Mobile Payments: An IBM Point of View Dr. Mark Sherman Lars van Dam IBM WebSphere Strategy
Aug 17, 2014
Mobile Payments:An IBM Point of ViewDr. Mark ShermanLars van DamIBMWebSphere Strategy
Outline
• Overview of retail payments• Mobile money market• Mobile money opportunities• Scenarios of mobile money
applications• Impacts to existing payment
systems• Operational issues for
implementing mobile money• Case studies• Summary
© 2012 IBM Corporation 2
Overview of retail payments: Participants
CardholderMerchant
AcquirerCard NetworkIssuer (Bank)
Overview of retail payments: Merchant, acquirer, networkand issuer interactions
Batches of transactions are queued by the
merchant, including a $100 transaction
by Hans
Card network distributes each transaction to the issuer, including Hans’s
$100 purchase
$100
Card network routes funds to acquirer
$100
http://www.creditcards.com/credit-card-news/how-a-credit-card-is-processed-1275.php
Issuer subtracts processing fees ($1.70) which are
exchanged with the card network and submits funds, including funds for Hans’s
transaction
$98.30
Merchant sends a batch of transactions to the acquirer to
receive payment
Acquirer subtracts discount fees ($0.50) and pays
merchant
$97.80
Acquirer submits batch of transactions to card networks
$$$$
Acquirer submits batch of transactions to card networks
$$$$
Note: Names and fees are illustrative and are not from any particular vendor or relationship
Outline
• Overview of retail payments• Mobile money market• Mobile money opportunities• Scenarios of mobile money
applications• Impacts to existing payment
systems• Operational issues for
implementing mobile money• Case studies• Summary
© 2012 IBM Corporation 5
Mobile money market: what is mobile money
Mobile Banking
Balance inquiryAccount applicationsAccount transactions
Bank locationsAlerts
Mobile Commerce
PromotionsBehavior trackingLoyality programs
Mobile Payments
Person to person transfersBill pay
Payment at POSIn application payments
Mobile Wallet: linking mobile device with accounts and account activity
Bank accounts
Credit cards
Loyality cards
Bank balances
Credit balances
Gift cards
Receipts
Credit limits
Phone balances
Using a mobile device as payment vehicle
Mobile money market: payments are accelerating in major markets
PayPal processed $4 billion worth of mobile payments in 2011*•$750 million in 2010*•$141 million in 2009*David Marcus, vice president of PayPal Mobile*
Starbucks Mobile Application with rewards and mobile payments•Started with Northern California and Seattle•Now available nationwide in the US•Mobile application is available on apple and blackberry
Juniper Research reports consumers will use mobile payments to pay for $670 billion worth of goods and services by 2015.
Google Wallet payments are now supported by Toys ‘R’ Us, Macy’s, and Bloomingdales
Mobile money market: emerging markets
• Application of mobile money varies greatly among geographies
• Emerging markets have a combination of circumstances that encourage adoption of mobile money
© 2012 IBM Corporation 8
Source: McKinsey, 2010, Capturing the promise of mobile banking in emerging markets
– Formal banking reaches about 37 percent of the population• 1 branch and 1 ATM per 10,000 people
– Mobile phones have a penetration rate of 50 percent• 5,100 mobiles phones per 10,000 people
– Very small deposits and loans are not profitable for traditional delivery models1.7 billion people in emerging markets have a mobile phone and no access to banking services
• Mobile money transaction volume growing at greater than 50% CAGR thru 2015• Mobile payments are projected to be between 15% and 20% of total consumer
payment transaction volume by 2020• Mobile payments made by over 1 billion users by 2016
Mobile money market: sizing the market
© 2012 IBM Corporation 9
Global mobile transaction volume Mobile transaction volume as a % of non-cash consumer payments by
geo in 2015
Mobile money is modest now but growing rapidly
•Sources: Gartner “Forecast: Mobile Payments, Worldwide, 2008-2015”; Pub May 2011; Winning After the Storm, BCG Global Payments Report, 2010, Portio Research, Mobile Payments 2012-2016 Analysis and Forecasts for the Worldwide Market for Mobile Payment Services, 2012.
