34 Mobile Payment (Thomas Lerner (auth.).pdf

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1. Mobile Payment
Thomas Lerner

2. MobilePayment

3. ThomasLerner
MobilePayment

4. Thomas Lerner
Mainz, Germany
ISBN 978-3-658-03250-0 ISBN 978-3-658-03251-7 (eBook)
DOI 10.1007/978-3-658-03251-7
Library of Congress Control Number: 2013956011
Springer Vieweg
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5. Introduction
Mobile payment, the modern practice of making payments via a mobile device
such as a cellphone, smartphone or tablet, has reemerged as the talk of the town.
Is what we’re hearing no more than a fresh round of lofty announcements of the
sort we’ve grown accustomed to in recent years? After all, we’ve heard it before. In
2002, mobile payment was touted as the next big development on the mobile
commerce landscape, an all-encompassing killer application.
1
In 2006, widespread
commercial use was deemed imminent. And in 2008, we were assured that a solid
infrastructure was already in place. But then there were the voices of skepticism.
The market was thought to be no more than half-baked. And by 2010, some disillu-
sioned market observers had begun to question, “Shall we all just pack up and go
home?”
2

As I outline in the present book, there are good reasons to believe that conditions
on the market have indeed taken a turn for the better and that mobile payment
services can be expected to gain momentum. That being said, there is still a long
ways to go before mobile payment evolves into a mass market here in Germany.
The reasons for optimism include the following:
Successful business models in Asia and in various developing countries, largely
spearheaded by major telecom providers, have gained widespread attention. In
various Asian and African countries, mobile payment services have not only intro-
duced considerable benefits for the service providers, they have given people ac-
cess to basic services, boosted consumer convenience and had a favorable impact
on national economies. As a model for industrialized countries, Japan can be ex-
pected to play an important role, especially in light of the experience it has gained
in the area of mobile payment over a largely successful 7 to 10-year introductory
period.
All of these factors would not suffice for an optimistic assessment of the situation if
it weren’t for a number of other interesting facts and trends. Various companies
with a lot of market clout such as Google, VISA, PayPal etc. have entered the mar-
ket offering services of their own. This has given the trend an additional boost.

1 Thomas Lerner: “Mobile Zahlungssysteme,” in: “Mobile Business – Märkte, Techniken
und Geschäftsmodelle,” (Bernd Diederich, Thomas Lerner, Roland D. Lindemannand
Ralf Vehlen), Springer Gabler Publishing, September 2001, p. 151.
2 Pinar Ozcan and Filipe Santos: “The Market That Never Was: Clashing Frames and
Failed Coalitions in Mobile Payment,” IESE Business School Working Paper – University of Navarra, 2010, p. 3.

6. VI Introduction
These heavyweights have entered the market precisely because they expect it to
expand disproportionately in the coming years. Moreover, the key technologies in-
volved have been developed, and it will not take long before the corresponding
mobile devices and POS readers are available in sufficient numbers. Then there is
the continuing boom in smartphones. Smartphone unit sales exceeded those of PCs
for the first time in 2011and, as of 2013, there are reported to be more smartphones
on the market than PCs. And finally, regulatory authorities have begun to work in
unison on the task of determining the extent to which mobile payment services are
covered by existing regulations and drafting new regulations to account for any
lack of coverage. The new SEPA regulations, the Payment Service Directive (PSD)
and the Electronic Money Directive, for instance, can be expected to facilitate the
entry of new competitors to the market. However, it naturally remains to be seen
who the winners will be. This is because success in the mobile payment sector will
depend on intelligent strategic and business approaches as well as the establish-
ment and continuous development of viable business ecosystems.
The success of various mobile payment business models devised and implemented
in the United States has also caused a stir, particularly in the banking sector whose
core business is essentially at stake. Are the banks going to be mere bystanders,
content to cede the market without a fight or will they begin to devise their own
business models?
Numerous initiatives and pilot tests involving mobile payment and contactless
payment with smartcards have also been introduced in Germany and across Eu-
rope. In the wake of the smartphone’s advance to first place among our tools of
daily use, the mobile payment option promises to be a further convenience for bil-
lions of people and thereby represents an obvious step into the near future.

7. Table of Contents
1 History, Technology and Commerce .......................................................................... 1
1.1 A Brief History of Money and Mobile Technologies ..................................... 1
1.2 From Mobile Banking to Mobile Payment ...................................................... 4
1.3 The Development of Mobile Payment Services up to 2020 .......................... 5
1.3.1 The Terrain ............................................................................................... 5
1.3.2 The Individual Features ......................................................................... 6
1.4 The Four Core Mobile Payment Segments ..................................................... 8
1.4.1 Characteristics of the Various Core Segments .................................... 8
1.4.2 Payment Service Networks .................................................................. 10
1.4.3 Enterprises, Case Studies and Initiatives ........................................... 10
2 The Market ................................................................................................................... 13
2.1 El Dorado in the South .................................................................................... 13
2.2 Japan’s Pioneering Role among the Developed Countries ......................... 15
2.3 Skepticism and Awakening in Germany ...................................................... 20
3 Strategies ....................................................................................................................... 23
3.1 Foundations ...................................................................................................... 23
3.2 The Bank-Driven Model .................................................................................. 24
3.3 The MNO-Driven Model ................................................................................. 28
3.4 The Collaborative Model ................................................................................. 32
3.5 The Independent Model .................................................................................. 34
3.6 Summary ........................................................................................................... 37
4 Mobile Technology and Security ............................................................................... 39
4.1 Preliminary Remarks ....................................................................................... 39
4.2 USSD .................................................................................................................. 40
4.2.1 The Technology ..................................................................................... 40
4.2.2 Potential Risks Associated with USSD Transactions ....................... 40
4.2.3 Summary ................................................................................................ 41
4.3 BLE – Bluetooth Low Energy .......................................................................... 42
4.3.1 The Technology ..................................................................................... 42
4.3.2 Summary ................................................................................................ 42
4.4 SMS ..................................................................................................................... 43
4.5 WAP/Internet .................................................................................................... 45
4.6 QR Codes ........................................................................................................... 46

8. VIII Table of Contents
4.7 Near Field Communication (NFC) ................................................................ 47
4.7.1 History .................................................................................................... 47
4.7.2 NFC Applications ................................................................................. 50
4.7.3 Summary ................................................................................................ 53
4.7.4 General Security Threats to NFC ........................................................ 53
4.7.5 Solutions and Recommendations ....................................................... 54
4.7.6 Summary ................................................................................................ 55
4.7.7 General Description of the Security of NFC Applications .............. 56
4.7.8 Functional Security ............................................................................... 57
4.8 Excursus: FeliCa ............................................................................................... 59
4.8.1 Contactless Data Exchange .................................................................. 59
5 Innovation Management ............................................................................................ 61
6 Case Studies ................................................................................................................. 67
6.1 M-PESA: Most Successful Mobile payment Service .................................... 67
6.1.1 Overview ................................................................................................ 67
6.1.2 Prerequisites for Success ...................................................................... 69
6.1.3 M-PESA Development ......................................................................... 73
6.1.4 How M-PESA Works ............................................................................ 75
6.1.5 Future Challenges ................................................................................. 77
6.1.6 Background Information on M-PESA ................................................ 78
6.1.7 Conclusion ............................................................................................. 79
6.1.8 Lessons Learned .................................................................................... 82
6.2 Osaifu-Keitai – The Japanese Model for Developed Countries ................. 84
6.2.1 Sony’s Felicity Card (FeliCa) as the Basis of Innovation ................. 84
6.2.2 Suica – the Ticketing Innovation from JR East .................................. 86
6.2.3 NTT DoCoMo’s Osaifu-Keitai Innovation ......................................... 87
6.2.4 The New Value-Added Strategy ......................................................... 87
6.2.5 The Innovative Osaifu-Keitai Business Ecosystem .......................... 89
6.2.6 Multi-sided Platform Strategy as a Basis for Business Development91
6.2.7 Development of Suica and Osaifu-Keitai .......................................... 91
6.2.8 The Reasons for Success in Japan ....................................................... 93
6.2.9 Current Proposals for Improving e-Money in Japan ....................... 94
6.2.10 Summary and Recommendations Drawn from Osaifu-Keitai ....... 94
6.3 The Starbucks Touch-to-Pay Service ............................................................. 97
6.3.1 The Development of the Service ......................................................... 97
6.3.2 Services Dependent on a Smartphone Operating System ............... 99
6.3.3 Summary .............................................................................................. 100
6.4 Square .............................................................................................................. 102
6.4.1 How Square Works ............................................................................. 102
6.4.2 Square Summary ................................................................................. 104

9. Table of Contents IX
6.5 Google Wallet (Tap and Pay) ........................................................................ 107
6.5.1 Overview .............................................................................................. 107
6.5.2 Payments .............................................................................................. 107
6.5.3 Security ................................................................................................. 107
6.5.4 Partnerships ......................................................................................... 108
6.5.5 Google Wallet’s Trajectory So Far ..................................................... 108
6.5.6 Summary .............................................................................................. 110
6.6 MasterCard PayPass ...................................................................................... 110
6.6.1 Contactless Payment with the MasterCard Pay Pass ..................... 110
6.6.2 Contactless Payment and Security .................................................... 111
6.6.3 History .................................................................................................. 111
6.6.4 MasterCard Ecosystem ....................................................................... 112
6.7 iZettle ............................................................................................................... 112
6.7.1 The Payment Procedure ..................................................................... 112
6.7.2 Processing of Payments ...................................................................... 113
6.7.3 The Business Model ............................................................................ 113
6.7.4 iZettle Summary .................................................................................. 113
6.8 mpass (Mobile Payment Service Offered by Wireless Carriers) .............. 114
6.8.1 Development of mpass ....................................................................... 114
6.8.2 How mpass Works .............................................................................. 115
6.8.3 Security ................................................................................................. 116
6.8.4 Summary .............................................................................................. 116
6.9 Paybox Profile ................................................................................................. 117
6.10 Post Finance Profile ........................................................................................ 117
6.11 Deutsche Bundesbahn’s “Touch and Travel” ............................................ 118
6.11.1 Development of Touch and Travel ................................................... 118
6.11.2 How Touch and Travel Works .......................................................... 119
6.11.3 Using Touch-and-Travel .................................................................... 120
6.11.4 Risks ...................................................................................................... 120
6.12 YAPITAL – Digital Money for a Modern Life ............................................ 121
6.12.1 Close Cooperation between YAPITAL and Regulators ................. 122
6.12.2 Value-Added Chain and Roles at YAPITAL ................................... 122
6.12.3 Security, Risk Management, Fraud Detection and Mobile
Technologies ........................................................................................ 122

6.12.4 YAPITAL Summary ............................................................................ 122
6.13 Contactless Payment with girogo ................................................................ 123
6.13.1 How Contactless Payment Works with girogo ............................... 124
6.13.2 Pilot Tests ............................................................................................. 124
6.13.3 Pilot Test Specifics ............................................................................... 124
6.13.4 Contactless Mobile Payment from the Perspective of the Savings
Banks ..................................................................................................... 124

6.13.5 Savings Bank Steps to Introducing Mobile Payment Systems ...... 125

10. X Table of Contents
6.14 Another Example: Mainz 05 FanCard ......................................................... 125
6.14.1 Advantages for the Club, Fans and Vendors .................................. 126
6.14.2 Main Functions at a Glance ............................................................... 126
6.15 Splash ............................................................................................................... 126
6.15.1 Mobile Added-Value Services ........................................................... 127
6.15.2 Flexible Payment Transaction ........................................................... 128
6.15.3 Business Model .................................................................................... 128
6.15.4 Splash Conditions ............................................................................... 129
6.15.5 Advantages and Disadvantages of Splash ...................................... 130
6.15.6 Development of Splash ...................................................................... 130
6.16 Avance Pay: Fast, Contactless and Secure NFC Payment and Collection
131

6.16.1 Solution Description ........................................................................... 131
6.16.2 Avance Pay at a Glance ...................................................................... 132
6.17 Pingit – Barclays Domestic/International Mobile Payment Service ........ 133
6.17.3 Service Description ............................................................................. 133
6.17.4 Results of Pingit .................................................................................. 133
6.17.5 “Mobile Checkout” and “Buy It” ...................................................... 134
6.17.6 International Expansion ..................................................................... 134
6.18 La Caixa’s Mobile payment Servic es ........................................................... 135
7 International Comparisons ....................................................................................... 137
7.1 Mobile Payments via POS Terminals .......................................................... 137
7.2 Contactless Payment: Interim Technology for Mobile NFC ..................... 139
7.3 Comparison of the Mobile payment Strategies of Global Corporations 140
8 Summary .................................................................................................................... 143
Index of Abbreviations ................................................................................................... 153
Glossary ............................................................................................................................ 155
Index of Figures ............................................................................................................... 165
References ........................................................................................................................ 169

11. 1 History, Technology and Commerce
1.1 A Brief History of Money and Mobile Technologies
34
If someone were to show us a flash card with the word money written on it, most
of us would probably go on to think about cash in the form of banknotes and coins.
Cash is readily associated with money because of its status as legal tender, its li-
quidity and its virtually universal acceptance as a means of making payment.
However, money has changed its form considerably in the course of time. Indeed,
the paper money and bank deposits familiar to us today are relatively modern in-
ventions.
Before considering our changing perceptions of money, however, it may be helpful
to first get in the clear on what exactly money is supposed to be.
Money is a good with a number of special properties and basic functions. It serves
as a means of exchange, value preservation and measurement.
Before the introduction of money, people were forced to trade goods and services
directly for other goods and services according to a limited system of exchange re-
ferred to as barter.
5
Considerable time and effort were sometimes required to find
trading partners who had the goods or services one wanted and who were also
willing to accept the goods or services one was prepared to offer.
If the goods that were later used as money retained their value over the course of
time, then they could be held for a longer period of time. This was an especially
useful property because it enabled one to separate the act of selling from the act of
purchasing. Money thereby became an important means of preserving value.
To avoid the limitations and inconveniences associated with barter, particular
goods or commodities were introduced as an independent means of exchange.
Such commodity money was ideally durable, portable and divisible.
Between 12,000 and 9,000 B.C., shells, whale teeth (Fiji Islands) and stone disks (Is-
land of Yap) were used as forms of commodity money. The use of metal money
began in parts of Asia around 2000 B.C. Gold and silver then became popular as an
independent means of exchange because they were easy to transport in small
quantities, durable and more or less divisible. Actual bank transactions were first

3 Olswang: “A Guide to Digital Money” 25 June 2010, 13 pages. 4 Jan de Meester: “Mobile Wallets – A Paradigm Shift” (Clearpark Payments Software) 29
November 2011, 19 pages.
5 “Die Geschichte des Geldes – ein kurzer Überblick” in: “Preisstabilität: Warum ist sie für
Dich wichtig?” (European Central Bank) 2011, p. 14.
T. Lerner, Mobile Payment, DOI 10.1007/978-3-658-03251-7_1,
© Springer Fachmedien Wiesbaden 2013

12. 2 1 History, Technology and Commerce
described around 1,750 B. C. in the Code of Hammurabi and, according to Herodo-
tus, it was the Lydians under King Croesus who first minted gold and silver coins
to use as an independent medium of exchange around 590 B. C.
6

9,000 – 1,200 B.C.
Barter
(cattle, shells, stones, etc.)
History of Money and Forms of Payment
Until 1876
2,200 B.C.
Use of metals as money
(gold, silver, copper)
1,750 B.C.
Banking business
Code Hammurabi
900 A.D.
Paper currency
in China
1800
First guaranteed
check
(Bank of England)
1500
First paper
money in Spain
1876
First paper money
transaction in Germany
Source: Jan de Meester “Mobile Wallets“ 2010
Olswang Digital Money, 2010

Figure 1: The history of money and forms of payment until 1876, © Jan de Meester “Mo-
bile Wallets” 2010, Olswang Digital Money, 2010
Paper money, backed by imperial decree instead of by a precious metal, was first
used in China around 800 A.D. The first comprehensive introduction of paper cur-
rency took place under the Song Dynasty in China around 960 A.D.
7
and the first
bonds were issued in fourteenth-century Venice in the context of the city’s expand-
ing foreign trade.
In Europe, Gutenberg’s invention of the printing press facilitated the dissemination
of banknotes. Still, it wasn’t until the 19
th
century, more than 1,100 years after it
was originally introduced, that paper money became a generally accepted means
of payment in “conservative“ Germany. This can perhaps be accounted for by the
fact that the value of paper money had indeed been subject to fluctuations and
therefore lacked a reassuring degree of stability.

