4_mpsp in the value chain

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1onfidential Documents

Report4



2

MPSP VENDORS

HCL Infosystems, DMS (Distribution & MarketingServices) August 2008

M - P A Y M E N T S I N



Summary

Mobile Payment Service Providers

Five hundred million people are expected to own mobile phones only in India by 2010. There are

currently 289 million mobile phones subscribers in India and 100 million are added every year. Thisincreasing rate of mobile phone users in India is catching eyes of the central bank of the country but

the question is that if central bank is interested in providing the financial services with the help of

mobile phone then who will be the system providers? Here comes a very big scope for such players

who are there with the technologies which will enable the two way users i.e. sender and receiver or

we can say payer or payee to get the facility of the system so called mobile payments. These system

providers can be anyone either a bank itself or a mobile network operator or a trusted third party this

trusted third party is called Mobile Payment Service Providers or Mobile Payment Gateway Service

Providers.

This part of the report deals with s detail study of all the current MPSP (Mobile Payment Service

Providers) in India their technology, fund management system and customer interaction techniques. Inthe mid part of the report I have listed the current charges of the MPSP’s and their tie-ups. As it’s

very much clear that a successful mobile payments need a collaborative model where all the players in

the business model value chain need to work in an interoperable manner.

Today mobile payments is already identified as a biggest demanding technology which will be

adopted not only by all those who are using mobile phone these days but this will dramatically bring

an unexpected growth of mobile phone users in the system in near future. No doubt this mobile

payment business is going to help the M-Commerce business to take a widespread shape and become

one of the most important medium of the cash flow in the country.

Understanding the need of mobile payments I will tell one thing that those were early days when most

common medium of money transaction was by cash but after interference of the country’s central

bank cheques and demand draft comes in light which become a convenient medium of fund flow then

after their comes the ATM machines but the problem was still with the users to move at the ATM

machines and Bank branches and make transactions, there was a revolutionary step taken by RBI

when it introduced Electronic Clearance System and National Economic Fund Transfer system to

make the fund flow electronically online which is the latest money transaction system running in the

country but in this case user need to be affordable with an expensive infrastructure equipments like

PC or Laptops and Internet connections now the point is that how much of the 116 crore population is

using a PC or Laptop and aware of internet.

But one common thing which can be generally seen these days among most of us is Mobile Phone and

this is what all about a new revolutionary payment system on Mobile phones called as M-Payments.

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Content Pg No

1. Summary 3.

2. Content 4.

3. Mobile Payment Service Providers (MPSP) in m-payments business model value chain. 5.

2.1 Importance of MPSP’s

4. Role of Mobile Payment Service Providers (MPSP) 6.

5. Types of m-payment solutions provided by MPSP’s 6.

6. M-payments technology used by MPSP’s 8.

7. Generic architecture of m-payments 10.

8. Technical architecture of MPSP for mobile communication 12.

9. M-Payments market in India 14.

10.Current MPSP’s detailed analysis in India 15.

11.Key Findings and In-depth Analysis of Mobile PSP’s offerings 16.

11.1 mChek Mobile Money Transfers 24.

11.2 ngpay Mobile Money Transfers 27.

11.3 Obopay Mobile Money Transfers 29.11.4 ItzCash Mobile Money Transfers 30.

11.5 Paymate Mobile Money Transfers 31.

11.6 Oxicash Mobile Money Transfers 32.

11.7 Spanco Mobile Money Transfers 33.

12.Issues and Challenges for MPSP’s 35.

13.Messaging Standardization for Mobile Payments 36.

14. Regulatory policies and standards Issues by RBI 40.

15.References 41.

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3. Mobile Payment Service Providers (MPSP) in m-payments business model value chain.

Fig: 1 Business Model Value Chain for M-Payments

5

Mobile

Netwo

rk

Opera

tor

Payment

servic

e

Provid

ers

Banks

Mobile

Netwo

rk

Opera

tor

Content

Aggrega Mercha

nts/Pay

ees

Custom

ers/

Payers

Role: Payers

are the end

users in this

system utilizing

the technology

Example: Any

shoppers orconsumer

Role: Support

for mobile

content delivery

Example:

Airtel, Vodafone,

Idea, BSNL and

MTNL

Role: Support

for mobile

content delivery

Example:

Airtel, Vodafone,

Idea, BSNL and

MTNL

Tech

Provide

rs

Role: Provide

technology platforms

like security and else

that enable secure

access to players

Example: Airtel,

Vodafone, Idea,

BSNL and MTNL

Role: Enables

technology to

integrate mobile

phones to bank acc

Example: mChek,

Obopay and Spanco

Role: Provides

backend payment

and settlement

system

Example: SBI, ICICI

and HDFC

Role: Provides

backend payment

and settlement

system

Example: SBI, ICICI

and HDFC

RBI

Role: Regulating all the players participating in

the game Example:

Airtel, Vodafone, Idea, BSNL and MTNL

Role: Manufacturer of

Handsets capable of

various m-payment

technologies

Example: Nokia, Samsung,

Motorola and LG



4. Role of Mobile Payment Service Providers (MPSP)

Fig1 is a common business model value chain which is currently running in India and also become a

very successful model for bringing M-Payment system in the common use. In the whole business

value chain model a Mobile payment service providers (MPSP) hold the most important and a crucial

role in the by sitting in the center of the whole system and providing an integration facility to the payer and payee both. In the other words the MPSP’s role is to integrate both the parties sender and

receiver’s mobile phone devices with the fund sources, MPSP’s are also concerned with enabling the

technology with the help of the message or information sent by consumers/payers are securely send to

the clearing houses via banks and in the same way after fund payments and settlement process the

transaction conformation messages to the payer and payees.

Role of Mobile Payment Service Providers

• External low-cost hosting at Third party payment processors that should be encouraged to

have a truly cross-bank and cross-carrier payment system.

• Policies enabling audit and governance of such a model to be framed including a centralizedsettlement mechanism.

• Third party processors should have the responsibility of Fraud management and should have

systems and process in place to check and control frauds.

5. Types of m-payment solutions provided by MPSP’s

Mobile payment solutions may be classified according to the type of payment effected, and based on

the technology adopted to implement the solution. There are a variety of combinations of these

frameworks – technology adopted and mode of payment, According to Mahi Carr a senior official

from IDRBT, Hyderabad there are three different models available for m-payment solutions on the

basis of payments in India.

a) Bank account based

b) Credit card based

c) Telecommunication companies billing based

2. (a) Bank Account based M-Payment

Today in India Banks have several million customers and in the same way telecommunication

operators also have several million customers. If they both collaborate to provide an m-payment

solution it is a win-win situation for both industries. In this model, the bank account is linked to the

mobile phone number of the customer. When the customer makes an m-payment transaction with a

merchant, the bank account of the customer is debited and the value is credited to the merchant

account.

2. (b) Credit Card based M-Payment

In the credit card based m-payment model, the credit card number is linked to the mobile phone

number of the customer. When the customer makes an m-payment transaction with a merchant, the

credit card is charged and the value is credited to the merchant account. Credit card based solutions

have the limitation that it is heavily dependent on the level of penetration of credit cards in the

country. In India, the number of credit card holders is 15 million. Only this small segment of the

population will benefit in the credit card based model. Though limited in scope, there may be high

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demand within this segment for a payment solution with credit cards and also, may provide high

volumes of transactions.

