trust Bank, MasterCard, G&D, INSIDE Contactless

Pilot in process; launched in Feb. 2010

Pilot using contactless stickers that are linked to the prepaid Zoompass mobile cash account. Subscribers can make purchases at any contactless-enabled retailer. http://www.nfctimes.com/project/canada-telco-joint-venture-trials-contactless-stickers http://blog.zoompass.com/2010/03/03/the-zoompass-tag-and-your-mobile-phone-all-you-need-to-make-purchases/

UK O2, Transport for London, Barclaycard, Visa Europe, TranSys, Nokia, AEG

Pilot completed in May 2008

Consumers were able to use Oyster and Visa payWave on a Nokia 6131 NFC-enabled mobile phone to pay for public transport and retail purchases. http://www.mobilemarketingmagazine.co.uk/content/o2-launches-major-london-nfc-trial http://www.mobilemarketingmagazine.co.uk/content/o2-hails-nfc-trial-success

Spain Telefonica, Visa, La Caixa, Samsung

Pilot announced in Feb. 2010

6-month trial with consumers able to use their NFC-enabled phones to make purchases at 500 shops in Sitges, with plans to extend the trial to Barcelona. http://www.nearfieldcommunicationsworld.com/2010/02/11/32661/telefonica-announces-nfc-trial-in-sitges-spain/

Colombia Redeban Multicolor, Comcel

Pilot announced in May 2010

Pilot to be launched in the first quarter of 2011 in Bogota, with POS terminals accepting PayPass transactions from NFC-enabled mobile phones. http://www.nfctimes.com/news/paypass-nfc-trial-planned-colombia

http://www.nfctimes.com/project/canada-royal-bank-canada-and-rogers-wireless-test-paywave

http://www.nfctimes.com/project/canada-royal-bank-canada-and-rogers-wireless-test-paywave

http://www.nfctimes.com/project/canada-mastercard-and-bank-tests-paypass-sticker-blackberrys

http://www.nfctimes.com/project/canada-mastercard-and-bank-tests-paypass-sticker-blackberrys

http://www.nfctimes.com/project/canada-telco-joint-venture-trials-contactless-stickers

http://www.nfctimes.com/project/canada-telco-joint-venture-trials-contactless-stickers

http://blog.zoompass.com/2010/03/03/the-zoompass-tag-and-your-mobile-phone-all-you-need-to-make-purchases/

http://blog.zoompass.com/2010/03/03/the-zoompass-tag-and-your-mobile-phone-all-you-need-to-make-purchases/

http://www.mobilemarketingmagazine.co.uk/content/o2-launches-major-londo

http://www.mobilemarketingmagazine.co.uk/content/o2-launches-major-londo

http://www.mobilemarketingmagazine.co.uk/content/o2-hails-nfc-trial-succ

http://www.mobilemarketingmagazine.co.uk/content/o2-hails-nfc-trial-succ

http://www.nearfieldcommunicationsworld.com/2010/02/11/32661/telefonica-announces-nfc-trial-in-sitges-spain/

http://www.nearfieldcommunicationsworld.com/2010/02/11/32661/telefonica-announces-nfc-trial-in-sitges-spain/

http://www.nfctimes.com/news/paypass-nfc-trial-planned-colombia

http://www.nfctimes.com/news/paypass-nfc-trial-planned-colombia




Australia Telstra, National Australia Bank, Visa

Pilot completed in Nov. 2008

3-month pilot with consumers able to pay with NFC-enabled mobile phones. http://www.nearfieldcommunicationsworld.com/2009/02/24/3780/australias-first-nfc-trial-hailed-a-success/

Singapore SingTel, NETS, ViVOtech, Nokia, NXP

Pilot completed; launched July 2008

Subscribers used NFC-enabled mobile phones to pay with NETS e-purse at contactless enabled retailers, download coupons from smart posters and redeem them at the POS, and top up mNETS cash cards. http://www.nfctimes.com/project/singapore-singtel-trial-enables-ota-reloads-nets-purse

India Citi, Vodafone Essar, ViVOtech, Nokia, MasterCard

Pilot completed; launched in June 2009

Consumers used NFC-enabled mobile phones to pay with MasterCard PayPass application and redeemed mobile coupons downloaded from smart posters. http://www.nfctimes.com/project/citi-tap-and-pay

Japan KDDI, Orico, Jibun Bank, Credit Saison, Aiwai Card Services, Toho Cinemas, ANA, Japan Airlines, Toyota Motor, Gemalto, Toshiba, MasterCard Worldwide, Hitachi, plus others

Pilot launched in May 2010

8-month trial with consumers able to use NFC-enabled mobile phones for a range of applications, including retail payment, cinema ticketing, and mobile ID. http://www.nfctimes.com/project/japan-kddi-launch-multiapplication-nfc-trial-felica-country

Table 21 lists commercial deployments of NFC mobile contactless technology.

Table 21: NFC Mobile Contactless Payments: Commercial Deployments

Location Participants Description

Ireland Zapa, Irish retailers (Insomnia, Munchies, Eddie Rockets, Londis)

Subscribers use NFC stickers to download/redeem coupons, collect/use loyalty points, pay with prepaid card. Zapa also offers mobile phone application for checking account balances. http://www.zapatechnology.com

Malaysia Maxis, Visa, Maybank

This was the first commercial launch using the NFC phone with an embedded secure element. http://www.maxis.com.my/mmc/index.asp?fuseaction=press.view&recID=373

http://www.nearfieldcommunicationsworld.com/2009/02/24/3780/australias-first-nfc-trial-hailed-a-success/

http://www.nearfieldcommunicationsworld.com/2009/02/24/3780/australias-first-nfc-trial-hailed-a-success/

http://www.nfctimes.com/project/singapore-singtel-trial-enables-ota-reloads-nets-purse

http://www.nfctimes.com/project/singapore-singtel-trial-enables-ota-reloads-nets-purse

http://www.nfctimes.com/project/citi-tap-and-pay

http://www.nfctimes.com/project/japan-kddi-launch-multiapplication-nfc-trial-felica-country

http://www.nfctimes.com/project/japan-kddi-launch-multiapplication-nfc-trial-felica-country

http://www.zapatechnology.com/

http://www.maxis.com.my/mmc/index.asp?fuseaction=press.view&recID=373

http://www.maxis.com.my/mmc/index.asp?fuseaction=press.view&recID=373




France Orange-France, SFR, Bouyges Telecom, NRJ Mobile, BNP Paribas, Credit Mutuel, Veolia, Samsung, Gemalto, Oberthur

Nice-based commercial service announced in May 2010 with four mobile operators and multiple banks offering NFC mobile contactless payments for both transit and retail purchases. http://www.nfctimes.com/news/french-make-it-official-nice-nfc-launch

Table 22 lists mobile contactless payment commercial deployments in Asia. The projects in Table 22 are based on contactless devices that are not considered full-featured NFC devices (they do not implement all three of the communication technologies mandated by the NFC Forum). However, the technology used in these projects is a subset of the technology promoted by the NFC Forum, and the use cases and applications are essentially the same as a fully NFC-enabled implementation.

Table 22: Other Mobile Contactless Payments: Commercial Deployments


Japan Many: NTT Docomo, Suica, Edy, Nanaco, JR East, KDDI, JCB, Softbank, Willcom

17 million subscribers use Felica-capable mobile phones for contactless payment in railways or stores, with over 600,000 stores accepting payment. Payment is from contactless e-purse accounts (Suica, Edy, Nanaco, iD). Adoption has been fast, with over 60 million phones in the market in 5 years. http://www.itif.org/files/2009-mobile-payments.pdf

S. Korea Many: SK Telecom, KSSC/T-money, LG Telecom, KT

63% of citizens have made payments using mobile phones; 3.5 million citizens use mobile phones for contactless payments. More than 1 million subscribers use T-money (electronic cash). http://www.itif.org/files/2009-mobile-payments.pdf

5.2.6 Implementation Strategies Retailers who are planning to implement mobile payment must consider certain key issues. The mobile payment approach should fit into the retailer's overall mobile strategy and support the retailer’s key business drivers. In addition, the approach should be forward-looking, to allow for expansion of mobile programs as mobile payment becomes mainstream. Mobile remote payment and mobile contactless payment require different considerations.

5.2.6.1 Mobile Contactless Payment

Mobile contactless payment provides an appropriate solution when the primary business driver for accepting mobile payment at the physical POS is one of the following:

• Enable and drive acceptance of alternative payment types • Provide better customer experience and convenience in making payments

http://www.nfctimes.com/news/french-make-it-official-nice-nfc-launch

http://www.nfctimes.com/news/french-make-it-official-nice-nfc-launch

http://www.itif.org/files/2009-mobile-payments.pdf

http://www.itif.org/files/2009-mobile-payments.pdf



• Move lines faster • Deliver enhanced customer service by providing personalized coupons, loyalty

points, and receipts to the consumer’s phone • Increase basket size, reduce cost of sales, or both • Enable in-store mobile merchandising and product cross-selling

Key considerations for mobile contactless payment implementation include:

1. Whether the retailer currently accepts contactless credit/debit/prepaid payments.

2. Whether a contactless-payments POS infrastructure is currently in place.

Contactless POS terminals that currently accept branded credit/debit/prepaid contactless cards also accept credit/debit/prepaid contactless payment from NFC-enabled mobile devices, without requiring any software or hardware changes.

3. Whether there are opportunities for the retailer to use the current contactless POS solution to accept retailer-branded credit, prepaid, or gift cards (also known as closed-loop payments), or loyalty cards.

Branded contactless debit cards and coupons/offers can be supported by NFC-enabled mobile devices.

4. Whether progress is being made within the payments and mobile industries in offering NFC-enabled phones and developing the business model for TSMs who provide the infrastructure to download payment applications securely to the consumer's mobile device (see Section 5.2.8).

5. Whether the retailer has branded credit- or gift-card programs that could be ported to NFC-enabled mobile phones.

Developing partnerships to move these programs forward can help retailers influence consumers to use these payment types and realize early benefits from mobile contactless payments. Retailers can consider offering these cards on NFC-compatible contactless stickers and begin enabling mobile contactless transactions for consumers before NFC-enabled mobile phones are commercially available.

6. Whether other consumer-oriented applications are business drivers for mobile (for example, coupons or loyalty programs).

Retailer ROI can be enhanced by considering incremental sales and cost savings that can be driven by demand generation programs.

7. Whether the merchant acquirer offers NFC-compatible contactless POS terminals and can provide assistance in implementing mobile contactless payments.

8. Whether hardware or software changes are needed at the POS to support mobile contactless payments.

A contactless reader or integrated contactless POS terminal may be required. Retailers must also consider reader placement, both to drive awareness and to make it easy for consumers to use their mobile phones for payment. Consumer



informational material (e.g., displays that indicate merchant acceptance) may also be valuable at the POS to promote consumer use of mobile contactless payments.

9. Whether training is required for sales clerks to support the use of phones for payment.

5.2.6.2 Store Requirements to Support Mobile Contactless Payments

One basic requirement for accepting mobile contactless payments is installation of a contactless payment acceptance infrastructure that, at a minimum, accepts branded (e.g., American Express, Discover, MasterCard, Visa) contactless credit/debit/prepaid cards. Retailers should also be sure that the contactless payment solution they select can accept the retailers’ own branded or other closed-loop credit, prepaid, gift, and loyalty cards and support PIN-enabled ATM/check/debit cards, coupons, vouchers, digital receipts, and club/membership validations. Even if support for these applications is not currently required, the contactless POS solution should be capable of supporting these applications in the future by accepting new software downloads.

Retailers should also consider several additional implications of supporting consumers who use the mobile phone instead of a card as the payment device:

• Most people can generally access their phones more quickly than they can access a wallet storing a card.

• Consumers typically have to juggle less material at the POS to complete payment (i.e., physical wallet, separate payment and loyalty cards, sometimes attached to a keychain, multiple coupons, split tender transactions requiring multiple payment cards).

• Paper receipts are unnecessary. • Consumers are accustomed to paying with a card and can do so fairly

automatically, with little thought. Using a mobile phone to make a payment may initially take additional thought, depending on how the application is implemented and the number of keystrokes required (i.e., entering a password to unlock the phone wallet or payment card).

• Combining payment, loyalty, and coupon redemption in one transaction may require additional software at the POS and additional interaction with the mobile device. (This additional interaction will cease to be an issue as the consumer becomes more familiar with mobile payment and the applications become more streamlined.)

Taking the above points into consideration, retailer management should address the following requirements:

• Place the contactless reader on the counter so that it is easily seen as consumers approach the POS. Consumers can then begin to access their mobile phones earlier.

• Train cashiers so that they understand the processes for accepting contactless payments, the authorization processes (if required), and what to do if a transaction fails.



• Perform research, evaluation, and related efforts to employ the most seamless contactless integration solutions and hardware that also allow for easy future upgrades.

• Give consideration to minimizing what is required to initiate the payment application, making it as simple as possible for the consumer.

• Plan properly to incorporate loyalty or other CRM programs into a contactless payment rollout as part of a phased approach.

5.2.7 Phased Approach for Implementing Mobile Contactless Payments Although a mobile contactless payment program could initially offer multiple features and services, the consumer’s ability to change behavior and comprehend and take advantage of a full-featured contactless experience immediately may be a limiting factor. In addition, launching a full-featured solution right off the bat can be complex. A carefully phased approach can fine-tune features and interactions as they are introduced and used. Adopting a phased approach, however, does not negate the need for good planning at the beginning to reduce the likelihood that unexpected issues will arise.

Retailers may decide that the following phased implementation approach addresses their business needs:

• Phase 1: Branded contactless and mobile payments • Phase 2: Retailers’ own brand or closed-loop payment or loyalty cards • Phase 3: Redemption of coupons, vouchers, offers, club/membership validation • Phase 4: Delivery of digital receipts, coupons/promotions, coupon redemption,

or other information from the POS to the mobile phone

A retailer could decide to implement one or more of these phases simultaneously.

It is important that the contactless POS solution chosen to implement whatever phase is the first phase is a solution that can also support subsequent phases without requiring any hardware changes.

5.2.8 Roadblocks to Mobile Contactless Payment Two major roadblocks stand in the way of mobile contactless payment:

1. Cost and ROI of implementing a contactless POS acceptance solution

2. Lack of NFC-enabled mobile phones

Two types of costs are involved in implementing a contactless POS acceptance solution: the cost of the hardware and software, and the cost of deployment, disruption, and training. Combining the contactless enablement project with another planned POS project (for example, implementation of PCI-approved pads or end-to-end encryption) can cut the cost of implementing the contactless POS solution almost in half. It is also important for the retailer to consider how compatible the contactless payment infrastructure will be with any desired future mobile contactless capabilities.

