Mobile Point View by Paul Ruppert

Mobile Transactions at MWC Bharti Telesoft

Mobile Payments, Mobile Transactions, mCommerce, Pay by Mobile, Mobile Money Transfer, mMoney, however you call it is becoming a very crowded space  and it all comes down to the Mobile Financial Services Market .

I've written about  it in the past in "Mobile Payments: Top 10 Issues between Banks & Operators" and "Mobile Payments Tipping Point" and "Text M for Money" and "$1.1 Billion passed in Chinese Mobile Payments" and "Hawala Money"...well you get the picture, this is a space I'm sharpening my perspectives on. 

Clash of the Titans--and the under-card-- Rumble of the Developed & Emerging Economies

At the Mobile World Congress there was huge attention to the Mobile Payments market. The GSMA's Pay by Mobile and Mobile Money Transfer briefings were oversubscribed by 5x !  Beyond the obvious titantic clash between MNOs vs. FIs, there is the conflict between technologies such as simple SMS vs. other bearer access points such as USSD, GPRS or even IVR in the mobile transactions space. Of course the really big conflict is going to be services already becoming available in emerging markets affecting the development of mobile transactions in developed markets. Who will lead and shape this space, the unbanked or the overly banked?

Some quick data points picked up in Barcelona:

• Mobile payment usage via a mobile enabled payment mechanism is expected to be used by 1.4 billion people by 2015, or 26% of the user base
• In a survey by EDC, mobile money transfers is considered to be the most strategically important mobile financial service in the future
• By 2012 it is estimated that 12% of subs in developed markets and 9% in developing markets will  use domestic money transfers, which translates into 504 million users globally.
• SMS is viewed as the preferred channel for mobile money exchanges                                                                                                                                My friend, and emerging markets mobile payments specialist, Michele Scanlon suggested I take a look at Bharti Telesoft, so I cornered a conversation with Kresh Goomany, Vice President of Bharti Telesoft's Africa Region.

Bharti Telesoft's Mobiquity platform embraces the mobile phone as a convenient payment   and transaction medium. They have open APIs to both banking and credit card gateways enabling operator services providing a high level of security, making it highly a flexible service delivery platform utilizing a multi-bearer access utilizing SMS, USSD, GPRS or IRV platforms. The Mobiquity platform is a swiss army knife of mobile banking initiatives covering mobile banking, ticketing, money transfer, bill payments, pre-paid airtime top-up, micro-credit transactions, credit card interfaces. Seems to do it all...although from a US centric perspective, I've yet to see any of these presentations which cover the mobile as a "gift cards" mechanism.

Listen to my podcast with Bharti Telesoft's Kresh Goomany (9 mins)

The value proposition of Bharti Telesoft is their genetics and the geography they're focusing on. Bharti Telesoft is a spin off of Airtel with roughly 40 million subscribers in India, providing value added services for the Indian market for some years. Now they are moving into the high growth, low ARPU, unbanked markets in middle Asia and Africa for the mobile transactions business. They open with their "Pre Top" (pre-paid top off) services for operators, and then move up the value chain to FIs or operators offering Roaming Re-charges, Mobile Banking such as balance queries and alerts, money transfers such as domestic or international remittances as well as mobile payments covering utility bills. Clearly they have the right strategy in entering the emerging markets, especially Africa which Kresh covers their market strategy in depth in the podcast. If Bharti Telesoft is defining the development of the mobile financial services markets in developing economies, what's next?

Bharti Telesoft: Big player to follow in the Mobile Payments / Mobile Transactions space.

 What do you think of Bharti Telesoft's prospects? Why aren't any western vendors of this size so well positioned as Bharti Telesoft? Will they eventually control the mobile payments play globally or is this likely to be a market structured along regional differences? Tell me what you think.

 

MWC Podcast: Hawala Money & Mobile Remitances

   

For the past five hundred years "mobile" money transfers in the Islamic world were accomplished through the Hawala or Hundi.

