ELECTRONIC PAYMENT SYSTEMS SPRING 2004COPYRIGHT © 2004 MICHAEL I. SHAMOS Electronic Payment Systems Lecture 13 Mobile Payments, Virtual Money

Mobile Payment Players User Network Operator Financial Institution Content Provider/ Merchant

Mobile Payment Issues User Network Operator Financial Institution Content Provider/ Merchant Security Privacy Ease of Use Devices Open Standards Inter- operability Roaming Authentication Integrity Non-repudiation Fraud reduction Getting Paid User adoption Low Cost Issues SOURCE: ARVANI GROUP

Current Business Models Card based (Visa, MC) Carrier based (DoCoMo) Third party (PayBox) SOURCE: ARVANI GROUP

ELECTRONIC PAYMENT SYSTEMS SPRING 2004COPYRIGHT © 2004 MICHAEL I. SHAMOS Mobile Card Systems MOTOROLA P7389 TRIBAND WAP PHONE WITH SMARTCARD READER

ELECTRONIC PAYMENT SYSTEMS SPRING 2004COPYRIGHT © 2004 MICHAEL I. SHAMOS WAP, i-Mode SET or SSL/TLS Mobile EMV Chip Debit/Credit Acquiring Bank Clearing & Settlement Issuing Bank Acquiring Payment Engine Merchant Gateway Wallet Server Voice or IP Browsing & Offer Request OPTION 1: Multi-app: SIM + EMV (CEC) Option 2: Dual slot phone with full size EMV Merchant Offer Purchase Request Authorisation Request / Response Shipment Confirmation M/CHIP transaction with ARQC and ARPC / ARC data classed as “Card Present” Transaction Wallet forwards address details SOURCE: MAOSCO

ELECTRONIC PAYMENT SYSTEMS SPRING 2004COPYRIGHT © 2004 MICHAEL I. SHAMOS Wireless Card Authorization SOURCE: SAMSUNGSAMSUNG

ELECTRONIC PAYMENT SYSTEMS SPRING 2004COPYRIGHT © 2004 MICHAEL I. SHAMOS Mobile Phone Future Millions More handsets than PCs connected to the Internet by the end of 2003 ! Projected cellular subscribers Projected PCs connected to the Internet Projected Web handsets

ELECTRONIC PAYMENT SYSTEMS SPRING 2004COPYRIGHT © 2004 MICHAEL I. SHAMOS Mobile Payment Population Growth SOURCE: CELENTCELENT

ELECTRONIC PAYMENT SYSTEMS SPRING 2004COPYRIGHT © 2004 MICHAEL I. SHAMOS...entering the paybox-PIN on the mobile phone 4 Clearing& settlement is done via electronic direct debit 5 Consumer authorises the payment to the Internet shop by... 3 Consumer has goods in shopping basket and selects “paybox - pay with mobile phone“ on website 1 paybox connects transaction partners and rings consumer on mobile phone 2 paybox Paybox SOURCE: PAYBOX NORDIC AB

ELECTRONIC PAYMENT SYSTEMS SPRING 2004COPYRIGHT © 2004 MICHAEL I. SHAMOS AUTHENTICATION AND AUTHORIZATION MADE OVER GSM NETWORK Transaction Space Internet Transaction Space Internet Payment Space Banking Network Payment Space Banking Network Authorization Space GSM Network Authorization Space GSM Network TRANSACTION TRIGGERED OVER THE INTERNET PAYMENT MADE THROUGH BANKING NETWORK Paybox Combines Networks SOURCE: PAYBOX NORDIC AB works with any mobile phone any network provider supports WAP via GPRS or UMTS high taxicab penetration 6% of all B2C in Germany

paybox paybox: Payment Procedure CustomerVendor 1. Send phone number 6. Ship goods 2. Send phone # + amount 5. Confirm payment 3. Call customers mobile phone 4. Confirm recipient + amount (PIN) SOURCE: ANDREAS KUNZ

ELECTRONIC PAYMENT SYSTEMS SPRING 2004COPYRIGHT © 2004 MICHAEL I. SHAMOS Paybox Features Payment authentication by mobile phone, relies on SIM identification and GSM encryption Started in May 2000 in Germany, now also operational in Austria, Spain and Sweden with more to come (e.g. Britain) 50% owned by Deutsche Bank Amounts: starting at about 1€ Transfer to other mobile phone (1-2% or 25 cent fees) or bank account possible Offline shopping possible