Within the United States, multiple pilot projects have demonstrated strong consumer and retailer demand for NFC-enabled mobile phones; however, currently such phones are not


available commercially. To move forward, the industry has deployed bridge technologies, which are compatible with and support mobile contactless payment. Implementing a bridge technology as a solution enables early adoption of mobile contactless payment (and other contactless functionality) while providing a valuable education that can improve the retailer’s ability to implement the additional capabilities offered by NFC-enabled mobile phones successfully when such phones become commercially available. Implementing a bridge solution offers several additional advantages for retailers, such as:

• The possibility of use with consumers’ current mobile phones • Potentially less reliance on a mobile operator for implementation • More distribution options

The two current bridge solutions are NFC-compatible contactless stickers and NFC microSD or NFC-enabled iPhone sleeves.

5.2.8.1 NFC-Compatible Contactless Stickers

NFC-compatible contactless stickers provide the following benefits:

• Offer the retailer a flexible, low-cost method for implementing closed-loop payment, couponing, and loyalty program support

• Enable better wallet share and higher use/participation rates by consumers than a plastic card

• Emulate some NFC-related features when married to a mobile application through the cloud

• Enable loyalty or prepaid programs for multiple retailers with a single sticker • Allow a retailer to brand the sticker and enable the consumer’s current mobile

phone A retailer-branded sticker can be added at the back of any phone and can also be linked to optional thick-client wallet software. Figure 44 shows a sample sticker.

Figure 44: NFC Compatible Contactless Sticker

Sticker use also involves certain challenges:

• Limited capabilities compared to active NFC-enabled mobile phones



• Limited ability to interface directly with a loaded mobile application • No requirement that the consumer enable a data plan to use the contactless

functionality, although contactless applications cannot be used unless they are SMS-based

• Potential competition for physical space on the phone with stickers issued by other parties

• No ability to support service discovery programs • No ability to support EMV off-line authorized transactions in markets where

merchant acceptance environments have limited connectivity • Unclear customer support model if implemented independently of the MNO • Potential for invalidating the customer's mobile phone warranty

5.2.8.2 NFC MicroSD Card or NFC-enabled iPhone Sleeve

The use of NFC microSD cards or an iPhone sleeve provide the following capabilities and benefits:

• Directly interact with a related mobile phone application • Can be configured, locked/unlocked, and accessed through the phone’s keypad

and display • Can store multiple credit/debit/prepaid/closed loop cards • Can be provisioned and managed OTA

A microSD card can easily be plugged into a smartphone. Figure 45 illustrates this approach.

Figure 45: Using an NFC MicroSD Card

This approach also involves certain challenges:

• No current support for service discovery programs (e.g., smart posters). • Higher cost than a sticker. • Currently does not work with certain mobile phones. In addition, the phone must

have a microSD card slot. • Potential for invalidating the customer's mobile phone warranty.




5.3 ACH Payment Enabled by Mobile Devices Retailers who want to provide alternative payment options (whether mobile remote payments or mobile contactless payments) should consider options that involve the lowest transaction cost. Many alternative payment options leverage the ACH network to connect the retailer directly to the consumer’s account for debit processing. NACHA provides support for mobile payment transactions through upcoming rules and governance, including transaction codes specifically designed for mobile transactions.

It is important to recognize the difference between a traditional debit ACH transaction and a mobile “one time” payment. Retailers should be aware of the risks associated with mobile payments, the steps necessary for security, and the rules applicable to consumer authorization.

A mobile ACH transaction would be one in which the consumer uses a mobile device to make a purchase over the Internet or a wireless network. In most instances, the consumer will have already enrolled or registered with the retailer, typically over the Internet. The consumer may be prompted upon enrollment or registration to provide information for a preferred payment method, including Internet ACH, which is processed through the ACH network using the Standard Entry Class (SEC) code known as WEB. (This code is assigned to consumer debit transactions in which the consumer’s authorization is provided over the Internet or a wireless network.)

Consumers can also enroll with a retailer for SMS alerts, which may prompt the consumer to purchase items based on payment instructions received in an SMS or text message, authorized when the consumer originally registered or enrolled with the retailer.

When a consumer then chooses to purchase a good or service from the retailer using a smartphone and a mobile browser, the retailer must authenticate the consumer as the retailer would in a traditional on-line environment and must also capture an authorization from the consumer.

Retailers would be able to create profiles for their customers, allowing them to make one-time or recurring purchases using their mobile devices, based on the original terms and conditions of the enrollment or registration. NACHA’s operating rules for Internet consumer debits provide additional risk obligations for retailers to help prevent fraud and mitigate risk.

5.3.1 Use Case for ACH Mobile Payment Enrollment—POS The ACH network is a low cost, ubiquitous, and secure choice for mobile payment transactions performed at a POS device. Figure 46 illustrates the enrollment process.



Figure 46: ACH Mobile Payment Enrollment Process

The enrollment process involves the following steps:

1. During the sign-up process, which is often part of enrolling in a customer loyalty program, the retailer collects basic information from the consumer.

Such information typically includes a name, address, e-mail address, contact information, and other preferences. The retailer assigns the customer a customer identifier at this time.

2. The retailer securely collects account information from the customer, which includes the route and transit number of the customer’s bank and the customer’s demand deposit account or bank account number.

The retailer may sign an ACH agreement with the customer at this point for ACH debit authorization.

3. The retailer verifies account ownership and status.

There are several possible verification methods, including check verification services and low value ACH credit posting. Verification using ACH credits is often performed by posting two separate payment transactions and requiring the customer to verify the total amount of the transactions.

4. The retailer activates the mobile payment service by providing the customer’s mobile device with a payment application that may leverage NFC capabilities, bar code scanning, or another mobile technology. The application must include a security feature that requires the customer to authenticate each payment transaction securely.

The application may be provided to the mobile device by download, a distributed SIM card, or active NFC stickers.

5.4 Other Mobile Payment Pilots and Commercial Initiatives Table 23 lists two examples of mobile payments that are not categorized as either mobile remote payments or NFC-enabled mobile contactless payments.



Table 23: Mobile Non-Contactless Payment Implementations


United States

Starbucks Pilot Starbucks Mobile Card is an iPhone application that allows the consumer to check balances, register the Starbucks card, and enjoy rewards. The pilot includes the ability to use the application to pay at the POS. The application allows the consumer to enter the Starbucks Card number, and the phone displays a barcode that can be used to pay at the POS.

Northern Europe

DSB (national Danish railroad)

Commercial DSB is launching an iPhone-based mobile ticketing application that allows customers to purchase tickets for regional trains and reserve seats. The application is fully integrated with DSB’s back office, ensuring that purchases are registered correctly in all relevant back-office systems. Payment is handled through PCI- compliant payment software that allows the consumer to pay with a payment card. Cards can be stored for future use. Access to stored cards is based on two-factor authentication. Tickets are delivered both as an image and as UIC-918-3 compliant 2-D bar codes in AZTEC format.

5.5 Mobile Payments ROI ROI calculation is critical to the decision-making process. According to Gartner, a project with an associated ROI calculation is 60 percent more likely to be approved than one without,42 and according to a recent issue of Information Week, more than 82 percent of IT decisions require an ROI calculation.43

Mobile payment can generate a significant ROI for retailers. An acceptable ROI does not require adopting all of the applications described in this blueprint. The ROI model described in Section 5.5.3 considers the mobile payments application only. Whether an acceptable ROI is associated with mobile payment only will depend both on consumer acceptance and on several other factors:

• Adoption by the retail industry • Adoption by the financial services industry • Adoption by mobile network operators • Adoption by trusted service providers • Government regulations

Early implementation of mobile payment could contribute significantly to a retailer’s obtaining additional market share. Eventually, mobile payment may be such a competitive necessity that an ROI decision is irrelevant.

42 Fujitsu, "ROI: Proof, Not Promises," http://www.fujitsu.com/caribbean/news/inthenews/roi.html 43 CIOview, "Business Benefits of Utilizing ROI Analysis,"

http://whitepapers.techrepublic.com.com/abstract.aspx?docid=25936



5.5.1 ROI Considerations Mobile payment has the potential to change the business model for U.S. retailing, banking, and credit card industries, creating payment methods that include new services and service providers. The transaction costs for these new payment methods could be more or less than what retailers currently pay for traditional credit and debit transactions.44

New mobile payment methods are expected to incur lower transaction costs, considering that the ACH alternative is already available. The ROI model in this section estimates what the savings (or additional costs) might be for each new payment method supported at the POS.

Which mobile payment methods are supported at the POS will have a direct impact on costs. For example, if a retailer already has NFC-enabled POS devices and does not plan to support new payment methods such as ACH, then costs could be zero.

5.5.2 Benefits of Mobile Payment Mobile payment offers benefits in terms of both increased revenue and reduced operational costs.

Consumers value alternatives, flexibility, and convenience. Mobile payment options satisfy all of these consumer requirements. Potential revenue benefits can therefore be realized in three major areas:

• Increased sales and conversions • Faster transactions • Improved customer loyalty

5.5.2.1 Increased Sales and Conversions

Increased sales and conversions are driven by coupons, offers, one-on-one marketing and promotion programs, and convenience.

Consumers can download coupons by tapping RF tags on smart posters or scanning product bar codes. Retailers and manufacturers can download promotions based on consumer purchase history. For example, a consumer buys a printer from an office supply retailer, who enables promotions to be downloaded for consumables like print cartridges, paper, labels, and photo paper.

Benefits also include increased cross-sell and up-sell opportunities and increased labor savings from mobile consumers who check themselves out. In addition, some consumers in selected product categories may prefer retailers who support mobile payment over those who do not because of the “cool” factor. Consumers who are "green business" advocates may prefer retailers who eliminate paper coupons, paper promotions, and paper receipts. And finally, mobile payments are very convenient: no cash, no plastic, no paper coupons, no key fobs, no paper receipts—just a secure mobile phone.

44 One lower-cost payment alternative is already available: ACH transactions, which some retailers already

use (for example, PayPal Mobile).



5.5.2.2 Faster Transactions

Mobile payment can speed up transactions in a number of ways. No longer must a consumer fumble with a wallet to find a credit or debit card or cash. In addition, such transactions eliminate the need to open a cash drawer or make change (for a cash payment) or insert a credit or debit card, to read the magnetic stripe.

Mobile payment may also result in shorter transaction times by eliminating the requirement for a signature or a PIN entry in certain situations. Payments linked to customer loyalty accounts will eliminate the tender process altogether.

5.5.2.3 Improved Customer Loyalty

Another potential benefit of mobile payment is increased customer loyalty. According to a report from Juniper Research, "Merchants have recognized that, even ahead of their wallets, people will usually make sure they do not leave home without their mobile device. The mobile channel offers merchants the opportunity to differentiate from their competition and acquire customers that become loyal."45

The mobile payment wallet eliminates the requirement for a credit or debit card (or other form factor), since consumers register their accounts with their mobile phone numbers. Retailers can use the registration information to increase consumer direct marketing. Proximity-based marketing can notify loyalty program customers of promotions about which they might otherwise be ignorant. (This advantage to mobile payment customers does need to be balanced with potential dissatisfaction on the part of non-mobile payment customers who miss out on promotions because they do not participate in the mobile program.)

Mobile payment also offers consumers improved security (it is no longer possible to lose a credit card while using it for payment), the possibility for real-time control of money (budget software is available that can, for example, limit a device-holder, such as a child, to spending only a certain amount per week), and the ability to review purchase histories.

5.5.2.4 Reduced Operational Costs

Several of the revenue benefits of adopting mobile payment can also reduce operational costs. Faster transaction times and self-checkout can result in payroll savings and decreased paper costs (due to digital receipts). In addition, mobile payment can reduce costs in the following operational areas:

• Coupon redemption processing • Cash handling, assuming mobile payment replaces some percentage of cash

transactions • Alternative payment types, assuming mobile payment replaces some percentage

of traditional credit/debit payment options

45 Cellular-news, "Mobile Retail Market to Exceed $12 Billion by 2014," March 9, 2010, http://www.cellular-

news.com/story/42311.php.


For quick service restaurants, mobile payment may reduce product waste. If customers use a mobile device to order what they want before they get to the restaurant, fewer products must be prepared ahead of time.

5.5.3 ROI Model To help determine potential ROI, a self-assessment tool was developed in conjunction with this document that can be used to identify the costs and benefits of supporting mobile payment and deliver an ROI estimate.

Every retailer’s ROI analysis is unique. Most cost and benefit factors are the same, but actual cost and benefit amounts are peculiar to each retailer’s situation. The following ROI model uses a hypothetical example to identify the major cost and benefit factors related to accepting mobile payments and mobile coupons at the POS. The ROI model assumes that new technology (such as smart card contactless technology or an NFC-enabled smartphone) is available at the POS to supplement or be integrated with traditional card swipe technology.

The model does not consider ramp-up time for consumer adoption. A proof-of-concept pilot is highly recommended to minimize risk and evaluate consumer reaction.

The ROI model is divided into two major sections: benefit factors and cost factors. Each section is broken down into more detailed components. Within each section, current state and future state columns (Figure 47) indicate how revenue and processing costs change.

Current State Future State1. Sales Information2. Transaction Payment Information 100% 100%3. Transaction Payment Processing Cost Factors4. Annual Transaction Payment Processing Costs5. Total Benefits

1. Store Information2. Hardware Infrastructure Unit Cost Extended3. Software Infrastructure4. Implementation Costs Unit Cost Extended5. Total Cost

BENEFIT FACTORS

COST FACTORS

Figure 47: ROI Model Sections

5.5.3.1 Benefit Factors—Sales Information

Table 24 lists the parameters included in the sales information section of the model. This section allows retailers to enter high-level sales and margin information. If customer demographics and product categories are prime candidates for incremental sales increases without changing the current customer base, then projections are entered in the Future State column as “Incremental % Increase of Sales.” If sales increases will result from the acquisition of new customers, projections are entered in the Future State column as “Incremental % Increase of Transaction.”



Table 24: Parameters in the Sales Information Section of the ROI Model

Parameter and Description Current State Information

Future State Information

Annual Revenue Annual value of customer net sales after coupons and promotions have been applied.

Entered Calculated based on incremental sales and transactions projections

Annual POS Transactions Annual number of customer transactions, including sales and returns

Entered Calculated based on incremental increase in number of transactions

Average Sales/Transaction Annual POS revenue divided by Annual POS Transactions

Calculated Calculated

Incremental % Increase of Sales Projected increase in sales resulting from new mobile payment alternative

n/a Entered

Incremental % Increase of Transactions Projected increase in number of transactions resulting from new mobile payment alternative

n/a Entered

Margin Contribution Average gross margin (%)

n/a Entered

Figure 48 is an example of high-level sales and margin information for a hypothetical retail company with annual sales of $500 million and projected incremental sales and transaction increases of 0.10%.

