The scope of the ‘ Overview on Mobile Payments Initiatives’
The ‘Overview on Mobile Payments Initiatives’, published by the European Payments Council ( ) in June 2014, describes various existing and new initiatives on mobile payments and aims to create awareness on the latest developments, based on the following sources:
- Contributions by members on community initiatives.
- Initiatives reported in various newsfeeds.
This first version of the report includes initiatives launched in the Single Euro Payments Area ( ) and beyond between November 2013 and May 2014.
The objective of the document is to provide illustrations of the development of the market on mobile payments. The descriptions provided are based on information which is publically disclosed by the various partners involved in these mobile payments initiatives. That means that they are a mixture of both high-level and detailed views, depending on the information available.
The overview given is not aimed to be exhaustive. The collection of the initiatives is done on a best-effort basis. The inclusion of any initiative into the document does not imply that the in any form endorses, supports, or recommends the said initiative. The non-inclusion of any initiative does not imply any judgment on the part of the . The endeavours to describe the initiatives as accurately as possible, with the sole objective of an illustration and is not accountable for any error and/or omission.
Note that the definitions introduced in this overview document might not be fully coherent with the terminology used by the various sources of information.
The document describes initiatives within the following categories: mobile payments, mobile wallet initiatives and mobile points of sale
The document contains sections highlighting underlying payment instruments, mobile wallet initiatives, and developments on mobile points-of-sale (mPOS), all of which have newly appeared on the market over the past year.
Consumers expect that new technology will continue to facilitate the convenience of carrying out daily and repetitive tasks. For example, an area that is still generating a great deal of attention is the necessity to use hard cash in conducting many commercial and personal daily payments. It is now widely accepted that some pervasive new technology-based solution should be introduced to minimise this problem.
Consumers also demand that whatever the ultimate nature of new technologies, processes or products, they should not add any significant shortcoming to the existing solutions they are supposed to improve upon. Furthermore, although there are already some service offerings capable of substituting cash, so far no technology or product has achieved the necessary acceptance to become a true alternative, chiefly because new burdens were added that consumers were not ready to accept.
Since mobile devices have achieved full market penetration and rich service levels they are an ideal channel for payment instruments. The usage of the mobile device is hereby primarily considered for the payment initiation whereas the underlying payments are based on existing payment instruments.
Mobile payments may broadly be classified as ‘contactless’ (also known as ‘proximity’) or ‘remote’ payments. For mobile ‘contactless’ payments the payer and payee (and/or his/her equipment) are in the same location and communicate directly with each other using contactless radio technologies, such as near field communications (NFC), Bluetooth or infrared for data transfer. For mobile ‘remote payments’ the transaction is conducted over telecommunication networks such as global system for mobile (GSM) or the Internet, and can be made independently of the payer’s location and/or his/her equipment.
Creating ease, convenience and trust for end-customers (payers/consumers and beneficiaries/merchants) is hereby regarded as critical for the further development of mobile payments.
Similar to the physical world, a ‘digital wallet’ acts as a digital organiser1 and typically contains identification information on the wallet holder, on payments instruments accessible to the wallet holder and, optionally, personal information items belonging to the holder (e.g. pictures, documents, etc). This may include information related to electronic identifications (eIDs), digital signatures and certificates, log-on information and billing and delivery addresses as well as payment instrument related information such as credit and debit products and payment cards (prepaid/purse, debit, credit). Furthermore it may include other applications such as loyalty, transport or ticketing.
A digital wallet is based on technical infrastructures (hardware and software) allowing the secure storage, processing and communication of the information described above provided by the wallet holder, the wallet issuer and the application/service providers. There exists a wide variety of different implementations for these infrastructures ranging from full implementation in the equipment of the wallet holder to remote implementations (as a remote wallet in a ‘Software as a Service’) accessed through the wallet holder's equipment.
Mobile wallets are digital wallets which are accessed through a mobile device (e.g. mobile phone, tablet, etc). In the context of this document, i.e. the ‘ Overview on Mobile Payments Initiatives’, it is a service allowing the wallet holder to access, manage and use mobile payment services, possibly, next to non-payment applications. As said before, this service may reside on a mobile device owned by the consumer, (i.e. the holder of the wallet), or may be remotely hosted on a secured server, (or a combination thereof), or on a merchant website. Typically, the so-called mobile wallet issuer provides the wallet functionalities but the usage of the mobile wallet is under the control of the consumer. In cases where the wallet issuer is the merchant, it is generally referred to as a ‘merchant wallet’.
Although different mobile wallets have been launched in the market in recent years, they are still in their early stages of development. However, a variety of services are already offered to customers. Where originally the penetration of mobile wallets was more focused on coupon deployment and loyalty management, more recently, the mobile wallet presents diverse capabilities extending well beyond these services such as the management of mobile financial services including mobile banking and payment opportunities.
As an illustration, a mobile wallet may include (but is not limited to) the following features:
- Management by the consumer/payer of a broad portfolio of mobile payment services from different providers (e.g., prioritisation or default selection) including sensitive data to be protected.
- Facilitation of the payments (selection and authentication) for goods or services or person-to-person payments.
- Storage of tickets, boarding passes that can be presented at a checkpoint.
- Offering of a single storage place for loyalty programs and coupons.
- Storage of credentials for easy and convenient identification and authentication (e.g. for access control).
- Storage of personal information such as delivery address to facilitate an on-line shopping experience.
Mobile point-of-sale (mPOS)
The term mPOS refers to the ability for a payment transaction to be executed through a (consumer) mobile device such as a smart phone or tablet instead of using a traditional point-of-sale terminal. Mobey Forum2 provides the following definition: an mPOS refers to using a consumer mobile device to facilitate payments and enable acceptance of payment instruments.
From a technical perspective, mPOS devices leverage both hardware and software components to allow a merchant or individual to accept payments. To support various data reading modalities, some form of add-on physical hardware such as a sleeve, dongle or card reader is typically required. As an example, several companies have developed mobile card readers, which plug into a mobile device’s audio jack to accept cards. The mobile apps that support such readers often have interfaces that resemble traditional cash registers.
The ability of a quick enrolment process for merchants with payment solution providers, the flexibility offered, the enhancement of retail and payment experience and the reduced equipment costs seem to be the main drivers for the adoption of mPOS based solutions.
To contribute to the further development of mobile payments, the has analysed the different payment categories and has given focus to mobile contactless card payments (MCPs) and mobile remote card and Credit Transfer payments over the past years. The has published a number of white papers and guidelines in this area, hereby endeavouring to:
- Inform stakeholders of the ’s commitment to mobile payments in .
- Describe some elements of the rationale for payment service providers and other interested parties wishing to enter the mobile payment services market.
- Demonstrate the consumer adoption potential of mobile payments by presenting several realistic and illustrative scenarios for the use of mobile payments.
- Collect stakeholder views and feedback.
For further information refer to the ‘related links’ below.
Dag-Inge Flatraaker is the Chair of the M-Channel Working Group.
Related article in this issue:
SEPA 2.0: an Overview of Regulatory Action Now in the Pipeline Impacting the European Payments Market Going Forward. The European authorities have clarified that migration to harmonised SEPA payment schemes and technical standards does not conclude this EU integration project
Related articles in previous issue:
EPC Comments on the Draft ‘Recommendations for the Security of Mobile Payments’ Developed by the European Forum on the Security of Retail Payments. EPC provides feedback on new report that seeks to define common minimum requirements for mobile payment services which allow the initiation of payments through a mobile device ( Newsletter, Issue 22, April 2014)
1 Also referred to as a ‘digital container’ by Mobey Forum.
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