$B
Outline
• Overview of retail payments• Mobile money market• Mobile money opportunities• Scenarios of mobile money
applications• Impacts to existing payment
systems• Operational issues for
implementing mobile money• Case studies• Summary
© 2012 IBM Corporation 10
Mobile money opportunities: overview
Customer Care and Insight
Mobile money software gives a holistic, single view of the customer and glean deeper insight into customer needs, so you can innovate with less risk. Develop high quality, tailored services to restore customer confidence, increase loyalty, and drive revenue.
• Mobile Banking• Branch of the Future• Mobile Payments• Mobile Commerce• Mobile Agents/Claims
• Store of the Future• Virtual currency• Location based shopping• Personalized campaigns• Mobile cross-sell, up-sell
• Mobile Network Monetization• Mobile field-force enablement
Retail
TelecommFinancial Services
Healthcare• Mobile check-in, Mobile prescriptions• Mobile payments• Mobile Health Monitoring & Prevention • Mobile enabled Clinicians
• Virtual currency – FF Miles• Customer Loyalty programs• Ecommerce – Ticketing, Entertainment
Travel &Transportation
Banks - leverage the user’s financial profile data• Help banks protect and grow revenue by maintaining brand
relevance and leveraging emerging business models• Provide a safe way to transact business, secure assets, reduce
fraud, ensure compliance• Offer secure digital vault services to aggregate coupons, transport,
loyalty rewards, traditional currencies
Merchants - leverage the user’s shopping patterns• Drives a more customer centric view; control point shifts to the
end-user with the mobile device. • Shift more towards “one to one marketing” and leveraging the
value of “intelligent data from digital currency”
Telcos - Leverage subscriber base and delivery channel
• Mobile Money will allow MNO's to increase customer retention and generate new revenue through value added services
Mobile money opportunities: key players
• Create new value by aggregating data and applying insights across the enterprise,
• Provide secure, high availability, large scale transaction processing
• Leverage Smarter Commerce
New mobilemoney entrants –
transform business
Outline
• Overview of retail payments• Mobile money market• Mobile money opportunities• Scenarios of mobile money
applications• Impacts to existing payment
systems• Operational issues for
implementing mobile money• Case studies• Summary
© 2012 IBM Corporation 13
Application scenario: consumer on-line purchase with tablet
• In the last year, tablets’ commerce traffic increased 348%• Tablets converted visits into purchases at a rate of 3.23
percent, well ahead of smartphones at 1.39 percent. • Payment processing for tablets mirrors web on line
purchases• Special considerations beyond web experience
– Exploitation of location information– More accessible than PCs– Need tablet-aligned gestures (e.g., sweeps)– Need visually large carts
© 2012 IBM Corporation 14
Customer Merchant Acquirer Credit Card Bank
Source: Monetate, Couch Commerce: How Tablet Shoppers are Changing Online Sales, 2012
Application scenario: mobile banking
• Customers interact directly with bank like on the web
• Special considerations beyond web experience– Diversity of devices – beyond browsers– Smaller screen – UI redesign necessary– Location awareness – enables services
such as ATM and branch locations– Authentication streamlined for mobile
devices
© 2012 IBM Corporation 15
Customer Bank
Application scenario: consumer purchase at retailer – NFC (Near Field Communication)
• Mobile device uses information in mobile wallet to act as credit card– Communicated at POS thru NFC– Much hyped, little used
• Not a compelling convenience compared to a credit card
• Gartner Hypecycle: “For the past decade, NFC has been a technology looking for a solution”
– May revive for virtual currency (loyalty points)