Current State Future State1. Sales Information

Annual Revenue 500,000,000$ 501,000,000$ Annual POS Transactions 10,000,000 10,010,000

Average Sales / Transaction 50.00$ 50.05$ Incremental % Increase of Sales N/A 0.10%

Incremental % Increase of Transactions N/A 0.10%Margin Contribution N/A 40%

Benefit Factors

Figure 48: Benefit Factors

5.5.3.2 Benefit Factors—Transaction Payment Information

Table 25 lists the parameters included in the transaction payment information section of the model. Retailers enter a company’s current percentage of annual POS revenue by payment type in the Current State column. The new mobile payment type will cannibalize sales from existing payment types. A projection of the effect on use of




existing payment types is therefore entered in the Future State column. For example, if mobile payments will reduce cash payments by 5 percent and current cash payments are 20 percent, then enter 15 percent in the Future State column for cash payment type. The percentage for current and future states must total 100.

Table 25: Parameters in the Transaction Payment Information Section of the ROI Model



% Cash Payments Percentage of annual POS revenue

Entered Manual projection

% Credit/Debit Payments Percentage of annual POS revenue


% Debit Payments Percentage of annual POS revenue


% Check Payments Percentage of annual POS revenue


% ACH Payments Percentage of annual POS revenue


% Gift Card Payments Percentage of annual POS revenue


% Cobranded Credit/Debit Payments Percentage of annual POS revenue


% Private Label Credit Payments Percentage of annual POS revenue


% New Mobile Payments Percentage of annual POS revenue

N/A Manual projection

Must total 100% Must total 100%

Figure 49 shows a sample retail company’s current and future percentage of annual POS revenue (as derived in Section 5.5.3.1) by payment type. In this example, New Mobile Payments are projected to be 20 percent of Annual POS Revenue.


Current State Future State

Benefit Factors

2. Transaction Payment Information 100% 100%% Cash Payments 20% 15%

% Credit Debit Interchange Payments 30% 25%% ATM Debit Payments 35% 25%

% Check Payments 5% 5%% ACH Payments 7% 7%

% Gift Card Payments 3% 3%% Cobranded Credit/Debit Payments 0% 0%

% Private Label Credit Payments 0% 0%% Stored Value Payments 0% 0%

% New Mobile Payments #1 - Fixed Fee per Transaction N/A 10%% New Mobile Payments #2 - Fixed Fee per Transaction N/A 0%% New Mobile Payments #3 - % per Transaction Amount N/A 10%% New Mobile Payments #4 - % per Transaction Amount N/A 0%

Figure 49: Retailer’s Annual POS Revenue

5.5.3.3 Benefit Factors—Payment Processing Cost Factors

Table 26 lists the parameters included in the payment processing cost factors section of the model. This section of the model allows retailers to enter a company’s processing costs for each payment type. A future state for current payment types may seem irrelevant, but the parameter allows future processing costs to be entered if they may change as a result of implementing mobile payment. At a minimum, the value entered for the current state should be entered in the Future State column for each payment type so that the model can calculate total processing costs for the current and future state.

The mobile payment type projected processing cost can be entered as a fixed rate per transaction or as a percentage of the transaction amount (like an interchange rate).

The last two parameters allow retailers to enter the projected costs for redeeming coupons from a customer’s mobile phone or wallet.

Table 26: Parameters in the Payment Processing Cost Factors Section of the ROI Model



Cost to Handle $100 in Cash and Coin Entered Entered

Credit/Debit Transactions Interchange Rate Entered Entered

Debit Transaction Fee Entered Entered

Cost to Handle Checks per Transaction Entered Entered

ACH Transaction Fee Entered Entered

Cost to Handle Gift Card per Transaction Entered Entered






Cost to Handle Cobranded Credit/Debit per Transaction

Entered Entered

Cost to Handle Private Label Credit per Transaction

Entered Entered

Cost to Handle Stored Value Cards per Transaction

Entered Entered

Cost for New Mobile Payments #1 Fixed Fee per Transaction

n/a Manual projection

Cost for New Mobile Payments #2 Fixed Fee per Transaction


Cost for New Mobile Payments #3 % per Transaction Amount


Cost for New Mobile Payments #4 % per Transaction Amount


PL (private label) Coupon Redemption Processing Cost % of Sales From the customer’s mobile phone or wallet account


Mfg Coupon Redemption Processing Cost % of Sales From the customer’s mobile phone or wallet account


Figure 50 shows an example of a retailer’s processing costs for each payment type. In this example, the new mobile payment transaction fixed fee is projected to be $0.28 per transaction.



Benefit Factors

3. Payment Processing Cost FactorsCost to Handle $100 in Cash & Coin 0.80$ 0.80$

Credit/Debit Transactions Interchange Rate 2.00% 2.00%ATM Debit Fixed Fee per Transaction 0.59$ 0.59$

Cost to Handle Checks per Transaction 0.75$ 0.75$ ACH Fixed Fee per Transaction 0.59$ 0.59$

Cost to Handle Gift Card per Transaction 0.80% 0.80%Cost to Handle Cobranded Credit/Debit per Transaction 1.00% 1.00%

Cost to Handle Private Label Credit per Transaction 1.25% 1.25%Cost to Handle Stored Value Cards per Transaction 0.25$ 0.25$

Cost for New Mobile Payments #1 - Fixed Fee per Transaction N/A 0.279$ Cost for New Mobile Payments #2 - Fixed Fee per Transaction N/A 0.279$ Cost for New Mobile Payments #3 - % per Transaction Amount N/A 2.00%Cost for New Mobile Payments #4 - % per Transaction Amount N/A 2.00%

PL Coupon Redemption Processing Cost % of Sales 0.0000% 0.0000%Mfg Coupon Redemption Processing Cost % of Sales 0.0000% 0.0000%

Figure 50: Retailer’s Payment Processing Costs

5.5.3.4 Benefit Factors—Annual Payment Processing Costs

The annual payment processing costs section of the model (Table 27) calculates annual transaction processing costs based on the previous inputs. It also allows retailers to enter a company’s total chargeback for the various payment types a company accepts.

Table 27: Parameters in the Annual Payment Processing Costs Section of the ROI Model




Cost related to Chargebacks Entered Entered

Cash Transactions Calculated Calculated

Credit/Debit Transactions Calculated Calculated

Debit Transactions Calculated Calculated

Check Transactions Calculated Calculated

ACH Transactions Calculated Calculated

Gift Card Transactions Calculated Calculated

Cobranded Credit/Debit Transactions Calculated Calculated

Private Label Credit Transactions Calculated Calculated

Store Value Card Transactions Calculated Calculated

New Mobile Payment #1 Transactions n/a Calculated







Private Label Coupon Redemption Processing Cost

n/a Calculated

Mfg Coupon Redemption Processing Cost n/a Calculated

Total Current & Future Costs Summary of above current state costs

Summary of above future state costs

Payment Processing Costs % of Annual Sales Total current state cost as a percentage of current state POS sales

Total future state cost as a percentage of future state POS sales

Figure 51 illustrates a retailer’s annual transaction processing costs based on the inputs from the previous sections. In this example, new mobile payment fees are projected to cost $780,780 for processing 20 percent of all POS transactions.


Benefit Factors

4. Annual Payment Processing CostsCost Related to Chargebacks -$ -$

Cash Transactions 800,000$ 601,200$ Credit/Debit Transactions 3,000,000$ 2,505,000$

Debit Transactions 2,065,000$ 1,476,475$ Check Transactions 375,000$ 375,375$

ACH Transactions 413,000$ 413,413$ Gift Card Transactions -$ -$

Cobranded Credit/Debit Transactions -$ -$ Private Label Credit Transactions -$ -$ Stored Value Cards Transactions -$ -$

New Mobile Payments #1 Transactions N/A 279,537$ New Mobile Payments #2 Transactions N/A -$ New Mobile Payments #3 Transactions N/A 1,002,000$ New Mobile Payments #4 Transactions N/A -$

Private Label Coupon Redemption Processing Cost -$ -$ Mfg Coupon Redemption Processing Cost -$ -$

Total Current & Future Costs 6,653,000$ 6,653,000$ Payment Processing Costs % of Annual Sales 1.33% 1.33%

Figure 51: Retailer’s Annual Transaction Processing Costs

5.5.3.5 Benefit Factors—Total Benefits

The total benefits section of the ROI model calculates the following:


• Annual Processing Cost Savings The difference between current and future Annual Transaction Processing Costs from Section 5.5.3.4, “Benefit Factors—Annual Payment Processing Costs”

• Annual Incremental Margin from Increased Sales The difference between current and future Annual POS Revenue multiplied by Margin Contribution % from Section 5.5.3.1, “Benefit Factors—Sales Information.”

• Total Benefits The total of the cost savings and increased sales amounts.

Figure 52 shows an example of the total benefits section. In this example, total benefits are $400,000, all from increased sales. Transaction cost savings are zero.

Benefit Factors

5. Total Benefits

Annual Processing Cost Savings

Annual Incremental Margin from Increased Sales

Total Benefits

($0)

$400,000

$400,000

Figure 52: Retailer’s Total Benefits

5.5.3.6 ROI Model Benefit Factors Summary

Figure 53 shows all five benefit factors sections of the ROI model.



Copyright ©All rights reserved. Verbatim reproduction and distribution of this document is permitted in any medium, provided this notice is preserved.

2010 National Retail Federation. Page 121



Average Sales / Transaction 50.00$ 50.05$ Incremental % increase of sales N/A 0.10%

Incremental % increase of transactions N/A 0.10%Margin Contribution N/A 40%


% Credit Debit Interchange Payments 30% 25%% ATM Debit Payments 35% 25%



% Private Label Credit Payments 0% 0%% Stored Value Payments 0% 0%

% New Mobile Payments #1 - Fixed Fee per transaction N/A 10%% New Mobile Payments #2 - Fixed Fee per transaction N/A 0%% New Mobile Payments #3 - % per transaction amount N/A 10%% New Mobile Payments #4 - % per transaction amount N/A 0%

3. Payment Processing Cost FactorsCost to handle $100 in cash & coin 0.80$ 0.80$

Credit/Debit Transactions Interchange Rate 2.00% 2.00%ATM Debit Fixed Fee per transaction 0.59$ 0.59$

Cost to handle Checks per transaction 0.75$ 0.75$ ACH Fixed Fee per transaction 0.59$ 0.59$

Cost to handle Gift Card per transaction 0.80% 0.80%Cost to handle Cobranded Credit/Debit per transaction 1.00% 1.00%

Cost to handle Private Label Credit per transaction 1.25% 1.25%Cost to handle Stored Value Cards per transaction 0.25$ 0.25$

Cost for New Mobile Payments #1 - Fixed Fee per transaction N/A 0.279$ Cost for New Mobile Payments #2 - Fixed Fee per transaction N/A 0.279$ Cost for New Mobile Payments #3 - % per transaction amount N/A 2.00%Cost for New Mobile Payments #4 - % per transaction amount N/A 2.00%

PL Coupon Redemption Processing Cost % of Sales 0.0000% 0.0000%Mfg Coupon Redemption Processing Cost % of Sales 0.0000% 0.0000%

4. Annual Payment Processing CostsCost related to Charge Backs -$ -$

Cash Transactions 800,000$ 601,200$ Credit/Debit Transactions 3,000,000$ 2,505,000$

Debit Transactions 2,065,000$ 1,476,475$ Check Transactions 375,000$ 375,375$

ACH Transactions 413,000$ 413,413$ Gift Card Transactions -$ -$

Cobranded Credit/Debit Transactions -$ -$ Private Label Credit Transactions -$ -$ Stored Value Cards Transactions -$ -$

New Mobile Payments #1 Transactions N/A 279,537$ New Mobile Payments #2 Transactions N/A -$ New Mobile Payments #3 Transactions N/A 1,002,000$ New Mobile Payments #4 Transactions N/A -$

Private Label Coupon Redemption Processing Cost -$ -$ Mfg Coupon Redemption Processing Cost -$ -$

Total Current & Future Costs 6,653,000$ 6,653,000$ Payment Processing Costs % of Annual Sales 1.33% 1.33%

5. Total Benefits



Total Benefits

($0)

$400,000

BENEFIT FACTORS

$400,000


Copyright ©All rights reserved. Verbatim reproduction and distribution of this document is permitted in any medium, provided this notice is preserved.

2010 National Retail Federation. Page 122



Average Sales / Transaction 50.00$ 50.05$ Incremental % increase of sales N/A 0.10%

Incremental % increase of transactions N/A 0.10%Margin Contribution N/A 40%


% Credit/Debit Interchange Payments 30% 25%% Debit Payments 35% 25%



% Private Label Credit Payments 0% 0%% New Mobile Payments N/A 20%

3. Payment Processing Cost FactorsCost to handle $100 in cash & coin 0.80$ 0.80$

Credit/Debit Transactions Interchange Rate 1.89% 1.89%Debit Transaction Fee 0.59$ 0.59$

Cost to handle Checks per transaction 0.75$ 0.75$ ACH Transaction Fee 0.59$ 0.59$

Cost to handle Gift Card per transaction 0.80% 0.80%Cost to handle Cobranded Credit/Debit per transaction 1.00% 1.00%

Cost to handle Private Label Credit per transaction 1.25% 1.25%New Mobile Payment Transaction Fee N/A 0.39$

New Mobile Payment % Rate per transaction N/A 0.00%PL Coupon Redemption Processing Cost % of Sales 0.0000% 0.0000%

Mfg Coupon Redemption Processing Cost % of Sales 0.0000% 0.0000%4. Annual Payment Processing Costs

Cost related to Charge Backs -$ -$ Cash Transactions 800,000$ 601,200$

Credit/Debit Transactions 2,835,000$ 2,367,225$ Debit Transactions 2,065,000$ 1,476,475$

Check Transactions 375,000$ 375,375$ ACH Transactions 413,000$ 413,413$

Gift Card Transactions -$ -$ Cobranded Credit/Debit Transactions -$ -$

Private Label Credit Transactions -$ -$ New Mobile Payment Transactions N/A 780,780$

New Mobile Payment % Rate per transaction N/A -$ Private Label Coupon Redemption Processing Cost -$ -$

Mfg Coupon Redemption Processing Cost -$ -$ Total Current & Future Costs 6,488,000$ 6,014,468$

Payment Processing Costs % of Annual Sales 1.30% 1.20%5. Total Benefits



Total Benefits

$473,532

$400,000

$873,532

BENEFIT FACTORS

Figure 53: Five Benefit Factors Sections in the ROI Model

5.5.3.7 Cost Factors

The cost factors section of the ROI model (Table 28) identifies hardware and software infrastructure cost factors and implementation cost factors that retailers need to consider before implementing a new mobile payment alternative at the POS.



