Re: Bank of America: Question #2 - Mobile Payments

pierrelin Tue Nov 15, 2011 3:00 am

Dear Ally,

Great find! I was drawn particularly to the part where it discusses some of the barriers to entry of Google Wallet. I think at least for now, one of the biggest hurdles for Google Wallet is actually waiting for the newer android powered phones to come bundled with the NFC chip. This is linked to the adoption rate of Google Wallet as well since no phones with NFC means no stage for Google to persuade consumers to use their service.

my 2 cents Smile

Ally Feng Mon Nov 14, 2011 11:41 pm

<Mobile payment eco-system>
I don’t see mobile payment as “threats” to traditional payments, instead, they are service adding on top of traditional payments, which usually allows provider to charge higher fee than traditional methods. Mobile payments are still leveraging the existing infrastructure of other payment methods establish by financial institutions. For example, Google Wallet works with the MasterCard PayPass network, and the to use Square you still need to have credit cards.

I’ve found one interesting graph explaining the eco-system of e-wallet(google wallet example): http://www.zdnet.com/blog/btl/google-wallet-handicapping-why-it-will-and-wont-work/49452
Bank of America: Question #2 - Mobile Payments Google10

Bank of America: Question #2 - Mobile Payments Google10

As the article explained: “An open ecosystem was played up. Google portrayed itself as an enabler—that’s not collecting transaction fees yet. Google promised open APIs and connective tissue to enable mobile payments. That line will appeal to a bevy of financial players. After all, Google’s monetization will come from Google Offers, its Groupon killer, as well as the advertising possibilities with users.”

I think what’s exciting about this is that multiple actors need to work together to make mobile payment work cohesively. Financial & mobile company has the credibility & infrastructure, mobile hardware & secure NFC technology are the ways to reach customers, and finally software integration & interoperability need to be in the place to glue everything together. Whether they trust each other to form open alliance, or trying to monetize its individual competitive advantage alone, is going to be an interesting e-wallet war for us consumers to observe, and to benefit from.

<Consumer Adoption>
With so many e-wallet offers to open, it’s interesting to see which kind of offer (and by whom) will make consumers eventually overcome their security concerns and change payment behavior. Is user experience more important, or brand’s trustworthiness? To sample someone apart from the innovative early-adopters in our EC class Razz

, for instance, an tech writer share its preferences:
http://www.zdnet.com/blog/btl/mobile-wallet-wars-bet-on-the-established-financial-billing-players/56623

“Nevertheless, tech players may get the press, but my wallet is likely to be stored with the same institutions I already have relationships with.
My mobile wallet pecking order goes like this.
1. Banks (established relationships).
2. Transaction networks (Visa, Amex etc).
3. Companies that have your financial data already (mobile carriers, PayPal, Apple).
4. Outsiders looking to disrupt (Google, Square).
All of these wallets are likely to be open. From there, the game comes down to trust and brand.”

rio ohmori Mon Nov 14, 2011 8:05 pm

I think payment custom will be changed. People with our age know old school stuffs. But for example, my friend's 6 years old kid, she is already playing with Iphone. To her, it's like a magic box. She can talk to friend, parents, video calls, take photos, internet browsing, and so on. Why not wallet? Again, security is the issue. Hacking, like Xiaowei mentioned, sounds more serious than dropping phones.

Also, I want to add different point of view here, that developing countries are potential. Especially p2p payment.
http://www.guardian.co.uk/technology/2011/jul/24/mobile-phones-africa-microfinance-farming

In Philippines, there are two major mobile payment, Smart Money and G-cash. Oversea workers can send load to their relative's phone. The relative can encash them, or Smart Money has master debit card. Since majority of shops can't accept mobile payment, people still have to encash them. The way I see them, their adaptability is high. So I won't be surprised if their way of payment change in the future.

Mu Jou Mon Nov 14, 2011 7:01 pm

pierrelin wrote:Thanks for the comments guys, to push this discussion further, do you guys see services such as Google Wallet, or Square as looming threats to the more traditional payment methods? Do you think they will coexist? or will one method stay the dominant one?

Basically, I think the service such as Google Wallet would dominant in payment methods, and even replace physical credit card.
I've thought about & dreamed about this for YEARS!! Why can't we put the IC chip on credit card into our device or SIM card?