2. (c) Telecommunication Company Billing of M-Payments

Customers may make payment to merchants using his or her mobile phone and this may be charged to

the mobile phone bills of the customer. The customer then settles the bill with the telecommunication

company. This may be further classified into prepaid airtime (debit) and postpaid subscription

(credit).

6. M-payments technology used by MPSP’s

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Globally today there are various types of technology available with the help of which a mobile device

(Mobile Phones, PDA’s and ESME’s (External Short Message Entities) can send and receive the

information related to the mobile payments, below I have mentioned some of the most common and

highly accepted mobile-payments technologies.

Mobile Payment Technologies:

a) Short Message Services (SMS)

b) WAP/GPRS

c) Unstructured Supplementary Services Delivery (USSD)

d) Phone-based Application (J2ME/BREW)

e) SIM-based Application

f) Near Field Communication (NFC)

g) Dual Chip

h) Mobile Wallet

a) Short Message Servicing (SMS):

This is a text message service that enables short messages up to (140-160 characters) that can be

transmitted from a mobile phone. Short messages are stored and forwarded by SMS centers. SMS

messages have a channel of access to phone different from the voice channel. SMS can be used to provide information about the status of one’s account with the bank (informational) or can be used to

transmit payment instructions from the phone (transactional).

Technical Issues

SMS-Gateway mobile payment service provides a connection between a service provider's application

compatible database and a telephone operator's CIMD2, UCP/EMI and SMPP protocol based SMSC

(Short Message Service Center) over TCP/IP.

SMS-Gateway is an easy to install and easy to use solution for SMS based services. It gives a wide

range of modification possibilities to meet the needs of service providers.

b) WAP/GPRS

General Packet Radio Service (GPRS) is a mobile data service available to GSM users. GPRS

provides packet-switched data for GSM networks. GPRS enables services such as Wireless

Application Protocol (WAP) access, Multimedia Messaging Service (MMS), and for Internet

communication services such as email and World Wide Web access in mobile phones.

c) USSD

Unstructured Supplementary Service Data (USSD) is a technology unique to GSM. It is a capability

built into the GSM standard for support of transmitting information over the signaling channels of the

GSM network. USSD provides session-based communication, enabling a variety of applications.

8



USSD is session oriented transaction-oriented technology while SMS is a store-and-forward

technology. Turnaround response times for interactive applications are shorter for USSD than SMS.

d) Phone-based Application (J2ME/BREW)

The client m-payment application can reside on the mobile phone of the customer. This application

can be developed in Java (J2ME) for GSM mobile phones and in Binary Runtime Environment for

Wireless (BREW) for CDMA mobile phones. Personalization of the phones can be done over the air

(OTA).

e) SIM-based Application

The subscriber identity module (SIM) used in GSM mobile phones is a smart card i.e., it is a small

chip with processing power (intelligence) and memory. The information in the SIM can be protected

using cryptographic algorithms and keys. This makes SIM applications relatively more secure than

client applications that reside on the mobile phone. Also, whenever the customer acquires a new

handset only the SIM card needs to be moved. If the application is placed on the phone, a new handsethas to be personalized again.

f) Near Field Communication (NFC)

NFC is the fusion of contactless smartcard (RFID) and a mobile phone. The mobile phone can be used

as a contactless card. NFC enabled phones can act as RFID tags or readers. This creates opportunity

to make innovative applications especially in ticketing and couponing. The ‘Pay-Buy Mobile’ project

launched by the GSM Association (fourteen mobile operators are part of the initiative) targets 900

million mobile users with a common global approach using NFC.

g) Dual Chip

Usually the m-payment application is integrated into the SIM card. Normally, SIM cards are

purchased in bulk by telecom companies and then customized for use before sale. If the m-payment

application service provider has to write an m-payment application in the SIM card, this has to be

done in collaboration with the telecommunications operator (the owner of the SIM). To avoid this,

dual chip phones have two slots one for a SIM card (telephony) and another for a payment chip card.

Financial institutions prefer this approach as they can exercise full control over the chip and the

mobile payment process but, customers would have to invest in dual chip mobile devices.

h) Mobile Wallet

A m-payment application software that resides on the mobile phone with details of the customer (and

his or her bank account details or credit card information) which allows the customer to make

payments using the mobile phone is called as a mobile wallet. Customers can multi-home with several

debit or credit payment instruments in a single wallet. Several implementations of wallets that are

company-specific are in use globally.

7. Generic Architecture for M-Payments

This is a simple, illustrative conceptual model that describes the relationship between the major

participants in an m-payment scenario (Fig. 2). There is the customer Payer and the merchant or

Payee who would like to use an m-payment service. The M-Payment Service Providers (MPSP’s)

9



provides the necessary technical infrastructure (hardware and software) to facilitate m-payments and

acts as an intermediary

Fig: 2 Generic Model for M-Payments Application Service Provider

between the financial institutions and mobile network operators. The MPSP register users who would

like to avail of the m-payment service. The users (customers and merchants) have to be registered

with the MPSP prior to using the service. At the time of registration the MPSP collects the bank

account details (or credit card details) of the customer and merchant as well as their valid digital

certificates. The mobile phone numbers of the customer and the merchant are mapped to their

respective bank accounts and this mapping is maintained by the MPSP. The users are provided with a

client m-payment system (mobile payment) that is either resident on their phones or else in the SIM

card. This application may be provided over the air to the users. The mobile payment will normally

interact with the MPSP server.

A mobile phone user communicates with a merchant and makes an economic transaction (e.g., buying

a ticket from an airline over the phone or shopping any goods from merchants). The merchant obtains

the phone number of the customer and initiates the m-payment transaction request stating the amount

for which payment is required. The customer confirms the request and authorizes payment. TheMPSP receives the authorization and verifies the authenticity of the customer. The MPSP then debits

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Mobile Phone Users

Telecommunications

Operator

Telecommun

ications

Operator

Telecommun

ications

Operator

Telecommun

ications

Operator

M-Payments Application

Service ProviderBanks

Security

Authority

Payee / Merchant



Fig: 3 Technical Architecture Models for M-Payments Application Service Provider

Let’s understand the technical architecture of the mobile payment gateway providers. A Mobile

payments system runs on SEMOPS ‘Secure Mobile Payment System’ technology in the above Fig:2

describes a complete flow and transaction management of the information, In the diagram the

architecture of the main modules in the mobile payment solution there are two main front-end

modules namely the customer and the merchant modules. These are designed to have extended

functionality, security, openness, usability and a versatile application-executing environment. From

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Transaction Management



front end with the help of different technologies like SMS, USSD, WAP/GPRS message is sent from

the mobile network operators which are stored on the Mobile Payment Service Providers SMSC.

Now SMSC with the help of service gateways send the data to service centers and to enterprise

servers which is also known as central access point where data are stored in the administrative data

base. Now in the back-end modules which comprise of transaction management applications thatreside in the payment processors’ premises and interact with their account management systems, as

well as the Data Centre module, which is responsible for the communication and reconciliation of

transactions between involved payment processors.