6 Ulrich van Suntum: “Die Geschichte des Geldes – Von der Muschel zum Papier” FAZ, 9
November 2010.
7 http://de.shvoong.com/humanities/486733-eine-kurze-geschichte-des-
geldes/#ixzz1gyQWTOST

13. 1.1 A Brief History of Money and Mobile Technologies 3
In its origin, the banknote of today is nothing other than a promise of payment, as
is stated literally on British pound notes: “I promise to pay the bearer on demand
the sum of X pounds.” All the same, paper money replaced precious (and scarce)
metals as a medium of exchange because it permitted a much greater degree of ef-
ficiency. The cost of its production was far less than the value of the coins that one
could purchase with it.
We are now at the beginning of yet another new era, an era in which paper money
and other customary means of exchange will be successively replaced by electronic
money. Moreover, as the use of electronic money gathers momentum, the process-
es of exchange and payment will also change in the context of our national econo-
mies and in the context of a global economy.
What are the technologies that are to enable this in the future? Here, we are essen-
tially talking about RFID, readable magnetic stripes, smartcards, SMS, WAP and
contactless NFC, as well as a host of developing business ecosystems geared to the
broader establishment of e-money or mobile payment.
1958
First credit card
(Bank of America)
History of Money and Forms of Payment
Since 1945
1967
ATM (Barclays)
1945
Radio frequency identification (RFID)
1980
Debit Cards
1997
WAP 1.0
Source: Jan de Meester “Mobile Wallets,“ 2010
Olswang Digital Money, 2010
1960
IBM invents the magnetic stripe card
1969
Eurocheque
1974
Smartcard
1995
Money card (Mondex)
1997
Contactless smartcard
(Octopus Card / Hong Kong)
2004
Mobile payment
FeliCa / NTT DoCoMo
1990
SMS (Vodafone)
2002
NFC (Sony / NXP)
2007
M-PESA (Safaricom)

Figure 2: The history of money and forms of payment since 1945, ©Jan de Meester “Mo-
bile Wallets” 2010, Olswang Digital Money, 2010
RFID was first used towards the end of the Second World War to enable radar de- tection. The Bank of America introduced the first credit card in 1958. IBM intro-
duced the magnetic stripe card to the market in 1971. Barclays introduced the first
automatic teller machines (ATMs) in 1967. The only related innovation originating

14. 4 1 History, Technology and Commerce
in Germany is the Eurocheque, which was introduced in 1969. The first smartcards
followed in 1974 and the first debit cards in 1980.
Mobile technologies experienced a breakthrough in 1992 with the introduction of
NOKIA’s GSM handsets and the sending of the first text message using SMS (Short
Message Service). The first money card was introduced in 1995. In addition to SMS,
a further basis for mobile banking came in the form of wireless application proto-
col (WAP), which was introduced by the WAP-Forum in 1997. Contactless smart-
cards – including those with FeliCa technology, which made its debut in the form
of the Octopus Card – began to make considerable inroads in 1997. The further de-
velopment of this technology by Sony and NXP Semiconductors soon led to the in-
troduction of near-field communication (NFC) technology. In 2004, NTT DoCoMo
became the first manufacturer to integrate FeliCa technology into cellphones and
smartphones in the context of launching its successful Osaifu-Keitai (mobile wallet)
solution. This was followed by the adoption of NFC technology by the major credit
card companies VISA and MasterCard.
Numerous studies and pilot tests around the world, as well as the successful mar-
ket introduction of the technology in various Asian countries and in various devel-
oping countries, signaled a promising future for a new medium of exchange.
1.2 From Mobile Banking to Mobile Payment
Many companies regarded the use of mobile devices such as cellphones and PDAs
during the boom phase of the New Economy (i.e. from around 1998 to around
2001) merely as an opportunity to gain access to additional sales channels. While
this view turned out to be accurate in the case of mobile banking, it was essentially
a fateful oversimplification that hindered the development of mobile payment ser-
vices. This is evidenced by the fact that most of the business models from this peri-
od failed.
Only mobile banking, the execution of bank transactions via cellphone, proved ca-
pable of development as a sales channel for some providers. The term mobile
banking usually refers to the following three basic applications: mobile account,
mobile brokerage (purchase and sale of securities) and mobile financial infor-
mation services (account balance, securities deposit account, current stock prices,
stock alerts, etc.).
In contrast, the mobile payment sector is less easy to define and demarcate. While
one could describe mobile payment simply as initiating payments via the use of a
mobile device, this streamlined description would leave us in the dark on too
many important details. For this reason, I turn my attention in the next section to
the task of mapping the projected development of the main components of mobile
payment services.

15. 1.3 The Development of Mobile Payment Services up to 2020 5
1.3 The Development of Mobile Payment Services up to 2020
1.3.1 The Terrain
The mobile payment map includes the following main features:
1. Markets (countries and international regions)
2. Merchants and retailers
3. Customers
4. Mobile devices supported by a payment platform
5. Providers of payment transaction services (e.g. customer accounts)
6. Four core areas in the evolution of broad-based, mobile payment services
7. Networks for mobile payment services
8. System providers and outsourcing services
9. Regulatory authorities
10. Relevant industry associations and standards
Payment Services Map
Markets
Retailers Customers
Payment Devices
Payment Service Providers
Core Payment Services
Payment Schemes
Suppliers
Regulations Standards

Figure 3: Overview of the payment services map

16. 6 1 History, Technology and Commerce
1.3.2 The Individual Features
1.3.2.1 Markets
The relevant markets can be broken down as follows: developing countries, Asia,
America and Europe (Germany).
Many developing countries are characterized by limited access to traditional bank-
ing services and a relatively widespread use of cellphones. Given the lack of an ex-
isting financial-services infrastructure, acceptance rates for mobile payment and
mobile banking solutions have been high in these countries and the market intro-
duction of such solutions has come relatively early, with a few specific developing
countries leading the way in the area of innovative payment-transaction systems,
especially when it comes to payments between persons via cellphone, so-called
P2P payments.
8

In the industrialized countries of Asia, where cooperation with technology compa-
nies began at an early stage, the focus has been on payments via contactless smart-
cards. After the successful implementation and expansion of the corresponding
services, the various companies involved turned to the task of developing new
business models and business ecosystems to support these payment services. This
preliminary work has given the major players in the region a solid basis for global
leadership in the area of mobile payment.
The North American market has been dominated by large Internet companies of-
fering online payment services. The current focus of these companies, as well as
various startup companies, is on business models designed to promote near-field
communication (NFC) at a global level.
In Europe, and Germany in particular, the billing of mobile contents such as ring
tones, music, etc. by service providers or mobile network operators has established
itself to a greater degree. Mobile payment services based on WAP technology have
been in place here and in other countries since 2000. In the wake of regulatory clar-
ifications, wireless-network operators, banks and credit card companies are spear-
heading a trend towards payment services involving a combination of contactless
smartcard technology and emerging mobile payment systems.
1.3.2.2 Service Providers
The lion’s share of current business is transacted by classic retailers who sell their
goods and services at their stores and other points of sale.
The remaining types of services (categorized according to products and sales
channels) have played a less significant role.
These include:

8 The term “P2P payments” refers to person-to-person payments.

17. 1.3 The Development of Mobile Payment Services up to 2020 7
• The sale of digital contents (music, videos, games, etc.)
• The sale of social network products (virtual gifts, games, etc.)
• The sale of applications (for mobile devices, tablets, television, etc.)
• The sale of goods and services via the Internet (electronic commerce) or air in-
terface (mobile commerce)
• The sale of transport services (ticketing, etc.)
• The sale of utility-related services (smart metering)
1.3.2.3 Overview of Service Providers in the Payment Services Segment
The present overview centers on retailers, payment service providers, card issuers
and providers of customer accounts. The relevant business activities can be catego-
rized as follows:
Retailers and payment-service providers
• Focus on electronic commerce (payment services for online retailers)
• Focus on digital content (payment for digital and mobile contents)
• Mobile network operators (MNOs) offer accounting for billing services (premi-
um SMS, MMS services) and for future point-of-sale solutions.
• Banks currently function as dealer-acceptance agencies and are preparing mo-
bile payment initiatives.
Card issuers and providers of customer accounts
• E-money providers (online or mobile wallets, i.e. as an alternative to credit
cards, debit cards and cash)
• Mobile network operators (transfer of mobile money, provision of payment ser-
vices via contactless smartcards)
• Banks (classic providers of customer accounts that also issue credit cards, debit
cards and prepaid cards to customers)

18. 8
1.4 T
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1.4.1 C
1.4.1.1 F
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19. 1.4 The Four Core Mobile Payment Segments 9
• Continuous incentive to lower transaction costs
• Customer experience marked by convenience
Sub-areas:
• - E-wallet (purse/money and account data)
• - Prepaid cards (account-based purse or electronic-money account for offline
payments)
• - Bank transaction services (special banking services)
1.4.1.3 Third Core Segment
Contactless, mobile smartcards (payment of low-priced goods and services) and
apps
• Convenient method of payment
• Quick transactions
• High customer throughput required
• Shorter lines at point of sale
• Replacement of cash
• Promoted by wireless carriers and providers of payment services
Sub-areas:
• Mobile near field communication (NFC)
• Focus of mobile payment services in the next 5 – 10 years
• The regulatory hurdles have been reduced in the wake of the success on the
Japanese market and the introduction of SEPA in Europe.
• Device manufacturers, mobile network operators and retailers have reached an
agreement on the NFC standard.
• Contactless smartcard: RFID technology is used to enable payment in connec-
tion with a card reader. The major credit-card companies and banks are behind
the technology’s rollout.
• Mobile barcode/SMS (short text messaging): special form of payment involv-
ing no use of near field communication (NFC). So far, the service has been used
to enable the payment of parking fees, highway tolls and coffee shop bills.
• Mobile point-of-sale terminal: Smartcards, smartphones and tablets are trans-
formed into card-acceptance terminals. This solution targets small independent
merchants and has received widespread acclaim.
1.4.1.4 Fourth Core Segment
Mobile money transfers between persons (national and international money trans-
fers and small merchant payments)
• Replacement of cash and checks
• No customer access to banks required
• Customer loyalty

20. 10 1 History, Technology and Commerce
Sub-areas:
• Transfer of mobile money between persons (P2P payments)
• This service has already been introduced in various developing countries.
• Typically operated by mobile network operators and banks
• Market success, however, depends on a bundle of factors.
• Account-based applications
• Transfer of payments from bank account owner to bank account owner
• International money transfers
• Primarily handled by specialized companies
1.4.2 Payment Service Networks
System providers
• Mobile payments
• Banking systems
• Security software
• Contactless technologies
• Point-of-sale infrastructure
• Risk management
• Outsourced service providers
Standards-issuing organizations and industry associations
• GSMA
• MOBEY Forum
• NFC Forum
• Open Mobile Alliance (OMA)
Regulation
• European Union (SEPA)
• European Payment Council (EPC)
• German Banking Industry Committee
• Banking and lending legislation in individual countries
1.4.3 Enterprises, Case Studies and Initiatives
The following enterprises, case studies and initiatives are related to two specific
mobile payment options that are already broadly available in certain countries and
that are expected to become broadly available at a global level: payment via con-
tactless smartcards and mobile transactions between individuals.
1. P2P/mobile money: M-PESA (Kenya and other developing countries):
transfer of money between individuals
2. NTT DoCoMo (Japan, Asia; FeliCa technology, NFC; mobile wallet, pay-
ment via contactless smartcards)
3. Mobile barcode: USA

21. 1.4 The Four Core Mobile Payment Segments 11
4. Mobile POS terminal: Square, iZettle, PayPal Here
5. Mobile NFC: Google m-Wallet, “Touch and Travel” (Deutsche Bun-
desbahn) and La Caixa
6. Integrated national and international business models: YAPITAL, Splash,
Avance Pay, PayPal, Barclays Pingit, mpass (Deutsche Telekom, Vodafone
and O2) and MasterCard PayPass and VISA payWave
7. Special models by Paybox (Austria) and PostFinance (Switzerland)
Excursus: Bridge technology “Contactless Payment via NFC Smartcards”
Girogo (solution introduced by the German Banking Industry Committee) and
Mainz 05 – FanCard

22. 2
T
2.1
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Figure 5:
O
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ap has continu
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apan, South Ko
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Mobile Wallet

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T. Lerner, Mobile Payment, DOI 10.1007/978-3-658-03251-7_2,
© Springer Fachmedien Wiesbaden 2013

23. 14
The domin
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takes a close
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Intelligence”
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r mobile pay

erri Haas and
enya,” Univer
as evidenced
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o more than 8
er look, one
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24. 2.2 Japan’
2.2 J
The Japan
services, a
to 10 years
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However,
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For instan
VISA, Pay
the develo
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year 2015
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Figure 7: M
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13 Gartner
their re
s Pioneering
Japan’s Pio
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n approach w
s, has played
when JR East
004 when NT
the boom in
g breakthrou
interesting fa
ce, a number
yPal, Wal-Ma
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accelerate the
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Market estimat
Informa/ PayP

r Inc. (June 20
espective com
g Role among
oneering R
ch to the intr
which has en
d a leading r
t introduced
TT DoCoMo
n Africa and
ugh for mobi
acts and tren
r of major co
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heir own mo
e general tre
ard Europe a
mity-payment
re expected to
tes and projec
Pal 2010

013): The slug
mpanies to rev
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Role amon
roduction an
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d the contact
o introduced
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ile payment
nds pointing
orporations a
get, have rec
obile payme
end.
as the market
t services as
o account fo
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ggish perform
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in the same
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with the gr
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mobile pay
m
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ance of Goo
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eloped Co
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Card and soo
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direction.
a, including G
ed considera
This copyca
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lion.
ment sector
13
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gle Wallet and
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ountries
bile payment
out the last 7
. It all began
on gathered
u-Keitai.
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Google, ISIS,
able sums in
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© McKinsey/
d ISIS has led
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25. 16
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offered by
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this sector
Figure 8: U
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USD 4 bill
the year 20

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26. 2.2 Japan’
Figure 9: P2
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s SMS, WAP
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% and NFC t
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regarded as t
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us cellphone
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7

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-

27. 18 2 The Market
According to projections, unit sales of NFC-enabled devices are expected to reach
40 to 50 million in 2011. Edgar, Dunn & Company have predicted an overall mar-
ket expansion for mobile NFC to USD 680 billion by the year 2016 and other mar-
ket observers expect the market value for NFC chips to reach between USD 300
million (Juniper Research) and USD 800 million (IMS Research) by the year 2014.
14

Experts suggest that the number of NFC-enabled devices available worldwide will
reach 750 to 900 million by the year 2016. Smartphone penetration, which hovered
around 47% in 2011, is expected to reach 70% in 2015.
15
Moreover, 85% of all POS
terminals are expected to be outfitted with contactless technology by the year 2016,
compared to only 10% in the year 2010.
16

In Europe, for instance, around 30 million NFC-enabled contactless cards were in
circulation at the end of 2011. Contactless services were first introduced to custom-
ers in Italy, Spain, France and the U.K. in June of 2011. Companies in Germany,
Benelux, Austria and Switzerland are still at the feasibility and pilot-test stage.
More than
50 million
NFC smartcards
on the European
market in 2013
Text
Rollout
Card project
Study
Mobile project
Contactless Payment Market
(Smartcards in Europe)
Sources: NFC Insight, April 2011
NFC World Europe, June 2011

Figure 10: Contactless services in Europe, © NFC Insight, April 2011 / NFC World Europe,
June 2011

14 NFC Insight: “NFC-Payments Fact Pack: The Hottest Predictions for 2012,” April 2012,
42 pages.
15 Ibid, p. 26 (estimate issued by Nielsen, Mercator, Morgan Stanley, Juniper Research and
others)
16 Ibid, p. 37 (estimate issued by ABI Research, 2011).