The Hawala is an informal money transfer system with a huge network of money brokers which are  primarily located in the Middle East, Africa and Asia.  The transaction takes place entirely on the honor system. The unique feature of the system is that no promissory instruments are exchanged between the hawala brokers. No records are produced of an individual's transactions, no records of individual users are kept; only a running tally of the amount owed one broker by the other. Settlements of debts between hawala brokers can take a variety of forms, and need not be direct cash transactions.

If you think mobile remittances are a modern phenomenon, think again. Modern Mobile remittances are but one of several such systems. Another well known example is the Fei Chien, meaning flying money system indigenous to China, also used around the world. These systems are often referred to as 'underground banking', which isn't entirely accurate since they operate in the open with complete legitimacy (sometimes the ends are illegal), and often these services are heavily advertised within immigrant communities.

Jumping to Mobile transactions of the 21st Century

Mi-Pay Ltd. was established in 2003 by executives who stepped out of Logica, the SMSc and messaging innovator. Originally it had a focus on outsourced pre-paid top off services for mobile operators which enables consumers to safely and securely add to their acounts from their handsets. Mi-Pay has initiated a pre-paid recharge solution for mobile operators concentrating on Europe and the Middle East.  It is looking to help modernize the traditional Hawala/flying money system by providing the mobile payments processing solutions to network operators interested in money transfer services such as remittances. Mi-Pay has been sharpening their technology over the last three years and is now bringing the solution to market focusing on the emerging markets of the Islamic crescent of central Asia, the Middle East, Africa and Latin America. They currently provide the payments switch to the new market entrant in Dubai, du.

Learn more about Mi-Pay and listen to my interview with Mi-Pay CTO, Simon Cavell at the Mobile World Congress. (8 min) 

MWC: Inside: Semi-Conductors for Contactless Payments

Inside is the company that enables contactless payments work inside your credit card and Mobile handsets.

With executive DNA drawn from sim card maker Gemplus, Inside designs and manufactures their “Micropass”, the silicon that goes into your “smart card” credit card and is the market leader in the segment. The twist is that they combine the silicon with a low power microprocessor enabling both read and writing functionality. Reflecting its French DNA, its R&D is in Aix en Provence with corporate headquarters in Boston and offices in San Francisco, Singapore and Poland. The business is split between the chips and the application development for cards. 

Why are we covering a silicon slinger? Inside is leveraging its card industry position and migrating to the mobile segment. With both the financial and mobile industry waking up to the growing opportunity in mobile transactions, Inside is well positioned to claim the mantle of market leader in the mobile NFC, especially with Visa as a strategic investor and other venture backers including

In the early days of contactless payments, novelty and limited use hindered the industry’s development. Centered in Europe, the large US market lagged in the use of smart credit cards, and innovation split. Result--high costs of card processors (the chip in the credit card), suboptimal performance and a bumpy supply chain for both since neither standing alone provided enough initial scale.  Through their partnership with Visa, Inside leapfrogged its competitors by improving quality, streamlining the distribution channels and improved the read range of their chip by boosting range and processing power. Their big innovation was combining the chip, the operating system and adding an application layer making the chip on a Visa or Master Card credit card act just like a mini PC. This was an innovation leap, and drove sales because of the simple integration of the “full stack.”

Capitalizing on their technical advances, they changed their approach to the market. Instead of just selling to the bank card issuers, Inside played on the pitch of the real decision makers in this value chain: the banks themselves. By establishing an educational relationship with the likes of Wells Fargo, Chase, and Citibank they set about to convince the end buyer of the layered value they brought, thus convincing the banks to spur the bank card manufacturers to include the chip in their selected card design. This deft sales strategy paid off. In 2006, 18 million contactless cards were issued in the US and Canada, 10 million of those contained the Inside chip. In 2007, 34 million were issued, and 24 million contained the Inside chip---71% market share.  For 2008 Inside expects over 60 million cards will be issued with the Inside processing chip. 

Why is Inside inside Mobile ?

Over the next few months, 12 mobile operators will run trials of contactless mobile payment services in Australia, France, Ireland, Korea, Malaysia, Norway, The Philippines, Singapore, Taiwan, Turkey and the U.S. as a precursor to commercial launches. The Inside MicroRead® NFC will power the critical contactless payment transactions in most of the handsets to be used in the trials under the Pay-Buy-Mobile initiative.