The mobile payment service is based on the structured interaction of the individual modules. There

are different transaction and channel specific front-end modules developed to reflect the specifics of

the heterogeneous environment and provide the user-friendliest interaction for the users (e.g. PC,

mobile, POS).

In the mobile environment the customer modules are tailored to the specifics and technical quality of

the handsets, as the design contains STK ‘Sim Tool Kit’ based applications but also the more modernJava and operating system (OS) based modules as well.

The merchant module design on the other hand will provide flexibility for the merchant in regards of

tailoring it to the operating specifics of the sales outlets. Besides the same modules used by the

customers an additional type, a multipurpose POS terminal is also available for the merchants. The

versatility on the front-end side meets a homogenous, unified back-end infrastructure (payment

processor module, Data Center) catering for the combined service.

In the backend the mobile payment service provider takes help of one more technology provider who

is responsible for developing the server side backend infrastructure for the payment gateway. The

implementation involved interfaces for handling interaction with the banks, processing payment andcommunication with merchant websites. Recently it is extended to implementation of web-services

based interface which allowed even non web clients as well to use the payment gateway.

Technologies Involved

Platform: Java / J2EE, J2ME

Tools/ Frameworks: Apache Axis, Hibernate, Spring

9. M-payments market in India

The Indian mobile telephony market has grown at a rapid pace in the past six to seven years.

Declining call tariffs in conjunction with favorable regulatory policies have lead to a tremendous

increase in the subscriber base, crossing the 270 million mark in 2008. While the growing subscriber

base has positively impacted industry revenues (which have risen consistently over the past few

years), operator margins also have shrunk, pulling down “Average Revenue per User” (ARPU). As

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ARPU declines and voice gets commoditized, the challenge is to retain customers, develop alternative

revenue streams, and create a basis for differentiation in high-churn markets.

In the early day’s mobile phone were only used as a device of M-Commerce is the latest In the mobile

payment technology Mobile Payment Service Providers.

Today with the help of mobile phone we can do far more than just make calls. Consumers are taking

advantage of text messaging, taking pictures, and listening to music and lots more which comes under

the bucket of mobile value added services. The next logical step is to use the mobile phone to send

and receive money—something that consumers in Europe and some countries of Asia have been

doing successfully for the last few years.

Many mobile payment service provider companies have already started their services and some of

them are already having their physical appearance in India, List of those companies is as follows

Mobile Payment Service Providers: Today in India seven companies are active name of the

companies are as follows with their technology and fund transaction method.

Payment service Provider Technology Fund Transaction Type

1. mChek - SMS - Bank Focused

2. ngpay - Application - Bank Focused

3. Obopay- SMS/App/WAP - Non-Bank Focused

4. ItzCash- SMS - Non-Bank Focused

5. Paymate- SMS - Bank-Focused

6. Nxtpay- N/A - N/A

7. OxiCash- SMS/WAP - Bank-Led

8. Spanco- SMS - Bank-Focused

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10. Current MPSP’s detailed analysis in India

Currently in India there are eight mobile gateway service providers companies are active among them

and number of new entrants are expected to enter as the regulatory issues by RBI will be published.

RBI is in the process to publish its latest and final operative guideline for Mobile Payment Service

Providers. Well among all the players mChek, ngpay, Paymate and OxiCash are the most active player in the current market. Where Spanco and ItzCash are slow movers, reason behind Spanco is

that Spanco is having a long term strategic alliance with SBI in India which will provide a complete

range of Mobile Banking facility under SBI also Spanco has got a 5 years tender under IRCTC for

providing IVR technology based mobile ticket reservation system and mobile payment authorization,

where Itz cash is busy in making its cash card business alliance with other mobile payment service

providers for familiarizing it more and more either ItzCash is waiting for the RBI’s final regulation.

NxtPay and Obopay is in the process to launch their technology, Obopay which is US based payment

gateway company is also in its very nascent stage in India, below I have mentioned various charges

regarding to the users and merchants.

Merchant Point of View

Payment Technology

Bank A/c

involved

Registratio

Charges

Operator

Charges

Bank

Charges

PSP

Charges

MNO

Charge

Bank

Partners

Merchan

Partners

Operator

Partners

mChek SMS Yes 20,000 Yes 0.50% - 8 7 1

Ngpay M-Wallet (App) Yes 20,000 3 Rs Yes 1% - - 45 All

Obopay SMS/App/Web - - - - - - - - -

Itzcash M-Wallet (SMS) No 10000 - - 0.50% - - 90 All

PayMate M-Wallet (IVR/SMS) Yes No 2 Rs Yes 1%-2% - 9 14 All

Nxtpay SMS

OxiCash M-Wallet (SMS) Yes 10000 3 Rs Yes 0.50% - - 16 All

Spanco M-Wallet (SMS) - - - - - - 1 - All

* Paymate registration charges for 1st year is 0 Rs after that discount rate of Master, Visa card. Bank charges 0% for first year later will be decide

* NxtPay not active *Paymate charge same as bank charge on each transactions.

User Point of View

Payment Technology

Registratio

Charges

Operator

Charges

Bank

Charges

PSP

Charges

MNO

Charge

Bank

Partners

Merchan

Partners

Operator

Partners

mChek SMS Yes No 3 Rs - - - 8 7 1Ngpay M-Wallet (App) Yes WAP Ch 3 Rs - - - - 45 All

Obopay SMS/App/Web - - - - - - - - -

Itzcash M-Wallet (SMS) No No 1 Rs - - - - 90 All

PayMate M-Wallet (IVR/SMS) Yes No 3 Rs - - - 9 14 All

Nxtpay SMS

OxiCash M-Wallet (SMS) Yes WAP Ch 3 Rs - - - - 16 All

Spanco M-Wallet (SMS) Yes WAP Ch - - - - 1 - All

* For Oxicash users operator charges are as per to normal plans. PSP charges are subject to discussion.

* NxtPay not active

Money Flow

Money Flow

Width of Distribution

Width of DistributionUsages Charges

Usages Charges

Figure 4: Comparative Analysis of M-Payment Services Providers

11. Key Findings and In-depth Analysis of Mobile PSP’s offerings

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1. M-Payment Gateway integration on the mobile phone

PSP User’s Phone Merchant’s phone

mChek SMS SMS

Ngpay Web App Web App

Obopay SMS, WAP, NFC, SIM-KIT WAP, SMS, SIM-KITItzcash SMS SMS

PayMate SMS SMS

Nxtpay N/A N/A

OxiCash WAP/GPRS WAP/GPRS

Spanco WAP SMS/IVR/USSD

Table 1: Technology provided by MPSP’s for mobile phone integrating process with the bank a/c or fund source

For mobile payment gateway service the basic and initial step is to integrate the mobile phone to the

payee’s and payer’s mobile phone, if we have a look on the current trend we will find that 5 out of 8

companies are providing integration facility through SMS technology where 3 out of 8 are allowingWAP/GPRS to enable mobile phone integration with the payment gateway.