28. 2.2 Japan’s Pioneering Role among the Developed Countries 19
Based on the current situation, the following development is projected for mobile
payment services around the world.
Most countries have initiated pilot tests to ascertain the feasibility and sustainabil-
ity of the new services. The tests have so far been promising. Pioneers in individual
countries have already introduced services to the market. These have achieved
astonishingly successful results, although the business models are not yet fully de-
veloped because various issues such as device (e.g. reader) availability, retailer re-
quirements, security, customer acceptance, interoperability and regulation remain
unclear or only partially settled.
This means that the business models still have a limited range, limited scalability
and a limited shelf life.
As the market develops, however, the regulatory matters (e.g. SEPA, PSD and E-
Money Directive) and the remaining security and interoperability issues will be re-
solved. Moreover, the available business models can indeed be adapted to take ac-
count of customers and retailers. Attempts will be made to evaluate and better un-
derstand the cultural influence of cash, while the “young” generation will continue
to demand more attractive payment options. Retailers, too, will continue to be on
the lookout for cost-effective methods of payment and attractive value-added ser-
vices.
Development of Mobile Money
Regulation
Interoperability
Security
Customer acceptance
Retailer requirements
Pioneers
Pilot tests / studies
Early adopters
Restrictive business
models
Limited reach
Limited scalability
Limited durability
Major players enter market
Improvement in payment infra-
structure
Mass market (100% device penetration / technology)
Integrated banking services
Additional revenues
Worldwide interoperability
Collaboration
Development
Business Models
1st Generation
Stage of Maturity Next Generation Payments
Sources: NFC Insight
Monitise 2011

Figure 11: The development of mobile money, © NFC Insight Monitise 2011

29. 20
The big p
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lead to a
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be within
various r
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th

O
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arkets incl
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A
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. Whatever
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obile paym
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. Asia, too,
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30. 2.3 Skept
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Figure 13: R
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ogo, Paybox,
ear 2011, for
with mobile
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31. 22
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32. 3 Strategies
3.1 Foundations
One of the most exciting issues relating to the broad implementation of mobile
payment services is that of business-model preeminence.
171819
Do business ecosys-
tems developed and driven by specific sectors enjoy greater prospects of success in
the implementation of mobile payment services than other business models? Is
there currently a preeminent model out there?
In seeking to answer this question, I examine the key stakeholders in the classic
value-added chain on the mobile payment market. For the sake of simplicity, these
shall include customers, banks, mobile network operators (MNOs) and retailers,
while credit card companies and other stakeholders will be considered to a lesser
degree.
In addition to the core competencies of the individual stakeholders, the present
analysis will focus on their ability to establish a viable business ecosystem. In par-
ticular, this will involve a consideration of a stakeholder’s capacity to influence de-
vice manufacturers and other stakeholders
20
in the overall system, as well as their
ability to orchestrate such a system. In their relationship to the manufacturers of
mobile devices, for instance, MNOs can be expected to enjoy a considerable ad-
vantage owing to the extended nature of their cooperative agreements and the in-
fluence they have on device specifications, in contrast to banks and retail associa-
tions.
The focus of the available literature has been on four different models, including
the bank-driven model, the MNO-driven model, the collaborative model and the
independent model. The independent model, for instance, might be implemented
by a startup company, a payment service provider or a retailer. Such models can be
expected to take on greater significance in the future.

17 Kurt Salomon (PHB Development): “Mobile Payments . . . a Southern Revolution! De-
velopment of Mobile Payments: Issues and Prospects for the Future,” 7 April 2011, pp.
50-51.
18 Atos Origin: “Breakthroughs in the European Mobile Payment Market,” 9 July 2007, p. 9.
19 Deloitte: “Reversing Charges: Could Mobile Payment at the Point of Sale Ever Pay for
Itself?” 8 August 2007, pp. 4-8.
20 Yoris A. Au, Robert J. Kaufmann: “The Economics of Mobile Payments: Understanding
Stakeholder Issues for an Emerging Financial Technology Application,” in: Science Di-
rect, 26 February 2007, pp. 1-24.
T. Lerner, Mobile Payment, DOI 10.1007/978-3-658-03251-7_3,
© Springer Fachmedien Wiesbaden 2013

33. 24 3 Strategies
3.2 The Bank-Driven Model
21
As transacting payments is one of the core businesses of banks, one is naturally in-
terested in trying to determine what advantages, disadvantages, opportunities and
risks would come into play in the case of a bank-driven model for the mobile pay-
ment market.
For instance, in connection with a mobile payment system, banks could evolve into
mobile virtual network operators (MVNOs), offering integrated multi-channel
banking services as well as mobile payment services (i.e. with the support of an
MNO).
This would yield the following options for the classic value-added chain for pay-
ments at the point of sale with mobile devices.
Mobile
payment
Order Settlement
Account
management Marketing
Bank-Driven Model
Acting as mobile virtual network operators (MVNOs), banks
step in and offer integrated multi-channel banking services
and mobile-payment solutions.
Value Chain
Bank offers
mobile
payment
POS terminals
enable
contactless
payments
Additional
mobile services
POS payments
TSM processes
payments
Status quo
in payments
(relationship
between
banks, retailers
and customers)
Marketing
services
(couponing, etc.)

Figure 16: The bank-driven model
22

1. Contactless mobile payments via POS systems
23

2. Additional services (e.g. enhanced customer information)
21 Laetitzia Chaix and Dominique Torre: “Different Models for Mobile Payments,” Febru-
ary 2010, p. 10.
22 Smart Card Alliance: “Proximity Payment Business Scenarios: Research Report on
Stakeholder Perspectives,” July 2008, p. 15.
23 POS = point of sale

34. 3.2 The Bank-Driven Model 25
3. Payments transacted at the POS, with banking systems first being queried
(e.g. credit-worthiness checks) to minimize the risk
4. Status checks of customers and retailers via the bank’s account administra-
tion
5. Other mobile-marketing applications
Compared to the other models, the bank-driven model does offer traditional ad-
vantages when it comes to payment transactions. Banks tend to be regarded by
customers as the absolute experts in the area of transactions and the processes on
which they are based. They stand for security and trust. Years of service provision
will often have led to solid relationships with private, wealth-management and
business customers. Moreover, retailers and business customers can be expected to
figure prominently in any given business ecosystem devised for mobile payments.
This customer and contractual basis involving private and business customers
would enable banks to offer new and reliable services swiftly and with the neces-
sary degree of market penetration.
Advantages of Bank-Driven Model
* Competence in processing and transacting payments * Solid relationships to business customers (retailers, entrepreneurs, etc.)
* Symbol of secure payment transactions * Extensive customer base * Offers of additional services perceived as reliable * Heightened sense of obligation with respect to customers
Figure 17: Advantages of bank-driven model
The advantages of the bank-driven model are associated with the core services provided by banks, including RTGS payments, international payments, electronic payments (e.g. DTA, SEPA), ATM maintenance and the issuing of bank cards. Put
briefly, the services involved enable payment transactions via various input and
output channels.
However, additional advantages and disadvantages will have to be considered
when it comes to the introduction of a new instrument of payment.
The benefits such a model would generate for the banks can be broken down into
the following categories “increased revenue” from additional fees associated with
an increased number of transactions, “cost savings” from lower costs for cash and
check processing and, in the medium and long term, from a reduction in the ex-
pensive cash business (e.g. ATMs) and expensive money logistics.

35. 26
Figure 18: B
The introd
in addition
to improv
effects cou
ing a busin
The cannib
Many are
As the cas
Japan show
will not be
will the re
sea change
cost-saving
Far more d
ited experi
tributing m
ver, mobil
channel an
participan
Benefits and r
duction of ne
n to tradition
ements in te
uld also resu
ness ecosyste
balization of
reluctant to
ses of M-PES
w, this conce
e affected. Th
evenue gener
e in the logis
g advantage
daunting for
ience on the
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le network o
nd, in genera
nts might suff

risks of offerin
ew, innovativ
nal payment
erms of custo
ult when esta
em.
f existing sou
risk rich so
SA/Safaricom
ern is altoge
he use of cash
rated by the
stics of mone
s.
r the implem
part of the b
cations and
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al, the existin
fer as a resul
ng mobile pa
ve and more
t services (e.g
omer loyalty
ablishing par
urces of rev
ources throug
m in Kenya
ether legitima
h and ATMs
use of these
ey supply ma
mentation of
banks when
their associa
uld be in a p
ng business
lt of conflicts
yment servic
e
e
contempor
a
g
. in the are
a
y
and public
r
tnerships i
n
enue is a p
r
g
h the intro
d
and Osaifu
-
a
te. Certain
s
will declin
e
e
modalities.
a
y also be a
s
the bank-d
r
it comes to
a
a
ted devices
p
osition to b
a
relations be
s
.
es for banks
ary value-add
a of security)
image. Posi
n the context
rimal fear of
duction of n
-Keitai/NTT
instruments
e in the cours
On the othe
sociated with
riven strategy
assessing the
and accesso
ar the way to
tween these
3 Strategies
ded services
), could lead
itive spin-off
t of develop-
f enterprises.
new services.
DoCoMo in
s of payment
se of time, as
er hand, this
th significant
gy is the lim-
e task of dis-
ories. Moreo-
o the mobile
two market
s

s
d
f
-
.
.
n
t
s
s
t
-
-
-
e
t

36. 3.2 The Bank-Driven Model 27
The willingness on the part of the banks to make the necessary investments will
also be a key factor as the situation develops. The resources for software develop-
ments and maintenance, the purchase of all kinds of mobile and stationary hard-
ware, marketing expenses and the removal of hurdles for retailers and customers
must be available and allocated smartly to solve the chicken-and-egg conundrum.
MNOs
Retailers
Customers
Transaction growth
New customers and fees
Lower costs
Shorter queues
Faster money throughput
Faster sales credit
Spontaneous sales
Reduction in costs associated
with counterfeit money
Greater speed and
convenience
Transaction history for
low-value purchases
Avoidance of ATM fees and
other service fees
Market exclusion
Fees for low-value
payment trans-
actions
Card reader
expenses
Stricter regulatory
control of banks
limits new options
Benefits Risks
Stakeholders
Bank-Driven Mode
l
:
Benefits and Risks for MNOs, Retailers and Customers

Figure 19: Benefits and risks of the bank-driven model (for MNOs, retailers and custom-
ers)
24

How do the potential stakeholders in the value-added chain regard the bank-
driven mobile payment model?
For the MNOs, the bank-driven model harbors the risk of being leapfrogged in the
value-added chain and left with nothing but a diminished role. On the other hand,
the model may entail an increase in data transactions, which would introduce the
potential for new fees and revenue from additional customers.
The biggest advantages for the retailers include lower manual processing costs,
lower costs for theft-avoidance measures and reduced losses relating to counterfeit
money. In the conduct of daily business, retailers stand to profit from faster money
throughput and shorter lines at their points of sale. The shift from cash to electron-
ic money can also be expected to result in an increase in spontaneous purchases.

24 Smart Card Alliance: “Proximity Payment Business Scenarios: Research Report on
Stakeholder Perspectives,” July 2008, p. 17.

37. 28 3 Strategies
Problematic for retailers is the introduction of new commissions and transaction
fees for low-value sales. Retailers can indeed be expected to resist these fees and
the pressure to invest in new card readers.
Customers will profit from quicker and more convenient payment transactions at
the point of sale, which is altogether a bonafide alternative to expensive ATM fees
and other payment procedures. The automatic recording of a transaction history
for low-priced items also represents a benefit.
However, certain additional applications (options) will be less likely to result for
customers because the banks are subject to stricter regulatory controls.
3.3 The MNO-Driven Model
252627
Long active in the core areas of mobile payment services (e.g. the billing of premi-
um services such as text messaging and multimedia-messaging services), the
MNOs are now attempting to expand into the mainstream world of payment ser-
vices, particularly at the point of sale with near field communication (NFC) and via
barcode scanning.
This model gives rise to the following value-added chain for payments at the point
of sale.
1. The MNOs develop their own attractive network applications in an effort
to win customer loyalty. The customer is also given the option of using
other contents and services offered by the MNO.
2. Both POS and P2P
28
payment services are available.
3. Billing of customer payments is handled along with the customer’s cell-
phone charges. This would involve delayed credits for retailers.
4. The MNOs are in a position to offer their customers more mobile market-
ing services than banks (i.e. in contrast to bank-driven solutions).