Table 28: Parameters in the Cost Factors Section of the ROI Model

Parameter and Description Unit Cost Information

Extended

Store Information

Number of Stores Actual number of stores that will support new mobile payment methods

n/a Entered

Average POS Devices per Store Average number of POS stations per store that will support new mobile payment methods

n/a Entered

Number of People in Call Center - Store Operations Support Number of people in call center that supports store operation POS application that will need to be trained for new mobile payment methods

n/a Entered

Hardware Infrastructure

Cost Avoidance Hardware cost per POS station that will be avoided as a result of implementing new payment methods

Entered Calculated based on number of stores and number of POS stations entered above

New Hardware Cost - per POS Cost of new hardware per POS station required to support new payment methods (for example, an NFC reader)


Installation Cost - per POS Cost per POS station to install new hardware (for example, an NFC reader)


Annual Service/Support for POS Annual hardware service contract per POS station for new installed hardware (for example, an NFC reader)


Total Hardware Infrastructure Costs n/a Calculated

Software Infrastructure

Cost Avoidance Software cost per POS station that will be avoided as a result of implementing new payment methods




Parameter and Description Unit Cost Information

Extended

POS Software Customization Cost per POS station to customize POS application to process new payment methods


Mobile Coupon Redemption Application Cost per POS station to redeem mobile generated coupons


Total Software Infrastructure Costs n/a Calculated

Implementation Costs

Training Cost - per Store Average cost per store to train store associates and management

Entered Calculated based on number of stores entered above

In-Store Materials - per Store Cost per store for training materials (for example, posters for break rooms or printed training documentation)


Store Layout Rework Cost Cost per store for reworking store layout for storing mobile orders and providing customer service desk to pick up mobile orders


Call Center Training Cost Cost per call center person to be trained to answer store questions about new payment methods

Entered Calculated based on Number people in Call Center entered above

Total Cost Calculated

Figure 54 is an example of the cost factors section of the mobile payment ROI model.


1. Store InformationNumber of Stores 750

Average POS Devices / Store 1.5Number of People in Call Center - Store Operations Support 10

2. Hardware Infrastructure Unit Cost ExtendedCost Avoidance 150 168,750$

Cost Avoidance -$

New Hardware Cost - Per POS 600 675,000$ Installation Cost - Per POS 50 56,250$

Annual Service/Support POS 15 16,875$ Total Hardware Infrastructure Costs 579,375$

3. Software Infrastructure

POS Software Customization 75,000$ Mobile Coupon Redemption Application -$

Total Software Infrastructure Costs 75,000$ 4. Implementation Costs Unit Cost Extended

Training Cost - Per Store 35 26,250$ In-Store Materials - Per Store 25 18,750$

Rework Store Layout for Pickup of Mobile Orders -$ Call Center Training Cost 500 5,000$

50,000$ 5. Total Cost

Total Cost $704,375

Cost Factors

Figure 54: Cost Factors Section of the ROI Model




6. MOBILE OPERATIONS

Mobile devices used by associates can have a significant positive impact on the efficiency of retail operations. Already, wireless devices have been in use for over 20 years in retail stores and distribution centers, increasing productivity, maintaining inventory accuracy, and reducing expenses. This section focuses on the currently implemented mobile operational functions—POS, workforce management, and internal communications—and describes how to use mobile devices to improve operations in those areas.

It is anticipated that the use of smartphones for internal operations will expand greatly, as future phones are enhanced with new features (such as RIFD readers) and manufactured to a high level of strength, reducing breakage and malfunctions. As functionality increases, it is expected that retailers will move beyond their current top priorities—mobile marketing, commerce, and payment—to incorporate the use of mobile devices into additional operational processes.46

6.1 Mobile Point of Sale It is significant that Apple stores currently have no POS terminals. The answer to the question of whether mobile phones can create the ultimate self checkout, with customers using their mobile phones to accomplish POS functions, may very well be “yes.”

Smartphone technology currently enables in-store mobile self-checkout using the cloud. Mobile applications are available that stores can implement; customers shopping in a store that has implemented this application can do the following, using their mobile phones:

• Identify themselves on entering the store. • Scan the bar code on merchandise with the mobile camera in the phone and

receive accurate and comprehensive product information. • Receives suggestions for purchases of associated products or be offered incentives

to purchase a selected item if the customer does not complete the payment cycle. • Select and pay for a product within the aisle of the store using current card

technology or new alternative payment methods. Potentially the mobile application provider can consolidate the payments from multiple retailers to achieve lower transaction fees.

• Produce either a printed or electronic receipt as proof of purchase. This enhanced selection and payment function can benefit both retailers and consumers.

Retailers choosing to leverage this technology can expect the following to occur:

1. Reduce the rate of “abandoned carts” in store by alleviating the primary causes, such as lack of information and long checkout lines

46 The use of mobile devices in additional operational processes will be explored in future releases of this

blueprint.



2. Increase transaction throughput on a per man-hour basis by enabling consumers to use their own smartphones as mobile self-scanners and complete the transaction without the active involvement of a manned checkout

3. Increase consumer takeaway of up-sell items by increasing the targeting and relevance of items suggested

With the advent of inexpensive, highly available, easily adaptable mobile devices, a wide range of new scenarios can be envisioned. Mobile point of sale (mPOS) adds a new dimension to the customer experience, bringing the typical transaction processes to the location where the customer, goods, and services—not a POS terminal—reside.

For the retail industry, the challenge is how to extend current network infrastructures and procedures to incorporate a mobile device securely and cost effectively. The hardware devices required to support this extension may include a set of retailer-provided custom mobile devices or a wide range of customer-owned mobile devices. Because more and more customers have mobile phones with increasing data functionality, retailers must enhance their product information and payment processing networks to incorporate the mobile phone as a payment device. The benefits are overwhelming; it is not a question of if the retailer should expand to mPOS but rather when the retailer will be able to support customers who use their mobile phones for transactions.

To provide the most effective mPOS experience, the retailer must recognize that a wide range of purchasing and privacy issues must be accommodated:

• Customers with transaction-capable mobile devices should be able to choose whether to use their devices for retail transactions and product information. The easiest way to handle this is to have customers sign an agreement giving the retailer permission to involve their mobile devices in conversations with the retailer’s supporting infrastructure.

• The mPOS user interface on the mobile device must be intuitive and easy for the customer to learn and use. The capabilities of mobile devices are expanding and beginning to favor graphical user interface (GUI) techniques over simpler, alphanumeric interfaces. Extensive use of GUI-based, easily understood applications will greatly enhance the customer’s or store associate’s experience, resulting in faster mobile device adoption.

• mPOS will need to be fully integrated, using ARTS and other integration standards, with the many retail applications that require POS data.

• New business processes will be necessary to allow customers to remove merchandise from a store without the traditional printed receipt or other proof of payment.

• The mPOS transaction must take currently available hardware components into account and also be able to accommodate future technologies. For example, mobile devices incorporating NFC technology, smart card chips, and bar-code scanners (either dedicated or using phone camera techniques);



smartphones; and mobile devices with basic functionality must all be accommodated.

• The customer must be able to choose how to confirm a transaction. Confirmation choices should include printing a traditional paper receipt, receiving an electronic receipt, or allowing a customer to request both types of receipts and having the store associate use the customer’s mobile device to satisfy the customer’s preference.

• Multiple types of payment methods need to be accommodated, including credit cards, debit cards, store charge accounts, stored value cards, coupons, gift card redemptions, or any combination thereof.

• Extreme care must be built into the transaction system to protect sensitive customer data. Current and future PCI requirements must be considered, with the goal being to avoid using any exposed or unencrypted privacy data in a transaction scenario. End-to-end encryption techniques should be considered to help secure sensitive data.

6.1.1 Mobile POS Examples The following examples illustrate how mPOS can enhance a business scenario.

6.1.1.1 Enhanced Dining Experience

Instituting mPOS in a restaurant can enhance a customer’s experience in a number of ways. The customer agrees to allow the restaurant to communicate with the customer’s mobile device. The customer’s mobile device is recognized by the hostess’s mPOS device, through an NFC interaction between the two (a tap), an attempt by the mobile device to connect to the restaurant’s Wi-Fi network, GPS pings, a Bluetooth inquiry, or some other mechanism. If the customer has dinner reservations, the hostess’s mPOS device is immediately made aware of the customer’s name and responds with a welcome message. The hostess then personally welcomes the customer and seats the party.

If the customer does not have reservations, the hostess uses an mPOS device to access a table scheduling application, which prompts the customer’s mobile device for the number in the party and any seating preferences.

The hostess is given an estimated time for seating and sends a message to the customer’s mobile device indicating the current wait time. Periodically, the hostess is able to send a message that keeps the customer apprised of the remaining wait time. If the wait time is more than a few minutes, the hostess may send the customer a message offering a discount coupon, a free food item, or a free dessert to encourage the customer to continue to wait.

Once seated, the waiter uses an mPOS device to establish a dialog link with the customer’s mobile device. The waiter can send the customer pertinent useful information such as a list of the daily specials, additional wine list information, or caloric information. The waiter can input the customer’s food and beverage requests, and the device will automatically send the food requests to the kitchen and the drink requests to the beverage



bar. The customer can use the dialog link to send a message to the waiter requesting additional service. Throughout the meal, the waiter and customer can monitor and influence the pace of the meal in an unobtrusive way.

When it comes time to pay the bill, the waiter can use a table-side mPOS device to communicate with the customer’s mobile device and present the bill for payment. The waiter can offer the customer several options for viewing the bill. For instance, a list of items served and a total amount can be displayed. Alternatively, the customer may ask to see what each person in the party ordered so that each can pay their own part of the bill. Bill payment could then be authorized exclusively from the customer’s mobile device or from some combination of the devices carried by the other members of the dinner party. The waiter could accept any type of payment, such as:

• Chip and PIN card (debit/credit) • Contactless card (debit/credit) • NFC-enabled mobile phone • Electronic cash transfer

After payment is processed, the customer can choose where the waiter sends the receipt: to the customer’s device, an e-mail address, or a local printer.

The hostess can be notified that the customer is leaving and send a message thanking the customer for coming and offering an incentive to return in the near future. This incentive can be automatically stored in the customer’s mobile device. Upon the customer’s return, the customer will be reminded that the incentive is available.

6.1.1.2 In-store Product Information to Aid Customer Merchandise Selection

An innovative approach to mobilizing product information would be to allow the customer to use the mobile device for self-service. When a customer enters a store, the customer’s mobile device is recognized by the retailer’s system, using technology similar to that described in Section 6.1.1.1. The customer uses the device to enter the name of an item or product category of interest, and the GPS in the mobile device guides the customer to the product. A message is sent to the in-store controlling server recording the customer’s interest. A sales assistant can be notified and sent to aid the customer.

In many cases, after customers narrow their product selections to a few choices, they want additional information. A “Need Assistance” icon can be added to the mobile device’s desktop. Selecting the icon sends a message to the store server, which sends a message request to the nearest available store associate’s GPS-enabled mobile device and directs the associate to the customer. The store associate may use the scanner on the device to read a bar code or use an RFID tag, NFC tag, or some other identifier to retrieve additional product information. The store associate may also forward other relevant product information, such as data sheets, product comparison ratings, or manufacturer’s product video presentations, to the customer’s mobile device to aid in final product selection. In-stock information, pricing, and other incentives may be made available to the store associate to help promote the sale.

If the sale is one that would require removing an item from store inventory, the sales associate can determine the item’s availability and current location for efficient delivery.



If the product is available and the customer wants to purchase it, the sales associate could use the device to act as a POS terminal, conclude the purchase, and transfer a receipt to the customer’s mobile device. If necessary, the sales associate could then send a message to the fulfillment desk and make the product available for customer pickup.

6.1.1.3 Self-Service Checkout

Another potential use of mPOS is to implement self-service checkout. The customer can walk up to the self-service checkout and notify it of the customer’s payment choice (mobile wallet). The checkout scans the items in the shopping basket (for example, using an RFID reader). After totaling the items, it sends the list to the customer’s mobile device using NFC. The customer sends the total to the mobile wallet over the cloud, with instructions to pay the total and report the payment to the POS at checkout. Upon receipt of payment notification, the POS finalizes the transaction and the customer leaves the store with the purchased items. A real benefit is that at no time is customer payment information exposed in the store infrastructure and data systems. No customer payment information is present in the store.

6.1.2 Technology and Standards Employed The above examples require a number of cooperative tasks that have only recently become possible and that rely on many industry standards. The recent and future availability of a rich set of hardware and software solutions to offer the consumer an enhanced user experience and create customer loyalty with the retailer depends on standards. Some of these standards organizations are listed below; the standards themselves are discussed in Section 6.1.4:

• Association of Retail Technology Standards (ARTS), which defines software application-to-application interoperability, hardware connectivity, and a data model that allows disparate systems to communicate.

• GS1 US (formerly the Uniform Code Council) • NFC Forum • European Payments Council (EPC) • Smart Card Alliance (SCA) • National Automated Clearing House Association (NACHA) • EuroPay, MasterCard, and VISA (EMV) • Global Platform

In addition to the standards defined by these organizations, mobile initiatives that include a mobile payment component must adhere to the Payment Card Industry Data Security Standard (PCI DSS).

6.1.3 Benefits and ROI Allowing customers to use their mobile phones to obtain accurate product information and pay quickly, with no checkout line delay, creates satisfied customers. Satisfied customers shop more often in their favorite stores, increasing sales and margins. In



addition, the retailer’s payroll will be reduced, as the requirement for associate interaction with customers to provide product information and process sales at POS is reduced.

6.1.4 Implementation Considerations The backbone of the mPOS system is a highly reliable, responsive network. A secure, seamless wireless connection must be available throughout the store to ensure that the mobile devices can connect and interoperate. In addition, cell phone repeaters and GPS triangulation nodes must be installed to ensure that mPOS devices and customer devices can be located. Cost savings and increased levels of service will not be realized if store associates or customers have trouble connecting mobile devices to the store’s infrastructure.

One critical implementation consideration is the need to provide an infrastructure that protects data. The data that the customer provides and the processing of sensitive information during the payment process must always be completely secure.

ARTS has undertaken an initiative to create an end-to-end encryption standard that could provide a high degree of transaction security. Any customer-sensitive data (credit card numbers, authorization numbers) are encrypted at the customer data-entry point and delivered through the network to the final point of decryption at a payment authorization facility.

In addition, all levels of communication processing must use well established, secure data transmission technologies to protect against data extraction and spoofing (a situation in which a person or program successfully masquerades as another person or program to obtain information) during transfer. For example, the wireless links must use robust transport security to prevent possible data compromise through illegal data sniffing (monitoring of data passing over a network).

Consumer data protection should be in place to protect customer data. In other words, the retailer must never allow unprotected data to be transmitted. The best practice is never to store customer sensitive data. If storage cannot be avoided, make sure the data is encrypted.