© 2012 IBM Corporation 16
Customer Merchant Acquirer Credit Card BankMobile Wallet
Source: Gartner, Hype Cycle for Mobile Device Technologies, 2011
Application scenario: consumer purchase at retailer – bar code – platform control
• Merchant generates transaction information– Customer uses custom app to send to mobile
payment platform– Mobile payment platform also serves as acquirer– Purchase confirmation sent to merchant thru different
path– Mobile payment platform may require return path to
go through its system
© 2012 IBM Corporation 17
MerchantMobile
paymentplatform
Creditcard
BankCustomer
Application scenario: consumer purchase at retailer – bar code – merchant control
• Merchant generates transaction information– Customer uses custom app to send to mobile
payment platform– Mobile payment platform provides wallet information
to merchant– Merchant processes transaction as if credit card
presented
© 2012 IBM Corporation 18
MerchantMobile
paymentplatform
Merchant Conventionalprocessing
Customer
Application scenario: consumer purchase soft goods
• Soft goods include tickets, phone cards, music
• Mobile device uses information in mobile wallet to act as credit card number– Communicated thru web interface– Optional documentation back thru mobile wallet
© 2012 IBM Corporation 19
Customer Merchant Acquirer Credit Card BankMobile Wallet
Inventory
Application scenario: consumer to consumer payments – telco mediated
• Common scenario in emerging economies for P2P payments
• Agents conduct the cash-in and cash-out functions, enabling customers to convert cash into electronic money and back again at convenient locations
• Telcos arrange funds transfers among their accounts
© 2012 IBM Corporation 20
Payer PayerTelco
PayeeTelco
Payee
Agent
PayeePayerAgent
Application scenario: consumer to consumer payments – mobile platform mediated
• Emerging scenario in both established and emerging markets– Requires established accounts
with either bank or mobile money platform vendor
© 2012 IBM Corporation 21
Payer PayerBank
PayeeMobileMoney
Platform
PayeeBank
Source: Venture Beat
Application scenario: transformative scenarios• Mobile devices have unique properties beyond credit
cards, cash, banks and PCs– Omnipresent: people always carry their phone with them– Personal: mobile identifies the specific person– Context: mobile has location, acceleration, orientation
information– Multiple inputs: gestures, audio, video
• Everyday micropayments– Parking (knows your car), vending
• Location and destination based pricing– Bus, subway and train fares
• Delivery of gift cards over the phone• Integration of loyality, context and location for
promotion• Streamline general admission event ticketing• Credit extension based on mobile activity• Competitive interception based on mobile application
activity• Multichannel offerings
– Prepare then retrieve ATM withdrawal– Preorder fast food
• Reminders to replace consumables• Personal credit card acceptance
Square
ShopSavvy
Outline
• Overview of retail payments• Mobile money market• Mobile money opportunities• Scenarios of mobile money
applications• Impacts to existing payment
systems• Operational issues for
implementing mobile money• Case studies• Summary
© 2012 IBM Corporation 23
Card Holder
Credit/Debit Card Payment
Mobile Payment
Merchant Acquirer Credit Card Company
Issuer
Telco
Payment Provider
Payers Payees Facilitators Fund Holders
Major M
arket
Emerging M
arket
Market Dynamics• Shift from cash and checks to cards and electronic payments• Mobile and social commerce are creating a discontinuity in the market.• Agents in Emerging Markets play an important role in distribution and liquidity
Impacts: new paths for payment processing introduced
Acquirers and credit card companies can
be utilized by or disintermediated by telcos and payment providers in mobile
transactions
Agent
Impacts: consumer and retail experiences are transforming