25 Laetitzia Chaix and Dominique Torre: “Different Models for Mobile Payments,” Febru-
ary 2010, p. 6.
26 Jan Ondrus: “A Disruption Analysis in the Mobile Payment Market,” 24 October 2010, p.
3.
27 Smith, Mark, Jan Markendahl and Per Andersson: “Analysis of Roles and Position of
Mobile Network Operators in Mobile Payment Infrastructure,” presented at: 21st Euro-
pean Regional IST Conference, Copenhagen, 13-15 September 2010, 26 pages.
28 Person-to-person payments

38. 3.3 The MNO-Driven Model 29

Figure 20: The MNO-driven model
29


Figure 21: The advantages of the MNO-driven model
The mobile network operators are already the providers of services relating to mo-
bile devices such as cellphones and smartphones, the preeminent tools of our mod-

29 Smart Card Alliance: “Proximity Payment Business Scenarios: Research Report on
Stakeholder Perspectives,” July 2008, p. 10

39. 30 3 Strategies
ern lives. This gives them special access to an immense customer base. Under con-
sideration of data protection law, they use their billing processes to offer services
that reflect user behavior, user interests and even user location. Compared to other
sectors, they are regarded as very innovative. The provision, development and ad-
aptation of security technologies belong in this context to their core business.
Benefits and Risks of
MNO-Driven Model
Revenue generation
(cross selling, new services, etc.)
Lower rates of attrition
MNO as the point of contact for
customers
Close customer relationship, helpful
information, role as a trustworthy
partner
Customers carry devices at all times
Enhanced image
Enhanced market position
Issues relating to trust and security
Complex negotiations with banks
and other stakeholders
Specific payment knowledge
required
Availability of services
Establishment of a payment
ecosystem
Benefits Risks

Figure 22: Benefits and risks of the MNO-driven model for MNOs
The successful implementation of the MNO-driven model would have a lasting
impact on the status and prospects of mobile network operators. They would not
only be partners for voice and data services. As the agent through whom payments
in the real world were transacted, they would have an opportunity to develop into
the main and trustworthy partner of the customer. The mobile payment function
and the additional services would lead to increased sales and the market develop-
ment of further sources of revenue (e.g. cellphone airtime) via cross selling. The
valuable network would make a significant contribution to the promotion of cus-
tomer loyalty and retention, i.e. effectively preventing, or at least at least reducing,
any tendency towards customer exodus.
To exploit this potential, MNOs would have to create a new payment-services eco-
system, establish a basis for credible security guarantees and win the trust of their
customers when it comes to payment-transaction competence. The know-how that
is required for these developments can be gained via the market or by entering into
partnerships and alliances. Even in this case, however, one could certainly antici-
pate difficult and complex negotiations with the banking industry.

40. 3.3 The MNO-Driven Model 31
Banks
MNOs
Customers
Focus remains on traditional
payment services
Control of profits in value
chain
Upgrading of existing
infrastructure (payment and
billing of customers and
retailers)
Lower rates of attrition
Convenience
Profit reduction in
traditional services
Credit risks
Risks associated with
theft and fraud
Retailer acceptance
Management of stake-
holders in ecosystem
Complex billing
Security concerns
Benefits RisksStakeholders
MNO-Driven Model
Benefits and Risks for Banks, Retailers and Customers

Figure 23: Benefits and risks of the MNO-driven model for banks, MNOs and customers
30

The fact that the banks would have nothing but disadvantages from the long-term
dominance of such a model naturally speaks against the model’s prospects. In
other words, one could nearly exclude the possibility of constructive cooperation
because the banks could only expect such cooperation to result in losses of
revenue.
The model would give the MNOs considerable control over most of the revenue in
the value-added chain and at the same time enhance their existing infrastructure
with new customer segments. The enhanced value of the network would bind
customers more strongly to the MNOs and thereby prevent the exodus of
customers. On the other hand, the MNOs alone would be exposed to the risk of
payment defaults on the part of customers as well as the increased risk of theft, i.e.
fraud involving payment-enabled devices. Then there are the retailers. How would
the retailers respond? Would they accept the new offer and would the MNOs
really be in a position to manage all of the stakeholders in the business ecosystem?
Would they be prepared to receive their payments later – perhaps not until the end
of the month – than they do in the case of the conventional bank network?

30 Smart Card Alliance: “Proximity Payment Business Scenarios: Research Report on
Stakeholder Perspectives,” July 2008, p. 11.

41. 32 3 Strategies
Customers would naturally value the convenience of the service and the billing in
the accustomed manner. However, are the MNOs in a position to manage the
security risks and the complex billing processes?
3.4 The Collaborative Model
The collaborative model is based on a joining of forces on the part of the banks and
the MNOs, with each contributing what it does best. The resulting business system
Mobile
payment
Order Settlement
Account
management Marketing
Collaborative Model
Banks and MNOs focus on their core competencies while
at the same time rising to meet the challenge of a cross-industry
partnership
Value Chain
Third party
selected to play
the role of a trusted
service (TSM), an
MNO might also
focus on the role of
an aggregator in
a business ecosystem
Sales of
services and
products via
mobile portal
Contactless
payment and
P2P possible
Customer
accounts
remain
with banks
Collaboration
of banks and
MNOs
Development
of mobile
marketing
services

Figure 24: Value chain resulting from the collaborative model
31

would offer advantages to both retailers and customers, and although it wouldn’t
represent the biggest possible prize for the banks and MNOs, it would be good for
both because neither would face the prospect of being left out in the cold. The cen-
tral challenge, however, would consist in finding ways to collaborate on a large
scale.
The value chain would now be somewhat more complex because the role of the
trusted service manager would take on greater significance. This role could essen-
tially be played equally well by a bank, an MNO or an independent third party.
The advantages take the form of risk minimization and the respective contributions

31 Smart Card Alliance: “Proximity Payment Business Scenarios: Research Report on
Stakeholder Perspectives,” July 2008, p. 24.

42. 3.4 The Collaborative Model 33
of the partners: quicker recording of credits by the banks and the development and
provision of innovative services for retailers and customers by the MNOs.
Banks Alternative channel
Additional profits
New customer segments
Focus on core competencies
Reduction of ATM and other fees
Investments in new technology
(hardware and knowledge)
Complex negotiations
MNOs Focus on core competencies
New customer segments
Additional profits (payments, etc.)
Complex negotiations
TSMs New transaction-based business
model
Value-added services
New risks (security: customer data)
New role, lack of experience
Benefits Risks
Collaborative Model
Benefits and Risks for Banks, MNOs and TSMs

Figure 25: Benefits and risks of the collaborative model for banks, MNOs and trusted ser-
vice managers
32

Still, important questions remain to be answered. Are the retailers prepared to pick
up the tab for the new services? Will the mobile payment services be designed in
such a way that the customers will be able to do nothing other than avail them-
selves of it?

32 Smart Card Alliance: “Proximity Payment Business Scenarios: Research Report on
Stakeholder Perspectives,” July 2008, p. 26.

43. 34 3 Strategies
Retailers Fast transaction period
Lower costs for the maintenance
of cash
Shorter queues
Increased customer satisfaction
Target marketing, customer
loyalty
Transaction fees
Customers Payment service (preferred bank)
Reduced latency
Convenience
Activation and storage of
banking and payment
application on mobile devices
Benefits Risks
Collaborative Model
Benefits and Risks for Retailers and Customers

Figure 26: Benefits and risks of collaborative model for retailers and customers
3.5 The Independent Model
The independent model involves a weakening or elimination of the roles played by
the classic stakeholders and the introduction of a novel approach.
The model’s implementation would depend on the fulfillment of the following
prerequisites:
• A considerable number of retailers would have to be prepared to be a part of
the business ecosystem.
• The provider would have to secure all transactions made at the POS and via
mobile and stationary devices.
• Retailers and customers would either have to be ready to learn or the services
would have to be largely self-explanatory.
• Good market communication and the proactive development and provision of
the necessary services (issues: security, money laundering)
• Provision of the services by an established enterprise that has been on the mar-
ket for a long time and that has won the trust of customers

44. 3.5 The Independent Model 35

Figure 27: The independent model
The independent model would offer banks and MNOs additional sources of reve-
nue and an opportunity to acquire new partners for their own core businesses. On
the other hand, the risk of disintermediation for both would always be latent.
Lacking a well-established business model, the independent stakeholder would
need to consider the risk of a high price tag for establishing market access and cus-
tomer loyalty. On the other hand, the advantages would be numerous, including a
transaction-oriented business model, new value-added services and cross-selling
opportunities.

45. 36 3 Strategies
Banks Alternative channel
Additional profits
New customer segments
Potentail new partners
Disintermediation
Low visibility for customers
MNOs New partners
New customer segments
Additional profits (payments, etc.)
Disintermediation
Indepen-
dent
service
providers
New transaction-based business
model
Value-added services
Cross selling potential
Costs of market entrance
Fraud and theft
Marketing
Establishing trusted brand
Small distribution
Benefits Risks
Independent Model
Benefits and Risks for Banks, MNOs and TSMs

Figure 28: Benefits and risks associated with the independent model
Retailers Speed of payment transaction
Lower cash management costs
Shorter queues at POS
Increased customer satisfaction
Target marketing
Customer loyalty
Transaction fees
Reputation
Fraud
New service provider products
Customers Lower payment-service costs
Reduced latency
Convenience
Additional access points
New technologies
Money transfer to new service
provider
New bills
New fees
Benefits Risks
Independent Model
Benefits and Risks for Retailers and Customers

Figure 29: Benefits and risks of the independent model for retailers and customers

46. 3.6 Summary 37
When selecting an independent service provider, it would be essential for retailers
to consider the provider’s reputation, capacity to penetrate the market and expec-
tations with respect to cases of fraud.
Customers would probably have to accept a new provider for money transfers and
perhaps new fees as well.
3.6 Summary
The four different models should give us a sense of the complexity associated with
the implementation of a mobile payment business ecosystem.
Market and Customer Requirements
for a Sucessful Mobile-Payment Service
Critical mass
Market power
Strategy
Investment
Customer, retailer relationsships
and access
Brand
Reputation
Cost-effectiveness
Standards
Marketing
Market expectations
Fast and easy access
Easy to use
Low technical requirements
Flexibility
Extensive services
Applications
Added-value services
Market Requirements Customer Requirements

Figure 30: Criteria for the success of a mobile payment model
33

Cooperation will be necessary because none of the major stakeholders is currently
in possession of comprehensive know-how.
While MNO-driven business models and scenarios are currently dominant, most
market observers expect new providers to pull even by 2015. In this regard, it may
be instructive to take a closer look at the most recent history of mobile payment
services.

33 Robin Contius and Robert Martignani: “Mobile Payment im Spannungsfeld von Unge-
wißheit und Notwendigkeit,“ BFS Finance, Munich, p. 7, 2008.

47. 38 3 Strategies
Numerous payment service offers were developed around the world at the end of
the 1990s. As their scope was essentially limited to billing, they created no added
value for retailers and customers.
It was the mobile network operators that moved forward with technical and busi-
ness-model innovations. In Austria, Paybox developed well beyond the remaining
three mobile network operators. In Japan, it was NTT DoCoMo that developed a
successful business ecosystem built around its Osaifu-Keitai product. In the rele-
vant developing countries, it was also the MNOs (e.g. in the case of M-PESA) that
led the way.
While a few bank-driven models were successfully implemented in the wake of
these developments, it has been the independent models introduced by Starbucks
and Square that have commanded the most attention as of late.
It remains to be seen whether and to what extent the banks and MNOs will suc-
ceed at introducing a competitive and collaborative model in the years to come. In
the past, these two players failed to join forces because they couldn’t reach an
agreement on who owned the customers. We’ll see what transpires as the stakes
involved become even clearer.

48. 4 Mobile Technology and Security
4.1 Preliminary Remarks
In addition to contrasting business models and the varying degrees to which the
use of mobile payment systems has evolved, significant country-specific differ-
ences can also be seen at the intersection of technology and security standards. The
dominant solutions in the developing countries, for instance, are based on a com-
bination of USSD and SMS technology. In the first-mover countries of Japan, South
Korea and China, companies invested in a contactless RFID smart card system
known as “FeliCa” at an early stage, and thereby embraced a predecessor to the
NFC technology that has captured the imagination of players in Europe and the
United States. Then there has been the succession of other technologies such as
those based on wireless application protocol (WAP) and their accompanying mo-
bile networks GPRS
34
, EDGE
35
, UMTS
36
and LTE
37
. Also warranting mention is the
use of QR codes, two dimensional barcodes that play a role in various independent
mobile payment services such as the one introduced by Starbucks. And, last but
not least, there are the various operating system applications or “apps” for cell-
phones and smartphones (e.g. Android, iPhone, Blackberry) that are used in con-
junction with the above-mentioned technologies.
Most of the established mobile payment services make use of a combination of var-
ious technologies. While the security aspects of these technologies are in need of
careful examination, an extensive discussion of these aspects and specific concerns
in the present context would take us too far afield. In what follows, I therefore re-
strict myself to mentioning the technical specifications in the context of addressing
security aspects relating to individual mobile technologies, including: USSD
38
,
SMS
39
, WAP, QRC
40
, NFC
41
/RFID
42
and FeliCa
43
.

34 GPRS: General Packet Radio Service
35 EDGE: Enhanced Data Rates for GSM Evolution
36 UMTS: Universal Mobile Telecommunication Service
37 LTE: Long Term Evolution
38 USSD: Unstructured Supplementary Service Data
39 SMS: Short Message Service
40 ORC: Quick Response Codes
41 NFC: Near Field Communication
42 RFID: Radio Frequency Identification
43 FeliCa: Felicity Card (contactless RFID smartcard system introduced by NTT DoCoMo).
T. Lerner, Mobile Payment, DOI 10.1007/978-3-658-03251-7_4,
© Springer Fachmedien Wiesbaden 2013

49. 40 4 Mobile Technology and Security
4.2 USSD
4.2.1 The Technology
44

The so-called unstructured supplementary service data (USSD) protocol is used to
support mobile communication services, location-specific services, reservation and
booking solutions as well as mobile payment services. The protocol is generally
transacted via GSM/SMS and offers a synchronous real-time connection at up to
182 alphanumeric characters. It also establishes a direct connection between the
sender and receiver. In contrast to SMS, this enables quick, direct and immediate
exchange.
The advantage of USSD mobile payment applications is that they support all of the
available operating systems and can therefore be installed on any mobile platform.
The technology enables easily realizable, session-oriented communication that is
more user friendly that SMS-based solutions. In the context of mobile payment so-
lutions, the technology can be used to make reservations, refill prepaid cellphone
or smartphone accounts (e.g. via a bank account), pay bills and make money trans-
fers. The interaction between the mobile device and the applications is enabled by
mobile network operators. The USSD application serves in this case as an interface
between customers and telecommunication providers on the one hand and bank
accounts on the other. This enables customers to make payment transactions via
their smartphones or via Web applications.
4.2.2 Potential Risks Associated with USSD Transactions
The risks associated with this technology include the following.
Request and response manipulation
This sort of manipulation involves an attack by a malicious user who is aiming to
confuse the primary user and bring about a fraudulent transaction.
Origin of the risk: inadequate encryption associated with the technology
Replay attacks
The loss of a mobile device can enable a malicious user to carry out attacks via a
special USSD application. The USSD application will thereby have to identify the
user (e.g. authentication via a combination of MSISDN, IMEI, PIN and a message
tracking ID). Such cases may arise if the identification is carried out via comparison
and not via an application.
Prepaid roaming query

44 “Analysis: Security Risks in USSD-based Mobile Payment Services,” CTO Forum, 31
May 2011.