Technology used for Integration No Of Companies

SMS 5

WAP/GPRS 3

Table 2: Technology Acceptability among companies

2. Understanding various m-Payment technologies in communication process

PSP Technology Payer’s mode of Comm. Payee’s mode of Comm.

mChek SMS SMS SMS

Ngpay M-Wallet (App) Web App Web App

Obopay SMS/App/Web SMS, Web App SMS, Web App

Itzcash M-Wallet SMS SMS

PayMate M-Wallet (IVR/SMS) SMS, IVR SMS

Nxtpay SMS N/A N/A

OxiCash M-Wallet (SMS) SMS, WAP/GPRS SMS, WAP/GPRS

Spanco M-Wallet (SMS) Web App SMS, Web App, IVR

Table 3: Technology used in payment instruction process

Table 3 contains different technology and mode of communication for both Payer’s and Payee’s.

According to this table presently most of the mobile payment service provider companies are

providing M-Wallet technology and the information is send through SMS,

M-Wallet: Basic difference between M-wallet and SMS, WAP/GPRS technology is that M-Wallet

allows users to refill or recharge the mobile phone either directly from their Debit Card/Credit Card or

Bank Account that means how much amount user is willing to have in their mobile phone they can

have and pay within or up to that much amount, but in SMS and WAP/GPRS direct integrated system

one can continuously pay till there is any balance in their account.

M-Wallet system is also further divided in to three modes

16



1. M-Wallet through SMS

2. M-Wallet through WAP/GPRS

3. M-Wallet through Web Applications

For payment request total 5 out of 6 companies are availing the facility through SMS where 3 out of 6

are providing the facility through WAP/GPRS.

Payment Request Flow Payer Payee

SMS 5 5WAP/GPRS, Web App 3 3

Table 4: Payment Instruction process technology acceptability

PSP providing technologies for enabling mobile payment

PSP Technology

SMS App WAP/GPRS IVR NFC

mChek

Ngpay

Obopay

Itzcash

PayMate

Nxtpay

OxiCash

Spanco

Table 5: Payment Instruction process technology acceptability

3. Comparison of PSP’s providing P2P and P2M mobile payment facility

PSP Technology

Person 2 Person Person 2 Merchant

mChek

Ngpay

Obopay

Itzcash

PayMate

Nxtpay

OxiCash

Spanco

Table 6: PSP’s providing P2P and P2M facility

Presently the mobile payment system is completely new in India and according to RBI operative

guideline there can be two modes of payment

1. Person 2 Person: P2P mobile payment system allows any individual to send or receive money

from any part of the country. Only requirements are listed below

17



a. Having a bank account in the same bank which is collaborated with the PSP

b. In case the payment gateway is redistricted to be available on the particular mobile

network operator then having a subscriber connection of that MNO’s.

2. Person 2 Merchant: P2M mobile payment system allows one transfer the money from their

account to the registered merchant’s accounts.

These days only 3 out of the 6 companies are availing the P2P payment system where Obopay is in

the process to be registered under RBI where mChek has already started this system from 15 th March

2008 with on the Airtel network and under some major banks in India like SBI, ICICI, HDFC and

corporation bank.

Rest all the companies are providing facilities to make Person 2 Merchant account transfer.

4. Comparison of technologies provided to Merchants to perform secure m-payment

transactions

PSP Technologies for m-payment

mChek SMS, E-Com Website, ATM, POS

Ngpay Web Application

Obopay POS, Web App, Obopay Prepaid Debit Card

Itzcash Web Application

PayMate SMS, E-Com, EDC Machine,

Nxtpay N/A

OxiCash SMS, WAP/GPRS, E-Com, POS

Spanco Web Applications

Table 7: Technology provided to merchants for performing mobile payments

Mobile payment service providers are providing various technologies to the merchants to provide the

payer to make payments for them, Some of the technologies are like SMS, Websites, personal

ATM’s, POS and EDC machines.

5. Comparative analysis of involvement of Banks among the PSP

PSP

Bank Focused Bank-Led Non-Bank Focused

mChek

Ngpay

Obopay

Itzcash

18



PayMate

Nxtpay

OxiCash

Spanco

Table 8: PSP’s comparison of different fund integration techniques

According to the current market basically there are three types of payment gateway available today

which I have mentioned and described below.

1. Bank Focused: Payment gateway providers who are only allowing Bank accounts for the

money transfer from ones account to another’s is called bank focused payment system, today

mChek, ngpay and Paymate are providing such services.

2. Bank-Led: Few Mobile payment gateway providers are providing some options to recharge

the payers bank account by other modes also like, IVR and E-Com where bank account is

involved but not one can avail the services or we can say one can recharge their mobile phone

with the help of PSP.

3. Non-Bank Focused: Some PSP’s are providing the m-Payment services without involving

the bank accounts.

6. Payment Methodologies

PSP

Bank A/c Credit card Pre Paid Cash

Card

Companion Debit

Card

mChek

Ngpay

Obopay

Itzcash

PayMate

Nxtpay

OxiCash

Spanco

Table 9: Technology provided to merchants for performing mobile payments

Under bank-focused, bank-led and non bank-focused system PSP’s are allowing different modes of

fund integration like Bank A/c integration, credit Card A/c integration, prepaid cash card integration

and Companion Debit Card which is also known as virtual account integration.

7. PSP’s comparative analysis with respect to the charges

1. Integration charges with respect to Payment Service Provider

PSP Integration Charges

Merchants Customers

mChek 20,000 (N) 0

Ngpay 10,000 (N) WAP Charge

Obopay N/A N/A

Itzcash 10,000 (N) 0

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PayMate 0 0

Nxtpay N/A N/A

OxiCash 10,000 (N) WAP Charges

Spanco N/A WAP Charges

Table 10: MPSP’s charging for integrating the mobile devices to merchants and customers

*(N) denoted that charges are negotiable.

To use the features of M-payment the basic requirement for both parties Payer and Payee, but in India

this concept is very recent so all the payment services providers are in the race of having more and

more types of services and maximum number of consumer base with them, as it is expected that in the

first phase there will be approximately 100 million mobile phone subscribers all over the country who

can avail this service and approximately 1 million merchants can come under this arrangement, first

and the initial step to utilize m-payment service is to integrate the mobile phones to the bank accounts

or the fund providing sources for which PSP will be responsible. For two way money send and

receive facility there will be two way mobile phone integration process, common charges for the

Merchants who will be interested to involve in the business falls between 10,000 to 20,000 Rs whichis completely negotiable, mChek has fixed its charges for 20,000 Rs,

For customers (Payers) there are very minimal charges which depend on the technology which is used

for integrating the mobile phone. Basically these days there are three ways available for customer to

register their mobiles with PSP

1. SMS

2. WAP/GPRS

3. Web Sites

SMS charges lies between 1 Rs to 3 Rs depending upon the service numbers, if PSP is providing the

integration services by SMS on long number 10 digit (e.g. 9123456789) numbers it costs simply 1 Rs

and if the service is provided by special SMS number of four digit then it costs between 2Rs to 3 Rs.

