Mobile payments


across their networks are just packets of data that could equally be app updates or someone browsing the Web. Interestingly, no one has yet offered an all-


encompassing service – i.e. one that can be used online as well as between individuals and in bricks-and-mortar shops. Because of this, the convenience factor of a mobile wallet to fully replace cash or cards remains limited, since it just can’t offer the same all-round ease of use. To establish themselves in the mobile pay-


ments space, network operators need to differ- entiate themselves from the other offerings that will continue to spring up. And they could de- liver on the two vital pillars required for success in this marketplace: security and convenience.


Security Security concerns are widely touted as the rea- son for the slow take-up of mobile payments in the UK. But network operators are in a unique position to reassure concerned customers, in that they own the infrastructure on which mo- bile payments rely. Tis means they can offer all the security that the so-called ‘over-the-top’ (OTT) providers do, and more. On top of the secure processes and end-


to-end encryption algorithms used by OTT players, mobile networks can potentially add hardware-level encryption, secure transport networks and tight device integration, together with intelligent use of their unique proprietary datasets to monitor fraud. What’s more, mobile operators have an im-


peccable record when it comes to customer security: while it’s sadly common to hear sto- ries of credit card details being stolen and used fraudulently, try to remember the last time you heard someone complain that a call was fraudu- lently charged to their mobile bill. You never hear such stories because this simply doesn’t happen: security around mobile networks and their existing billing systems is rock-solid. And even though, when it comes to mobile


payments, mobile operators are regulated in the same way as any organization offering such a service (via an e-money licence, as opposed to the much stricter full banking licence), the mo- bile networks can point to other strict security regulation and legislation with which they have to comply, as well as their excellent past security record. Cow mpare this with a widely publi- cized security hole that was found in Google Wallet earlier this year, for example. When it comes to the security of one’s mon-


ey, customer trust is incredibly fragile, and the networks are in a strong position to reassure. However, that isn’t to say that mobile operators will not need to invest in the kind of sophisti- cated fraud-detection systems that banks have in place, because, as operator-linked payments proliferate, they will become a target for more


LAND mobile September 2012


With Barclaycard’s PayTag, launched in April, card holders can make payments of up to £20 by holding the tag – which can be attached to a mobile phone – over a contactless reader. This month, Orange and Barclaycard announced plans to launch the first Android smartphone compatible with Orange’s Quick Tap contactless payments service


fraudulent attacks. But with the right invest- ment in this area, they can get ahead of the game. Network operators could offer further secu-


rity by making use of their unique proprietary datasets, such as handset location. Tis might be as simple as confirming on behalf of a bank that a phone truly was at the location where a transaction is purported to have happened. Or, even more intelligently, networks will know the usual movement patterns of a given handset, so if a payment is attempted at a location that doesn’t fit with the usual pattern (if the phone has been stolen, for example), it could trigger a security alert.


Convenience, pervasiveness Te other advantage that mobile operators have is convenience for the customer and the per- vasiveness of mobile phones throughout society – both in the developed and, significantly, the developing world. Many of the mobile wallet systems that have


appeared so far work by loading money from your bank account or card into a virtual wallet, which you top up when it runs low, in much the same way you would draw out more cash and keep it in your real wallet. However, mobile networks could bypass this


step altogether by linking their mobile pay- ments system to your monthly bill or pre-paid credit. All the infrastructure is there to do this, the credit and identity checks have already been carried out (for contract customers), and so the setup process will be faster and easier than having to sign up to a whole new system. And from a security perspective, you wouldn’t have to share your details with an additional party. Peer-to-peer payments could also work in


this way, with money sent from one mobile to another being debited from one account and credited to the other. While such payments would still need to go via a clearing house to


prevent money-laundering, this would be invis- ible to the end user, who would simply see and appreciate the increased level of convenience the system offers. Te astonishingly rapid take- up of mobile payment systems in less developed countries proves this point. Furthermore, at the end of the month, the


customer has to check and pay off only one bill rather than several. And if the phone was lost or stolen, a single call to the network could have it and the payments system blocked, rather than needing to make separate calls to block the phone, and the third-party payments system. Tis kind of integration has proved popular with customers, many of whom get their land- line, broadband, television and mobile phone service from the same provider, for example. Adding a mobile payment mechanism to this mix is a natural extension. Mobile phones are pervasive throughout so-


ciety: even those who may not have a credit or debit card or even a bank account are likely to have a mobile phone. In this way, parents can give their children an allowance by topping up their phone’s pre-paid credit, rather than having to give them a bank account with a debit card, or cash pocket money (as well as topping up their phone). And the mobile payments systems could also be configured to help prevent young- sters from purchasing age-restricted goods.


Bringing it all together Tese are key differentiators that mobile op- erators can offer as part of their services, but the key to long-lasting success lies in creating a mobile payments service that can be used just about anywhere. All the current ones are merely pieces of a larger jigsaw. It’s only when all these parts are put together to create a service that’s secure, convenient and accepted virtually anywhere, that someone will crack this market. And the telecoms operators are ideally placed to do it.


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