50. 4.2 USSD 41
The manipulation of roaming access data can lead to revenue losses for the service
provider.
Mobile payment transaction as “plain text”
If service providers other than a mobile network operator use this technology for
their payment services, the mobile network operator may be able to gain access to
sensitive customer data, including customer ID numbers, account numbers, trans-
action data and PINs.
Further risks can arise as a result of weak encryption, service response delays and
exception-handling reactions.
4.2.3 Summary
45

Although USSD includes no independent security features, it is nonetheless used
around the world to make mobile payments. While a certain degree of encryption
is absolutely necessary to secure the integrity of data in USSD-based payment sys-
tems, end-to-end encryption can only be secured by obtaining a separate applica-
tion (e.g. via a SIM Toolkit or a special Java application).
USSD
Mostly used in
developing coun-
tries
4%USSD
Technology Advantages Risks / Limitations Areas Usage
Delayed payments
(MNO overload)
Missing security layer (GSM speci-
fication)
Data in plain text
User friendly
Prefers MNO
strategy model
Available on all
devices
Easy to use
Interactive menu enables SMS, USSD
and WAP sessions
Synchronous
connection

Figure 31: USSD profile
46


45 Raju, Prabu; Gajwani, Aril; Gonvalves, TA and Srinivas, Raja: “Analysis of Mobile Infra-
structure for Secure Mobile Payment,” presented at the Mobile Payment Forum in India,
March 2008, pp. 6-7.

51. 42 4 Mobile Technology and Security
4.3 BLE – Bluetooth Low Energy
4.3.1 The Technology
Bluetooth low energy (BLE) technology operates in the same spectrum range as
Classic Bluetooth technology (2.400 GHz-2.4835 GHz ISM band), but uses a differ-
ent set of channels. These channels are 40-2 MHz wide. The technology was intro-
duced by NOKIA in 2006 and was integrated into the main Bluetooth standard in
2010 (Bluetooth Core Specification Version 4.0).
BLE or Bluetooth Smart is a wireless computer network technology for applica-
tions in healthcare (e.g. health thermometer profiles, blood pressure profiles, etc.),
fitness (e.g. cycling speed, heart rate profiles, etc.) security, home entertainment
and proximity payments.
The bit rate is 1 Mbit/s, the maximum transmission power is 10 mW and the range
about 50 Meter or 60 feet. An application layer and a 128-bit AES encryption were
defined for purposes of security.
BLE is compact, inexpensive and compatible with a wide range of cellphones, tab-
lets and computers. The iPhone 4S was the first smartphone to include BLE. Many
other devices followed, including Google Android version 4.3., Linux release 5.0,
Apple iPad (3
rd
and 4
th
generation), NOKIA Lumia, Samsung Galaxy and Blackber-
ry.
4.3.2 Summary
Apple and PayPal have refused to integrate NFC in their devices and services for
mobile payment. The slow adoption of NFC represents a risk for service providers
that have focused on this technology. In contrast, BLE is inexpensive, available for
immediate use and enables the swift expansion of new services.
47


46 The user data are based on an estimate issued by Gartner Inc. for the year 2015.
47 Thomas Lerner: “Apple´s Doppelschlag gegen NFC,” in: Mobiler Zeitgeist, 24 September
2013.

52. 4.4 SMS 43
Bluetooth / BLE
Compatibility with
most major
smartphone and
tablet devices
Familiar technology
Easy to use
Low power
requirements
Compact size
Low cost
Supported by PayPal and Apple
Smartphones
Watches
Tablets
Security / proxi-
mity / payment
Automotive
Automation
Home electronics
Healthcare
40%
(smart-
phones
and
tablets)
Bluetooth
(BLE)
Technology Advantages Risks / Limitations Areas Usage
Security
No backward
compatibility
with classic
bluetooth
(specification: 4.0)

Figure 32: BLE profile
4.4 SMS
Short Message Service (SMS) is a text messaging service that was developed for use
in connection with GSM to enable the sending of messages of up to 160 alphanu-
meric characters. The first short message (referred to in many countries simply as
an SMS) was sent at the beginning of the 1990s. Given that the service was devel-
oped to enable the transmission of short messages and non-critical services, no
provisions were made for mutual authentication, message encryption and end-to-
end security.
48

According to BITKOM estimates, 46 billion SMS messages were sent in Germany in
2011. Fee-based “Premium SMS” was introduced in Germany in 2003. These are
used mostly as a means of billing services such as ringtone and logo services. This
led to high quality mobile marketing and entertainment campaigns.
49
The generat-

48 Kelvin, Chikomo; Ming Chong Ki; Alapan Arnab and Andrew Hutchinson: “Security of
Mobile Banking,” Institute for Applied Sciences, University of Cape Town, Rondebosch
7701, South Africa, page 2.
49 Frank, Volker and Thomas Lerner: “Best Practice Mobile Business – Globaler Vergleich
nachahmenswerter Anwendungen,” 2nd Issue, Business Village, 2004, p. 13, pp. 70-78.

53. 44 4 Mobile Technology and Security
ed revenue is divided up among the service providers, the content providers and
the participating wireless companies.
SMS messages are usually sent from a mobile device (cellphone or smartphone) to
an SMS gateway or an SMS center (usually operated by a wireless carrier)
50
where
the recipient’s phone number (usually appearing in the header) is read for purpos-
es of forwarding the message to the recipient.
When handling the billing, the SMS center generates a call data record (CDR) con-
taining a timestamp, the current number, the MSC number, the message sender
and the message receiver. The mobile network operator assigns the CDR to the
party incurring the fee (usually the sender) via the MSISDN and calculates the fee
according to a specific tariff or flat rate.
SMS
Devices (available
on all devices
worldwide
Familiar
Easy to use
Remittance
Remote payments
P2P payments
Mobile banking
51%
SMS
Technology Advantages Risks / Limitations Areas Usage
Expensive
(additional costs)
Asychronous connection
Receiver not
available in
real-time
Payment service
can fail
Delayed payment
Missing confir-
mation of SMS-
delivery
Lack of encryp-
tion
Social enginee- ring: fraudsters
send SMS to mis-
lead customers

Figure 33: SMS profile
51

For this reason, there are certain risks associated with the use of basic SMS tech-
nology to transact payments. Put simply, end-to-end encryption is indispensable
when it comes to payment transactions. Secure SMS, which solves the security
problem associated with the GSM standard, represents a solution.
GSM is vulnerable to attacks because the network does not possess an overarching
security protocol. This vulnerability then extends to USSD and SMS. Problems

50 Raju, Prabu, Gajwani, Anil…, loc. cit., pp. 4-5.
51 The user data are based on an estimate issued by Gartner Inc. for the year 2015.

54. 4.5 WAP/Internet 45
arise in particular when it comes to authentication, confidentiality and end-to-end
encryption.
Wireless application protocol (WAP) was introduced in 1997 by the WAP Forum to
enable Internet connectivity among devices as well as additional, secure mobile
services.
4.5 WAP/Internet
Wireless application protocol (WAP) is a standardized means by which a mobile
device communicates with a server that is connected to a mobile-data service such
as GPRS, UMTS or LTE.
52

The wireless transmission protocol consists of various protocol layers based on the
OSI model. In contrast to SMS and USSD, a separate security layer, the wireless
transport layer security (WTLS), was added to secure data protection, client and
server authentication and data integrity.
53

WAP
38%
WAP /
Internet
Technology Advantages Risks / Limitations Areas Usage
Devices (Internet
access)
Familiar
Smaller screen
Can be used on different networks
(GPRS, UMTS, etc.)
Browser
Synchronous
connection
Security layer
(WAP Forum)
Usage increasing
Only a few trans-
actions are pro-
cessed on this
technology
Cost / flatrate
Security: WTLS /
WIM
Account-based
transfers
Online payments

Figure 34: WAP profile
54


52 Diederich, Bernd/Thomas Lerner/Roland D. Lindemann/Ralf Vehlen: “Mobile Business –
Märkte, Techniken, Geschäftsmodelle,” Gabler Verlag, October 2001, p. 76.
53 Diederich, Bernd: loc. cit., p. 80.
54 The user data are based on an estimate issued by Gartner Inc. for the year 2015.

55. 46 4 Mobile Technology and Security
Communication between WAP clients (e.g. WAP-enabled cellphones) takes place
via a WAP gateway and a server.
The server contents are transmitted via hypertext transfer protocol (HTTP) to the
WAP gateway, which then transmits the contents via WML
55
to the end device. The
possible carrier systems include GPRS, UMTS and EDGE.
4.6 QR Codes
Two-dimensional QR codes
56
(black and white matrix barcodes) have been in use
for a number of years. QRCs represent a convenient way of linking a physical ob-
ject to a URL.
57
Virtually any image is possible (numeric, alphanumeric, binary).
To scan a QR code, one needs a Java-enabled cellphone or a smartphone with an
integrated camera. The barcode is photographed with the camera, a special pro-
gram (e.g. a screen reading software product for Android or iPhone-based mobile
devices) analyzes and decodes the black-and-white raster graphic while also con-
verting the hidden telephone number, short message, link (URL), text or business
card with name, telephone number and e-mail address to a readable plain image.
These are often used in connection with scanning and Android and iPhone appli-
cations.
The black-and-white raster graphics are associated with minor security risks. They
represent ideal phishing bait because they could easily be linked to malicious text
messages or websites. One doesn’t know the source of the application and, in a
worst case scenario, one might be led to an unknown website, or malware could be
installed on the mobile device. Direct QR codes that contain all of the product in-
formation are problematic in this regard. This makes indirect barcodes more suita-
ble, as these require an application and a manually-acknowledged call from an
online server.
58

The use of secure QRCs allows one to further minimize the above-mentioned risks
by making the data content invisible to third parties via encryption. The encryption
itself takes place upon the creation of the secure QRC (SQRC). The decryption is
performed by the reader. 2D codes with encrypted data are used in Germany in the
case of Deutsche Bundesbahn tickets and Stampit (Deutsche Post) envelopes.

55 WML – Wireless Markup Language
56 QR code: Quick Response Code/two-dimensional barcode
57 URL: Uniform Resource Locator
58 Shannon, Mey: “Security-News,” 19 December 2011.

56. 4.7 Near Field Communication (NFC) 47
4.7 Near Field Communication (NFC)
Near field communication (NFC) is a transmission standard for the contactless ex-
change of data across short distances of 4 to 10 centimeters. The relevant NFC spec-
ifications are outlined in various ISO standards.
59
The technology makes use of a
magnetic field to enable communication between two devices.
60
NFC is based on
RFID technology and an NFC identification protocol to enable the secure transmis-
sion of data.
4.7.1 History
The RFID patent was registered in 1983. NFC technology was developed jointly by
Sony and NXP Semiconductors (founded by Philips) to enable the exchange of in-
formation types (e.g. telephone numbers, images, MP3 images and digital authen-
tication codes) between NFC-enabled devices, including cellphones, RFID chip
cards and RFID-chip card readers that are held in proximity to one another. The
NFC Forum was founded by NOKIA, Philips and Sony in 2004 to promote the
standardization and development of the NFC specifications. In 2006, Nokia intro-
duced the 6131 cellphone, the first NFC-enabled cellphone.
NFC works at a frequency of around 13.56 MHz and offers data transmission rates
of up to 424 Kbit/second inside a range of around 10 centimeters. In contrast to
conventional contactless technologies that operate only in active and passive com-
munication modes, NFC technology offers various modes.
Whether the interface can operate in various modes depends on whether a device
creates its own radio frequency field or receives the energy for this from the radio
frequency field generated by another device. Three different communication con-
figurations are possible if the aim is to enable two devices (e.g. a smartphone and a
reader) to exchange information with one another. These include active-active
(peer-to-peer), active-passive (read and write mode: the NFC device is active and
reads or writes a passive legacy tag) and passive-active (the NFC device behaves
like an existing contactless card, comparable to a device operating according to the
existing legacy standards).


59 Ernst Haselsteiner and Klemens Breitfuss (Philips Semiconductors): “Security in Near
Field Communication (NFC),” pp. 1-2
60 Rhode & Schwarz Whitepaper: “Near Field Communication (NFC), Technology and
Measurement,” March 2011, by: Roland Minihold, pp. 1-22,

57. 48 4 Mobile Technology and Security
NFC / QRC
POS payments 8%NFC
Technology Advantages Risks / Limitations Areas Usage
Fast payment
process
(VISA study:
24-34 second
payment duration
for cash and credit
card payments
and 15 seconds
for NFC payments
Convenient
Secure
Promising pilot
tests
Biggest success in
Japan, South Korea
and now China
NFC devices
(smartphones, tab-
lets, chips, POS
readers) will be
mainstream in 3-4
years)
Customer accep-
tance
Services launch
Additional costs (device upgrades)
Value-added services are required
for success
QRC
Ticketing
Stamps
Payments
Available only on
smartphones
(2013: 1 billion
devices worldwide)
Security risks
Easy to use
Convenient
Perfect for added-
value information
20%
(available
only on
smart-
phones)

Figure 35: NFC/QRC profile
Comparison of NFC and RFID
Setup
Coverage
Usability
Selectivity
User scenarios
Customer
experience
Transfer rate
Transfer modi
RFID support
< 0.1 milliseconds
4 inches
Easy, intuitive
High, secure
Payment, access,
participation
Touch, wipe
Up to 424 Kbit/s
Active-active,
active-passive
Yes
< 0.1 milliseconds
Up to 10 feet
Easy
Partly
Monitoring
NFC RFID

Figure 36: Comparison of NFC and RFID technology

58. 4.7 Near Field Communication (NFC) 49
In addition to active and passive modes, there are also the two different roles re-
ferred to as the initiator and the target that are established in the NFC communica-
tion concept. NFC is based on a message-answer concept. In other words, a device
A sends a message to a device B, whereupon B sends an answer back to A. A in
this case is the initiator and B is the target. The table below shows the range of pos-
sible combinations involving the active and passive modes. Only the combination
comprised of initiator and passive is not possible.
Mode Combinations (NFC)
Active
Passive
Possible
Not possible
Possible
Possible
Initiator Target
Mode Combinations (NFC)
Active
Passive
Active
Passive
Devices alternately generate
RF field
Device 1 generates RF field
Device 2 Description
Active
Active
Device 1
Device 2 generates RF field

Figure 37: Possible active-passive mode combinations in NFC
NFC makes use of inductive coupling, i.e. the magnetic field of two coiled conduc-
tors, with the “sending device” being referred to as the initiator and the “listening
device” being referred to as the target.
61
In the case of a peer-to-peer configuration,
both directions are modulated in the same manner and coded like a sending de-
vice. Less energy is needed if both devices have their own power supply.
NFC is reverse-compatible with the widespread smartcard infrastructure based on
ISO/IEC 14443 A, ISO/IEC 14443 B and, as in the case of the Sony FeliCa, JIS X
6319-4. In order to enable data exchange between two NFC devices, a new com-
munication protocol was developed that is based on the standards ECMA-340 and

61 SONY: “Best Practices White Paper – NFC-F Device Detection,” Version 1.0, p. 9.

59. 50 4 Mobile Technology and Security
ISO/IEC 18092.
62
Each of the above-mentioned modes can be combined with the
above-mentioned transmission technologies.
The NFC Forum was founded by NXP, Sony and NOKIA in 2004 to harmonize
NFC technology and promote its dissemination.
Mobile Technology in
Japan and ROW
FeliCa technology makes Japanese mobile payment a Galapagos service.
Source: Etona Ueda / 2008
Rest of WorldJapan
FeliCa chip
Triple DES
IC chip
Encryption
Operating system
Application
Mobile device
FeliCa OS
Various
applications
Osaifu-Keitai
(since 2012:
hybrid device)
ISO 14443, Type A & B
AES / RSA / T-DES
Multos
Java Card OS
EMV contactless
ISO 7816
NFC mobile
ISO 18092

