world of mobile payments by muthu

World of Mobile Payments – An Overview

Author: Muthu SivaFCMI(UK), FBCS(UK), FIC(UK)MBA, ME

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Definition

Payment for products or services between two parties for which a mobile device, such as a mobile phone, plays a key role in the realization of the payment under financial regulations

Instead of paying with cash, cheque, or credit cards, a consumer can use a mobile phone to pay for a wide range of services and digital or hard goods. Although the concept of using non-coin-based currency systems has a long history,it is only recently that the technology to support such systems has become widely available.

Mobile payments center on transactions between consumers and merchants that involve direct purchase of goods and services that can be both account-based and point-of-sale (POS).

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Adoption

• Mobile phones are also providing an unprecedented opportunity for expansion of financial activity in developing countries where the number of phone users can exceed the number of those having bank accounts

• The combined market for all types of mobile payments was projected to reach more than $700B globally by 2017

• The use of mobile payments in developing countries has attracted public and private funding by organizations such as the Bill and Melinda Gates Foundation, USAID and MercyCorps

Mobile payments can be categorized based on technology as1. Proximity2. Remote

Categorization

Proximity Payment

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Remote Payment

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Payment approach:• Credit/debit card-based payment by entering user information via a secure Wireless Application Protocol (WAP)

Interface• eWallet/stored-value account-based payment via a secure WAP interface. In this case, user card and bank

account information are stored securely on the user’s mobile device. PIN-based authentication is used in conjunction with transport over interactive voice response (IVR), WAP, SMS and USSD channels

Secure activation of the customer by the service provider and trusted enabling of the link between the MSIDN and the card number are essential

Transaction Models

At present, stakeholders have not clearly separated roles within the mobile payment ecosystem. Financial institutions and mobile network operators (MNOs) are competing for the entity that will hold the customer account and receive the biggest portion of fees. This unclear environment has created another kind of categorization based on the entity that holds the account of the customer

• Bank-centric

• Nonbank-centric.

Bank-centric Model - the account of the customer is held by a bank. Issues involving matters such as liability, antimony laundering, transaction monitoring for fraud detection and compliance fall under the appropriate local, national and international banking laws and regulations. When a payment is initiated, the consumer’s bank must authorize the transaction. The payment networks used are the traditional ones such as Visa and MasterCard and the major differences are at the endpoints of the transaction.

Nonbank-centric model - the account of the customer is held at nonfinancial organizations such as an MNO or

a third-party payment service such as PayPal. In such a case, important regulatory, security and even profit sharing

questions arise.

Especially in the European Union (EU), the easing of restrictions on payment operators are leading to changes in the

mobile payment landscape across Europe. Specifically, new players (mobile operators, department stores, etc.) will be allowed to be recognized as Payment Service Providers (PSPs) without having the status of a traditional credit institution and to operate in direct competition with traditional financial/credit institutions, provided they comply with the requirements set out in the directive. They can act as an Electronic Money Issuer (EMI) or PSP. They will be able to offer services such as cash deposits and withdrawals, direct debits, credit transfers, etc.

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Service Providers

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Worldwide there have been a number of deployments of mobile payments across the spectrum of proximity and remote payment and for both bank-centric and nonbank-centric transaction models

Benefits & Security

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• Speed and convenience for the customer• The capability to send money abroad via person-to-person (P2P) mobile payment services• Cost-effective coverage is available in rural areas where no financial institutions exist• The mobile wallet can consolidate many cards• Improved authentication via PIN-based service• The SMS/USSD encryption ends in the radio interface• Multi-factor authentication (PIN authentication & digital signature by trusted third party)• DRM (Digital Rights Management) incorporated in smartphone TPM (Trusted Platform Module) design,

cryptographically supported DRM

User Experience

• Poor reliability - transactional premium SMS payments can easily fail as messages get lost• Slow speed - sending messages can be slow and it can take hours for a merchant to get receipt of payment.