The trials form part of the GSM Association’s Pay-Buy-Mobile initiative, which is designed to provide a single global approach to enabling contactless payments using a mobile phone. Consumers will be able to use their handsets to quickly, easily and securely pay for goods and services in shops, restaurants and train stations. 35 mobile operators representing 1.3 billion customers are participating in the initiative.The technology implemented by INSIDE will allow the mobile operators to quickly deploy SIM-based applications, thanks to a direct link between the NFC chip and the SIM card via the standard SWP protocol.

“This is the result of several years of early investments from INSIDE Contactless, where we were able to anticipate the standards and produce the first NFC chip with a SWP interface,” said Philippe Martineau, executive vice president, NFC Business Line.

One of the characteristics of INSIDE’s MicroRead technology is the capacity to behave as a router in the phone rather than just a simple modem, establishing secure connections between different devices, and giving phone manufacturers flexibility to address various market applications and regions

Around the globe, Visa and MasterCard have mandated the contactless form for their issuers. With the increased penetration of contactless point of sale terminals and such interoperability as the Visa Mastercard initiatives moving ahead, it is expected to be a 500 million unit market by 2009. Dual interface (swipe and contactless) “open” bankcards are already prominent in the EU, UK, Turkey, Brazil, Mexico, Hong Kong, Korea and Taiwan. Over 1 billion credit cards exist in the US, with about 400 new slivers of plastic issued every year the market resembles the ATM phenomenon of the 80s, with the need of both the plastic and the reader growing slowly, steadily and inevitably. It is estimated that about 2012 dual saturation of reader and card will exist in the market, and consumer response to the power of the card, even in the US, is strong.

Inside sees the migration to mobile as a major initiative in their strategy. Given their heritage from the SIM card industry, they “get” the mobile play and plan to capitalize on the emerging mobile payments market.  Imagine a mobile phone energized by an Inside chip registering via an internal mobile web interface,  empowering applications such as  transit location, couponing, loyalty, and even non-payments information exchange. You could walk into a Starbucks, wave your mobile and the last 5 skus could be transferred to the reader and the barista could ask simply: “Café macchiato or double espresso today Mr. Ruppert?”  Pretty kewl vision, more importantly extremely plausible for that to be widely available by 2012.  Not a consumer brand, but watch out for Inside. 

Not a consumer brand, but watch out for INSIDE.

  WHAT DO YOU WANT TO SEE & HEAR ABOUT AT MWC?

 

YOUR REPORTER ORDER: Reply or send me an email and I'll look into issues and companies you readers are interested in. Just submit a response to this post or send me an email through contact on the Mobile Point View blog, or TEXT ME at plus one three zero one seven two eight seven eight one eight and I'll check into it. Don't be shy, just ask!

Mobile Payments: Top 10 Issues between Banks and Mobile Operators

Central Issues in Mobile Banking Market

1. Banks. They think like bankers; they move slowly and are strong on committees, processes and regulation, all of which should be seen as strengths in risk management strategies; however mobile operators can help bring innovation to these same banks as they seek to move into the mobile payments space.
2. Banks are looking for multi-channel services, i.e. mobile is only seen as an extension of their existing services; whereas mobile operators can help bring new financial services to new banking segments (see below).
3. From a bank’s perspective, mobile can help exponentially drive transaction volume. This volume is predominantly SMS-based; often revenue-generating for the mobile operator, and mainly balance enquiries from the bank’s perspective. That's all. From a mobile operator perspective, this SMS volume doesn't even move the needle regarding incremental SMS volume or revenue opportunity.
4. Banks bring trust to the consumer, whereas mobiles bring ubiquity and personal proximity with the mobile phone being touted as a personal key entry device necessary for some bank authentication and card issuing rules.
5. Ambitious mobile network operators have an opportunity to experiment with new models and to work with regulators to help implement these by shaping the regulatory environment. The question is will they, and when?
6. Mobile banking is not the definitive answer to the un-banked such as in the merging markets, but mobile does offer lessons in terms of distribution footprint to reach non-serviced areas.
7. Convenience of payment can help drive take-up of payment services regardless of the frequency of usage or number of clicks required to access/pay for service.
8. Mobile banking is very effective for electronic money, but market realities dictate the need for a cash in/cash out agent outlet either using cash to access formal bank channels or to develop new encashment agents underlining the fact that cash is still an efficient payment tool.
9. Relevant services need to be offered to the consumer. Bill payment, airtime/messaging topup and money transfer all feature highly as requested services, as well as standard balance enquiries. But what else is there, consider transaction expansion.
10. There is no one wining business model in the world of mobile banking, but those currently highlighted indicate a collaborative model between an existing bank (bringing existing consumer trust in the brand) and mobile operator, possibly under a new brand name.
11. Mobile operators need the bank as it brings trust, compliance and interoperability into the rest of the banking infrastructure.