Somehow, here are some reasons I stand for it:
1. It's not that easy to loss your mobile device as your wallet or credit card!! Under recent the using behavior, user would check their mobile device more than their wallet.
2. It's much more securable for mobile device than credit card. Your device can be protected by password and even fingerprint!!
3. Mobile device would be easier to locate and be found if you really lose it.

I really hope all the bank would provide this kinda services....

pierrelin Mon Nov 14, 2011 5:30 pm

Thanks for the comments guys, to push this discussion further, do you guys see services such as Google Wallet, or Square as looming threats to the more traditional payment methods? Do you think they will coexist? or will one method stay the dominant one?

gregoire.schiller Mon Nov 14, 2011 5:29 pm

To give quick response to part 2 of the question,

With the new mobile payment methods, the already existing consumer targeting will be reinforced with the geographical factor. It seems hence very likely that the spontaneous purchases will gain in momentum (being targeted when passing in front of a shop, a restaurant and through your mobile payment service, being offered in a very visible way automatic discounts and bests bargains along with customer feedback). Also will be reduced the situations when customers are out without any means of payment.
I hence really believe customer will become more aware of the deal they can access close to where they live and as a result will increase their spending. The mobile commerce reconciliates even more physical commerce and e-commerce, increasing at the same time the m-dependancy...

C.

Khanh Linh LAM Mon Nov 14, 2011 5:16 pm

I agree that most of people who have a smartphone could find in that a convenient way to pay, but it is not the case for everybody. First, all the people even in the developed countries don't necessarily have a smartphone. Second they don't necessarily want their payments to be tracked and known. I personally care about the security but for me one the arguments against this is to be sure to have some cash with me. What if the system falls down ? Ok it's a old way of thinking but I think many people could think like this.
To nuance I would say that mobile payment is quite practical and quick concerning small payments, as we saw it on the video.

gregoire.schiller Mon Nov 14, 2011 4:45 pm

I think mobile payments are about to change the landscape of ecommerce. They could actually be one of the key windows for growth.

Indeed, everyone, at least in developed countries today, has a mobile phone today. We always carry it with us and most of the times it is a smartphone. Therefore, it is much easier for users to pay with their mobile phone. Furthermore, it could be much more convenient for users to trace their online payments they have made by mobile than non mobile. The telephone could just save all the information of payments and this could be accesible at any time by users.

joern.esdohr Mon Nov 14, 2011 3:33 pm

Concerning development for new technologies of payment processing for desktop PC's, today's news is a press release of Intel and MasterCard, which plan to collaborate on a way to improve just that.

It sounds very enticing. A multi-layer security by 2 or more devices is very positive: by Chip / NFC / Card reader within the Ultrabook and Card or Smartphone. The system-integrated authorization process also seems much more convenient, less prone to errors and more secure than typing in and transmitting your credit card details.

PS: also notice, MasterCard PayPass is also used with Google Wallet, as can be seen in the related video.

article from engadget ( http://www.engadget.com/2011/11/14/intel-and-mastercard-to-offer-ultrabook-users-safer-nfc-checko/ ):

Intel and MasterCard to offer Ultrabook users 'safer' NFC checkout via PayPass

Entering a 16-digit credit card number may be a thing of the past with a new initiative from MasterCard and Intel, which allows users to checkout online by tapping a PayPass-enabled card, tag or smartphone to their Ultrabook. Calling the checkout "safer" and "simpler," Intel is bringing its Identity Protection Technology to the potluck, giving shoppers two-factor authentication and chip-based display protection when forking over that hard earned cash. Here's how it all works: when you tap a NFC smartphone or other PayPass-enabled device, it will communicate with the Ultrabook, generating a six-digit code from the embedded processor or from within the Manageability Engine. The ME hardware, encrypted with third-party algorithms, then transacts with the e-commerce site, hopefully offering shoppers more protection than standard software solutions. Since using the feature requires an NFC-connected device as well as the Ultrabook and a username and password, forgetful folks who tend to misplace their phone or computer won't have to worry about unwarranted spending. Sadly, the solution won't protect your wallet from the perils of a late night shoe shopping spree. Check out the full PR after the break.

complete press release:

Intel and MasterCard Join Forces to Enhance the
Consumer Payment Experience for Online Shopping

Collaboration to provide more options for a safer and simpler check-out process for online merchants and consumers

SANTA CLARA, Calif. and PURCHASE, NY – Nov. 14, 2011 – Intel Corporation and MasterCard Incorporated announced today a multi-year strategic collaboration to further enhance the security and consumer payment experience for online shopping.

