Status of Mobile Payments 19 September 2007 Eelco de Jong Senior Consultant RFID Europe 2007.

Status of Mobile Payments

19 September 2007

Eelco de JongSenior Consultant

RFID Europe 2007

2

Introducing Thaesis

• What we doWe are a strategic consulting firm helping senior

managers to– to grow and innovate their business; and– to navigate successfully in dynamic market

environments

• Who we are– Prof.dr. Theo Huibers (Managing Partner)– Dr. Bernd Wondergem (Partner)– Drs. Eelco de Jong MBA (Senior Consultant)– 5 consultants and back offie

Source:

3

“The convergence of payments and mobile communications is

not just logical – it is inevitable”

John Philip Coghlan, Visa USA CEO March 2007

“The convergence of payments and mobile communications is

not just logical – it is inevitable”

John Philip Coghlan, Visa USA CEO March 2007

Do you agree?

4

Mobile payments is the future?

5

Some questions

• When will NFC reach mass adoption?A. Within two years (2009)B. Three to five years (2010-2012)C. Never

• Which application will drive adoption of NFC technologie?A. Mobile payments?B. Mobile ticketing (e.g. public transport)?C. Other (e.g. smart posters, loyalty, vouchering)?D. No application

6

What is….

• Contactless• M-wallet• Physical payment• POS• Remote payment

7

Agenda

1. Introduction

2. Mobile payments 1.0: 2000-2005

3. Mobile payments 2.0: 2006-2010

4. Conclusion and summary

8 N°8

Defining mobile payments

Use of a wireless communication device (such as a mobile phone) to make a purchase or other payment related transaction

Value: Low value (<5 €), Medium (5-25 €), High (>15 €)Physical: With Point-of-Sale terminal (POS), or remote

(no POS available)Type of settlement:

• Through operator (e.g Premium SMS)• Pre-paid wallet• Debit card enabling or credit card enabling

Mobile Payments:

Mobile Payments can be divided along multiple dimensions:

9

Mobile Payments 2000-2005: Hard lessons learned….

15

Summary Mobile Payments 1.0 in Europe 2000-2005

• Many early European mobile payment initiatives have failed – Main reasons for failure are lack of usability and lack of

availability

• Mobile payments 1.0 in Europe is dominated by Premium SMS – 20%-40% revenue share for telecom operators– In 2006 1 Billion Euro purchased through Premium SMS– Used by 60% of young consumers

• Increasing consumer acceptance in niche areas such as m-parking – In Croatia more than 50% of all parking fees are paid by mobile

phone

• Europe is currently far behind Asia

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2006-2010 will be the era of Mobile Payments 2.0

18

Some Mobile Payments 2.0 initiatives in 2007

UK: Combined Barclays and

Oyster contactless

card

UK: Combined Barclays and

Oyster contactless

card

Belgium: operators launch

SMS payment

Belgium: operators launch

SMS payment

France: NFC pilots in Caen,

Strasbourg, Grenoble, Paris

France: NFC pilots in Caen,

Strasbourg, Grenoble, Paris

Croatia: 50% of parking fees paid by moble phone

Croatia: 50% of parking fees paid by moble phone

Austria: operator-owned Paybox grows

to 300,000 mobile payment users

Austria: operator-owned Paybox grows

to 300,000 mobile payment users

Germany: NFC implementation in public transport in

Frankfurt area

Germany: NFC implementation in public transport in

Frankfurt area

Netherlands: NFC pilots with payments

using credit and debit card

Netherlands: NFC pilots with payments

using credit and debit card

Norway: Telenor and banks launch BankID Norway: Telenor and banks launch BankID

Italy: card issuer CartaSi launches ski pass payment

service

Italy: card issuer CartaSi launches ski pass payment

service

UK: Vodafone and Citigroup

announce remittance

venture

UK: Vodafone and Citigroup

announce remittance

venture

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Mobile Payments 2.0 will be driven by four trends

1. Consumers who are adopting a mobile lifestyle– Mobile phones are including photo camera’s, MP3

players, etc

2. Superior usability for new services, enabled by NFC – NFC is easy, simple and convenient

3. The global mass adoption of contactless cards – Creating an infrastructure for NFC-enabled mobile

phones

4. The evolution of “traditional” mobile payment 1.0 applications

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NFC Payments: Fast and Simple – Touch to Pay

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Consumers value NFC because it is EASY, FAST and CONVENIENT

Consumer feedback:

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NFC will be a major driver for mobile payments

1. NFC will be a payment method for physical payments – Using the growing infrastructure for contactless cards– Leading to micro payments, for example with Mastercard Paypass, or direct

debit

2. NFC will accelerate the growth of mobile ticketing – Including public transport, airline tickets and hotel check-in– Leading to more remote payments, both micro and macro

3. NFC will make it easier to download digital content on the phone– Leading to more micro-payments, for example with Premium SMS

With NFC, payments with a mobile phone can be faster

and easier than traditional payments such as cards and

cash….