Neither banks, nor operators will be able to do this independently. They need each other and are like mating porcupines, or crashing tectonic plates in approaching this market opportunity. Don't get caught in between.

OK. Now its your turn. What do you think of the prospects of Mobile Transaction? How will the market settle for a solution? Comments are very welcome (please!) with the objective of building a community who engages in a conversation. And if you liked the post, please dig, delicous, or stumble to spread the word! Thanks for your readership.

Tip of the hat to Michele Scanlon of Green Giraffe

$1.1 Billion passed via Chinese Mobile Payments

China Unionpay's 8 million Users E3Q

At least 8 million consumers had used China Unionpay’s mobile-phone payment as of the end of October, up 21% from 6.6 million as of June, the Shanghai-based national payment card network says.

Consumers initiated nearly 50 million transactions through October totaling 8 billion yuan [US$1.1 billion or 731 million euro]. That compares with 24.5 million transactions they initiated during the first half of the year that totaled 3.9 billion yuan, UnionPay says. "The mobile-payment service was first launched last year as a pilot program, with a current coverage of 21 provinces and cities nationwide," a UnionPay spokesperson tells CardLine Global.

China UnionPay operates the mobile-payment service with banks and mobile operators such as China Mobile and China Unicom. After tying their UnionPay card accounts with mobile-phone numbers, customers can send text messages to make phone, utility, credit card, air ticket and insurance payments.

Mobile Influencers: M Transactions with Michèle Scanlon Part 2

Thanks for returning to my Mobile Influencers interview with Mobile Transactions consultant Michele Scanlon. In Part 1 of our conversation we covered the developing mobile payments markets of the world's emerging economies and the diffentiators of M-Transactions. 

Michèle Scanlon, is the founder and Principal Consultant at Green Giraffe and has over a decade experience as an analyst and consultant focusing on the global prepaid markets, especially in emerging economies. Her projects assist operators with marketing & operational strategies for prepaid distribution, tariffs and recharge strategies, vendor competitive positioning, as well as due diligence on investments illuminating the value of prepaid markets. Michèle’s recent focus has been on innovative applications beyond airtime top off including mobile banking strategies, remittances and prepaid electricity payment systems. 

Part 2 starts now....

Mobile Influencers: Mobile Transactions with Michele Scanlon

I’m starting a new topic here at Mobile Point View called “Mobile Influencers” where I plan to interview friends, colleagues, clients and associates who share an expertise and command of the mobile industry, as well as being very interesting people.

Most bloggers would just create a new label without the fanfare. Since my mission with Mobile Influencers is to bring attention to people and their views, it rightly deserves special notice and recognition. I hope you enjoy the view points and "point views" of my friends from the mobile, venture, operations, applications and management segments as they visit Mobile Point View and share their talents and perspectives.

Starting off the Mobile Influencers series is my good friend Michele Scanlon, who is the Principal consultant at Green Giraffe in Cape Town South Africa. Michele and I have known each other six years, and to me, Michele Scanlon is THE EXPERT for mobile payments in global emerging markets, whether in Africa, Asia, Middle East or Latin America. And her client portfolio reflects it.  Indeed emerging market mobile payments is usually what we talk about, wrestling with how to tap the mobile payments markets across the world’s developing economies. She’s constantly on the go covering territory and consulting to MNOs between Green Giraffe’s Cape Town and London offices. Let’s get right to it then!