Swipe
NFC
OTA
In-Person Transactions
Online Transactions
Context-Aware Marketing
RetailersConsumers
Interactive
Non-interactive
Non-location-aware
Location-aware
P2P B2B
Optical Scan
Acquirers
Impacts: retailers, banks and facilitators look to expand their roles
BanksRetailers
Payment Providers
Credit Card Companies
Telcos
Both Acquirers and credit card companies can be utilized in or disintermediated from electronic payments
In major markets banks act as the fund holders
Telcos and payment providers can either access payers’ funds directly through banks or indirectly through acquirers and credit card networks
Outline
• Overview of retail payments• Mobile money market• Mobile money opportunities• Scenarios of mobile money
applications• Impacts to existing payment
systems• Operational issues for
implementing mobile money• Case studies• Summary
© 2012 IBM Corporation 27
– Some signs to track• Know-Your-Customer: black lists• Account activity: mobile banking supports easy account creation and dormant accounts
could be used for laundering• Behavior profiles of customers: amount, timing, velocity, source and destination
location of transactions• Behavior profiles of agents: in addition to customer checks, looking for splitting
payments to increase fees
• Mobile devices offer additional capabilities to manage security• Faster data on location for potential intercept• Potential use of biometrics (e.g. face image) to reduce false positives• Remote management
Operations: security and fraud detection• Mobility adds additional vectors to
conventional fraud– Technical
• RFID jamming• “Nishing”• Data validation: ensure all formats adhered to• Malware
© 2012 IBM Corporation 28
Source: McAfee Threats Report: First Quarter 2012
Operations: Support of parallel channels
• Expectation of consistency across multiple channels– Pay bills anywhere
• Expectation of cross channel interaction– Finish ATM, food order or
application transaction– Video interaction with call center
from tablet and ATM• Need one view of the customer
maintained across all systems supporting channels– Including in-flight interactions
Operations: scaling to meet transaction volume
• About 750B global mobile money transactions expected in 2020– About 25,000 transactions a second
• Likely to grow rapidly for use in micropayments
• Currency equivalents, like loyalty points, drive the number higher
© 2012 IBM Corporation 30
Source: BCG Global Payments, 2011
Operations: ensuring availability
31 © 2012 IBM Corporation
Qualities of service can be insufficient in emerging markets
Sources: http://www.informationweek.com/hardware/data-centers/data-center-outages-generate-big-losses/229500121; World Bank, Underpowered:The State of the Power Sector in Sub-Saharan Africa, 2009;
Total data center outages occurred once a year on average. An average data center outage for an e-commerce company costs more than $1 million. Poneman Institute, 2011
Sub-Saharan Africa’s manufacturing enterprises experience power outages on an average of 56 days per year. World Bank, 2009
India loses power to 600M people for up to two days. NYT and CNN, 7/31/2012
Operations: integration driven by partnerships
• Many interconnected players– Merchants, banks, telcos, mobile
payment platforms, acquirers, credit card companies
• Many interconnection systems– ACH, ATM, Swift, EDI, SMS
aggregators, 3rd party financial interconnection networks
• Competing wallets– Connecting with large number of
mobile wallets will be challenging
© 2012 IBM Corporation 32
© 2012 IBM Corporation
1962: IBM created the Sabre airline reservation system for American Airlines—a precursor of everything from the ATM to e-commerce
Operations: How can IBM help
"Visa relies on System z for global transactions processing--and confirmed the ability to handle the 2010 Christmas peak of almost 11,000 transactions a second.".