6.2 Workforce Management The current economic climate has forced retailers to look constantly for ways to cut costs and improve the bottom line without cutting customer service. Payroll is one of the largest controllable expenses. By incorporating and integrating mobile technology into the overall workforce management application, retailers can achieve better control and visibility of their workforce. To optimize staffing and associated payroll, however, workforce management applications need timely and accurate data.

Figure 58 illustrates a workforce management model in which the workforce management solution is hosted and delivered to the store using the software-as-a-service (SaaS) model. The model provides access through a common portal to store managers and store associates using in-store mobile devices. The portal is managed and supported by a central management platform, which acts as a gateway between the store and the corporate headquarters, where all service requests, mobile device management, and


monitoring services are managed and delivered. This model minimizes the infrastructure footprint at the store, reduces the overall capital expenditure investment (the SaaS provider invests in the hardware, software, and project costs), and simplifies the IT systems management process.

Corporate


Figure 55: Workforce Management Model

6.2.1 Workforce Management Examples As shown in Figure 58 and described in the following examples, mobile devices can support three key workforce management functions:

• Communication and planning • Labor budgeting, forecasting, and scheduling • Time and attendance tracking

6.2.1.1 Communication and Planning

Mobile devices can support the use of a single, streamlined channel that delivers up-to-date and important information to store managers and store associates for communication and planning purposes. For example, a store manager’s mobile device can be configured so that all communication channels (e-mail, voice, SMS) converge and all operations tools are consolidated. A manager can access everything needed through an intuitive interface with the touch of a button. From this interactive interface, the manager can send store associates shift assignments, task assignments, or communication updates (such as a change in store or corporate policy) in real time. Associates can then use their mobile devices to view or request changes to their shift and task assignments, report the status of their assigned tasks, and acknowledge receipt of corporate directives and policies directly to the store manager. The store manager can approve or reject responses

The Store

Workforce Manage-

ment Planning

& Directives

Hosted Workforce Manage-

ment Solution

Communi-cation and

Planning

Labor Budgeting,

Forecasting, Scheduling

Time and

Attendance

Central Management

Platform Mobile Devices

(cell phones, two-way radios, biometric readers, NFC devices, & location- based GPS devices)

Store Managers

Store Associates

Workforce Management Portal

Core Operations (Buy, Sell, Move, Corp



and requests from store associates immediately. This information can be synchronized seamlessly and sent back to corporate planners for workforce prioritization and planning purposes.

6.2.1.2 Labor Budgeting, Forecasting, and Scheduling

Appropriate labor forecasting, labor scheduling, and labor management and budgeting capabilities optimize both daily internal operations and corporate-driven tasks at a store.

For example, based on a predefined set of actions that are triggered as a result of the latest sales and operations results, a corporate office can send instant alerts to a store manager’s mobile device, instructing the manager to take an action, such as executing a new directive, initiate a corrective action, or follow an updated schedule that is based on the latest labor forecasts and budget. Store managers can in turn instruct store associates in real time to follow these directives and actions, interacting directly with the associates over their mobile devices. These directives and actions can then be executed immediately.

Store managers can instantly request a certain number of associates to end their shifts early or work overtime, sending the requests directly to the associates’ mobile devices. These requests can be tracked, monitored, and sent to a corporate office in real time. This capability gives the corporate office tighter control over the labor budgeting, forecasting, and scheduling process, thus providing the ability to react quickly to changes in market conditions.

6.2.1.3 Time and Attendance Tracking

Automated and self-service tools available over mobile and wireless networks enable associates to perform schedule-related and administrative activities using in-store mobile devices without supervision.

For example, associates can immediately access time and attendance tools loaded on in-store mobile devices simply by logging in using their assigned associate numbers. They can then clock in and out for shifts and breaks, change shift assignments, or check hour balances. These actions and requests can then be forwarded to and updated on a store manager’s mobile device for immediate review and approval. Having access to this information in real time allows store managers to respond appropriately to requests in a timely manner and address discrepancies in store associates’ time and attendance records and information. Associates with NFC-enabled devices can also tap readers to access secure areas, track time spent in a specific area, and perform security checks.

6.2.2 Technology and Standards Employed The technology and standards used by a mobile workforce management solution can vary, based on the solution vendor of choice; regardless of the vendor, the following key areas merit consideration:

• Central management platform • Technology used to connect to the workforce management solution • Data integrity and accuracy



The central management platform serves as the central management system and connects all clients (typically mobile devices and thin clients) to the workforce management solution hosted at a central location (i.e., a corporate office or a third-party solution provider). The central management platform is therefore the connection between the store and the headquarters. It is typically set up and delivered through a SaaS model. This platform typically provides a single Web-based portal for all service requests, mobile device management, and monitoring services (see Figure 58, above).

People should be able to authenticate, connect, and interact with the workforce management solution using several media supported by different technologies, such as mobile devices (cell phones, two-way radios), biometric readers, NFC-enabled devices, and location-based GPS devices. The services may also be available through downloadable applications (iPhone, Blackberry, Droid), SMS messages, interactive voice recorders, and e-mail. Appropriate security measures should be put in place to ensure that communication between mobile devices cannot be compromised and that the data exchanged is accurate and protected.

Two ARTS standards are applicable to this area: the Workforce Management XML Schema and the Time Punches XML Schema (for more information about these standards, see Section 8.3.5).

6.2.3 Benefits and ROI Using the appropriate mobile technology solutions in conjunction with an existing corporate workforce management platform can help retailers obtain better control of and optimize their workforces across the entire enterprise.

The appropriate use of mobile technology can streamline communications and coordinate planning. Store managers can have direct and frequent contact with corporate headquarters and be involved in specific workforce planning functions (such as labor forecasting, scheduling, and management). Managers can also ensure that their workforces and tasks are aligned and prioritized appropriately without being tethered to their desks. Store associates can communicate, collaborate, and coordinate with each other and with store managers from multiple locations within the store. Having an integrated communication channel and clear visibility into the entire workforce allows store managers and associates to make their daily workforce management operations more efficient. They can collaborate more effectively and make better decisions, which in turn will improve customer service.

The use of mobile devices can also optimize labor scheduling. Assignments and schedules based on local labor laws, store patterns, corporate directives, and associate availability, skills, and work preferences can be delivered directly to both store managers and associates. In addition, store managers using mobile devices can monitor key performance indicators (KPIs), payrolls (i.e., timesheet approval), and overtime in real time. By utilizing mobile workforce management devices and tools to optimize labor scheduling, retailers can ensure that they have the right mixture of labor to complete both corporate-driven tasks and daily operational tasks while meeting target customer service levels. Store managers can interact in real time with associates from multiple locations within a store (for example, to approve requests for time off).



When time and attendance tracking is closely integrated with labor schedule solutions, retailers have tighter control of associates’ schedules and can ensure compliance with rules and regulations. Providing associates with access to mobile self-service workforce management tools that integrate labor scheduling and time and attendance solutions enable them to perform activities that are normally performed by store managers (i.e., work-hour tracking, punch-in/punch-out, vacation lookup, shift switching) from multiple locations within the store, while ensuring that the associates comply with local labor laws (i.e., work hours and overtime).

6.2.4 Implementation Considerations Retailers should consider the following when implementing a workforce management solution:

• Establish a workforce management process that is sustainable and focused on execution and operational excellence across the entire retail enterprise.

• Ensure that the mobile workforce management solution can interface and integrate with other information sources and solutions within the store (i.e., POS, inventory system) and at headquarters (i.e., CRM, ERP, SCM).

• Select a solution that conforms to standards (i.e., ARTS, GS1) and incorporates both SOA and a cloud-based architecture. Such a solution minimizes the integration effort and maximizes interoperability with other solutions across the entire enterprise.

• Evaluate ROI in terms of time to deploy and total cost of ownership.

6.3 Internal Communication The essence of mobile technology’s success is the ease with which the technology allows people to communicate. Applying mobile technology to an enterprise’s internal communication is an obvious and simple step. Integration with key enterprise systems allows associates and partners to receive relevant information automatically on their mobile devices.

6.3.1 Internal Communication Examples There are doubtless a multitude of applicable scenarios in which mobile technology can be used to improve internal communication within an enterprise. For example, integrating mobile devices with calendar applications such as Microsoft Exchange or Lotus Notes can automatically remind meeting participants of upcoming meetings. Store personnel can be notified of important events in real time throughout the day (for example, store personnel can be alerted when a known shop lifter or important customer enters the store). Additional notifications can be sent to store associates with information allowing them to identify customers who are looking for assistance.

Information and metrics can also be pushed to store managers, allowing them to spend more time on the floor interacting with customers or staff and less time sitting at their desks.



6.3.2 Technology and Standards Employed Creating a workflow to improve internal communications in a retail operation can be as simple as creating an extension to an existing application that allows the application to push messages to appropriate recipients. Retailers can also launch advanced applications that integrate with the company’s security and HR systems and must be downloaded to a phone.

Common to both of these implementations is the use of a messaging technology such as SMS, Apple Push Notification, IMAP Push, MS ActiveSync Push, or BlackBerry Messenger. Notifications must be pushed from an IT system at a central location to the relevant mobile devices. The push can be (for example) a simple SMS message with an embedded link or a binary message that triggers the local application.

6.3.2.1 Message-Based Applications

Message-based applications provide the simplest implementation with the fewest number of features. Recipients would receive notifications in the form of short messages describing an event and using standard technology, such as SMS or an e-mail technology (MS Active Sync, IMAP Push).

Message-based applications can be combined with more advanced application approaches, either based on browser technology or as smart clients that must be downloaded to the device. This approach would allow the retailer to combine the best of two worlds: the simplicity of messages and access to additional information through a richer user interface.

6.3.2.2 Browser-Based Applications

Browser-based applications capable of providing additional information or offering more advanced features employ the following additional standard technologies:

• HTTP • XHTML • CSS

6.3.2.3 Downloaded Applications

Applications downloaded to a mobile device employ the following standard technologies:

• SMS or Apple Push Notification • Objective C/C#/Java (depending on the device type) • HTTP, SOAP, or a similar protocol

6.3.3 Benefits and ROI By improving the workflow for internal communications, a retailer can become more agile and flexible, as associates are always aware of relevant information. Improved internal communication leads to a number of benefits:

• Increased sales through improved customer interaction • Increased customer satisfaction through personalized interaction with staff



• Improved efficiency, as information is more readily available • Less time wasted waiting for the last person to arrive at meetings

The first two benefits in particular allow retailers to set themselves apart from the competition and engage customers in a truly personal dialogue.

6.3.4 Implementation Considerations Probably the most important consideration when selecting a system to mobilize internal communications is interoperability with the existing infrastructure. For example, when selecting a solution for mobilizing meeting reminders, the selected vendor should have extensive successful experience working with the retailer’s calendar system.

Another important consideration is how best to control the flow of information that will be pushed around the organization. For example, only the people invited to a meeting should receive the meeting reminder. Similarly, only appropriate store associates should be notified of a customer’s inquiry, thereby ensuring that key customers always receive assistance from a knowledgeable store associate.

The choice between a down-loaded and a browser-based application is also important. The choice depends on the company’s infrastructure, the complexity of integration with back-office systems, and the level of detail possible on the mobile device. If the back office already includes a central Web-based portal, a browser-based application optimized for the mobile devices deployed in the organization is likely to be the simplest and cheapest approach to extending the amount of information that can be pushed to an associate. However, if a large quantity of information is involved, an application downloaded to the phone is likely to be a better, although also more costly, approach.

6.4 Mobile Approvals Decision-makers in most industries rarely sit in front of their computers. As a result, approval processes take longer, leading to frustration and increased operational costs. Mobile retailing allows managers to be on the store floor and, wherever they are, to react quickly to both customer and associate operational needs.

Mobile approvals cover a wide range of scenarios across a number of industries. All of the scenarios share the following characteristics:

• An order/bill/transfer/purchase must be authorized by a busy individual who is rarely at a desk.

• The authorizing individual possesses a mobile phone. • The order/bill/transfer/purchase can be summarized adequately and the summary

is legible on a small screen. Mobile approvals allow a store to improve response times for urgent requests and critical store issues requiring immediate resolution. For example, a mobile approval can handle any of the following typical situations:

• A manager must authorize a purchase order created by an associate.



• A manager must authorize leaves of absence due to illness or vacation. Such authorization would probably take place outside of the store, while the manager is travelling to or from work.

• A financial controller must authorize the payment of a bill. • A CFO must authorize a funds transfer between internal company accounts. • A manager must approve a price override, refund approval, or similar request

made by a store associate interacting with a customer.

6.4.1 Technology and Standards Employed Creating a workflow to support mobile approvals may require changes ranging from a simple extension to a purchase portal that is already optimized for the mobile devices deployed across the organization to installing a complex application that integrates with the company’s security and finance systems and must be downloaded to a phone.

Common to both of these implementations is the use of a messaging technology such as SMS, Apple Push Notification, IMAP Push, MS ActiveSync Push, or BlackBerry Messenger. The request for approval must be pushed from an IT system at a central location to the authorizer’s mobile device. The push can be (for example) a simple SMS message with an embedded link or a binary message that triggers the local application.

6.4.1.1 Browser-Based Application

Browser-based applications capable of supporting mobile approvals employ the following standard technologies:

• SMS • E-mail (MS Active Sync, IMAP Push) • HTTP • XHTML • CSS

6.4.1.2 Downloaded Application

Applications downloaded to a mobile device employ the following standard technologies:

• SMS or Apple Push Notification • Objective-C/C#/Java (depending on the device type) • HTTP, SOAP, or a similar protocol

6.4.2 Benefits and ROI By implementing a workflow for mobile approval, a company can become a more agile and flexible organization, as key individuals are no longer bottlenecks. Mobile approval leads to a number of benefits:

• Greater associate satisfaction through streamlining of internal processes • Improved efficiency; key personnel can approve important tasks or “sign”

important documents


• Improved customer service by not having to wait for manager authorization • Enhanced cash management capabilities through cooperation with external

partners, such as banks The last benefit in particular allows international companies to enhance their cash flow, as funds can be transferred between accounts at opportune moments when the exchange rate is favorable or differences between accounts can be settled to prevent paying high interest rates for overdrafts.

Figure 60 illustrates a simplified process for supporting mobile approvals:

Figure 56: Simplified Mobile Approval Flow

The process includes the following steps:

1. An event occurs in the central IT system, caused by an external party such as the authorizer’s colleague or the company’s bank, which pushes a notification to the authorizer.

2. The authorizer fetches the details for the event and authorizes the order/ bill/transfer/ purchase.

3. The central IT system sends a confirmation to the originator of the event.

6.4.3 Implementation Considerations Implementation should authenticate not only the device from which the approval originates, but also the individual who authorized the approval. In general, the device may be authenticated through its MSISDN by proper integration with the mobile network operator.