Credentials, Experience & Talent

Mobile Payments Speed Dating

I attended FINOVATE yesterday, a great conference focusing on Online and Mobile Banking services. Mirroring DEMO, the Silicon Valley conference that serves as a launchpad for many fledgling companies, FINOVATE provided 14 companies the chance to perform a 7 minute pitch on their service, much like a speed dating event. Held in the global financial center of New York, the place was packed with representatives of FIs (Financial Institutions) and a few mobile guys such as yours truly.  The conference was a great success with overflow rooms having to be be booked for the 300+ attendees. A great conference organized by Jim Bruene, editor of the very informative and thorough "Online Banking Report."  His February 23, 2007 edition is a great play book for Mobile Banking--check it out at his site.

[If you're really interested in Mobile Payments head directly to Mobile Banking  a blog written by Brandon McGee, a VP & Sr. Mobile Product Manager at Huntington Bank in Indianapolis in the US. I had the distinct pleasure of talking with Brandon and I came away impressed with his command of the mobile platform which he is building services around. I've been reading his first rate blog for about a month. He's got solid industry analysis as well as clear perspective. Check it out and subscribe. ]

Social Personal Finance Untethered

The morning started off for me with a brief by Lending Club, an online lending community where people borrow and lend money, bypassing the banks and therefore getting better rates. Essentially P2P lending. A similar play to micro financing in emerging economies, this is not lending a few bucks here and there, but tens of thousands at a time. It is a remarkable connection between social networking and lending, which empowers both lenders and borrowers to have a non-traditional source for money. Very clever. Quickly having to leave the room, I returned a few minutes later to see the presentation by Online Resources, a virtual collection agent.  A well laid out solution to provide a better way for collection agencies, as well as debtors to capture a means avoiding the conflict of tardy payment calls, greater payment options, etc.  Two great ideas at opposite ends of the lending value chain.

Mobile Payments & Mobile Banking Similarity

After sitting through the mobile focused presentations, I came to the conclusion that both the mobile advertising and mobile payments segments are very similar in their stages and even following parallel developments. Consider. Notwithstanding the heavy hype out there, they are both still in the trial or test stages. Some are arguing that both provide greater efficiencies in reaching customers, especially interesting to bankers, and more precise in contextual delivery, especially interesting to advertisers.

But, the reality is no bank is focusing a great deal of resources in capital, time, talent or people in the mobile banking space, yet. similar to the mobile advertising space. All the big bank boys were in the audience including the lead mobile banking executives from Citi, Wells Fargo, and JPMorgan Chase and regional bank leaders such as Huntington. Everything from my conversations indicate that it is still just at trial stages, and in limited deployments. This is bad news for many of the Mobile enablers of banking applications. Granted there is much interest in the potential for the channel to access and initiate banking transactions, but this is still very early in the development of the segment. My caveat is that this was practically an exclusively North American audience. How the markets are developing off shore could only be glimpsed indirectly through the US subsidiary of Monitise, a UK mobile payments solutions provider. Given the time constraints of 7 minutes their was little background on how the UK initiatives were similar or different from the US offering.

Bottom Up or Top Down Development

Which leads me to proffer the following. The tension in the development of the mobile payments and mobile banking market is going to be between the top down development interests by the FIs and the solutions providers or bottom up from the rank and file consumers. To a great extent, at least in emerging markets and developing economies where great growth opportunities exist, the tension will also be between local mobile network operators and global banks. From the FI perspective mobile payments are merely a segment of the overall means of connecting for banking purposes.

The banks are betting that in the great majority of instances you will be banking through a desk top, not untethered via a mobile handset. Tied down will be where the real grunt work is executed of balancing checkbooks and paying bills. The mobile will be where you check your balance before using a debit card, pass social payments when you owe your mates some coin after a night out on the town, or use your phone as a near field communications payments device. This especially plays into the belief in the FI industry that the youth cohort already are accessing and banking via a desk top. While in secondary school they are ideal buyers working with mobile, then periodically balancing their check book as the funds dwindle. They'll know this since they will be accessing balances via SMS inquiries. Around the time they turn 25, they'll flip to the desktop to make the diaper payments and mortgages.  That's the top down perspective.