ELECTRONIC PAYMENT SYSTEMS SPRING 2004COPYRIGHT © 2004 MICHAEL I. SHAMOS PIN authorization Direct DebitCrediting Account at ANY bank in ANY country Money Transaction Provision of Goods and Services Purchase Consumer Merchant Call on GSM network Transaction Request and Confirmation Paybox: Transaction Instruction Engine Deutsche Bank´s Network Paybox Cross-Border Mobile Payments Merchant Account at ANY bank in ANY country Consumer Clearing System via EDI SOURCE: PAYBOX

ELECTRONIC PAYMENT SYSTEMS SPRING 2004COPYRIGHT © 2004 MICHAEL I. SHAMOS AsiaPay PayDollar PayDollar Mobipay –supports iPaq or Palm Bank cards PayDollar Direct (peer-to-peer ) PayDollar PPS – real-time online debit payments –DEMODEMO SOURCE: PAYDOLLARPAYDOLLAR

ELECTRONIC PAYMENT SYSTEMS SPRING 2004COPYRIGHT © 2004 MICHAEL I. SHAMOS User ))))    OPERATOR NETWORK + Processor +Issuer/ Acquirer If PIN not entered directly Mobipay 1. User chooses Mobipay payment method on merchant site 1 Internet Merchant REF: Alternative: + PIN 3 3. User sends reference (+ PIN) Mobipay System with Access Node router 4 4. Data validation 4 5. PIN request REF: ptas Store X PIN: Authorisation 2. Merchant sends unique Mobipay reference asociated with amount Product.....: REF PIN response 6 REF: ptas Store X PIN: WEB GSM Delivery REF 1234 Store x OK 8 8. Confirmation 8 Vending Machine OR

International Mobipay CLIENT FROM COUNTRY B MERCHANT Country ACountry B GSM Roaming Local Mobipay Local Mobipay Acquiring Bank Issuing Bank Mobipay International Current international card infrastructure 7 Principle: Use existing international payment infrastructure SOURCE: MOBIPAY 0

Mobile commerce platform T-Mobile Micropayment Service ContentBilling Advertising Location Based Services Customer: mobile devices Mobile Gateway Micropayment Public Key Infrastructure Application Repository Merchant: Point of Sale Financial Institution 2. Upload application and credentials 2. Sign purchase order 3. Return signed purchase order 1. Send purchase order Clearing and settlement 1. Provide Customer‘s keys and certificate Application and credential upload 4. Check signature 1. Register Customer registration b) Check purchase orders a) Send collected purchase orders regularly c) Clearing and settlement 2. Certification request 3. Create key pair and certificate SOURCE: T-SYSTEMS

ELECTRONIC PAYMENT SYSTEMS SPRING 2004COPYRIGHT © 2004 MICHAEL I. SHAMOS Digital Wallets Files or devices containing payment information, possibly representations of money Used for seamless payments, without significant user intervention SOURCE: LAUDON & TRAVER

ELECTRONIC PAYMENT SYSTEMS SPRING 2004COPYRIGHT © 2004 MICHAEL I. SHAMOS Microsoft Wallet

ELECTRONIC PAYMENT SYSTEMS SPRING 2004COPYRIGHT © 2004 MICHAEL I. SHAMOS How Microsoft Passport Works SOURCE: LAUDON & TRAVER

ELECTRONIC PAYMENT SYSTEMS SPRING 2004COPYRIGHT © 2004 MICHAEL I. SHAMOS Major Ideas Mobile payment is expanding rapidly Wallets yield great conveneince Blind digital signatures are possible eCash is a minor development

ELECTRONIC PAYMENT SYSTEMS SPRING 2004COPYRIGHT © 2004 MICHAEL I. SHAMOS Q A &

mCommerce: Replacement for Cash & Card Data Telco network Mobile Payment Platform Internet Call Center Financial Institutes / Telco billing Vending, Access, Ticketing, etc. Users External Business Systems WWW SOURCE: SONERA

ELECTRONIC PAYMENT SYSTEMS SPRING 2004COPYRIGHT © 2004 MICHAEL I. SHAMOS 1. Offer (WML/HTML, PFL) 4. Request PO (API) 5. Certified PO Mobile Gateway Mobile PSP 6. Certified PO 2. Offer (WML) 3. Payment Authorization Merchant Mobile buyer Merchant’s PSP 0. Routing 0 7. Deposit 8. Deposit A Mobile Payment Scheme SOURCE: NEWGENPAY.COM

ELECTRONIC PAYMENT SYSTEMS SPRING 2004COPYRIGHT © 2004 MICHAEL I. SHAMOS Mobile Aggregators SOURCE: VERTICAL ONEVERTICAL ONE SEE ALSO YODELEE2GOYODELEE2GO WIRELESS BANKING: EDSEDS