A number of additional standard solutions capable of securely authorizing an individual are also available. These include solutions for wireless authentication through standard encryption certificates or two-factor authentication based on proprietary security schemes accessed through a downloaded application. In addition, all data transfer should be secured adequately using industry standard methods such as SSL.

The choice between a downloaded and a browser-based application depends on the company’s infrastructure, the complexity of integration with back-office systems, and the level of detail presented on the mobile phone. If a central Web-based portal already Copyright © 2010 National Retail Federation. Page 139 All rights reserved. Verbatim reproduction and distribution of this document is permitted in any medium, provided this notice is preserved.



exists as part of the back office, a browser-based application optimized for the mobile devices deployed in the organization is most likely to be the simplest and cheapest approach. However, if a large amount of information must be presented in order to adequately represent an order/bill/transfer/purchase, a downloaded application is probably a better, although more costly, approach.



7. INTEGRATED IMPLEMENTATION STRATEGY

Before beginning to implement mobile support for their businesses, retailers should develop a 3- to 5-year strategic and tactical plan Mobile is more than just a new device or technology that can be used to conduct the business of retail. It will change the business rules and processes. Therefore, it is extremely important that retailers develop a plan that identifies which business processes can be enhanced with mobile processing and the technology infrastructure that is required to support these changes. The plan must be flexible—mobile is a rapidly evolving technology—and be fully coordinated with the direction that both e-commerce and IT will take within the company.

This section discusses key considerations for retailers planning mobile retail implementation that apply to all of the categories of mobile retail. (Specific implementation details are included with the specific scenarios in previous sections of this document.) Table 29 summarizes which of the mobile subchannels are considered applicable to each of the business scenarios described in the previous sections.

Table 29: Technologies Appropriate for Mobile Retail Business Scenarios

Technology

Business Scenario Browser‐Based

Downloaded Application

SMS MMS

Voice Wi‐Fi Bluetooth

NFC ImagingBar Code

GPS

Advertising & Marketing

X X X X X X X

Customer Service X X X X X

Shopping Tools X X X X X X X X

Product Information X X X X

Loyalty X X X X

Promotions & Coupons

X X X X X

Mobile Store X X X X X X

Mobile Remote Payment

X X X X X

Mobile Contactless Payment

X X X X X

Mobile Point of Service

X X X X

Warehouse Management

X X X X X

Workforce Management

X X X

Shelf Stocking X X X X

Internal Communication

X X X



Technology

Business Scenario Browser‐Based

Downloaded Application

SMS MMS

Voice Wi‐Fi Bluetooth

NFC ImagingBar Code

GPS

Inventory Control X X X X

Price Verification X X X X X

Mobile Approvals X X X X

7.1 Development Considerations When developing a new mobile application, the retailer will in general be forced to choose between using a browser-based application or a downloaded application, as it is rarely cost effective to create the same application for each subchannel. If the downloaded-application approach is chosen, the retailer will also be forced to make choices with regard to platform support (i.e., iPhone vs. Android vs. BlackBerry vs. Windows Mobile), as developing downloaded applications for a large range of platforms is extremely expensive and maintenance intensive. In essence, the retailer will be forced to choose between different technologies.

The choice of which approach to take will depend on numerous factors, including:

• Can the retailer control what devices the consumer is able to use to access the application and also anticipate what devices will be on the market 12 months in the future and require support?

• Who is the target audience for the application? Is it consumers, employees, partners—or perhaps all three?

• Is the target audience sensitive to application cost or concerned about the use of data by the application?

• What information must be presented on the mobile device? The retailer may benefit from lessons learned by European banks, many of whom spent millions of dollars trying to squeeze their online banking applications onto the limited screen of a mobile phone, with disastrous results.

• Should an application be available off line as well as on line? • Is advanced functionality such as GPS, NFC, or camera access required?

7.1.1 Browser-Based Applications For most retailers, developing a browser-based mobile application will at first appear to be the simplest solution. Development teams can reuse the knowledge and lessons learned from the retailer’s e-commerce initiatives. Browser-based mobile applications rely on technologies such as HTML, CSS, and HTTP, which are familiar to most Web developers.

However, mobile development must take into account a number of considerations in addition to those that generally apply to Web development, including:



• How to ensure compatibility across the thousands of available mobile handsets • How to optimize the user interface for the consumer’s specific handset • How to offer the user convenient access to the mobile site

7.1.1.1 Handset Compatibility

The compatibility challenge is already familiar to developers from e-commerce initiatives. Customers access a retailer’s e-commerce application using different browsers, each with different capabilities. Browser-based mobile applications take this paradigm to the extreme, as there are hundreds of different mobile browsers, all with vastly different capabilities, as opposed to the three or four different browsers that are generally used to access e-commerce applications. An additional complication is that currently, different vendors offer an array of browsers for most smartphones.

The first consideration may be addressed by adhering strictly to mobile standards such as XHTML MP 1.0 / 1.1 and Wireless CSS. Each of these standards is composed of a subset of their Web counterparts. Tools such as Validome are available to validate a document and are extremely useful. Additionally, the retailer should decide on a conservative design that is compatible with low resolution screens.

7.1.1.2 User Interface Optimization

Even if the retailer’s browser-based application is compatible with the consumer’s specific handset, there is no guarantee that the user experience is going to be a good one. Once broad compatibility has been achieved, an ambitious retailer must look further into optimizing the application based on each device’s specific capabilities.

To address this issue, the retailer will have to determine what specific handset is being used. For example, the iPhone, with a resolution of 320x480, has much more available screen space than older handsets, such as the Sony Ericsson K790i with a resolution of 240x320 (Figure 61). Therefore, the retailer could present more information on the iPhone than on the K790i without degrading the user experience.

Another consideration is that some modern smartphones, such as the iPhone, have not implemented proper support for common mobile standards but do support newer standards, such as HTML5. The retailer should consider engaging with specialized third party software vendors who can provide the required technology to the retailer, either as part of a central strategic mobile platform that is installed as an integrated part of the retailer’s infrastructure, or as an external hosted solution offered as SaaS (see Section 7.2.2 for further information). The choice of whether to use a third-party software vendor or develop an in-house solution should be weighed against the retailer’s need to bring a consistent experience to the retailer’s customer base.


Figure 57: iPhone and Sony Ericsson K790i Display Areas

7.1.1.3 Web-Site Access

Retailers must also consider the access issue. Starting the phone’s browser and navigating to a specific URL can be difficult, especially on older phone models. The browser may be hidden, and entering a URL is often a frustrating experience.

Employing messaging technologies such as SMS will allow the retailer to address this issue. Allowing the customer to send a simple SMS message to request a link to the retailer’s mobile site can lower any barriers to entering the site. However, to offer this approach properly, the retailer must take into account both the customer’s wireless carrier and the customer’s mobile phone. For example, some large U.S. carriers, such as Sprint, and some modern smartphones, such as the iPhone, do not support standard SMS WAP Push, which generally allows someone to access a URL by simply clicking “OK.” To avoid this obstacle, the retailer must embed the URL in the response message, allowing native software on the phone to detect the URL and make it accessible to the user.

7.1.2 Downloaded Applications Developing a mobile application to be downloaded means making some difficult decisions that must weigh development cost and time against number of customers reached. In general, it is very unlikely that a retailer will be able to develop downloaded applications for all available mobile platforms, which means that the retailer will generally be forced to choose between the mobile operating systems shown in Table 30.




Table 30: Phone Operating Systems and the Associated Programming Languages

Operating System Programming Language

iPhone OS Objective‐C

Android (several versions)

Java

Symbian C

Windows Mobile (v6.0, v6.5, or v6.5.1)

C++

Windows Phone (v7.0)

C#

BlackBerry (several versions)

Java

Development for each of these operating systems requires not only knowledge of different programming languages but also a strong understanding of the underlying environment. For instance, BlackBerry devices are known to run a number of different versions of the BlackBerry operating system, which are not all compatible with each other. Similarly, Android’s operating system can include different vendor-specific extensions that cause additional fragmentation.

This fragmentation is only expected to increase as new iterations of the hardware and software platforms introduce features that are not backwardly compatible across all devices. A good example of such fragmentation is the multitasking capabilities of the iPhone OS 4.0, which will be supported by the iPhone 4G and the iPhone 3GS but not the older iPhone 3G.

Including support for low-end mobile phones capable of running applications written in J2ME and Brew will lead to even further fragmentation, due to the vastly different device profiles and packages. In the J2ME world, a device can be CLDC 1.0-, CLDC 1.1-, or CLDC 1.2-compliant as well as MDIP 2.0- and MIDP 2.1-compliant. The first profile describes the device connection capabilities, and the second profile describes its multimedia capabilities. In addition, each vendor has been free to include an arbitrary number of Java specification requests and, in some cases, even their own proprietary extensions to the J2ME environment.

Mobile gaming companies (who must support a large variety of mobile phones) estimate that they spend 20 percent of their research and development budget creating a mobile game and 80 percent of the budget porting the game to different handsets. This figure is for “smart” game developers who have outsourced their porting to Eastern European software developers specializing in porting mobile applications.

Not only will retailers have to deal with fragmentation of the software platform, the capabilities of different mobile device hardware can vary greatly. For example, high-end smartphones are often equipped with GPS and high resolution cameras, whereas lower end smartphones tend not to have GPS functionality and only include a low resolution camera. If a retailer decides to use these features, additional restrictions are imposed.



Device fragmentation means that a retailer choosing to use downloaded applications to launch mobile applications will require advanced life-cycle management capabilities for each application. In addition, the retailer must maintain older versions of the APIs, to continue to provide access to the back-office infrastructure. To address the challenges of device fragmentation, a retailer will be forced to choose between the different mobile operating systems. A good approach to making this decision is to identify which handsets generate the most traffic on the retailer’s mobile site. The retailer should also create and maintain a detailed database that links a specific version of a specific application to a specific mobile platform for each user. These types of device management capabilities will provide retailers with enough information to determine when a new version of a specific mobile application has reached a sufficient adoption level that old APIs can be removed.

7.1.3 Mobile Payment Retailers who are considering implementing mobile payment have additional decisions to make. As discussed in Section 5, mobile remote payments typically use browser- or downloaded app-based technologies or SMS and are offered by a variety of service providers.

NFC-enabled mobile contactless payments involve different implementation considerations. Mobile wallet software interacts with the payment application that is stored in a secure element. The mobile wallet software can be a native application that is supplied with the mobile phone when the consumer purchases it, or it can be a downloaded application. In the future, the secure element will be supplied for an NFC-enabled mobile phone (for example, embedded within the phone itself) by the mobile operator, in the form of a UICC, or by another entity, in the form of a removable memory card. In the near term, bridging technologies, such as microSD cards or stickers, can contain the secure element and antenna for non-NFC enabled phones.

7.1.3.1 Development Required

What development work is required by the retailer will depend on what types of mobile contactless payments are to be implemented.

If the retailer is most interested in accepting network-branded credit and debit cards for mobile contactless payment, little development work would likely be required. The mobile wallet and secure element are supplied by the mobile network operator, and the payment application and account information are provisioned OTA to the secure element. Retailers can accept mobile contactless credit and debit payment using current contactless POS readers. As mobile contactless payment becomes more ubiquitous, alternative payment types (e.g., an electronic check or ACH service) can also be supported in this way.

If, on the other hand, the retailer is most interested in accepting the retailer's own branded credit card or stored value (gift) card, retailers can either create their own mobile application capable of communicating with the POS using NFC, or the retailer will need to partner with one or more TSMs to provide OTA provisioning of the payment type to consumers after the secure element is embedded in the mobile phone.



7.1.3.2 Mobile Contactless Payment Requirements

To support mobile contactless payments, retailers must meet the following requirements:

• Enable the POS with the contactless reader infrastructure. • Support limited data capture at the POS using the contactless readers. • Support processing that uses the captured data.

To implement mobile contactless payments and other NFC-enabled mobile applications at the POS (e.g., closed loop payments, gift cards, loyalty cards, brand-specific cards), retailers must take the following actions:

• Provide a back-end system for data mining and management. • Identify options and requirements for customer communication and CRM using

the enabled devices. If the retailer opts to roll out NFC-based payment solutions before NFC capabilities are available in all or a vast majority of mobile handsets (Gartner predicts that 20 percent of all consumers will have an NFC-enabled handset in 2012), the retailer would additionally be required to roll out enablement hardware such as a sticker or microSD card. Such hardware can be issued or distributed by other parties, or it can be bought, issued, and controlled by the retailer. In the latter case, the retailer must also provision the hardware, manage the device lifecycle, and integrate capabilities with back-end systems. Retailer-controlled enablement hardware also gives retailers the ability to resell other capabilities that can use the same hardware.

7.1.4 Other Application Types The world of mobility includes a range of technologies in addition to browser-based or downloaded applications, and for very simple or very specialized applications, one of these may be a better choice. For instance, SMS is a viable approach for simple notification services or for opting in to more advanced services. Additionally, SMS, being a push technology, may provide the communication backbone for either a browser-based or a downloaded mobile application. Other messaging technologies, such as MMS or e-mail, should be considered for more advanced types of messages that may include rich content.

7.2 Approach to Mobilization/Path to Mobile When starting on the path to mobilizing the retail organization, a retailer should carefully evaluate the organizational impact of implementing a mobile strategy.

The retailer’s IT governance policy should be expanded to include rules and regulations for governing communication through the mobile channel. The retailer should take advantage of work such as the U.S. Consumer Best Practices Guidelines for Cross-Carrier Mobile Content Programs47 to comply with standard mobile practices. IT systems and processes should be implemented to ensure that auditing requirements are met satisfactorily, the level of availability is appropriate, and transactions are as visible

47 Mobile Marketing Association, U.S. Consumer Best Practices Guidelines for Cross-Carrier Mobile Content

Programs , version 5.1( May 2010), http://www.mmaglobal.com/bestpractices.pdf.



and transparent as necessary. Finally, a retailer must ensure that security and privacy measures are appropriate for meeting industry security requirements, including end-to-end encryption and strong authentication.

7.2.1 Mobile Governance When a retailer initially begins implementing mobile services, it is important for the entire organization to have a common understanding of and set of practices that govern communication in the mobile channel. The mobile channel is the most personal way for a retailer to communicate with customers. Great care should be taken to ensure that all communication is relevant and that every message is appropriately personalized and targeted to the individual customer.

By expanding the general IT governance policy to include a dedicated section describing mobile governance, the retailer will be in a good position to ensure that all mobile initiatives are in compliance with corporate values. The mobile governance section should at the very least include the following:

• How outbound messages are aligned, to ensure that different parts of the organization are able to coordinate their communication initiatives. It is very important to ensure that messages sent to the customers are not considered unsolicited messages.

• Which integration points must be covered to ensure an appropriate level of transparency for transactions in the mobile channel. One of the current challenges, especially with messaging-based communication, is the absence of transaction transparency and the limited visibility afforded by wireless carriers and mobile aggregators. A retailer should address this challenge by ensuring adequate integration with key systems.