Here's the bottom up perspective. Much of the mobile banking segment is going to be driven from the consumers up to the FIs, with a considerable dash of operator influence. Much of this is going to be driven primarily from the prepaid market and users that are functionally already engaged in "banking-like" transactions. First, in the Philippines for example, Smart and Globe already offer a means to move funds via "sachets" where you can top off your mobile phone accounts, or extend payments for school tuitions.

In the prepaid market, mobile users already are transferring funds from one cash account to a credit account inside the operator. Viola, they are engaged in banking functions and actions already. And this is a big business. Two years ago in a conversation with Napoleon (Paulie) Nazarone, the CEO of Smart, Paulie relayed that the sachet program was roughly a US$50 million business, and most of the transfers were from US$ 0.16 to US$3.00. No typo there, that's 16 cents. In other parts of the world, this already exits, and it's the prepaid mobile market. Layer on SMS alerts and notifications, and perhaps more operators should be examining the banking programs such as G Cash offered by Globe in the Philippines, or Smart's Parabel.

In Part 2 of my Finovate coverage, I'll be highlighting what I consider the differences in the offerings of the mobile banking providers MFoundry, Firethorn, Monitise, MShift and ClairMail.

Google Sends SMS Mobile Payments: GPay

Google, the company everyone loves to hate, hates to love, and incorporates into their business plan's liquidity event, is entering the mobile payments space. On February 28th, 2006, Google  filed a US patent application for a "GPay Service" enabling private or social payments transactions for goods or   services. Payment One, SmartPay (China), Cyphermint, Altair Financial, Mobile Candy Dish, BankSys (Belgium), Monitise(UK), Obopay, mFoundry, and Firethorn please welcome your new competitor in the space. See my post "Mobile Payments: The Tipping Point" to learn more about the mobile payments space.
What's New Here?   

Nothing Really New Here

There's really not much new with the process as described in the patent application. A G Pay subscriber, pays via the sending of a SMS text message to the GPAy server that clears with the merchant for the amount of the payment. GPay then debits the payor's GPay account, and credits the payment to the seller. As described in the patent application (#20070203836)

"A computer-implemented method of effectuating an electronic on-line payment includes receiving at a computer server system a text message from a payor containing a payment request representing a payment amount sent by a payor device operating independently of the computer server system, determining a payment amount associated with the text message and debiting a payor account for an amount corresponding to the amount of the payment request, and crediting an account of a payee that is independent of the computer server system."  Wherein the method of the claim is via an SMS message.

Large and smaller firms are already in the mix as reflected above, as are patent applications already submitted for the likes of mobile IM transfers of funds, as well. How Google is differentiating from the likes of Obopay and others is unclear. Of course it is Google, so watch this space. If Google was really on their toes, their SMS payments patent would have been accompanied by a Near Field Communications payment system as well. That dual modality would have been really interesting. They can always buy ecrio to get that.

Mobile Payments in China

  Nokia NFC has launched a mobile payment service into commercial use in China focusing on Beijing, Guangzhou and Xiamen.

Nokia's mobile payments service is based on Near Field Communication (NFC), an upgraded payments technology from RFID, which enables mobile phones to capture and transmit e-payment and data downloading services from graphics and IR interfaces. The service is expected to expand the adoption of mobile payments via an OEM installed app allowing consumers to conveniently to use a mobile phone to pay their bus and subway fees, film tickets, food and other "social payments."

Zheng Shaodong, director of Nokia's Asian NFC Business Department, says that Nokia has kick-started up the mobile payment value chain with this first ever NFC mobile handset centered payment in current commercial use.

According to a Nokia survey on target mobile phone payment users, 56% of the users often use public transport cards and more than 80% of them say that they are interested in integrating the transportation card functions into mobile phone payment. Note, it's happening in China first.