With NFC, payments with a mobile phone can be faster

and easier than traditional payments such as cards and

cash….

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NFC: A tremendous opportunity for cash displacement

Profit decomposition ofpayments for European Banks:

Source: McKinsey Payment Practice

-21,2 € Billion

+ 30,2 € Billion

Cash payments Non-cash payments (credit/debit/transfer)

Huge benefits of cash displacement :

• A 50% reduction of

cash transactions will

result in 10 € Billion

annual savings for

European banks

• And potentially billions

in new revenue streams

Huge benefits of cash displacement :

• A 50% reduction of

cash transactions will

result in 10 € Billion

annual savings for

European banks

• And potentially billions

in new revenue streams

(includes Germany, UK, France, Italy, Spain, Netherlands, Belgium, Sweden, Poland)

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3. Contactless is moving towards global mass adoption

• Major cities mass transit operators have migrated to contactless– Japan, South Korea, HongKong, Singapore, London, France– Netherlands will migrate soon to nation-wide system– Over 200 Million contactless transit cards

• US and Asian banks are moving toward contactless payments– 50 Million contactless banking cards in circulation– 40,000 stores now accept Paypass, and growing– All new US Visa cards are contactless enabled

• Growing acceptance of contactless among identification technologies

– Supply chain management, access control, ticketing etc

NFC Mobile handsets will utilize this growing global infrastructure

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What are the issues for mobile payments adoption?

• The complexity of the ecosystem– Banks– Telecom operators– Handset manufacturers– Regulators– Merchants– Card institutions– Consumers

• All these stakeholders will need to see the benefits

• Standardisation (at national and international level)

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Summary and Conclusions

Since 2006 mobile payments are entering a new phase, driven by four trends:

1. Consumers are adopting a mobile lifestyle2. NFC enables new consumer services on the mobile

devices3. The global mass adoption of contactless cards4. Traditional mobile payment application are evolving

As a result, mobile payments are already becoming a reality in Europe

31 N°31

“ The best way to predict the future is to invent it.”

Alan Kay

“ The best way to predict the future is to invent it.”

Alan Kay

Eelco de JongSenior ConsultantE: [email protected]: +31-6- 1590 5506

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Appendix: NFC Pilots

1. C1000 Retail Stores, Netherlands2. Caen, France3. JCB Credit Card, Netherlands4. Transport Ticketing, Grenoble, France5. NFC Paypass, Dallas, USA6. NFC HSBC Cards, USA7. NFC Payments at Philips Stadium, USA8. NFC Trial Hagenberg, Germany9. NFC Payment trail, Strasbourg, France10.NFC Transport Ticketing, Hanau, Germany11.NFC Consumer Services in Cinema complex, Bangkok,

Thailand

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Case Study: C1000 Retail Stores, Netherlands

• Description:

A number of NFC applications in the retail stores of C100, including payments, loyalty and information services.

• Start: 2007

• Users: 100

• Key Words: loyalty, payments, information services

• Handsets: Samsung

• Operator Rabo Mobiel, KPN

• Chip: NXP

• Others: LogicaCMG, C1000 (Schuitema)

• Source:

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Case Study: Payter

• Description:

Mobile payment pilot in Rotterdam, based on mobile-wallet application (pre-paid). Strong focus on developing additional services for consumer (loyalty, smart posters, vouchers). 30 stores participating in centre of Rotterdam. Planned rollout in 2008

• Start: 2007

• Users: 1000

• Key Words: loyalty, payments, information services

• Handsets: Nokia 6131 NFC

• Operator operator independent

• Chip: NXP

• Others: Equens

• Source: www.payter.com

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Case Study: NFC Pilot Caen, France

• Description:A number of NFC applications in the city of Caen, including payments at retailer Monoprix, parking, and tourist information.