Consumers do not want to be kept waiting more than a few seconds• Low Pay-out rates• Security and privacy as well as convenience are key drivers from a consumer perspective

Conclusion/Future

The mobile payments market is one that is undergoing transformation and holds a future that is promising for bothconsumers and providers alike in a world that is witnessing a rise in mobile services based on smartphone technology.Some key points of particular interest to security based on the current state and anticipated future for mobile payments, that can be noted are• Collaborative and competitive models for mobile payment services are being created• Strong assurance from independent trusted third parties as well as the development of, and adherence to, bestbusiness practices within the mobile payments ecosystem will be required to encourage widespread consumeradoption

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Top Mobile Payment providers

Google Wallet

Link https://www.google.com/wallet/#

About Google Wallet makes it easy to pay - in stores, online or to anyone in the US with a Gmail address. It works with any debit or credit card, on every mobile carrier.

Products Google Wallet

How does it workJust Tap and Pay with your Android phone everywhere you see the symbol at participating stores and click Buy with Google from your favorite apps, mobile sites, Google Play, YouTube, and more.

Send or request money in Gmail, as easily as sending a picture. Just click the $ sign in your attachments bar

Swipe your card at millions of MasterCard locations, or use it to withdraw cash from ATMs You can also transfer the money to your bank account, or use it to send money online to someone else

Fees Account Opening: FREE

• Sending or Receiving Money from Google Wallet is FREE• Sending Money using a Debit/Credit Card funding instrument: 2.9%

per transaction (minimum $0.30)• Adding Money to Wallet Balance from Debit/Credit Card: 2.9% per

transaction (minimum $0.30)• ATM & Cash withdrawals: Google does not charge. However, ATMs

may charge a fee for each cash withdrawal• Cash back at POS (i.e. at a grocery store check out ): FREE• Tap and pay purchase: FREE

User Experience Customers are happy for it’s1. Instant payment2. PIN protected3. Lets you pay using any existing major credit card for you

What is lacking 1. Only available on select Android phones2. In-store purchases only work at locations with PayPass3. Website information confuses more than clarifies how to get and use

the app

Help & Support https://support.google.com/wallet/

Google Wallet

DWOLLA

Link https://www.dwolla.com/

About Dwolla is a payment network that allows any business or person to send, request and accept money. It has it’s own network that securely connects to your bank account and allows you to move money

Products Built Dwolla OAuth + RESTful API for various Marketplaces, eCommerce, Gaming , Retail, Charity, Point of Sale customers.Customer Examples:

How does it work Send money to email addresses, phone numbers, LinkedIn connections, Twitter followers, and businesses that accept Dwolla

By default, the receiver pays the $0.25, but the sender can choose to pay the fee instead

You can send money to someone even if they don’t have a Dwollaaccount. But, they will need to create one to claim the funds. Businesses need to set up a Dwolla account to accept Dwolla


Transfer/Receive funds: $0.25 transaction fee if transaction amount is > $10. Free if transaction amount is <=$10

Note: By default, the receiver pays the fee if applicable, but the sender can choose to pay the fee instead

User Experience Customers are happy for it’s1. Instant transaction2. Lowest transaction fee3. Deposit and send cash instantly4. Free online and mobile tools5. Send money to friends on social networks6. Shop easily, and safely online7. It provides email support and help articles published on its website.