The collaboration will combine MasterCard's expertise in payment processing and commerce with Intel's strengths in silicon innovation and chip-based security. It is designed to provide more options for a safer and simpler checkout process for online merchants and consumers using Ultrabook™ devices and future generations of Intel-based PCs.

The two companies are working together to optimize a variety of emerging payments technologies, including MasterCard's PayPass® and Intel® Identity Protection Technology (IPT). Intel® Identity Protection Technology can enable consumers to use strong two-factor authentication and hardware-based display protection. This provides increased online security against malware. Additionally, when used with an Intel® Identity Protection Technology-enabled reader, consumers will be able to pay for online purchases with a simple tap of their PayPass-enabled card, tag, or smart phone on an Ultrabook device.

"MasterCard is constantly working to improve the shopping experience for consumers and merchants," said Ed McLaughlin, chief emerging payments officer, MasterCard. "The collaboration with Intel will deliver enhanced security and faster checkout – with the convenience of a simple click or tap."

Consumers continue to shift their shopping to the Internet. Online sales reached $176.2 billion last year in the United States alone and are expected to grow at double-digit percentage rates annually for the next 5 years, according to Forrester Research.

"Our goal is to enable users of Ultrabook devices and future generations of Intel-based PCs to enjoy the convenience of e-commerce while making online payments safer from malware and hackers with the advanced security capabilities of Intel Identity Protection Technology," said George Thangadurai, general manager of PC Client Services Division, Intel Corporation. "Online commerce is a key focus area for Intel, and through this partnership with MasterCard, we intend to deliver an innovative, personalized and safer e-commerce experience to consumers."

alex.gordiani Mon Nov 14, 2011 3:08 pm

d.alsafi@gmail.com wrote:
KaiCamenzind wrote:I personally think their is for sure a certain demand for mobile banking services. As we observe how the whole mobile device market develops and more and more powerful devices enter the market it is obvious that bank customers will expect to be able doing the same activities on a mobile device as they did on a computer. Some current statistics claims that already one third of american citizens don´t use a computer anymore. So there is a visible trend away from pc to mobile devices.

Greetings,

It is an eye catching trend about how the mobile activities are developing with steady growth. In fact, I read an article about the issue (Ingeniøren news paper) which states that some experts within the area prospect the fact that the development within mobile payments, this will replace 80% of PC payments by around 2020. I personally enjoy payment/purchase through PC as it gives me better overview, that is to say, I like to read the terms written in small letters.
My concern about whether payment/purchase through mobile devices will imply greater multitasking effort in the daily day. In this case, wouldn't this create some sort of psychological distraction that will result in greater stress levels?!

Cheers,
D

To D.

I think you're basically right, maybe this new possibility of purchasing and paying online will distract us from our daily commitments. But, as for me, I'm already losing time in things like purchasing and paying online through my smartphone and maybe I'll appreciate a tool that allows me to do such things in a faster and safer way.

d.alsafi@gmail.com Mon Nov 14, 2011 12:13 pm

KaiCamenzind wrote:I personally think their is for sure a certain demand for mobile banking services. As we observe how the whole mobile device market develops and more and more powerful devices enter the market it is obvious that bank customers will expect to be able doing the same activities on a mobile device as they did on a computer. Some current statistics claims that already one third of american citizens don´t use a computer anymore. So there is a visible trend away from pc to mobile devices.

Greetings,

It is an eye catching trend about how the mobile activities are developing with steady growth. In fact, I read an article about the issue (Ingeniøren news paper) which states that some experts within the area prospect the fact that the development within mobile payments, this will replace 80% of PC payments by around 2020. I personally enjoy payment/purchase through PC as it gives me better overview, that is to say, I like to read the terms written in small letters.
My concern about whether payment/purchase through mobile devices will imply greater multitasking effort in the daily day. In this case, wouldn't this create some sort of psychological distraction that will result in greater stress levels?!