For 100 years, IBM has advanced payment systems across the world
•WebSphere MQ worldwide supported over $1 quadrillion of transactions
•CICS software is accessed by virtually every ATM around the world
Operations: IBM can help bring assets to provide business value
Strategic role in mobile money Neutral provider of capabilities from IBM and
partners, including business consulting, technology consulting and software
IBM middleware can provide the enterprise backbone for mobile money enabling transactional insight and connectivity, and the ability to connect mobile devices to payment interactions
IBM is a thought leader in the space, contributing to standards and driving innovative customer transformation
IBM’s Global Business Services provides reference architectures for the mobile money ecosystem
Payers:ConsumersBusinesses
Payees:MerchantsBusinesses
Governments
Fund Holders:Banks
Facilitators
P2P B2B
Operations: from theory to practice
Customer Merchant Acquirer Credit Card BankMobile Wallet
Transaction/payment processing• Messaging and Integration - WebSphere MQ & ESB• Transaction processing (CICS & WAS)• Financial Transaction Manager• Banking industry process and data models• WebSphere Decision Management• Smarter Commerce: WebSphere Commerce• Analytics: Cognos• Financial Fraud Detection: SPSS, i2
Consumer payment platform• Mobile application platform (Worklight)
• Integrated buying experience (WebSphere Commerce)
• Banking Transformation Toolkit (BTT)
Merchant Consumer Interaction• Marketing management (Unica) • Analytics and marketing optimization
(Coremetrics, Cognos, SPSS, Tealeaf)• Event-driven interactions (Ilog and
WebSphere Business Events)• Smarter Commerce
Merchant Point of Sale• Point of sale devices, software, integration and
management (IBM Retail Store Solutions/Toshiba)• IBM Payment Systems – Services -- addresses
merchant/acquirers/credit card processors
Outline
• Overview of retail payments• Defining mobile money• Mobile money market• Mobile money opportunities• Scenarios of mobile money
applications• Impacts to existing payment
systems• Operational issues for
implementing mobile money• Case studies• Summary
© 2012 IBM Corporation 36
ING Direct France
• Leading iPhone banking app in France with a unique user experience
• Flexibility: Valued HTML5, but preferred starting native• Mobile adaptation of data integration and authentication layers
38
Lotte Credit CardAugmenting offerings with IBM Worklight
WSP14583-USEN-00
Solution components:
IBM Worklight Finance All Solutions (FAS)
The need: Korean companies are facing a demand for mobile apps from over 7 million smartphone users, up from only 800,000 in 2009, forcing them to vigorously explore options for value-added services.
The solution: To capitalize quickly on this rapidly growing trend, Lotte Credit Card turned to IBM Worklight to develop an advanced application with a rich and engaging user experience using over 100 screens, location-based features and scannable mobile coupons. The application incorporates augmented reality components—a first in the region—helping users find the retail locations of its reward partners on the go.
The benefit: Reduced time to market and associated costs
Deployment of one of the region’s most advanced financial mobile applications
Enabling better customer and employee user experience across more devices
“We chose IBM Worklight because it was the best technology for Lotte to consolidate application development, enhancement and maintenance, while ensuring cost savings and timely delivery to our customers.”
—Kim, Young Sam, IT Planning Team Leader, Lotte Credit Card
© 2003 – 2012 Monitise Group Limited. All Rights Reserved. Confidential.
Architecture for monitise IBM solution39
Worklight Studio
Worklight Server
deploy to app store
provision app
B2B/ B2C
download
AndroidMATM-265-100
JSON/HTTPS
?
IBM MQ
security/activation
IBMCICS
DB2
JRULES
push
SMS
MESSAGING SERVER
COGNOSDATA WAREHOUSE
monitise
IBM
IBM CICS Adaptor
monitiseENTERPRISE PLATFORM
(WAS)WebSphere Application Server
DataPow
er
Visa’s real-time messaging technology (RTM) creates a seamless experience for merchants who want to increase engagement with their consumers through
Visa provides real-time technology to achieve breakthrough marketing effectiveness for merchants.
Personalized offers
Business problem Merchants operate in a highly competitive environment where the keys to success are bringing customers in the door and then keeping them loyal to the merchant’s brand.
Solution: Visa’s real-time messaging technology (RTM) allows merchants to provide more relevant offers to enrolled consumers by combining historical purchasing behavior with real-time purchase location information. Offers are delivered to enrolled consumers through their mobile devices and personalized to them.
Visa created a new revenue stream by maximizing the value of
Real-time purchase location information
Outline
• Overview of retail payments• Defining mobile money• Mobile money market• Mobile money opportunities• Scenarios of mobile money
applications• Impacts to existing payment
systems• Operational issues for
implementing mobile money• Case studies• Summary
© 2012 IBM Corporation 41
Summary
• Mobile money encompasses existing and new forms of payment processing
• Today’s opportunity is modest, but growth in selected applications is expected to be explosive
• Many scenarios for mobile money alter existing payment processes while others create new patterns and opportunities for commerce
• Deploying mobile money solutions requires a mix of business and technical depth
© 2012 IBM Corporation 42
© IBM Corporation 2012. All Rights Reserved.
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