Social forum appreciate the support for quick response

What is lacking 1. Markets about it service only through it’s website2. Even though it offers email support, it would be great if they can start

Live Customer support3. User experience on Mobile app needs improvement4. Drawback of the service is that both the merchant and customer

need to have Dwolla accounts, it trails well behind it's competitors in terms of registered users

Help & Support http://help.dwolla.com/

DWOLLA

Paypal

Link https://www.paypal.com

About Paypal allow payments and money transfers to be made through the Internet. Online money transfers serve as electronic alternatives to paying with traditional paper methods

Products Paypal

How does it workPaypal is available online or at Apple App Store or Google Play Store

Paypal also introduced its "One Touch" service which allows users to pay with a one-touch option on participating merchants websites or apps

Paypal to Paypal transfer is instant and for other money transfer features it will take three to four business days to copmlete

There is a transfer limit of $2000 per month

Fees Account Opening: FREECurrency conversion fees may apply for overseas payments.There’s no monthly or cancellation fee when you sell.There is a fee after you make a sale and fee vary from country to countrySelling is 4.4% + $0.30 USD per sale, or lower

User Experience Customers are happy for it’s1. Security with best anti-fraud detection and prevention2. PIN protected3. Lets you pay using any existing major credit cards

What is lacking 1. Money transfer is not instant if it not between Paypal account2. Poor Customer Service

Help & Support https://www.paypal.com/webapps/helpcenter/helphub/home/

Paypal

ENTROPAY BUSINESS

Link https://business.entropay.com

About EntroPay for Business is an innovative payment solution that allows you to manage all of your company’s spending, while retaining full control in a simple, quick and cost effective manner.

Products EntroPay for Business provides two essential products – EntroPay Payout and EntroPay Purchasing

How does it work Every EntroPay for Business account has an Account Balance, which is used to fund all of the financial activities you perform on your account such as sending a payment overseas. In order to make use of this service, you must first top-up your Account Balance, which may be performed via Bank Transfer for via Credit/Debit card

How to receive funds Your clients will be able to claim their payout funds through an e-mail sent out by EntroPay once the payment is issued. They will then be able to deposit the funds into an EntroPay virtual prepaid Visa debit card, which can be used anywhere Visa is accepted online

ENTROPAY BUSINESS


Account Top-up (Credit Card - Instant): 2.5% of transaction amount(Bank Account) : 1.5% of transaction amount

Transfer funds: $0.50/£0.25/€0.40 per transaction

Receive funds: FREE

User Experience 1. Allows funds transfer through virtual visa card to anyone across globe with an email address which is simple and instant

2. No minimum amount restrictions to retrieve funds3. Delay in refund process4. Complicated account upgradation process5. Fraudent transaction complaints over social media6. Poor Customer service

What is lacking 1. No Mobile App2. Does not have comprehensive help/support information on their

website3. Opportunity to increase countries where the service can be made

available. Currently available in 90 countries

Help & Support https://business.entropay.com/purchasing/support/

Square Cash

Link https://square.com/cash

About Square Cash is the easiest way to send money electronically. Cash is fast, free, and deposits directly to your debit card

Products Square Register – Point of Sale (available in US, Canada and Japan) Square Appointments (not available outside US)

How does it work Download app from Apple App Store or Google Play and create an account with email address and start sending Cash from the app with SMS or from any email provider

Cancel or Refund cash payments: Using ‘Request feature’ the user can ask to send the funds back if it’s already redeemed by the recipient or you can Cancel if it’s not already redeemedTo issue a refund, simply send the amount you wish to refund back to the original sender

After linking your debit card, funds are directly deposited into your bank account within 1-2 business days. Square does not hold funds in a secondary account

Fees App download: FREESend, Request, and Receive Cash: FREE

You get a high transfer limit of up to $250 a week. However, if you link up your Square Cash account to your Facebook page, you can increase that weekly allowance to $2,500

User Experience Customers are happy for it’s1. Square Cash doesn’t work with a middle man, so sending cash is

much more direct than any other service that’s come before2. Square Cash is free and there are no fees attached to downloading

the app3. Supports 130 different currencies4. Connect a cash drawer, receipt printer, or bar code scanner

What is lacking 1. Online reviewers have noted one major concern regarding Square Cash’s potential lack of security features

2. There is no two-step authentication3. Available only in US

Help & Support https://squareup.com/help/us/en/topic/139-square-cash

Square Cash