2. Information Transaction chargers over Mobile Network Service Providers.

PSP Information Transaction Charges

Merchants Customers

mChek 0 Rs 3 Rs

Ngpay 3 Rs 3 Rs

Obopay N/A N/A

Itzcash 0 Rs 1 Rs

PayMate 2 Rs 2 Rs

Nxtpay N/A N/AOxiCash 3 Rs 3 Rs

20



Spanco N/A N/A

Table 11: MNO’s charges for sending payment instruction by mobile phones

In the current scenario the m-payment service information by SMS and WAP/GPRS is provided with

the help of MNO’s (Mobile Network Operators). Payer and Payee both have only to pay the

information transaction charges to mobile network operators which lie between 1 Rs to 3 Rs.

3. Transaction Charges (Banks)


Merchants Customers

mChek Yes No

Ngpay Yes No

Obopay N/A N/A

Itzcash No No

PayMate Yes No

Nxtpay N/A N/A

OxiCash Yes No

Spanco N/A N/A

Table 12: Bank charges for fund settlement and clearing system

Bank charges are only involved in those transaction which is done under the bank focused or Bank –

led system (where bank account is integrated to the mobile phones). Currently in India only C2M

(Customer to Merchant) payment system is available on mobile phone where the first strategy from

all the system participants (PSP, Merchants and Banks) is to take money from customers so customersare not charges any percentage on the amount paid but merchant is paying a portion of the money

what is received.

Later bank is charging under two categories

1. Debit Card (Bank Account) Payment Transaction

2. Credit Card Payment Transactions

For Bank account and Debit card based transaction bank has to follow RBI’s guideline and has to

provide m-payment facility under ECS and NEFT systems, which c

Global payment gateways Visa and MasterCard may soon have to share information with the ReserveBank as part of the apex bank's efforts to regulate various payment systems in the country.

Presently, there is no legislation to make it binding on these companies to share information but the

government has drafted a bill that will empower RBI to regulate these companies, the regulator's

Chief General Manager A P Hota told reporters on the sidelines of a conference on e-payments.

"The Payment and Settlement Systems Bill, likely to be tabled in the monsoon session, will empower

us to regulate companies like Visa and MasterCard...it will make it mandatory on their part to share

information with us," Hota said.

The bill seeks to empower RBI to regulate and oversee various payment and settlement systems

including those operated by non-banks and card companies.

21



4. Transaction Charges (Banks)


Merchants Customers

mChek 0.50% NoNgpay 1% No

Obopay N/A N/A

Itzcash 0.50% No

PayMate 1%-2% No

Nxtpay N/A N/A

OxiCash 0.50% No

Spanco N/A N/A

Table 13: Bank transaction charges for fund settlement and clearing system

Payment Service Providers who are providing the whole technology and known as system provider is

charging a 0.5% to 2% of the whole money which will be transacted where the upper limit for the

retail transaction will be up to Rs 10,000 as per RBI guideline.

Currently Mobile Network Operators in this game are not charging anything directly from the payer

or payee but those MNO’s who are in the collaboration with PSP’s are getting a part from them. Like

Airtel from mChek.

Sources:

[Strategic Approach Backup \\ MChek \\ Web Pages \\ Payments News India's Airtel Launches Range of MobileCommerce Solutions - March 04, 2008.mht]

8. Common architecture for m-payment registration and making fund transaction

Integration of Mobile phones (Payee and Payer) to Fund Source (Bank Account or Cash Cards)

22

CUSTOMER MERCHANTPSP BANK

1

3

6

4 2

5



1 – On choosing Payment Service Provider customer shares his ‘mobile number’ with the PSP.

2 – Merchant registers and integrates m-Payment application on its mobile.

3 – PSP integrates the Customer and Merchants account to their bank account

4 – Payer follows the instruction and sends the SMS for m-Payment to payment service

providers.

5 – PSP sends the encrypted message to bank for transaction process

6 – Finally after transaction money is debited into Merchant’s account.

11.1 mChek

Technical Architecture of Mobile Payment System

Customer/Merchant Integration with PSP : SMS

Integration with Bank A/c : SMS

Fund Payment : SMS

23

Payment

request sent

to customer

BANK B

MOBILE NETWORK PROVIDERS

BANK C

1

1Payment

Request by

merchant

multiple

channels

3

Customer authorizes with

mChek PIN

4

Transaction Authorization

Request5


Response

2

6

VISA-Credit

Card

7Fund Transfer

Payer’s

Bank Payee’s

Bank

CUSTOMERMERCHANT

mChek Channel Integration

Platform

BANK A

mChek m-Payment

platform

Mobile Phone

Integration



1. Customers and Merchants mobile phone and Visa bank card are integrated with thehelp of mChek Channel Integration Platform.

Process: SMS Mchek to 121 > Receive a 6 digit mChek PIN number.> Register Bank details.

2. Merchant sends a payment request to mChek on behalf of customer.

3. Customer receives a payment request.

4. Customer authorizes with mChek Pin number

Process: SMS Mpay <Amount> <Mobile number> to 121> Enter mChek PIN

5. Transaction request sent to the Sender’s Bank

6. Transaction authorization received from Receiver’s Bank

7. Visa allow the fund transfer from payer’s bank to payee’s bank

mChek: mChek is seen unique among all other players because of its some of the features listed

below.

1. Web / Remote Transactions: mChek brings the security of ‘card present’ transactions to the

world of e-commerce thereby reducing fraud and minimizing charge-backs. A mChek user

provides his mobile/proxy number to the merchant, who initiates a mChek payment request

from his mobile phone. When the user authorizes the “please pay” request with his mChek

PIN, mChek sends a payment confirmation to both the user’s & the merchant’s mobile

phones, thus completing the over-the-counter transaction.

2. IVR / Call-center payments: Consumers can transact through call-centers and IVR without

sharing their sensitive card information and by only giving the mobile number to transact. A

mChek user selects mChek as the preferred payment option and provides his mobile/proxy

number to the call centre agent, who initiates a mChek payment request. When the user

authorizes the “please pay” request with his mChek PIN, mChek sends a payment

confirmation to the call centre application, thus completing the IVR / call centre transaction.

3. OTC Payments: mChek mobile payments platform enables a privacy-protected, fraud free

transaction where consumers can transact without revealing their card details by using only

24



their mobile. A mChek user provides his mobile/proxy number to the merchant, who initiates

a mChek payment request from his mobile phone. When the user authorizes the “please pay”

request with his mChek PIN, mChek sends a payment confirmation to both the user’s & the

merchant’s mobile phones, thus completing the over-the-counter transaction.

4. Utility Payments: Consumers can pay their utility bills like telephone / mobile bills,

electricity bills, annual insurance payments, etc at their convenience anywhere anytime. A

mChek user can initiate utility payments by sending an SMS to a short-code (e.g. PAY

AIRTEL 1250 to 458), received by the mChek mobile payments platform which sends a

“please pay” request to the user’s mobile phone, who can then authorize the payment with his

self-secured mChek PIN. The entire utility payments experience is non-intrusive for the end

user.

