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

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Presentation on theme: "Status of Mobile Payments 19 September 2007 Eelco de Jong Senior Consultant RFID Europe 2007."— Presentation transcript:

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

2 2 Introducing Thaesis What we do We 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 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 4 Mobile payments is the future?

5 5 Some questions When will NFC reach mass adoption? A.Within two years (2009) B.Three to five years ( ) 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 6 What is…. Contactless M-wallet Physical payment POS Remote payment

7 7 Agenda 1.Introduction 2.Mobile payments 1.0: Mobile payments 2.0: Conclusion and summary

8 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 ( 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 9 Mobile Payments : Hard lessons learned….

10 10 Significant growth in Premium SMS for digital goods Premium SMS: In Billion Euro of digital goods are paid for by Premium SMS More than 60% of young consumers in Europe have downloaded digital goods, paying with Premium SMS Premium SMS: In Billion Euro of digital goods are paid for by Premium SMS More than 60% of young consumers in Europe have downloaded digital goods, paying with Premium SMS source: Forrester Research

11 11 Strong growth in specific areas, such as mobile parking Mobile parking solves clear issues with (pre-paid) parking payments in major cities

12 12 Mobile payments in Croatia account for 50% of all parking fees VIPnet m-parking: 50% of all parking fees in Croatia are paid through VIPnet mobile solution, a mobile operator VIPnet m-parking: 50% of all parking fees in Croatia are paid through VIPnet mobile solution, a mobile operator

13 13 And the start of convergence between operators and banks

14 14 But Europe is far behind Japan and South-Korea

15 15 Summary Mobile Payments 1.0 in Europe 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 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

16 will be the era of Mobile Payments 2.0

17 17 Defining the new scope of Mobile Payments 2.0 Physical payments NFC based Remote payments Mobile banking Person To Person Public Transport Access Control Ticketing NFC Applications Mobile Payment Applications Banks Perspective Mobile Network Operators Perspective Physical payments SMS based Identification Authentication Transport Cards Contactless payments Contactless cards Mobile devices Digital payments

18 18 Some Mobile Payments 2.0 initiatives in 2007 UK: Combined Barclays and Oyster contactless card Belgium: operators launch SMS payment France: NFC pilots in Caen, Strasbourg, Grenoble, Paris Croatia: 50% of parking fees paid by moble phone Austria: operator-owned Paybox grows to 300,000 mobile payment users Germany: NFC implementation in public transport in Frankfurt area Netherlands: NFC pilots with payments using credit and debit card Norway: Telenor and banks launch BankID Italy: card issuer CartaSi launches ski pass payment service UK: Vodafone and Citigroup announce remittance venture

19 19 Mobile Payments 2.0 will be driven by four trends 1.Consumers who are adopting a mobile lifestyle – Mobile phones are including photo cameras, 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

20 20 1. Consumers are adopting a mobile lifestyle Source: Nokia

21 21 NFC Payments: Fast and Simple – Touch to Pay

22 22 Consumers value NFC because it is EASY, FAST and CONVENIENT Consumer feedback:

23 23 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….

24 24 The number of NFC pilots is growing rapidly Example NFC Pilots in : 1.C1000 Retail Stores, Netherlands 2.Caen, France 3.JCB Credit Card, Netherlands 4.Transport Ticketing, Grenoble, France 5.NFC Paypass, Dallas, USA 6.NFC HSBC Cards, USA 7.NFC Payments at Philips Stadium, USA 8.NFC Trial Hagenberg, Germany 9.NFC Payment trail, Strasbourg, France 10.NFC Transport Ticketing, Hanau, Germany 11.NFC Consumer Services in Cinema complex, Bangkok, Thailand

25 25 NFC: A tremendous opportunity for cash displacement Profit decomposition of payments 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)

26 26 Proof of cash displacement by contactless cards Analysis of Mastercard Paypass contactless transactions in USA indicates that contactless cards are displacing cash: Average transaction size are declining ($ in Q3 2006) In Q % of Paypass transactions were below 10$ (compared to 38% in Q4 2005) Source: Mastercard Transaction Data Contactless cards are already displacing cash

27 27 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

28 28 4. Traditional mobile payment applications are evolving Since 2006 the market is witnessing numerous mobile payment initiatives, specifically around: SMS-based physical payments, with wallet or linked to bank account Person to person payment Remittances Most initiatives have been started by: Start-ups (e.g. obopay, LUUP, Tunz) Mobile operators (m-Banxafe, Mobilkom, Mobitel), sometimes in partnership with financial institutions (BankID in Norway) Card institutions (Visa, Mastercard)

29 29 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)

30 30 Summary and Conclusions Since 2006 mobile payments are entering a new phase, driven by four trends: 1.Consumers are adopting a mobile lifestyle 2.NFC enables new consumer services on the mobile devices 3.The global mass adoption of contactless cards 4.Traditional mobile payment application are evolving As a result, mobile payments are already becoming a reality in Europe

31 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 Jong Senior Consultant E: M:

32 32 Appendix: NFC Pilots 1.C1000 Retail Stores, Netherlands 2.Caen, France 3.JCB Credit Card, Netherlands 4.Transport Ticketing, Grenoble, France 5.NFC Paypass, Dallas, USA 6.NFC HSBC Cards, USA 7.NFC Payments at Philips Stadium, USA 8.NFC Trial Hagenberg, Germany 9.NFC Payment trail, Strasbourg, France 10.NFC Transport Ticketing, Hanau, Germany 11.NFC Consumer Services in Cinema complex, Bangkok, Thailand

33 33 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 OperatorRabo Mobiel, KPN Chip:NXP Others:LogicaCMG, C1000 (Schuitema) Source:

34 34 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 Operatoroperator independent Chip:NXP Others:Equens Source:www.payter.com

35 35 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 OperatorOrange Chip:NXP Others:Monoprix Source:

36 36 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 OperatorKPN Chip:NXP Others:JCB (credit card), Vivotech (contactless EMV readers), Gemplus (mobie payment application), PaySquare (merchant acquisition), CCV Holland (processing) Source:

37 37 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 OperatorBouygues Telecom Chip: Others:Gemalta (SIM card with Single-Wire Protocol), Inside Contactless, Sagem Communication, Source: /actualite/communiquesdepresse/cpdetail_2800.html

38 38 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 OperatorZtar Mobile Chip: Others:G&D (OTA personalisation and Paypass application), 7-Eleven, Bluko Information Group, Peoples Bank Source: Mastercard

39 39 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 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 OperatorCingular Chip:NXP Others:Chase (bank), Visa Source: Video:

41 41 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

42 42 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 OperatorSFR, 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: card/index.php?2007/02/08/39-sfr-joins-in-credit-mutuel-nfc- trial

43 43 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 OperatorVodafone Chip:NXP Others:RMV (Rhein-Main- Verkehrsverbund), T-Systems

44 44 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


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