• What level of detail is required to establish an appropriate audit and billing trail for mobile services. The retailer should evaluate the level of detail required for audit and billing records. The appropriate level of detail may vary, depending on the types of mobile services that are launched. For example, a mobile service that includes a mobile payment component will require much greater detail than a notification service.

• What measures are required to deal with the “natural” delivery uncertainty of the mobile channel. The mobile channel is by nature a wireless channel and therefore prone to interference from outside sources, which will inevitably lead to performance degradation. This issue is even more critical for asynchronous communication such as messaging; messages can be lost or delayed in transmission. The retailer should therefore consider technical or procedural safeguards to ensure a satisfactory level of service. As for all communication in the mobile channel, these safeguards should be customized based on the customer’s profile. That is, a different procedure should be invoked for a “gold” level customer than for a customer with an unknown track record.



Mobile initiatives today are often launched either by marketing or sales units without coordination with other parts of an organization, such as IT. The mobile application for a particular initiative is generally developed and hosted by a specialized third-party software developer, who may understand mobility but may not be as conversant with enterprise software. While this approach can allow a retailer to launch mobile services quickly, it can also lead to “siloed” applications that do not communicate or share data appropriately. Data for the same customer (although typically with slightly varying profile data) can be present simultaneously in multiple applications that do not reference each other properly. This situation leads to an increased total cost of ownership (TCO) for each application and degradation of the user experience. The increased TCO often results in a poor service level agreement (SLA) between the business unit and the IT unit for mobile services, because the service is not properly integrated with core IT systems such as surveillance and monitoring. In addition, mobile applications rarely comply with established change-management procedures, thereby limiting IT control, increasing coordination requirements, and resulting in higher maintenance costs.

As part of a mobile governance policy, retailers should seek to evaluate the organizational impact of launching mobile services and ensure that all relevant parts of the organization are adequately informed. Guidelines should also be established for working with third-party mobile specialists. These guidelines should include integration and hosting requirements to ensure compliance with the retailer’s standard procedures, such as change management controls.

7.2.2 Achieving Control of the Mobile Channel The technical responses to an established mobile governance policy should establish central solutions for mobilizing core business processes that are designed to overcome the challenges listed above and ensure that mobile services comply with defined policies and quality standards based on best practices.

Like other critical IT systems, such as a retailer’s e-commerce platform, mobile services may benefit from being launched on a central piece of infrastructure dedicated to dealing with the mobile channel. This infrastructure component should provide high availability through appropriate redundancy and serve as the central integration point to other core IT systems for general requirements such as providing transaction transparency and creating audit and billing records with the required level of detail. Figure 62 illustrates how mobile applications can use centralized middleware to provide high availability and generalized integration.


Figure 58. Overview of Mobile Applications Built on a Centralized Mobile Platform

As Figure 62 indicates, a retailer can use multiple mobile aggregators to provide redundancy and failover capabilities for messaging-based transactions. The central mobile platform offers automatic integration with other core systems, such as CRM, finance, and statistics. The centralized infrastructure can serve as a specialized communication bus and integrate directly with the retailer’s ESB and with other services exposed by an SOA. Building mobile applications on a central piece of infrastructure allows the applications to reuse general business logic, which leads to a lower TCO and reduced development costs.

If the retailer plans to launch m-commerce applications that include a mobile remote payment component, the central mobile platform should include a PCI DSS-compliant mobile payment system capable of handling a range of payment methods, such as payment cards, stored value accounts, and MNO billing. This approach allows the retailer to minimize the PCI footprint by letting the central platform handle all payment transactions.

7.2.3 Privacy, Authentication, and Security When launching mobile services, especially services that include a mobile payment component, a retailer must address concerns related to privacy, authentication, and security.

7.2.3.1 Privacy

U.S. Consumer Best Practices Guidelines for Cross-Carrier Mobile Content Programs describes best practices for managing customer privacy within the mobile sphere.48 Even though this document officially concerns itself only with messaging-based mobile


48 Mobile Marketing Association, op. cit.



applications, the best practices described provide an excellent set of privacy guidelines for retailers:

• The customer must actively opt into push services. Push services include notifications, alerts, and other types of subscription-based services.

• The customer should always be provided with a simple way to opt out of a service. Sending an SMS message with the word “STOP” is a good example of a simple approach.

• The retailer should notify the customer in advance before charging the customer for renewing a subscription. The notification should include the cost of renewing the subscription as well as information detailing how to decline the renewal.

Other authorities within the mobile sphere, such as Apple, have adopted a similar approach to approving mobile applications before offering them to users, and the retailer should try to apply the guidelines listed above to all types of mobile applications

7.2.3.2 Authentication

The mobile phone provides a convenient way to enhance authentication processes to use two-factor authentication (2FA). The retailer may automatically determine the customer’s mobile number (MSISDN) through integration with wireless carrier networks or mobile aggregators. The MSISDN provides the first authentication factor: something you have. (Other alternatives are also possible, such as issuing certificates to the customer’s mobile phone.) By using the mobile number to identify the customer and combining it with a second factor, something you know (such as a password), the retailer can offer 2FA.

The following two guidelines are therefore critical to implementing authentication:

• Authenticate the user, not just the device. • Restrict access to a service to the user’s device.

A number of off-the-shelf solutions are already available from vendors specializing in providing 2FA in the mobile channel. The approaches differ from vendor to vendor. Some base their solutions on wireless public key infrastructure (WPKI), based on the SIM card, while others provide a solution that is implemented in Java, Objective-C, or another programming language and that therefore resides in the phone’s application layer. Each approach has its pros and cons; a retailer should carefully evaluate which approach provides the best solution for the retailer’s needs.

Finally, mobile technology can be applied within the retailer’s own organization to enhance authentication procedures, such as logging on to a virtual private network or accessing data that is considered business sensitive.

7.2.3.3 Security

The different mobile-payment-related organizations have already done a lot of work on security. In general, encryption technologies such as SSL or TLS are considered adequate for securing data while it is being transmitted. All transmitted data are further encrypted by standard network technology standards, such as GSM and CDMA. For applications that incorporate mobile contactless payment functionality, the TSM, in cooperation with the MNO and the issuer (who could be a retailer in the case of retail-branded or retail-



owned payment cards), will address concerns related to secure storage of a customer’s payment details on the mobile phone. The mobile contactless payment transaction is processed through the retail POS system in the same way as any other contactless payment transaction, using the currently implemented POS security features.

For other retail-specific applications that contain or transmit sensitive data, the retailer should apply standard security practices, including end-to-end encryption principles based on standard encryption schemes such as PKI, SSL, and TLS.


8. MOBILE STANDARDS

To achieve universal consumer acceptance, mobile processing must be global. What works in the United States must also work in Asia, the Pacific, and EMEA. The only way to ensure this interoperability is to adopt global standards. Fortunately, many organizations are already working to develop and promote these necessary standards (many of whom are partners in preparing this document).

Some standards organizations define how technology should be enabled. Other organizations define specifications that ensure the security of payment transactions. The entities involved must address challenges that include determining an appropriate method for testing individual mobile phone handsets and secure elements and resolving lifecycle issues.

Numerous standards bodies are involved in mobile contactless payment operations. Figure 63 identifies which standards body is responsible for standards that are applicable to particular pieces of hardware and software.

Figure 59: Contactless Payments Hardware and Software with Associated Standards

Key to making mobile contactless payments work is the ability to provision the players with the appropriate components. Figure 64 shows which standards bodies are involved in the provisioning effort.




Figure 60: Provisioning

All standards organizations are interested in increasing the ease of access, global interoperability, and security of mobile payment technology for consumers. For example, for every payment network, someone is responsible for certifying the applications on the network. Table 31 summarizes the responsibilities of the individual standardization and specification organizations that play a role in current mobile payment implementations.

Table 31: Summary of Standards and Certification Organizations

Organization

Area of Responsibility

Responsibility Mobile Handset

Other Functions

Payment Applications

PCI SSC x x Maintains, evolves, and promotes standards for payment account security.

EMVCo x

Establishes specifications to ensure interoperability of smart card-based payment systems worldwide. For mobile payments, seeks industry collaboration and coordination of mobile payment standards.

Payment brands (American Express, Discover, MasterCard, Visa)

x

Require that a mobile payment application submit to a security and functionality qualification process for an application to be branded for their network.

GlobalPlatform x Drives adoption of its technical standards, which provide an open and interoperable infrastructure for transactions performed using smart cards, systems, and devices.



Organization

Area of Responsibility

Responsibility Mobile Handset

Other Functions

Payment Applications

ETSI x Produces globally applicable standards for information and communication technologies, including fixed, mobile, radio, converged, broadcast, and Internet technologies.

GSMA x x Engages in technical, commercial, and public policy initiatives to ensure that mobile services are interoperable worldwide.

OMA x x Develops mobile service-enabler specifications to promote interoperability.

NFC Forum x x x Develops specifications for NFC devices that are based on ISO/IEC standard 18092 for contactless interfaces, ensuring interoperability among devices and services.

3GPP x x Produces globally applicable technical specifications for third-generation GSM.

3GPP2 x x Establishes standards for CDMA 2000.

CDG x x Ensures interoperability among systems while expediting the availability of 3G CDMA technology to consumers.

ISO/IEC x Establishes international standards, including standards applicable to financial transactions and contact and contactless smart cards.

8.1 Technology Details Table 32 summarizes the relevant characteristics of the technologies most commonly used for mobile.

Table 32: Technology Details

Network

Type Range

(m) Frequency Bit rate Set-up time

Bluetooth Point-to-multipoint

10 2.4–2.5 GHz 2.1 Mbit/s 6 s

Wi-Fi Point-to-point 10–100 2.4 GHz 5 GHz

802.11a–54 Mbps 802.11b–11 Mbps 802.11g–54 Mbps 802.11n– 450 Mbps


Network Range Frequency Bit rate Set-up time


Type (m)

ZigBee Point-to-point Point-to-multipoint Mesh

10–100 2.4–2.5 GHz 900 MHz 868 MHz

250 Kbit/s As low as 16 ms

NFC Point-to-point < 0.2 13.56 MHz 424 kbit/s < 0.1 s

8.1.1 Wi-Fi and ZigBee Wi-Fi and ZigBee are wireless technologies; Figure 66 illustrates network access points within a store. In addition to communicating between mobile devices, the location of the receiver can be discerned, which can be helpful in targeted marketing and store operations.

Figure 61: Wi-Fi and ZigBee Access Points

8.1.1.1 Wi-Fi

Wi-Fi is a network technology based on IEEE standard 802.11 that enables secure, reliable wireless connectivity to a local network and to the Internet. Wi-Fi is supported by the Wi-Fi Alliance, which is a global non-profit association.

Wi-Fi is widely adopted and is installed on many personal computers and smartphones. It is the infrastructure on which many wireless networks are based.

8.1.1.2 ZigBee

ZigBee is an open, global-standard wireless networking protocol based on IEEE standard 802.145.4 for small, lower power digital radios, which also applies to sensors and control devices. ZigBee is a collaborative effort by a global consortium of companies in the ZigBee Alliance.

One of ZigBee’s key features is the ability to locate an object and identify how far away it is. ZigBee is secure, low cost, and quick and easy to deploy. Other key features include:

• A low duty-cycle, which provides long battery life • Low latency • Direct sequence spread spectrum (DSSS) modulation • Support for up to 65,000 nodes per network



• 128-bit AES encryption, for secure data connections • Collision avoidance, retries, and acknowledgements

8.1.2 Near Field Communication Near Field Communication (NFC) technology evolved from a combination of contactless identification and interconnection technologies. In June 2006, the NFC Forum unveiled an NFC technology architecture and announced the first Forum-approved specifications.

The NFC Forum supports four initial tag formats based on ISO/IEC standard 14443 Type A and Type B and on the NFC standard ISO/IEC 18092. ISO/IEC 18092 defines communication modes for the NFC interface and protocol (NFCIP-1) using inductive coupled devices operating at a center frequency of 13.56 MHz for interconnection of computer peripherals. NFC Forum-compliant devices must support these formats.

As of August 2009, the NFC Forum has released 15 specifications49:

• NFC Data Exchange Format (NDEF) • NFC Record Type Definition (RTD) • NFC Uniform Resource Identifier (URI) Service Record Type Description • NFC Text Record Type Description • NFC Smart Poster Record Type Description • NFC Tag Types 1-4 • NFC Generic Control RTD Technical Specification • NFC Forum Connection Handover Technical Specification • Digital Protocol Technical Specification (candidate release) • NFC Logical Link Control Protocol (LLCP) Technical Specification (candidate

release) • NFC Activity Technical Specification (candidate release) • NFC Signature RTD Definition (candidate release)

8.2 Contactless Smart Card Standards Two primary standards govern the operation of contactless smart cards: ISO/IEC standard 14443 and ISO/IEC standard 7816.

ISO/IEC 14443 is a four-part international standard that defines the interfaces to a “proximity” contactless smart card, including the RF interface, the electrical interface, and the communication and anticollision protocols. ISO/IEC 14443-compliant cards operate at 13.56 MHz and typically have an operational range of 4-10 cm (2-4 in.). ISO/IEC 14443 is the primary contactless smart card standard being used for transit, financial, and access control applications. It is also used in electronic passports and in the FIPS-201 PIV card.

49 http://www.nfc-forum.org.


ISO/IEC 7816 is an international standard with 14 parts. ISO/IEC 7816 Parts 1, 2, 3 and 12 deal with contact smart cards only and define various aspects of the card and its interfaces, including the card’s physical dimensions, the electrical interface, and the communications protocols. ISO/IEC 7816 Parts 4, 5, 6, 7, 8, 9, 11, 13, and 14 are relevant for all types of smart cards (contact as well as contactless).

Each payment type has its own standards and specifications and its own certification requirements. The NFC Forum and Smart Card Alliance partners in developing this blueprint can provide more information.

8.3 Association of Retail Technology Standards The Association for Retail Technology Standards (ARTS) was established in 1993 to support the rapid implementation of technology within the retail industry by developing standards to facilitate integration of software applications and hardware devices. ARTS has developed a widely adopted logical data model, 18 XML schemas, 35 device standards, and 8 RFP templates (Figure 68).

Figure 62: ARTS Standards

8.3.1 Service Oriented Architecture (SOA) Blueprint ARTS provides standard messages for use when integrating applications. These standard messages enable SOA, which allows a retailer to purchase only those services needed to run that retailer’s business. To help the retail community get the most out of this



architecture, ARTS created an SOA blueprint,50 the goal of which was to provide retail-specific ideas for successful implementation of SOA in the retail segment.