5. Mobile Mall: The mChek mobile payments platform makes mobile-malls a reality by

bundling payments processing with a mChek-hosted, searchable & mobile-optimized content

management platform that is available on a mobile device. End user tagging, rating & content

sharing also pave the way for intelligent & targeted ad insertion. The possibilities for the

mChek USSD mall are manifold – from brands-malls to location based and community malls,from deals to gift registries, etc – with the content being accessible from all mobile phones via

their USSD browser. This also enables operators to negotiate and offer exclusive deals to

some or all of their customers. The process for making a payment for a mChek mall item is

the same as other mChek payments.

6. VISA Money Transfer: mChek provides a platform for enabling convenient VISA money

transfer across a mobile device that is compliant with existing regulatory practices in India. A

mChek user with a bank issued mChek VISA debit/prepaid card can make a payment to

another mChek user with any VISA card. The process is initiated by the sender sending an

SMS to a short-code (e.g. PAY 9198123981213 1578.23 to 458) and authorizing the “please

pay” request with his mChek PIN.

7. Mobile Banking: mChek’s security model (i.e. secure mChek PIN), technology (i.e. open

architecture) and service-provider connectivity make mobile banking extremely easy for

banks to integrate with and customers to use. Although the gamut of mobile banking offing

via mChek are bank dependent, mChek possesses the technology & processes to support

balance inquiry, mini-statement requests, check inquiry, bill payments, etc. mChek offers its

Payments & Secure Authentication clients in the following three convenient ways:

i. mChek (No client, server-side wallet) - A clientless server-side wallet that uses combination

of SMS and USSD or IVR to initiate and fulfill transactions. A customer can register on

mChek website / on his phone to avail of this service.

ii. mChek SIM Client - A secure client on the customer's SIM card (STK), uses SMS as the

communication protocol. The client is available as a SIM swap from Operators. mChek

application has been certified by leading SIM manufactures like Gemalto, G&D, Oberthur

and Syscom making it available for immediate deployment by Telcos.

iii. mChek Smart Client - A secure client on the customer's Java-enabled mobile phone, uses

SMS or HTTP as the communication protocol. The client can be downloaded by sending an

SMS (WAP Push, OTA using GPRS/Edge) or from mChek / partner websites.

mChek/Payment – This solution enables customers to “put their VISA card(s) inside their mobile

phone” – whether it is a pre-paid, debit or credit card – and shop conveniently at all the outlets where

VISA and mChek are accepted. Additionally mChek can be used for prepaid recharge, payment of utility bills and person-to-person payments, leveraging the VISA Money Transfer system.

25



11.2 ngpay


Customer/Merchant Integration with PSP : Web Application

Integration with Bank A/c : Web Application

Fund Payment : App, Cash Card

Model 1: M-Payment through SMS in Bank Focused

26

BANK B


BANK C

1

1

Payment done by customer

with authorized ngpay PIN

2


Request3


Response

4

Credit

Cards

5Fund Transfer

Payer’s

Bank Payee’s

Bank

CUSTOMERMERCHANT

mChek Channel Integration

Platform

BANK A

mChek m-Paymentplatform

Mobile Phone

Integration

6Payment

Conform

4

5



1. Customers and merchants have to download ngpay application from website or by

GPRS.

Process: SMS ngpay to 56767 > Receive a 6 digit ngpay PIN number.> create list of favorite

merchant partners.

2. Payment done on ngpay application by 6 digit ngpay PIN

3. Customer authorizes their Visa/MasterCard credit cards, HDFC Bank Account and

ITZ cash cards with ngpay Pin number


5. Transaction authorization received from Receiver’s Bank or merchant receives the

Itzcash amount to its bank account.

6. Payment conformation is send to the customer’s mobile phone web application.

• Ngpay can be used to buy air & rail tickets, bank transactions, bill payments, movie tickets,

shop for books & gifts, transfer funds and make payments.

• Entertainment at Fame Cinemas, Inox Cinemas: Search for shows, select/view seats, and pay

for tickets

• Travel through IRCTC, Deccan, Make-My-Trip, Yatra, and RedBus: Search for options, price

trips, and book tickets.

•Shopping from Ferns N Petals, Archies, and Future Bazaar: Search, buy, and ship products toanyone, anywhere in India.

• Banking with HDFC Bank: Full suite of mobile Banking and Payment services.

• Telecom Services with BPL Mobile: Manages accounts, top-up the prepaid balance, pay

monthly postpaid bills

• Bill Payments: Pay utility bills, insurance, telecom bills and more with 22 of India's Leading

Utilities and Telecom Service Providers including TATA Indicom, SBI Life, Insurance Birla

Sun Life, BESCOM, and Reliance Energy.

• Charity: Make donations to charities & NGO's including CRY, SIDDHIVINAYAK Temple

Trust, Cancer Patients Aid.

27



11.3 Obopay


Customer/Merchant Integration with PSP : App, SMS, WAP/GPRS

Integration with Bank A/c : No

Fund Payment : App, Cash Card


28



Request3

4

Banks

CUSTOMER

Obopay Channel Integration

Platform

Obopay m-Payment

platform

4

SMS

Mobile

App

Web

App

IVR App

MERCHANT WEB

POS

MERCHANT

MOBILE APP

OBOPAY

A/c

7

Fund

Transfer

BANK CBANK BOBOPAY

1

1

2


Response



1. Customers and merchants have to download ngpay application from website or by

GPRS.

Process: SMS ngpay to 56767 > Receive a 6 digit ngpay PIN number.> create list of favoritemerchant partners.

2. Payment done on ngpay application by 6 digit ngpay PIN

3. Customer authorizes their Visa/MasterCard credit cards, HDFC Bank Account and

ITZ cash cards with ngpay Pin number


5. Transaction authorization received from Receiver’s Bank or merchant receives the

Itzcash amount to its bank account.

6. Payment conformation is send to the customer’s mobile phone web application.

Obopay uses a prepaid debit model in which users add money to their Obopay accounts in advance of

purchases. Money may be added to an Obopay account through:

1. Obopay merchant locations

2. Interactive Voice Response (IVR)

3. Obopay website

4. Customer service representative.

As a software solution, Obopay requires users to have a mobile phone and Obopay account. An

Obopay account is created through Obopay website or customer service center. Once registered, a

unique personal identification number (PIN) is given to the user to verify all transactions. Upon

registering, the account holder enters their mobile phone number to have the Obopay Mobile

Application (OMA) pushed to their phone. Once the OMA is installed, users can begin using Obopay

for their financial transactions.

Obopay has till date not clearly defined its policy in India but it’s a US based well established

company in the mobile payment technology. For bank integration Obopay integrates transactional

databases directly with a pooled Obopay bank account at a partner bank. All funds stay within this

account, although merchants have the option of transferring their funds from their Obopay accounts to

other accounts through ACH transfers.

In fact Obopay in other countries provide m-payment technologies in two three ways

29



1. Mobile phone to merchant mobile phone

2. Mobile phone to merchant point of sale web application

3. Obopay prepaid companion debit card

11.4 ItzCash


Customer/Merchant Integration with PSP : SMS

Integration with Bank A/c : No

Fund Payment : SMS


30


1

1

Prepaid Account

debited by Itz

Cash cards


Response

3

CUSTOMERMERCHANT

ItzCash m-Payment

platform

Mobile Phone

Integration

2

Payment

Conform

BANK B

Money debited to merchant’s

account

3

4



1. Customers and merchants have to register with ItzCash by SMS and create their own

account.