• Start: 2005• Users: 200• Key Words: ticketing, payments,

information• Handsets: Samsung• Operator Orange• Chip: NXP• Others: Monoprix• Source:

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Case Study: NFC JCB Credit Card, Amsterdam, Netherlands

• Description:NFC based credit card payments with JCB credit card at WTC in Amsterdam

• Start: 2006• Users: 100• Key Words: payments, credit cards• Handsets: Nokia• Operator KPN• Chip: NXP• Others: JCB (credit card), Vivotech

(contactless EMV readers), Gemplus (mobie payment application), PaySquare (merchant acquisition), CCV Holland (processing)

• Source:http://www.mobiletechnews.com/info/

2006/06/12/123126.html

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Case Study: NFC transport ticketing, Grenoble, France

• Description:NFC based ticketing and information services for public transport in Grenoble. Secure element is stored in the SIM

• Start: March 2007• Users: 200• Key Words: public transport, ticketing• Handsets: Sagem• Operator Bouygues Telecom • Chip:• Others: Gemalta (SIM card with Single-

Wire Protocol), Inside Contactless, Sagem Communication,

• Source:http://www.institutionnel.bouyguestelecom.fr/actu/

c1_2.aspx?fUrl=/actualite/communiquesdepresse/cpdetail_2800.html

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Case Study: NFC Paypass in Dallas, USA

• Description:NFC based payment with MasterCard Paypass card at Dallas

• Start: 2006, • Users: 500 • Key Words: mobile payments• Handsets: Nokia 3220• Operator Ztar Mobile• Chip:• Others: G&D (OTA personalisation and

Paypass application), 7-Eleven, Bluko Information Group, People’s Bank

• Source:Mastercard

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Case Study: NFC payments at HSBC Cards, USA

• Description:NFC based payment with HSBC Mastercard

• Start: 2007, • Users: 200 (HSBC employees)• Key Words: mobile payments• Handsets: Nokia 3220• Operator• Chip:• Others: HSBC, Mastercard, Vivotech• Source:Mastercard

40

Case Study: NFC Payments at Philips Stadium, Atlanta, USA

• Description:NFC based payment with Visa at Philips Stadium in Atlanta

• Start: 2006• Users: unknown. • Key Words: mobile payments• Handsets: Nokia 3220• Operator Cingular• Chip: NXP• Others: Chase (bank), Visa • Source:http://www.rfidjournal.com/article/view/2638/• Video:http://www.youtube.com/watch?v=NpoK2ebF7Js

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Case Study: NFC Trial Hagenberg• Description:• Various NFC applications at university,

including access control, payments, loyalty and peer-to-peer.

• Start: 2006• Users: 100 • Key Words: payments, acces

control, loyalty• Handsets: Samsung X7000m• Operator• Chip: NXP• Others: University of Applied

Sciences

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Case Study: NFC Payment Pilot in Strasbourg

• Description:NFC based payment pilot in Strasbourg, led by Credit Mutuel CIC. With EMV Payment Application in the SIM. Payments upto 200 euro at various locations, including restaurants.

• Start: 2006, moving into next phase with SFR in 2007

• Users: Inititially 200, but growing. Initially 50 merchants.

• Key Words: payment• Handsets: Sagem• Operator SFR, NFJ Mobiel (MVNO)• Chip:• Others: Credit Mutuel CIC (bank),

Gemalto (SIM with Paypass application), Inside Contactless (NFC Module), Mastercard Paypass, Sagem Monetel (payments terminal)

• Source:• http://www.smartinsights.net/smart-card/

index.php?2007/02/08/39-sfr-joins-in-credit-mutuel-nfc-trial

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Case Study: NFC Transport Ticketing in Hanau and Frankfurt

• Description:NFC based ticketing for public transport passengers in Hanau and Frankfurt. Now expanding into broader information, loyalty, payment and ticketing applications, for example with the Erlebnis card

• Start: 2005, now commerically available

• Users: Inititially 200, but growing.

• Key Words: public transport ticketing

• Handsets: Nokia 3220• Operator Vodafone• Chip: NXP• Others: RMV (Rhein-Main-

Verkehrsverbund), T-Systems

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Case Study: NFC Consumer services in Cinema, Thailand

• Description:

NFC based consumer applications such as information, ticketing and marketing at cinema complex in Bangkok, Thailand

• Start: 2007

• Users: Inititially 200, but growing.

• Key Words: marketing, ticketing

• Handsets: Nokia 3220

• Operator

• Chip:

• Others: PayZy