countries. It was also working on mobile payments in Western Europe, and was one partner in a pilot in Nice in France, starting in May 2010 and with the service subsequently rolled out across the country. Dubbed Cityzi and using Samsung mobiles, it combines payments, loyalty schemes and transport ticketing. Mung Ki Woo, vice president, electronic payments and transactions, Orange France Telecom, felt the ‘third phase of mobile’ was emerging, within which devices would be used for ‘daily life transactions’. He foresaw an ‘access layer’, akin to that for the internet, for third-party services, including payments from banks. ‘There is very low appeal for contactless for just one service,’ he felt. He believed banks and mobile operators would work together, rather than competing, with the former the specialists when it comes to payments and having the distribution that the mobile operators lack. Standard Bank has been one pioneer. At home, it has pushed agency banking since 2009/10, using the platform of South Africa-based Visa subsidiary, Fundamo, and working with African telco, MTN. Using Infosys’ Digital Commerce platform, it has also been pushing into agency banking throughout Africa. In South Africa, Standard Bank has around 750 branches but it has been the first bank in the country to make a strategic move into agency banking, thereby significantly extending its reach. By mid-2012, it had more than 9000 agents, mostly in townships. These are typically micro- businesses that are empowered to offer banking services, particularly focused on the unbanked. As well as selling, say, Coca-cola, said the bank’s director for business banking in Africa, Roy Ross, they were now effectively a bank branch. Mobile and internet technology is key to this, supporting the agents themselves and supporting cashless payments and commerce with customers.
Fraud
On the fraud front, it is likely that mobile phones will be increasingly used as an authentification device. Indeed, this is starting to happen. For instance, Payfair has piloted innovative security, involving a one-time registration and then minimal data input for internet payments. When customers try to make an online payment, a one-time encrypted signal is sent to their mobile phones. If that signal matches a signal transmitted to the computer, then the payment is authorised. There had been strong interest in this from banks, said
Payfair’s co-founder and CEO, Dominique Buysschaert. Probably half of all card fraud is e-payments related, he estimated, despite the relatively low volumes, and this is increasing, so it is a big problem. In addition, 70 per cent of aborted e-commerce transactions are interrupted at the moment of payment, suggesting that the current system is
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too complicated. One key benefit of the Payfair system would be ease of enrollment and implementation, he believed, with no need for additional equipment. The bank would remain in the driving seat, he said, and this was a potential source of additional revenue, through the ability to add services, such as SMS confirmations. But fraud prevention isn’t cheap. The estimated cost of EMV is $5 billion. The US’s push instead for PCI DSS (Data Security Standards) was expected to cost US merchants and processors more than $2.25 billion up front and then $0.5 billion per annum, with end-to-end encryption (E2EE) estimated to add another $2 billion on top of this and questions are still raised in the US about the return on the investment needed for EMV.
Where is the business case?
Banks often struggle to see the business case for new forms of payments. The more channels, the greater the cost. Mobile operators, similarly, often question the value of entering the payments space, with its low margins. It is not always easy to tell, but many schemes are probably not yet making money. If, as a bank, you invest in mobile payments, building the partnerships and infrastructure, what will be the uptake and where is the profit? Udo Milkau, head of strategy and market development at DZ Bank, has likened it to building a railroad: a lot of upfront investment in the hope that people will use it. Déan Korosec from Slovenia-based Nova KBM, the
second largest bank in the country, highlighted this issue from a relatively long-running mobile payment scheme in his country, branded as Moneta. It was initially launched in 2001 by the country’s largest mobile operator, Mobitel, with Nova KBM joining in 2003, at which point they set up a joint company, M-Pay. It attracted three mobile operators and two banks (Postbank being the bank addition), with up to six cards and bank accounts on one SIM card. Transactions are sent to the issuer online and it is based on delayed payments, which appear on customers’ monthly account statements. The business model is difficult because there are ‘four hungry mouths’, he observed – the issuer, acquirer, processor and now the mobile operator. The latter is ‘used to eating well’. The bank or operator acquires the merchant and they share the revenue. The communications have to be subsidised, otherwise they would kill the scheme, he said. He pointed out that the need to be SEPA compliant had brought a lot of costs for no clear gain and he believed that banks have to ‘do something different’ with mobile technology, rather than merely replicating today’s products.
This is backed up by another central European pioneer,
Bank Zachodni in Poland (now part of Santander). It launched MasterCard PayPass and Visa PayWave prepaid
Payment Systems & Suppliers Report |
www.ibsintelligence.com
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