Process: SMS ItzCash to 57575 > Receive a 4 digit ngpay PIN number.>

2. Buy Itz Cash cards from any of the channel and recharge the account either online or

on mobile.

3. As the payment is done transaction authorization response is sent to merchant

4. Money is debited to the Merchants bank which is registered to the ItzCash

11.5 Paymate


Customer/Merchant Integration with PSP : SMS, App, WAP/GPRS

Integration with Bank A/c : Yes

Fund Payment : SMS, App, WAP/GPRS


31

Payment

request sent

to customer

BANK B


BANK C

1

1

Customer

mobile

number to

PSP

multiple

channels

Customer authorizes with

Paymate PIN

4


Request6


Response

2

7

BANKS

7Fund Transfer

Payer’s

Bank Payee’s

Bank

CUSTOMERMERCHANT

Paymate Channel Integration

Platform

BANK A

Paymate m-Paymentplatform

Mobile Phone

Integration

2

35



1. Customers and Merchants mobile phone integrated with the help of PayMate Channel

Integration Platform.

2. On choosing PayMate customer shares his ‘mobile number’ with the merchant

3. Merchant passes ‘mobile number’ and ‘amount to be charged’ to PayMate

4. PayMate instantly calls/ sends the customer a SMS asking for confirmation

5. Customer replies to the call/ SMS authorizing with his ‘PIN’ and ‘Alpha Code’

6. Post validation PayMate passes customers ‘account number’ and ‘amount’ to the

bank

7. Bank debits the customer’s account instantly and informs PayMate

8. PayMate updates the merchant on the transaction status

9. PayMate simultaneously sends a confirmation SMS to customers mobile number

11.6 OxiCash


Customer/Merchant Integration with PSP : WAP/GPRS

Integration with Bank A/c : Yes

Fund Payment : SMS, WAP/GPRS

Step 1: Creating M-Wallet

32

2

CUSTOMERMERCHANT

OxiCash m-Payment

latform

Mobile Phone

Inte ration

11

2

4 digit password by

SMS

4 digit password by

SMS



Step 2: Payment Transaction Process

Step1

1. Customers and merchants have to register with Oxicash with the help of WAP/GPRSenabled mobile phone by visiting www.oxicash.in/wap and create their own account by

entering sufficient information.

2. Oxicash instantly sends a message on the mobile phone which contains 4 digit mPIN

numbers.

As the users receive 4 digit mPIN number one have to recharge the wallet by providing their

online bank account which are Oxicash partners bank account.

Step2

1. Another way of recharging the m-wallet is by direct purchasing the top up card andentering the PIN number appearing on it.

2. Now a user can make the fund transaction by entering the 4 digit mPIN number.

3. Then oxicash m-payment server sends the transaction authorization request to the

banks if payment done by bank/credit card account or done self settlement if payment done by

topup card.

4. Transaction authorization response is received by clearing house.

5. Fund is transferred from payer’s bank account to payee’s bank account

6. Finally merchant receives the payment conformation.

33

CUSTOMERMERCHANT

OxiCash m-Payment

platform

2

Send payment request

on SMS with 4 digit

mPIN

Direct Top-

up from

Distributers

Banks

OBOPAY

5

Fund

Transfer

BANK CBANK BBANK A

1

4

3

6


Request


Response

Merchant receive payment

conformation

http://www.oxicash.in/wap

http://www.oxicash.in/wap



12. Major Issues and Challenges for Mobile Payment Service Providers

1. Security issues: For widespread use and customer acceptance of m-payment services, both

perceived and technical levels of security should be high. For customers, privacy should not

be compromised and there should be no possibility of financial losses. For businesses,

customer authentication is important. As per the general framework of any secure messaging

system - confidentiality, integrity, non-repudiation and authentication should be guaranteed

by the m-payment services. The transport layer security offered by GSM/CDMA networks

sufficiently guarantees confidentiality (that messages cannot be read by anyone else) and

message integrity (the assurance that the message has not been altered in transit).

Authentication (identifies the author of the transaction) and non-repudiation (makes sure that

any of the users in the system cannot later deny the message they sent) can only be guaranteed

with the help of wireless public key infrastructure (WPKI) and digital certificates. Secure

mobile payment transactions can be implemented using existing national public key

infrastructure, which is independent of financial institutions, mobile network operators andmobile payment application service providers but can be used by all of them. Their proposed

technological solution to provide secure mobile payment transaction is briefly described

below.

2. Simplicity and Usability: The m-payment application must be userfriendly with little or no learning curve to the customer. The customermust also be able to personalize the application to suit his or herconvenience.

3. Universality: M-payments service must provide for transactions between

one customer to another customer (C2C), or from a business to acustomer (B2C) or between businesses (B2B). The coverage shouldinclude domestic, regional and global environments. Payments must be

34



possible in terms of both low value micro-payments and high value macro-payments.

4. Interoperability: Development should be based on standards and opentechnologies that allow one implemented system to interact with othersystems.

5. Privacy and Trust: A customer must be able to trust a mobile paymentapplication provider that his or her credit or debit card information maynot be misused. Secondly, when these transactions become recordedcustomer privacy should not be lost in the sense that the credit historiesand spending patterns of the customer should not be openly available forpublic scrutiny. Mobile payments have to be as anonymous as cashtransactions. Third, the system should be foolproof, resistant to attacksfrom hackers and terrorists. This may be provided using public keyinfrastructure security, biometrics and passwords integrated into themobile payment solution architectures.

6. Cost: The m-payments should not be costlier than existing paymentmechanisms to the extent possible. A m-payment solution should competewith other modes of payment in terms of cost and convenience.

7. Speed: The speed at which m-payments are executed must beacceptable to customers and merchants.

8. Cross border payments: To become widely accepted the m-paymentapplication must be available globally, word-wide.

13. Messaging Standardization for Mobile Payments - Mobile Payment Forum, India

Mobile Payment Forum a body working with IDRBT under RBI is concerned with the messaging

standardization for mobile payments systems in Indian. According to RBI to create interoperability

between the various mobile payments system partner a common messaging system should be

launched which are defined below.

i) The customer of one mobile system should be able to avail the services offered by the other

mobile payment systems.

ii) The customer of one mobile system should be able to transfer/receive money from the customers

of other mobile payment systems.

Entities

1. Mobile Payment System providers

2. Banks

3. Customers of the Mobile Payment System providers

4. Merchants

5. Gateway & Settlement Agency

The mobile payment ecosystem consists of member financial institutions, customers, merchants and

the various mobile payment service providers. The technology used is proprietary and heterogeneous.The security and transaction flow is approved by financial institutions.

35



Customer always directly interacts with their mobile payment service provider for the transaction

authorization and will not be able to interact with other mobile providers directly. It is mobile

payment provider’s responsibility to authenticate the customer. It is always a one to one relation.

However, customers can be acquired by multiple payment providers and the mobile technology

allows the use of multiple payment technologies.