Figure 38 Comparison of mobile technologies used in Japan and the rest of the world, ©
Etona Ueda/2008
4.7.2 NFC Applications
• Mobile payment
• Taxi-service ticketing
• Point-of-sale payments
• Storing of vouchers on mobile devices
• Authentication and access control
• Secure access to buildings and computers
• Unlocking cars
• Data transfer between various NFC devices
• Exchanging business cards
• Printing photos

62 Atos Origin: “Breakthroughs in the European Mobile Payment Market,” White Paper, p.
3.

60. 4.7 Near Field Communication (NFC) 51
Options for a Secure NFC Architecture
SIM card /
UICC
Worldwide usage possible
Universal compatibility
Universal integrated circuit card
Card slot required
Card exchangeable
MNO: SIM card owner
Direct customer contact
Service fee
SIM programming (OTA)
MicroSD
Card
Can be bought individually Service provider: all
service providers can
offer services based on
MicroSD card
Embedded
chip in
secure
element
New mobile device is necessary Equipment producer / service
provider:
- Producer: card owner
- Expert knowledge required
Characteristics Who Profits

Figure 39: Integration of NFC technology in mobile devices

Figure 40: Diagrams of secure NFC architecture in mobile devices
63
, © Dave Holmes, NXP,
NFC Market Upddate Q407, page 5

63 Steinmeier, Steffen: “NFC Market Update and Technology Overview,” Q1/2008, NXP, p.
5.

61. 52 4 Mobile Technology and Security
Scenario 1:
64
The card data are stored on the secure element in the mobile device.
If the secure element is integrated in a mobile device, then the device itself be-
comes the main point of access for security. In this scenario, even the MNO is
forced to work closely with the device manufacturer to ensure the compatibility of
applications with the secure element.
If the market-introduction strategy favors Scenario 1, stakeholders will depend on
the market introduction of this mobile device, including all subsequent activities
such as intensive testing. The market introduction process will therefore be slower
and more cost-effective than in the case of Scenario 2.
Google, Citi, MasterCard and First Data are pursuing this strategy in the context of
introducing mobile payment services. This means that they are currently depend-
ent on the market introduction of the next mobile device by Sprint. Google, how-
ever, is planning to expand its mobile wallet service as an open platform so as to
encourage other companies, including mobile-device manufacturers, to participate
in the business ecosystem.
Scenario 2:
65
The card data are stored on a Micro SD Card.
In this case, the Micro SD chip contains the NFC chip and the secure element, es-
sentially making it possible to outfit older mobile devices with NFC capacity. That
makes Scenario 2 the fastest scenario for market introduction. Both the NFC tech-
nology and the application come with the Micro SD Card. This is the best scenario
for enterprises interested in administering and controlling their own payment-
transaction applications. All they would have to do is provide Micro SD Cards to
their customers, i.e. without having to engage the mobile device manufacturers
and MNOs.
This approach is currently being taken by VISA and MasterCard in the context of
pilot studies, as well as by various U.S.-based banks.
Scenario 3:
66
The card data and secure element are stored on a portable SIM card.
This is the scenario for mobile network operators interested in bringing their solu-
tions to the market. It enables them to control which solutions other service pro-
viders make available to their customers, such as which mobile devices are made

64 BTN – Bank Technology News: “Which Mobile Payment Technology is the Best Fit for
Banks?” in: BTN – Technology Innovation. Business Results, Vol. 22, No. 3, June 2011, pp. 1-2.
65 BTN – Bank Technology News: “Which Mobile Payment Technology is the Best Fit for
Banks?” in: BTN – Technology Innovation. Business Results, Vol. 22, No. 3, June 2011, pp. 1-2.
66 BTN – Bank Technology News: “Which Mobile Payment Technology is the Best Fit for
Banks?” in: BTN – Technology Innovation. Business Results, Vol. 22, No. 3, June 2011, pp. 1-2.

62. 4.7 Near Field Communication (NFC) 53
available. Other service providers are essentially relegated to the back seat when it
comes to contacting their customers.
4.7.3 Summary
The mobile device will be outfitted with a new contactless technology that will
change our payment experience in a way that was not available with contactless
cards. The mobile device will enable the introduction of new services and options
that could never be made available with cards as we know them.
4.7.4 General Security Threats to NFC
67

4.7.4.1 Eavesdropping
The possibility of eavesdropping warrants consideration. If two devices share in-
formation with one another via NFC, they are essentially using RF waves to com-
municate with one another. It would now be open to attackers to use antennas to
pick up the transmission signals.
The eavesdropper would have to know how to scoop the data from the RF field,
i.e. what equipment would to necessary to do so. The main question when it comes
to eavesdropping is: how near would an attacker have to be to pick up a useable
RF signal?
The distance depends on various parameters:
• The sending device’s RF field characteristics
• The characteristics of the eavesdropper’s antenna
• The quality of the eavesdropper’s receiver
• The quality of the eavesdropper’s RF-signal decoder
• The nature of the location where the eavesdropping is to take place (physical
obstructions, noise level, etc.)
• The energy that is emitted from the NFC device
• The mode in which the data sender operates, i.e. it is much more difficult to
eavesdrop on devices that send data in passive mode than in active mode.
4.7.4.2 Data Corruption
The easiest way to corrupt data is to disrupt the communication between the send-
er and the receiver. This requires disrupting the data spectrum at the right time
and frequency, with the intended result being a denial of service.
4.7.4.3 Data Modification/ Data Insertion
The aim of the attacker in cases of data modification is to intervene in the transmis-
sion environment so that the receiving device receives valid, but manipulated data.

67 Ernst Haselsteiner and Klemens Breitfuss, loc. cit., pp. 4-6.

63. 54 4 Mobile Technology and Security
The feasibility of bringing this about depends on the strength of the amplitude
modulation, with different degrees of feasibility applying to 100% and 10% modu-
lation.
The insertion of data is only possible when the target device takes a long time to
answer, essentially giving the attacker an opportunity to send data to the receiver
before the valid sender. However, data insertion attacks will only succeed if the in-
serted data are transmitted before the target device begins to answer. Any over-
lapping of the data streams will corrupt the data and lead to a denial of service.
4.7.4.4 Man-in-the-Middle Attacks
Man-in-the-middle attacks involve 2 parties who think they are exchanging data
directly with one another while their exchange is actually being orchestrated by a
third party.
4.7.5 Solutions and Recommendations
4.7.5.1 Eavesdropping
While near field communication (NFC) technology alone does not provide protec-
tion against eavesdropping, data that are transmitted in passive mode are much
more difficult to listen in on than data transmitted in active mode. That being said,
the use of the passive mode for various applications that involve the transmission
of sensitive data via NFC is not sufficient.
4.7.5.2 Data Corruption
NFC-enabled devices can fend off data corruption attacks by checking the RF field
while transmitting data. If the device is programmed to do this, it can detect and
fend off attacks. The energy needed to corrupt data is much greater than the ener-
gy needed to detect attacks.
4.7.5.3 Data Modification/Data Insertion
There are various ways to protect against data modification.
The use of a baud rate of 106k in active mode makes it virtually impossible for the
attacker to modify all of the transmitted data via the RF connection. This means
that the active mode would have to be protected against data manipulation for
both transmission directions.
There are also various ways of protecting against data insertion.
1. Ensure that the answering device answers without delay.
2. Ensure that the answering device monitors the transmission channel continuous-
ly to make sure that it is open for transmission. This will enable the device to detect
an attempt to carry out an attack.
3. Establish a secure channel between the two devices.

64. 4.7 Near Field Communication (NFC) 55
4.7.5.4 Man-in-the-Middle Attacks
MITM attacks can be prevented by configuring the active-passive communication
mode in a way that ensures the RF field is continuously generated by one of the
two parties. In addition to this, the active party should monitor the RF field during
data transmission so as to detect any disturbances caused by an attacker.
4.7.5.5 Establishing a Secure Channel for NFC
Establishing a secure channel for NFC is the best means of protecting oneself
against eavesdropping and any form of data manipulation. A standard key agree-
ment protocol (i.e. on the model of the Diffie-Hellman key exchange) that is based
on RSA or elliptical curves should enable the use of a shared secret between any
two devices.
This can then be used to derive a symmetric key such as 3DES or AES to ensure the
confidentiality, integrity and authenticity of the transmitted data.
4.7.6 Summary
NFC alone will not suffice to protect against eavesdropping or data manipulation.
The only solution is to establish a secure channel between the two NFC-enabled
devices. NFC Benefits and Risks
Speed
Convenience
Innovative payment method
Image
Link to additional NFC services
Generation of impulse purchases
Employee efficiency
Reduction of cash transactions
Generation of additional revenue
Cost savings
Innovation (new technology)
Security gaps
Lack of international standards
Lack of clear business model
Acceptance (clients, retailers, etc.)
Trust in technology and provider
Advantages for retailers unclear
Penetration delays
(technology and devices)
No perception of mobile as
long-term strategic project
Technical complexity
Additional NFC service needed
for success
Benefits Risks

Figure 41: Benefits and risks of NFC

65. 56 4 Mobile Technology and Security
4.7.7 General Description of the Security of NFC Applications
NFC devices can be used for various purposes. For instance, they can be used in a
passive role (communication between the NFC device and a reader) for smartcards
(contactless payment at a cash register).
NFC devices can also be used in active mode to control communication with an-
other reader and/or a transponder.
These two applications can be implemented together to enable the transaction of
various kinds of payment.
The following descriptions offer a look at the security requirements that apply to
the use of NFC technology. Please refer to the source cited below for a more de-
tailed account of these requirements.
68

When it comes to the use of NFC technology, the following general security goals
(relating to function, information security and data protection) warrant considera-
tion:
Security Goals
3 General
Security Goals
Information
Security
Service
Functionality
Privacy
Availability
Confidentiality
Integrity
Non-linkability
Non-observability
Anonymity
Authenticity
Non-repudiation
Binding validity
Fault tolerance
Fail safe
Personal data
Personal rights

Figure 42: General security goals

68 Harald Kelter and Rainer Oberweis (both BSI), Cord Bartels and Birger Rosenberg (both
NXP) for the Federal Office for Information Security: “TR 03126 – Technische Richtlinie
für sicheren RFID-Einsatz (hier: TR 03126-3: Einsatzgebiet ‘NFC-basiertes e-Ticketing’),”
2009, 169 pages.

66. 4.7 Near Field Communication (NFC) 57
Information security presupposes comprehensive protection against willful at-
tacks. The following sub-goals are to be achieved when pursuing this overarching
goal:
• Availability: the applications and the information must be made available to the
customer by the operator in the manner assured.
• Confidentiality: communicated and stored information must be protected
against access by unauthorized individuals.
• Integrity: the information must be protected against unauthorized modification.
• Authenticity: the communication partners must be the people they indicate they
are.
• Non-repudiation: agreements/messages issued by authenticated persons must
be protected against repudiation.
• Accountability: the combination of authenticity and non-repudiation must be
assured.
The term functional security refers to the immunity of a deployed system to un-
controllability. This goal includes the following sub-goals:
4.7.8 Functional Security
Fault tolerance: the service provider should be able to continue operating the sys-
tem and maintain its availability for use by the customer despite any faults.
The third overarching goal for NFC-based payment systems is the maintenance of
data protection. This refers to the protection of data against any misuse by third
parties. This goal includes the following sub-goals:
• Anonymity: the identity of the user cannot be detected by third parties.
• Pseudo-anonymity
• Non-linkability: users can access services and resources on multiple occasions
without running the risk of being linked to these.
• Non-observability: state in which it is impossible to decide whether an event or
transaction is taking place.
It is essential when considering an NFC-based mobile payment service to analyze
and evaluate the following processes from the point of view of security and poten-
tial risks (especially in the case of immediate risks associated with the use of the
application). Measures include recommendations that may help to reduce or elimi-
nate the dangers associated with a residual risk. The processes include the creation
of a customer account (application, disclosure of personal data, identity and credit-
worthiness checks, bank account data), issuing of personalized customer media
and authorizations, the creation and provision of useful services (initialization of
the NFC cell phone, applications, authorization for use of applications as well as
authentication and identification) and performance tests (NFC chips, control de-
vices, revocation lists, reading and evaluation of authorizations, etc.). Such pro-
cesses also include functions that are important for daily operation, i.e. disabling

67. 58 4 Mobile Technology and Security
(e.g. in the case of defective or lost NFC devices), enabling, adding authorizations,
applications and media.
The risks associated with NFC payment services relate to various locations, for in-
stance, at the contactless interface, the NFC cellphone (active/passive), the reader
and the mechanism of key management.
The risk-relevant aspects of the contactless interface include the NFC cellphone (in
active or passive mode), the contactless reader, the key management mechanism
and the control and background process systems. The interface is exposed to risk
as a result of the insufficient compatibility of the individual system elements, i.e.
which may permit eavesdropping.
The risk factors for the “active” NFC cellphone include the following:
• Insufficient compatibility with other interfaces (eavesdropping)
• Malfunctioning (e.g. no reception, weak battery)
• Handling problems
• Unauthorized reading out of authorizations
• Manipulation of authorizations
• Protection against DOS
69
attacks
• Protection of personal data
• Manipulation of display contents
The following additional risk factors apply to the “passive” NFC cellphone:
• Unauthorized reading out of authorizations
• Unauthorized editing or manipulation of authorizations
• Exact reproduction (simulation) of the existing NFC cellphone model
Roadblocks to the quick market introduction of NFC technology:
• Numerous standards-issuing organizations (Eco, NFC Forum, Global Platform,
Moby Forum, European Payment Council, GSMA, Open Mobile Alliance, ISO,
etc.)
• Lack of a clear and fair business ecosystem to assign the activities and sources
of revenue to the necessary stakeholders
Acceptance and success depend on the cooperation of seven interest groups
70
:
 The mobile network operators that offer secure mobile network and secure
plug-ins for mobile payment applications
 The credit card companies and card-issuing banks that provide the network
for card-based transactions and the associated value-added chain.
 The trust service managers to act as liaisons between the interest groups that
secure the infrastructure and offer their services

69 DOS – Denial of Service
70 Bianchi, Louis “NFC State of the Industry and What to Expect – A Great Future but a
Long Road,” (VDC Research), p. 14, 1 February 2009

68. 4.8 Excursus: FeliCa 59
 Retailers who use NFC-enabled readers
 Customers with NFC-enabled and credit-card-enabled devices
 Manufacturers of NFC-enabled devices
 UICC
71
manufacturers
• Security
Drivers of rapid NFC introduction:
• Convenience (no more cash and cards necessary)
• Transaction speed at the POS
• Incentive for spontaneous purchases
• Lower costs associated with the processing of cash (e.g. anti-fraud and theft
measures)
• Increased transaction frequency
• Enhanced opportunities for further automation
• Faster updating options
• Approach to real-time loyalty applications
4.8 Excursus: FeliCa
7273
4.8.1 Contactless Data Exchange
The contact between a FeliCa and a reader for the purpose of reading and writing
data is enabled by holding the FeliCa close to the reader. The FeliCa contains an IC
chip and an antenna that receives the necessary energy from the electromagnetic
signals emitted by the card reader.