8.3.2 Cloud Computing Blueprint While SOA identifies the services required to perform specific functions, so-called cloud computing provides the cost effective infrastructure needed to run those services (Figure 69). The consolidation of information required to execute retail planning, acquisition, moving, and selling activities effectively requires significant computing capability. The cloud can provide these services as elastic resources that can be used in current or new applications, in a wide variety of application types, and by all types and sizes of organizations and companies. ARTS created the ARTS Cloud Computing for Retail white paper,51 similar to the SOA blueprint, to explain the technology from a retailer’s perspective.

ARTS provides standardized messages to communicate between the various SOA services located in the cloud computing environment.

Figure 63: SOA Platform and Services on a Cloud Infrastructure

8.3.3 ARTS Data Model The ARTS Data Model version 1.0 was released in 1996 to create standard data names and structures to enable master data management and make integration of disparate applications easier. Today, the model contains over 600 tables and 4,500 elements in a


50Association for Retail Technology Standards, SOA Blueprint for Retail, Version 1.1, July 4, 2008. 51 Association for Retail Technology Standards, Cloud Computing for Retail” Version 1.0.0, Decl 12, 2009.



relational model that describes retail business functions and the retail process. It serves as a guide for retail IT support, a database design for new applications, and a repository for data storage.

8.3.4 ARTS UnifiedPOS The ARTS Unified Point of Service (UnifiedPOS) is a standard APIspecification that is platform independent (language and operating system neutral) for connecting 35 POS devices, such as scanners, magnetic card readers, and printers, to POS terminals. New devices required to connect mobile phones to POS are or will be included in UnifiedPOS.

The API specification is intended to enable interoperability between standard applications and standard devices from multiple providers. The specification defines an architecture for application interfaces to retail devices and a set of retail device behaviors sufficient to support a range of POS solutions.

8.3.5 ARTS XML The ARTS XML was created in 1999 to develop and maintain standard XML schemas based on the structures and data elements within the ARTS data model to integrate applications within a retail enterprise. There are 18 schemas in the ARTS inventory; the following schemas are relevant to mobile retail:

• POSLog enables rapid integration with POS applications. Retailers planning to implement mobile payment, coupons, and discounts will find that POSlog is a required standard.

• Digital Receipt was recently updated to display receipts on mobile devices and contain additional data.

• Payment defines payment as a service; it can now be removed from the POS application, making it easier to use on mobile devices and still comply with PCI.

• Retail Transaction Interface defines services for ease of integration with POS and allows multiple services/applications to use a common set of business rules.

• Product Content Management (PCM) supports the communication of images (digital assets) between manufactures and retailers or any parties.

• Stored Value is a set of XML messages that support debit/gift cards, purchase, redeem, recharge, and similar functions.

• Time-punch defines data messages to support recording associate work time, log in, change assignments, log out, and similar functions.

• Associate Management identifies employees and records all relevant information, including profiles and employment histories.

• Inventory tracks inventory by item by physical location, with all levels of summary available

• Item Maintenance defines information about products from unique item (EPC) to summary categories (styles and SKUs). Retailers planning to scan a bar code and display product information will want to investigate the Item schema.

More information about ARTS standards is available at www.nrf-arts.org.



8.4 GS1 GS1 US is a not-for-profit global standards organization that assigns and manages standard identification numbers to identify products, cartons, locations, and other entities. These numbers are usually represented as the familiar bar code or electronic tag called an EPC. GS1 standards enable the unique identification of products, services, locations, logistics, and assets in the business-to-business community around the world. ARTS partners with GS1 US to ensure that GS1 standards are included in ARTS business and technical guidelines.52

GS1 has recently launched an initiative to provide the B2C ecosystem of access to trusted product data on entry of a GTIN.

52 For information on GS1 Identification Numbers, see

http://barcodes.gs1us.org/dnn_bcec/Standards/IdentificationNumbers/tabid/81/Default.aspx



9. TERMS AND ACRONYMS

Term Definition

1-D bar code Linear (one-dimensional) bar code representation of data as widths (lines) and spacing of parallel lines, such as a product’s universal product code.

2-D bar code Two-dimensional bar code representation of data in a geometric pattern that is easy for mobile cameras to read. QR-Codes, GS-1 2D, and AZTEC are 2-D bar codes.

2FA See two-factor authentication. ACH Automated Clearing House aggregator Entity that can aggregate messaging services between mobile network

operators and the retailer (for example, Open Market or mBlox). API application programming interface application (app) Small, dedicated-purpose software program designed to help a user

perform one or more specific tasks. BI business intelligence Bluetooth Proprietary open wireless technology standard for exchanging data over

short distances (using short length radio waves) from fixed and mobile devices. Bluetooth can connect several devices, overcoming problems of synchronization.

BREW Application development platform created by Qualcomm that can download and run small programs for playing games, sending messages, sharing photos, and the like. Application developers who use BREW can easily port their applications between all Qualcomm devices.

browser-based application

Application that is hosted in a browser-controlled environment (e.g., a Java applet) or coded in a browser-supported language (such as JavaScript, combined with a browser-rendered markup language like HTML) and that relies on a Web browser to render the application executable.

CLDC connected limited device configuration cell phone See mobile phone. cloud computing Internet-based computing, whereby shared resources, software, and

information are provided to computers and other devices on demand, as is the case with electricity and the electricity grid. These resources are sometimes referred to as the cloud.

common short code (CSC)

A 3-7 digit “phone-number” used by companies to send and receive SMS and MMS messages that enable a simple action across multiple carriers in a given geographic area. Common short codes are also known as short codes and short numbers.

CRM customer relationship management CSC See common short code. CSS cascading style sheet EMEA Europe, the Middle East, and Africa



Term Definition

EMV Standard for interoperation of chip cards (cards with an integrated circuit, or IC) with IC-capable POS terminals and ATMs for authenticating credit and debit card transactions. The EMV standard defines the interaction at the physical, electrical, data, and application levels between IC cards and IC card-processing devices for financial transactions.

ERP enterprise resource planning ESB enterprise service bus feature phone A low-end mobile phone that has less computing ability than a

smartphone; sometimes referred to as "dumb phones." Feature phones can often run simple applications based on Java or BREW.

geofence Virtual boundary for a real-world geographic area. When a location-aware device (such as a phone equipped with GPS) enters or exits a geofence, the device receives a notification.

gift registry Mechanism for requesting items from others on special occasions, such as weddings, graduations, and similar celebrations. The list compiler does not intend to purchase these items but wants others to do so.

GPS global positioning system GUI graphical user interface handset On a telephone, the device the user holds to the ear to hear audio. Modern

handsets typically contain a microphone as well; in early telephones the microphone was mounted on the phone itself, which often was attached to a wall at a convenient height for talking. Handsets on such phones were called receivers, a term often applied to modern handsets. On a mobile phone, the entire unit is a radio transceiver that communicates through a remote base station and is referred to as a handset.

high availability A system design protocol and associated implementation that ensures a certain degree of operational continuity during a given measurement period. Availability refers to the ability of the user community to access the system, whether to submit new work, update or alter existing work, or collect the results of previous work.

HTML, HTML5 hypertext markup language, hyper-text markup language version 5 HTTP hypertext transfer protocol HTTPS hypertext transfer protocol secure IMAP Internet message access protocol IVR interactive voice response Java Programming language that is not operating–system dependent. Java

applications can in theory be run anywhere. JavaScript Object Notation (JSON)

Lightweight, text-based open standard designed for human readable data interchange derived from the JavaScript programming language.

Java specification request (JSR)

Formal document that describes proposed specifications and technologies for adding to the Java platform.

JME, J2ME Java Micro Edition JSON See JavaScript Object Notation. JSR See Java specification request. KPI key performance indicator LBS See location based services.



Term Definition

location based services (LBS)

Feature that relies on knowing the approximate location of a mobile device.

m-commerce The full shopping experience on a mobile device, including product selection, shopping basket, payment, checkout, and transfer of product or service from retailer to consumer.

MEF mobile enterprise framework MIDP mobile information device profile microSD card Small, removable memory card commonly used in mobile phones, portable

media players, and other handheld devices. See also SD card. MNO mobile network operator MMS See multimedia messaging service. MO mobile originated mobile device Handheld wireless, portable device such as a media player, mobile phone,

e-reader, or tablet. mobile marketing Set of practices that enables organizations to communicate and engage

interactively with an audience through any mobile device or mobile network.

mobile operations Business process or transaction carried out using a mobile device. The device must be capable of receiving a custom application developed by the retailer.

mobile network operator (MNO)

Telephone company that provides services to mobile phone subscribers. MNOs are also referred to as mobile phone operators and cellular companies, among other synonyms.

mobile payment Payment for goods or services initiated from a mobile phone or similar device, such as a personal digital assistant or smartphone.

mobile phone (cell phone)

Handheld device connected to a mobile network operator that can make and receive calls and send and receive messages. Different mobile phones can have different capabilities. See also smartphone and feature phone.

mobile retail Use of a mobile device for the purpose of performing retail business processes as a customer, an associate, or a business partner.

mobile wallet An electronic wallet that is stored on a phone. A mobile wallet can be thought of as a data repository that holds enough consumer data to facilitate a financial transaction from a mobile handset, and the intelligence required to translate an instruction from a consumer into a message that a financial institution can use to debit or credit bank accounts or other payment instruments.

mobile Web application Web site that has been revamped to accommodate the limited screen size available on a mobile device.

MSISDN Mobile Subscriber Integrated Services Digital Network Number MT mobile terminated Multimedia Messaging Service (MMS)

Standard way to exchange multimedia messages with a mobile phone. MMS extends the core ability of SMS and is most often used to send photographs, for example.



Term Definition

native application Application written for a specific operating system that does not run within a browser. Native applications typically contain more features and are able to use a platform’s many capabilities.

NFC Near Field Communication Objective-C Reflective, object-oriented programming language that adds Smalltalk-style

messaging to the C programming language. Used primarily on Apple's Mac OS X and iPhone OS.

operating system (OS) The software on a computer that manages the way different programs use the computer’s hardware and regulates the ways that a user controls the computer. The combination of the operating system, the hardware architecture, and other components (such as the user interface) is often referred to as a platform.

OS See operating system. OTA over the air PCI payment card industry PKI See public key infrastructure. Plain Old XML (POX) Term used to describe basic XML as opposed to complicated, multilayered

XML specifications such as those that define Web services. platform See operating system. POS point of sale POX See Plain Old XML. PSMS premium billing SMS PSP payment service provider public key infrastructure (PKI)

Hardware, software, people, policies, and procedures used to create, manage, distribute, use, store, and revoke digital certificates that address the problem of protecting private information that must be transmitted publically.

QR code Matrix code (or 2-D bar code) created by Japanese corporation Denso-Wave in 1994. The "QR" stands for "quick response," as the creator intended the code to be decoded at high speed. QR codes are common in Japan, where they are currently the most popular type of two-dimensional codes. Most current Japanese mobile phones can read this code with their cameras.

REST Lightweight request/response architecture that leverages HTTP methods. RF radio frequency RFID radio frequency identification SaaS See software-as-a-service. SD card Non-volatile memory card format developed by Panasonic, SanDisk, and

Toshiba for use in portable devices. It is widely used in digital cameras, digital camcorders, handheld computers, netbook computers, PDAs, media players, mobile phones, GPS receivers, and video games.

secure element Storage location in a mobile phone for information that needs robust protection, such as information authenticating the identity of a payer. There is no consensus on where the secure element should reside; candidates include a SIM card, a secure memory card, an embedded smart card chip, or an external device attached to the phone.



Term Definition

service oriented architecture (SOA)

Flexible set of design principles applicable to systems development and integration. A deployed SOA-based architecture provides a loosely-integrated suite of services that can be used within multiple business domains.

shopping list List of items needed to be purchased by a shopper. Shopping lists are typically not shared, but are intended strictly for the shopper’s personal use.

short code See common short code. Short Message Service (SMS)

Communication service that allows the exchange of short text messages on a mobile device. The term SMS is often used as a synonym for all types of short text messaging.

short number See common short code. SIM subscriber identity module SOA See service-oriented architecture. smart card A pocket-sized card (or other form factor) with an embedded integrated

circuit that can be either a secure microcontroller or equivalent intelligence with internal memory or a memory chip alone. The card connects to a reader with direct physical contact or with a remote contactless radio frequency interface.

smartphone Mobile phone that can handle data as well as voice signals. Smartphones offer advanced computing ability and connectivity, allowing the user to install and run more advanced applications based on a specific platform. Smartphones run complete operating system software, providing a platform for application developers.

smart poster Posters, collateral, advertisements, or similar materials that include a small and inexpensive NFC tag that can contain information or a link to a Web site that an NFC-enabled phone can read by touching.

SMS See short message service. SOAP (Simple Object Access Protocol)

Protocol specification for exchanging structured information in the implementation of Web services in computer networks. SOAP relies on XML as its message format.

social media A group of Internet-based applications that build on the ideological and technological foundations of Web 2.0, and allow the creation and exchange of user-generated content (for example, Facebook).

software-as-a-service (SaaS)

Software that is deployed over the internet and/or is deployed to run behind a firewall in your local area network or on personal computer. With SaaS, a provider licenses an application to customers as a service on demand, through a subscription or a “pay-as-you-go” model.

SSL Secure Socket Layer tablet Complete computer contained entirely in a flat touch-screen that uses a

stylus, digital pen, or fingertip as an input device instead of a keyboard or mouse.

TLS transport layer security triangulation Process of determining the location of a point by measuring angles to it

from known points at either end of a fixed baseline, rather than measuring distances to the point directly.



Term Definition

trusted service manager (TSM)

Entity who securely distributes and manages a service provider’s services to the mobile network operator’s customer base. The trusted service manager provides the single point of contact for service providers to access their customers, and also performs life-cycle management services for NFC applications.

TSM See trusted service manager. two-factor authentication (2FA)

Use of any two of the three possible methods to authenticate that an individual is who the individual claims to be. The three possible methods are something an individual knows (a secret, such as a PIN), something the individual has (a possession, such as a passport), or something unique to the individual’s physical makeup, such as a fingerprint (referred to as something the individual is ).

UICC universal integrated circuit card Unstructured Supplementary Service Data (USSD)

Mobile phone capability generally used for mobile banking in developing countries where WAP is unavailable. In most countries, WAP is used for mobile banking and now mobile payment

UPC Universal Product Code USSD See Unstructured Supplementary Service Data. WAP wireless application protocol WCSS wireless application protocol cascading style sheet WebKit A layout engine designed to allow Web browsers to render Web pages.

The engine provides tools to display web content in windows and implements browser features such as following links when clicked by the user, managing a back-forward list, and managing a history of pages recently visited.

Web template Tool used to separate content from presentation in Web design and for the mass production of Web documents. Web templates can be used by any individual or organization to set up a Web site.

Wish list List of items that the list compiler would like to purchase if possible. Wish lists can be shared with others.

WPKI wireless public key infrastructure XHTML extensible hypertext markup language

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