The customer of one mobile payment provider should be able to avail the services provided by the

other mobile payment provider. The mobile payment provider needs to get the payment guarantee

when the customer of other mobile provider avail the services in its system. The mobile payment

provider who acquires the transaction has to interact with the customer’s mobile payment provider to

get the financial authorization.

A common gateway and settlement agency is required to provide routing between the various mobile

payment providers and for the settlement amongst themselves.

Given below are the message sets for the various purposes of integration between the Payment service

providers

Message Formats

Sale Transaction/P2P transaction

Data Element Format Request Response Comments

Message Type ID N4 0200 0210 -

Bit Map B64 M M

P2 Primary Account Number N.19 M Mobile/Proxy Number

of the customer

P3 Processing Code N6 M M

P4 Transaction Amount N12 M M Amount

P11 Systems Trace Number N6 M M

P12 Transaction Time N6 - M

P13 Transaction Date N4 - M

P24 Network ID N3 M M

P37 Retrieval Reference Number

AN12 - M

36




P38 Authorization ID Response AN6 - O

P39 Response Code AN2 - M

P41 Card Acceptor Terminal ID ANS8 M M

P42 Card Acceptor ID ANS15 M - Acquirer id(acquiring

Bank)

Sale/P2P transaction Reversal Transaction


Message Type ID N4 0400 0410

Bit Map B64 M M

P2 Primary Account Number N..19 M M

P3 Processing Code N6 M M

P4 Transaction Amount N12 M O

P11 Systems Trace Number N6 M M

P12 Transaction Time N6 - M

P13 Transaction Date N4 - M

P24 Network International N3 M M

P37 Retrieval Reference

Number

AN12 M

P38 Authorization ID Response AN6 O

P39 Response Code AN2 M

P41 Card Acceptor Terminal ANS8 M M

P42 Card Acceptor ID ANS15 M

AN - alphanumeric data type

N - Numeric data type

B - Binary representation of data

M - Mandatory/required to be included in the message.

C - Conditional

37



O - Optional

Settlement messaging system - Offline

At the end of the day, the Master Settlement Agency (MSA) provides the net settlement positions

between the various payment service providers. The MSA here shall act as the clearing house. Thissettlement will happen on a T+1 day basis. This will be done offline.

The MSA will send the following information in the format given below to each of the service

providers

List of transactions where the Payment Service Provider is credited

INWARD SETTLEMENT REPORT

Sl.

No. Date

Time

stamp

Acquiring

financial

institution

ID

Acquiring

Mobile

Payment

system ID

Issuing

Mobile

Payment

Provider ID

Issuing

financial

institution

ID

Customer

ID

Reference

ID AMOUNT

In the above report, the MSA will give the details of all the transactions reflected where the Payment

Service Provider is receiving money.

List of transactions where the Payment Service Provider is credited

OUTWARD SETTLEMENT REPORT

Sl.

No. Date

Time

stamp

Acquiring

financial

institution

ID

Acquiring

Mobile

Payment

system ID

Issuing

Mobile

Payment

Provider

ID

Issuing

financial

institution

ID

Customer

ID

Reference

ID AMOUNT

In the above report, the MSA will give the details of all the transactions reflected where the Payment

Service Provider is receiving money.

Net Settlement Report

In this report, the MSA will give the details of the net settlement between the various acquiring and

issuing financial institutions.

S.no Issuing Acquiring Acquiring issuing Count of Amount Count of Amount Net Settlement

38



Mobile

Payment

Provider

ID

Mobile

Payment

Provider ID

financial

Institution

financial

Institution

Inward

Transactions

Payable outward

Transactions

Receivable Amount

Grand

Total Note: fee details are not added and can be discussed in the final version of the document.

Source: Messaging Standardization for Mobile Payments - Mobile Payment Forum, India – March 2008

14. Regulatory policies and standards Issues by RBI

According to RBI (Reserve Bank of India) in its operative guideline for banks it is mentioned that

1.3 Providing the framework for enabling mobile payments services to banking customers would

generally involve the collaboration of banks, mobile payments service providers and mobile network

operators (MNOs). The service can also be provided as a proximity payment system, where the

transactions are independent of the MNOs. In mobile payment systems, the banks provide the basic

service framework, ensure compliance to KYC/AML norms, creates a risk management and

mitigation framework, and ensures settlement of funds. The mobile payments service providers are

intermediaries for providing the technology framework for the implementation of the mobile

payments services. The mobile network operators provide the telecom infrastructure and

connectivity to the customers. Their role is limited to providing the SMS/WAP/GPRS/USSD/NFC GSM or CDMA voice and data services connectivity and in hosting the certain technology

solutions like USSD. In a Non-MNO based systems, proximity or contactless channels like IRDA,

RFID, Optical, NFC, etc. are used for communication between POS and the mobile phone of the

customer.

RBI declared that the payment service providers will be acting as an intermediary between bank and

customers for providing the technology framework now here one thing is clear that to submit the

electronic information of both the parties’ payer as well as payee which will be further communicated

between banks and Clearing Houses for fund transfer will be done by mobile payment service

providers only

About mobile network operators RBI says that their role would be limited up to

providing telecom infrastructure and customer connectivity in certain technologies those are

1. SMS

2. WAP/GPRS

3. USSD

4. IVR

5. NFC

TRAI on mobile payment issue says that Mobile Payment Service providers should have the

independence to develop and launch customized applications targeted towards their customer base

however messaging system between application and Banks needs to be regulated. This will lead to

standardization of the transaction processes and settlement systems. These should include

39



• Instruction formats for all mobile initiated payments, remittances and banking

• Instruction formats for all mobile initiated payments, remittances and banking

• Security standards for instructions, interfaces, data storage and transactions

• Technology standards and guidelines for various modes of data transfer like SMS, GPRS etc.

• Sign up for service: Existing or new customer: Bank controlled through regulated KYC

• Transaction: PIN based transactions in terms of domestic transfers.• Anti Money Laundering: monitoring carried out by the Bank

• Transactions monitoring controlled at the banking end

• Agent appointment responsibility with the bank

15. References

Figures Page Number

Fig: 1 Business Model Value Chain for M-Payments 6

Fig: 2 Generic Models for M-Payments Application Service Provider 10

Fig: 3 Technical Architecture Models for M-Payments Application Service Provider 12

Figure 4: Comparative Analysis of M-Payment Services Providers 15

Tables

Table 1: Technology provided by MPSP’s for mobile phone integrating process 16

with the bank a/c or fund source

Table 2: Technology Acceptability among companies 16

Table 3: Technology used in payment instruction process 16

Table 4: Payment Instruction process technology acceptability 17

Table 5: Payment Instruction process technology acceptability 17

Table 6: PSP’s providing P2P and P2M facility 17

Table 7: Technology provided to merchants for performing mobile payments 18

Table 8: PSP’s comparison of different fund integration techniques 19

Table 9: Technology provided to merchants for performing mobile payments 19

Table 10: MPSP’s charging for integrating the mobile devices to merchants and customers 20

Table 11: MNO’s charges for sending payment instruction by mobile phones 21

40



Table 12: Bank charges for fund settlement and clearing system 21

Table 13: Bank transaction charges for fund settlement and clearing system 22