71 UICC – Universal Integrated Circuit Card
72 SONY: “FeliCa White Paper,” March 2011, 4 pages.
73 See the above diagram comparing mobile technology in Japan and the rest of the world.

69. 60 4 Mobile Technology and Security

Figure 43: Contactless FeliCa technology, © SONY FeliCa: Contactless Technology 2011
The data exchange that takes place between the card and the card reader is com-
plete within only 0.1 seconds. The data transmission rate ranges from 212
Kbits/second to 424 Kbits/second. In terms of its capacity for high-speed pro-
cessing, FeliCa technology is more than suitable for applications in the area of
NGA.
The security technology is based on a secure key management system. The com-
munication between card (chip) and card reader is encrypted by a randomly gen-
erated key. Such keys can be protected against attacks by individual card applica-
tions.
The FeliCa supports various services on a single card/chip. The use of various keys
guarantees the security of various services accessed by the same card/chip.
FeliCa technology supports symmetric communication, which supports the same
modulation/demodulation for the communication between both partners.

70. 5 Innovation Management
The establishment of a successful mobile payment service represents a major chal-
lenge for all of the prospective providers. To gain a sense for this, we need only to
consider the multifaceted nature of the new business ecosystem, the complexity of
the value-added chain, the successful convergence of the necessary industries and
areas of technological know-how, the task of quickly resolving the chicken-and-egg
conundrum and the delicate (if not impossible) task of securing the enthusiasm of
retailers and customers from the beginning.
While the know-how of providers is usually limited to a particular market sector,
mobile payment systems and their corresponding business ecosystems will require
a level of cross-industry cooperation that can only be achieved in the framework of
partnerships or mergers. This will enable the achievement of a certain degree of
innovation. The most successful business models of the still-young Internet era (in-
cluding the models deployed by the providers of existing mobile payment ser-
vices) have all paid homage to the notion of open innovation
74
as a source of ideas
and as an approach to market development. This can be observed in the case of
Apple, NTT DoCoMo (Osaifu-Keitai), SAP, Google and many other corporations.
But how is an enterprise supposed to open itself up to external innovation? How
can innovation be managed effectively? What types of innovation will be support-
ed and how can they best be supported? How is one to motivate the various stake-
holders? What criteria are to be used to select a business model? And what is the
right platform strategy?
NTT DoCoMo changed its strategy at multiple junctures in recent years in order to
successfully implement its enterprise strategy. In order to implement Osaifu-Keitai
(NTT DoCoMo’s mobile wallet), the company invested in a multifaceted platform
strategy
7576
that turned out to be very successful. But here I’m getting ahead of my-
self. In what follows, I’ll first turn my attention to a description of various ap-
proaches to managing outside innovation.

74 Boudreau, Kevin J. and Karim R. Lakhani: “How to Manage Outside Innovation,” in:
MIT Sloan Management Review, Summer 2009, pp. 69-76.
75 Hirano, Atsushi Carl: preface in: “Mobile FeliCa in Japan – Five Years of Mobile Contact-
less Services: Payment, Loyalty, Transport,” in: Innovation Research, December 2009, p.
2.
76 Hagiu, Andrei: “Multi-sided Platforms: Form Microfoundations to Design and Expan-
sion Strategies,” in: Working Paper of the Harvard Business School, 2009, pp. 12-15.
T. Lerner, Mobile Payment, DOI 10.1007/978-3-658-03251-7_5,
© Springer Fachmedien Wiesbaden 2013

71. 62 5 Innovation Management
The two diametrically opposed approaches to the management of outside innova-
tion that have been discussed in the literature recently by Boudreau and Lakhani
include the collaborative-communities model and the competitive-markets model.
While the collaborative-communities model distinguishes itself in terms of soft fac-
tors such as open access to information, transparency, mutual development, shared
intellectual property and a willingness to work for free, the competitive-markets
approach to managing outside innovation is oriented towards an intense competi-
tion with a focus on one’s own economic interests.
Management of External Innovation
Markets versus Communities
External innovators supply variants
and substitutable components
Formal governance (rule-based, etc.)
Competitive relationships among
external innovators
Profit motive plays key role in driving innovation
Value capture by platform owner
(direct contracting and licensing
with external innovators)
Contribution from mixed
offerings to coproduction
Informal governance (socially
embedded interactions)
Cooperative relationships
Range of extrinsic and intrin- motivations
Value capture only through demand (driven by external
innovation)
Competitive Markets Collaborative Communities

Figure 44: Approaches to managing outside innovation: markets versus communities
According to Boudreau and Lakhani, the dynamics of the two forms of manage-
ment are so different that enterprises must get in the clear on three questions be-
fore acting. First, what types of innovation should be entrusted to outside innova-
tors? Second, how is one to motivate such outside innovators? Third, what
business model is the right one?
If the innovation challenge is a matter of moving a step or two beyond a cumula-
tively acquired body of knowledge, then collaborative communities will have in-
herent advantages. The primary task at hand will be to integrate skills, knowledge
and technologies that are not within the scope of any given stakeholder.
However, if the innovation challenge requires extensive experimentation involving
fundamentally different technical approaches and divergent customer and retailer
groups, then a competitive-markets approach will have natural advantages, given

72. 4.8 Excur
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73. 64
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74. 4.8 Excursus: FeliCa 65
Alternative Platform Strategies
SAP(third-party
applications)
Facebook
(marketers &
product developers)
Apple iPhone (jailbreakers)
SAP
(developer network)
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(cloud computing)
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Google Android (hardware development)
Wikipedia
Apple
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Google Android (operating system
development)
Competitive
Markets
Communities
Source: Kevin J. Boudreau / Karim R. Lakhani

Figure 47: Real-world examples of the various platform models
77
, © Kevin J. Boudreau /
Karim R. Lakhani
The platform facilitates a robust exchange between the two parties, although the
innovator does not interact directly with the platform owner during the innovation
process.
The multi-sided platform strategy aims to reduce search costs and the subdividing
of transactions and, not least, to generate positive network effects, which, in the
end, is essential to any expansion strategy. In extreme cases, it may come to a win-
ner-take-all market.
The multi-sided platform strategy reduces search costs by reducing the asymmetric
exchange of information between the retailer and the customer (e.g. in the case of a
mobile payment platform). Moreover, the value of the platform will grow as more
customers avail themselves of the services and more retailers use the services to
transact payments. The provision of payment services also represents an example
of sharing transaction costs. The platform owner makes an infrastructure available
that significantly facilitates the transaction of payments between retailers and cus-
tomers and thereby enables a reduction in the shared transaction costs.
78


77 Hagui, Andrei, loc. cit. pp., 8-9, 22 78 Hagiu, Andrei, loc. cit., p. 8

75. 66 5 Innovation Management
In the real world, we often encounter mixed approaches to the management of ex-
ternal innovation. We can also expect to see this among the successful providers of
mobile payment solutions. This means that the innovation strategy implemented
by the prospective providers will be a critical success factor. At the appropriate
time, the providers should establish an innovation strategy that matches the par-
ticular type of innovation involved, considers the relevant motivations and makes
use of a suitable platform business model.

76. 6 Case Studies
6.1 M-PESA: Most Successful Mobile payment Service
in the Developing Countries
6.1.1 Overview
6.1.1.1 Kenya
The East African country of Kenya has a population of nearly 39 million. Around
78% of all Kenyans live in rural areas. More than 42% of Kenyans are younger than
15-years-old.
79
Among African countries, Kenya has experienced above-average
growth in recent years.
The Kenyan economy is dominated by agriculture, with many people living from
subsistence farming and the production and export of coffee and tea. Other indus-
tries are less developed.
6.1.1.2 M-PESA: Mobile Money
With a market share of nearly 80%, Safaricom (a Kenyan subsidiary of Vodafone) is
the dominant mobile network operator in Kenya. After conducting a preliminary
pilot test,
80
Safaricom introduced one of the most successful services for the trans-
fer of money via cellphones in March 2007: the SMS and USSD-based system
known as M-PESA. The “M” in M-PESA stands for “mobile“ and “PESA” is the
Swahili word for “money.”
81

The service enables its users to transfer money to a cellphone account, to transfer
credit via USSD-SMS technology to other users and, finally, to exchange the credit
(“e-float”) on the cellphone account for “real” money.
From the very beginning, M-PESA grew quickly and soon established itself as the
most successful cellphone-based financial service available in any of the develop-
ing countries. It ultimately became a model for others.
82


79 Mureithi, Muriuki: “m-Payments Experience in Kenya – The Case of M-PESA,” Summit
Strategies Ltd + International Development Research Center Canada and DID – Depart-
ment for International Development UK, 27 April 2010, p. 2.
80 Nick Hughes and Susie Lonie: “M-PESA: Mobile Money for the Unbanked – Turning
Cell Phones into 24-Hour Tellers in Kenya,” in: Innovations, Winter/Spring 2007, pp.: 77- 80.
81 International Finance Corporation (World Bank Group): “Case Study – M-PESA Kenya,”
15 June 2010, p. 2.
82 Thomas Lerner “Datenbeschleuniger für Banken – Internet via LTE,” Die Bank – Zeit-
schrift für das Bankwesen, May 2010, p. 68.
T. Lerner, Mobile Payment, DOI 10.1007/978-3-658-03251-7_6,
© Springer Fachmedien Wiesbaden 2013

77. 68
By April
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83 Safaric
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85 Prof. N
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84
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afaricom’s
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“Financial I
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rt Global B
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ase Studie
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t Kenya als
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f
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78. 6.1 M-PE
S
Mobile mo
erators in
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of 96,000 r
70%, mob
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86 GSMA
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87 Central
SA: Most Suc
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Prerequisites
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ney for the U
tion, p. 6, 2013
ya: “Mobile Pa
bile payment
lso offered b
his expansion
illion use the
uted to grow
preferred form
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three differe
pecific chara
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terprises dev
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ayment Data,”
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8687

hat leave Ke
ddle of the 1
cessfully from
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dustry from 2
69
network op-
ow have reg-
he large base
frequency of
This means
7

enya predes-

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2012 – Global
9
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79. 70 6 Case Studies
faricom with a market share of 78%, Zain with a market share of 15% and Or-
ange with a market share of 5%.
From 1999 to 2009, the number of mobile network subscribers climbed to 19.4
million.
88
If we assume that each subscriber has only one cellphone, then more
than 50% of the population (more than 85% of all adults) now has access to mo-
bile network technology.
No other technology has penetrated the market so rapidly in Kenya. For in-
stance, it took 100 years for the land-line telephone network to reach a coverage
rate of 80% of the entire population. The dissemination of cellphones took less
than a fifth of the time to reach the same level of coverage.
3. Favorable market conditions
Safaricom’s virtual monopoly on the provider side helped it to establish the M-
PESA service on the market. The existing demand for financial services (i.e. the
lack of available financial services) was also a contributing factor. Before M-
PESA, only 19% of the Kenyan population had access to such services. That
number then grew to 60% within a span of only three years. Safaricom’s com-
petitors in the banking sector had offered their services only in the country’s
major centers. Moreover, compared to M-PESA, the services were not fast, not
convenient and not available everywhere.
4. The role of the regulatory agencies
8990

The regulatory agencies quickly recognized the broad economic benefits associ-
ated with M-PESA’s introduction and played more of a supporting role from
the beginning, acting more or less according the principle that “regulation fol-
lows innovation.” This effectively lowered the legal hurdles. The regulatory
agencies thereby also helped to secure trust in the new payment-transaction
mechanism and facilitate the structuring of the business model, the service offer
and the distribution channels.
The regulators also set various conditions. The value of individual transactions
was limited to prevent money laundering and Safaricom was also required to
integrate a system to prevent money laundering, including the monitoring of
suspicious transactions. Regular audits in connection with Treasury Depart-
ment inquiries relating to fraud and system downtimes (e.g. relating to the op-
erational risks of the use of the technology or the robustness of the system) as

88 DFAE: Département fédéral des affaires étrangères: “Wirtschaftsbericht Kenia,” 29 June
2010, p. 2.
89 Tonny Omwansa: “M-PESA: Progress and Prospects,” in: Innovations/Mobile World
Congress 2009, pp. 120-122.
90 Afi – Alliance for Financial Inclusion: “Enabling Mobile Money Transfer – The Central
Bank of Kenya´s Treatment of M-PESA,” 17 February 2010, pp. 1-16.

80. 6.1 M-PESA: Most Successful Mobile payment Service 71
well as end-to-end inspections of encryption, SIM card function, business pro-
cesses, hardware security, organizational security, backup, control and monitor-
ing of all processes was met with a positive response on the part of the Kenyan
population.
5. The design of the services (which were convenient, secure, intuitive, fast and
inexpensive) led from the beginning to high rates of acceptance, which meant,
in turn, that positive network effects could be generated and the classic chicken-
and-egg conundrum could be avoided in the context of the introduction of
payment-transaction applications.
91

Safaricom showed how customers could easily profit from the service and re-
moved all of the hurdles that might be in the way of system use.
The company reinforced the trust in its local sales teams and supported them
when it came to marketing services, registering customers and exchanging
money.
The design of the value-added chain and the establishment of the necessary
roles were essential. Revenues, branding and remuneration structures were put
in place from the beginning, with the individual stakeholders taking over the
following responsibilities:
Safaricom/M-PESA:
• Operate and develop the m-payment platform and implement the
agreed-upon business model
• Manage the marketing mix
• Provide technology and continuous service development
• Receive the transaction fees
Retailer
• Cash and liquidity management
• First point of contact for customers
• Local marketing
• Receive 30% of the transaction fee
Customer
• Pay fees based on the amount of the transaction
• Pay money to registered and unregistered users
• Use M-PESA services


91 Arthur D. Little (Pulver and Ludwig S.): “Case Study on M-PESA,” February 2010, p. 11.

81. 72
Figure 5
The rem
contrib
charge
ment to
to the g
pricing
The ov
ular tra
require
buildin
and tra
6. The ma
a. Esta
b. Crea
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i.
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92 Arthur D
50: Value-add
moval of the
bution to the
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o everyone, t
growth in cu
g policies (e.g
erall offer is
aining progr
ed Safaricom
ngs, service b
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ablish a high
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Incentives
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D. Little: “Cas

ded chain and
e significant h
success of th
, low fees, c
the establish
ustomer num
g. no SMS fee
rounded off
rams for com
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brand, agent
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degree of br
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ork, virus re

se Study on M
M-PESA role
hurdles to s
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convenient a
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mbers (trusted
es).
f by liquidity
mpany empl
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and distribu
use of availa
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rand recogni
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egistration
M-PESA, Kenya
e
s
92

y
stem use r
e
e
. In particu
l
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s
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w
d
brand) an
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oyees, retai
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t of the retail
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read technolo
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ishing a com
2010, p. 10.
Case Studies
an important
uded free-of-
ciple of pay-
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tomers. This
vestments in
g campaigns
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mprehensive
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82. 6.1 M-PESA: Most Successful Mobile payment Service 73
iii. Close monitoring of customer experience
c. Offer significant price and commission incentives to secure swift customer
and retailer acceptance.
93

d. Introduce suitable marketing mix/killer application and establish trust.
The launch with “Send money home” eliminated barriers by lowering the
risk and costs associated with money transfers. That was M-PESA’s killer
application, the application that ultimately made a significant contribution
to mass acceptance.
The corporate brand (Safaricom green) was compelling for retail outlets.
SMS confirmation of transactions
Requirement that retailers keep a physical record of all transactions
e. Distribution channels (retail aggregator model)
6.1.3 M-PESA Development
M-PESA’s innovative business model was jointly financed in 2005 by Vodafone
and the Department of International Development (DFID), with each party con-
tributing 50%. The DFID’s core mission is to reduce poverty in developing coun-
tries by supporting private initiatives.
After Vodafone had provided the platform, it worked with its Kenyan subsidiary
Safaricom on a pilot test. On 6 March 2007, the mobile payment transaction plat-
form was made available throughout the country with the simultaneous launching
of a marketing campaign for the payment-transaction service. In the wake of the
success that came in the following two years, services were expanded. Finally, be-
ginning in 2010, more comprehensive financial services were introduced and what
was originally planned as a payment-transfer solution emerged as a mobile-
banking platform.
94


93 Mas, Ignacio and Amolo Ng´weno, Ebenda, p. 1.
94 Nyaoma, Gerald (Director Banking Services, Central Bank of Kenya): “Mobile Payments
Regulatory Framework Perspectives in Kenya,” Mobile Payments Services Regulatory
Financial Dissemination Workshop, Lagos, 25 January 2010, p. 12.