Cheers,
D

KaiCamenzind Mon Nov 14, 2011 11:45 am

I personally think their is for sure a certain demand for mobile banking services. As we observe how the whole mobile device market develops and more and more powerful devices enter the market it is obvious that bank customers will expect to be able doing the same activities on a mobile device as they did on a computer. Some current statistics claims that already one third of american citizens don´t use a computer anymore. So there is a visible trend away from pc to mobile devices.

andykorn87 Mon Nov 14, 2011 11:04 am

I think despite of all the discussions here about mobile payment considering the bank of america, I found a very interesting paper about that topic of mobile payment in general, which is worth to read. It also describes the market situation and key factors for a successful buisness.

https://www.ebaportal.eu/_Download/Research%20and%20Analysis/2010/Mobile_payments_2010_Innopay.pdf

Xiaowei Wen Mon Nov 14, 2011 10:38 am

As to the change of purchasing habits of consumers in the future, I agree with rio that it mainly depends on the security issue. Once some security accidents happen (here I don’t mean “dropping the phone”, but the accident made by “Hackers”), the whole m-commerce industry will be badly influenced. But if there’s no security problem, the mobile payments and smartphones will better integrate with each other. In China, many e-commerce companies, like Taobao, has already focused more on mobile purchase service. Maybe one day on the street, everyone will use their smartphone for purchasing and banking business.

three forms	Ability to attract and retain customers
local mobile payments	Convenient: contactless payment without card & signature when shopping (but some may just enjoy the feeling of swiping cards)
mobile commerce	Convenient: payment without physical proximity location when buying from online merchants
P2P	Convenient: global remittance Really great because many people use the 3rd party (like, Alipay in China) to transfer between different accounts without the transfer fee! (different from e-banks)

Ally Feng Mon Nov 14, 2011 6:52 am

1.
Local mobile payments(I suppose you mean NFC payment?): Using mobile device as digital wallet. Ex. Google wallet, Square.
Mobile commerce: The ability to conduct commerce using a mobile device.
Person-to-person (P2P) payments : Letting one person to pay another individual via digital transaction

2.
I think the evolution of payment methods are meant to provide a trustworthy & convenient way for both the buyer the seller. We have to note that every payment method actually adds a little transaction costs (compare to cash payment) in exchange of the convenience & trustworthiness . Therefore, those mobile payment methods change no business model for the three parties involve: sellers, buyers, and the payment platform provider, but do provide opportunities for them.

<Opportunities & Benefits for the 3 parties>
Buyers:
Payment method won’t be a barrier for them to purchase things they want, even when having no cash or transacting with an unknown seller.

Sellers:
Payment won’t be a trust barrier for customers to pay them.(ex. merchants who won’t be authorized by credit card companies to have credit card payment system because they’re too small; or have no place to install the system, ex. Night market vendor) Sometimes the convenience of payment methods might encourage the customer to opt for their products.

Payment Platform Provider:
The advent of mobile computing allows ‘outsiders’ like Google and Square to share a pie in the business what usually own by banks and mobile companies. If they can provide a win-win payment model that delivers sufficiently compelling consumer experience and integrates multiple aspects of personal financial activities, it will be something. Stores can leverage LBS promotion, and platform providers will have valuable personal level data for market analysis.

rio ohmori Mon Nov 14, 2011 6:20 am

I searched for what's going on in my country. Since I am away from my home country for 10 years, I felt like so out of date...

In Japan, cell phone is functioning as e-money wallet. (I knew it existed for a while, bud I did not know that much progressed)
As of now, mobile phone can be used for following services:
* E-money (purchase of goods at shop, e-commerce, and vending machine)
* Transportation ticket (Just like Yu-card in Taiwan)
* E-ticket (Download e-ticket from web, and pass cell phone over reader)
* E-points (Collect points upon shopping to avail additional service, or receive gift)
* E-member card (Replacing physical member card)
* Credit card (Pass cell phone over reader. You can use it as credit card without signing)
* E-lock (Used as a key to unlock electric lock)

Of course, the biggest issue is security. If you drop it, you will lose everything. Some handset has "lock" function that unlock it before payment, and it will lock automatically in few minutes later. Or for some handsets, you can use phone line or e-mail to stop e-wallet function.

I will try to find short clip in English how those are used in Japan.

pierrelin Mon Nov 14, 2011 4:08 am

Google Wallet

Square

pierrelin Mon Nov 14, 2011 3:54 am

In a relatively immature US market, mobile payments have been gaining traction in the following three segments: local mobile payments, mobile commerce, and person-to-person (P2P) payments.

Briefly discuss the three different forms of revenue streams and their ability to attract and retain customers.
Also, with mobile payments changing the landscape of e-commerce, how will purchasing habits of consumers in the future be different?

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Bank of America: Question #2 - Mobile Payments