83. 74
Figure 51: M
M-PESA r
then grew
the end of
The numb
the second

95 Safarico
M-PESA custo
recorded 1 m
w to 5 million
April 2011, M
ber of retaile
d largest sale

om: M-PESA C

omer and reta
million new
n by the end
M-PESA had
rs grew dur
s network in

Customer and
ailer developm
subscribers
d of 2008 and
d 14 million c
ring the sam
n the country
Agent Numb
m
ent up until
in the year
d
9 million
b
c
ustomers.
e period to
y
.
ers, 16 May 2
0
6
C
March 2011
95

2007. The to
y the end of
28,000, maki
011, p. 1.
Case Studies
otal number
f 2009. As of
ing M-PESA
s

r
f
A

84. 6.1 M-PE
S
Figure 52: D
n
Only the s
M-PESA s
outlets and
6.1.4 H
Safaricom
their cellp
tion proce
that are als
Instead of
measured
that exist i
ministered
via a SIM

96 A SIM
phones
enable u
vice) is a
SA: Most Suc
Distribution o
nacio Mas / D
sellers of cell
sales outlets
d bank outle
How M-PESA
accepts cash
phones and a
eds on the b
so required t
f money, Sa
in monetary
in an accoun
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card storage

(Subscriber Id
that operate o
users to acces
a news channe
ccessful Mob
of M-PESA sa
an Radcliffe (
phone airtim
is 14 times h
ts.
A Works
h credit from
are at the sam
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afaricom ho
y units (esse
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A. It is conne
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dentification M
on the basis o
ss and navigat
el that is avail
bile payment
ales outlets in
(Bill & Melin
me account fo
higher than
m customers
me time reg
ssport or a na
nk account.
olds somethi
entially an in
to the name
ected to the
n on the cellp
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of GSM proto
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t Service
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Kenya
,
©
W
da Gates Stif
t
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the combin
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who have
a
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E
a
tional ID c
a
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dividual el
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of the user.
cellphone
n
p
hone.
96
Whi
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is a smartca
cols. The car
d
o
ne menu. Th
e
M
cellphones.
Weltbank, Aug
tung)
s outlets. Th
ed total of po
a Safaricom
ESA users. T
ard, the same
able, namely
ectronic mon
The account
number and
le users incu
rd that is ins
d contains enc
e SMS (Short
75
gust 2010, Ig-
he number of
ostal-service
SIM card in
The registra-
e documents
ly “e-Float,”
ney account)
t itself is ad-
is accessible
ur no fees for
stalled in cell-
cryptions that
Message Ser-
5

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85. 76 6 Case Studies
money transfers, a fee amounting to 1% of the transaction value is applied when
users exchange “e-float” for real money.
M-PESA customers can exchange e-float with other M-PESA customers via SMS
technology or exchange it for cash at Safaricom outlets. The following e-float flat
rates apply: USD 0.40 for P2P transfers, USD 0.40 for bill payments, USD 0.33 for
withdrawals and USD 0.013 for dialing up account information.
The customer accounts are administered on a server by Safaricom. The mobile
network operator maintains all customer-credit balances at two banks.
M-PESA subscribers can transfer money or withdraw money from a Safaricom
agent. The agents receive a fee for each withdrawal. M-PESA agents accumulate e-
float on their cellphones, i.e. acquired from Safaricom or customers, and administer
cash in their business offices. In other words, much of the task of maintaining li-
quidity and security is handled by the Safaricom agents.
M-PESA retailers have formed retailer groups at various locations to minimize the
occurrence of imbalances within a given group.
These groups include a central office that is directly connected to M-PESA. The
money that is gathered by M-PESA in exchange for e-float is transferred to regular
bank accounts held by Safaricom.
The Kenyan Central Bank has so far issued no special reserve-depot requirements
in relation to M-PESA. This can be expected to change if M-PESA continues to de-
velop and credit balances continue to grow. Regulators will then examine the pro-
cedure.
Among other things, the success of M-PESA is based on the trust of the people in a
company that enjoys one of the best business reputations in the country. The De-
posit Protection Fund currently covers savings of up to only KSH 100,000 (around
EUR 1,300). This means that M-PESA credit balances would be largely uninsured
in the wake of a banking industry collapse.
Assigned agents attached to Safaricom’s central office administer cash and e-float
balances via inter-agent and central-office transactions. Both the central office and
these agents can make transactions with M-PESA users.
The second model is an aggregator model. The aggregator acts as a central office
and manages the same tasks. However, the agents can also act as entities that are
independent of the central office. Their relationship to one another is merely con-
tractual.
The third model permits a bank to act in the capacity of a super-agent. The bank
thereby assumes the role of the aggregator, although without being able to ex-
change e-float with M-PESA users.

86. 6.1 M-PESA: Most Successful Mobile payment Service 77
The M-PESA service has so far led to a reduction in the circulation of cash. If the
acceptance of e-float continues to grow, it will begin to take on properties that are
typically associated with cash.
6.1.5 Future Challenges
6.1.5.1 Service Development and Potential Concept Development
The core service centered originally on P2P applications (the transfer of money). In
recent months, M-PESA introduced an institutional payments service. Enterprises
can now use M-PESA to pay their employees and settle their accounts payable.
In the future, the service is to be made available to retailers as a means of payment
for goods and services.
M-KESHO, Swahili for “mobile tomorrow,“ was introduced in April 2010. M-
KESHO is essentially a micro-credit and investment business. By March of 2011,
more than 750,000 Kenyans had availed themselves of this service for their person-
al “tomorrows”. Huawei smartphones are now being used to enable M-PESA
transfers, essentially opening the door to even more complex services.
The M-PESA money transfer platform has also been expanded to include 80,000
Western Union dealers. This enables Kenyans abroad to use the mobile-money
service in 45 countries throughout the world.
97

Around USD 642 million was transferred to Kenya in the year 2010 alone. With its
“Nu nana” (“buy“) service, Safaricom currently supports shopping at supermar-
kets.
98

The International Monetary Fund (IMF) reported on 24 October 2011 that the mo-
bile payment provider M-PESA now processes more transactions in Kenya than
Western Union throughout the world. Around 70% of the Kenyan population cur-
rently uses this service. This means that the service will develop from a compre-
hensive retail M-payment platform to a comprehensive financial services platform.
The following factors will be essential in this regard: new services require im-
proved customer care, network availability will have to be expanded, the business
ecosystem will require additional national and international partnerships and, last
but not least, competitors will want a piece of the pie.
In June 2012, Safaricom reported having 15 million M-PESA customers. Further-
more, there are likely to be around 70,000 retailers offering the M-PESA service
throughout the country. Expanding the business ecosystem to include banks and
undergoing the transformation from a mobile payment provider (MNO-driven

97 Okoegwale, Emmanuel: “Safaricom´s M-PESA Transfers Outstrip Western Union Glob-
ally,” in: www.mobilemoneyafrica.com; 21 October 2011.
98 Lerner, Thomas: “Mobile Payment – Das Geld liegt in der Luft,” in: Die Bank, Volume
5/2012, p. 64.

87. 78 6 Case Studies
model) to a mobile-banking provider (collaborative model) has enabled Safaricom
to exploit new business opportunities. Within 3 months of introducing a new range
of services (M-Shwari) in December 2011, Safaricom had acquired an additional
800,000 customers.
International expansion is now the declared objective. The company has estab-
lished itself in various countries with varying degrees of success. By the end of
2014, the processing speed of the platform is to have been increased ten-fold.
Moreover, the platform is to be further expanded to include innovative services
such as the acceptance of Bitcoins.
6.1.5.2 Regulatory Requirements/Uncertainty
The banks can be expected to increase the pressure on Safaricom and M-PESA. The
task of meeting expanded money laundering requirements and fraud-prevention
requirements in particular can be expected to become more demanding.
6.1.6 Background Information on M-PESA
6.1.6.1 Comparison of M-PESA with Other Payment Transaction Instruments
From the beginning, the Kenyan Central Bank emphasized that M-PESA is not a
bank. However, cellphones were widespread in Kenya at the time (both in urban
and rural areas) while regular banking services were scarcely available. M-PESA
quickly developed into a replacement for missing bank accounts because it
“reached out to” the unbanked population.

88. 6.1 M-PE
S
Figure 53: C
t
Legend:
RTGS – Re
ACH – Au
ATM – Au
Mobile – M
6.1.7 C
M-PESA w
settlement
Furthermo
very low.
value per
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99 Stephen
“Rising
ber 2010
S
A: Most Su
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Comparison o
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Mobile Paym
Conclusion
will never rep
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The growth
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n Mwaura Nd
Payment Infr
0, p. 50.
ccessful Mob
of payment tr
Kenya, Decem
oss Settlemen
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duati (Head of
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ransaction vo
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79

nnel
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89. 80
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90. 6.1 M-PE
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6.1.7.2 A
Figure 55: A
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81

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91. 82
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Figure 56: M
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While M-P
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100 Povert
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v
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that warra
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b
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t that is typi
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bile money ca
arious enterp
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minished sign
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s have retai
will have to co
isk associated
r
100
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e payment se
ving in devel
nt considerat
Region: “Ken
ber 2010, p. 21
Case Studies
ically associ-
work of com-
annot be ex-
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nificantly or
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92. 6.1 M-PE
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services (e.g.
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93. 84
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6.2 O
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6.2.1 S
In the begi
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94. 6.2 Osaif
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95. 86
speed and
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drawback
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logical nic
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6.2.2 S
The succe
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Case Studies
FeliCa chips,
ips. Another
ose countries
py a techno-
wallet appli-
as a Galapa-
possible.
uld not have
East). In co-
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96. 6.2 Osaifu-Keitai – The Japanese Model for Developed Countries 87
6.2.3 NTT DoCoMo’s Osaifu-Keitai Innovation
NTT DoCoMo´s Osaifu-Keitai system for money transfers and for private cashless
payments via cellphone became a smashing success in Japan within three years.
Osaifu-Keitai essentially means mobile money in Japanese. Even though cash is
still one of the most common means of payment in Japan, e-money has continued
to develop as an alternative means of payment and has begun to replace cash in
various areas.
The reasons for this include the fact that mobile devices based on the successful i-
mode Internet platform have become a convenient tool for the customers of the tel-
ecommunications company. In addition to combining contactless IC technology in
the form of the FeliCa chips and mobile wallet functionality in new mobile devices,
NTT DoCoMo accepted a major risk in adopting the role of a moderator and went
on to develop an innovative business model for marketing the new applications.
Osaifu-Keitai was a win-win situation for all of the stakeholders in the new busi-
ness ecosystem. In the end, Osaifu-Keitai succeeded in changing the lives of people
by giving them greater flexibility and mobility – in part because it, in the words of
Takeshi Natsuno, “established a sensible bridge between the virtual world of the
Internet and the real world of commerce.”
6.2.4 The New Value-Added Strategy
The combination of cellphone and contactless IC enabled NTT DoCoMo to intro-
duce a decisive change in strategy. Up until 1999, the company had focused on the
marketing of “voice” and expanded its telecommunications infrastructure accord-
ingly.
102
After 1999, it changed its focus to Internet connectivity, i.e. the establish-
ment of an infrastructure for IT in order to offer its customers multi-media and (i-
mode) Internet services.
These developments were followed in 2004 by the inclusion of a lifestyle infra-
structure
103
with a wallet function as a starting point, with the payment function be-
ing selected as a point of entry for a foray into the real world. It was clear that new
lessons had been learned from the many failed attempts to introduce mobile pay-
ment services at the end of the 1990s. The cellphone is also a marketing tool that
nearly everyone carries at all times. The average Japanese also carries twelve dif-
ferent service cards around on a daily basis.
104
This was the beginning of the idea.
People will no longer need to carry cash and service cards around with them if the-
se can be integrated into their cellphones and smartphones and everything remains

102 Masaki Yoshikawa (NTT DoCoMo): “Mobile Wallet Service in Japan (Osaifu-Keitai),”
31 October 2008, p. 3.
103 NTT DoCoMo Factbook, June 2011, p. 15
104 Innovation Research: “Mobile FeliCa in Japan – 5 Years of Contactless Mobile Services:
Payment, Loyalty, Transport,” December 2009, p. 2.

97. 88
secure an
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Figure 62:
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105 Hiro
m
10 Fe
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t
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(Nomura Re
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-Keitai
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,
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98. 6.2 Osaif
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106 Carl A
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The Innovativ
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Atsushi Hirano
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106
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of including
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ded to be ar
ted service m
del at a very e
in Japan,” Jun
89
ki Yoshikawa
tailers or the
stomers and
grators.
of these three
ganism in the
ew and high
competitors
s, competen-
was to take
rranged and
manager and
early stage.
ne 2007, p. 13
9


a
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99. 90
Figure 64: N
The Osaifu
• Device
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Case Studies

ing:
tionality and
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o reduce the
s
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100. 6.2 Osaif
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6.2.6 M
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107 Carl A
2009, p
108 Andre
sion St
u-Keitai – The
Multi-sided P
Development
oMo was qu
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ng before ne
Development
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Atsushi Hiran
p. 2.
ei Hagiu: “Mu
trategies,” Wo
e Japanese M
Platform Stra
t
107108

uick to recog
changed its p
g the role of t
the custome
oMo had alr
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sufficient nu
etwork effect
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no, in: Innova
lti-sided Platf
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M
odel for De
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gnize the di
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the platform
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. Armed with
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ticipants fr
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: “Mobile F
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The three m
s and the ret
perience with
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Keitai) in Japa
eliCa in Japan
tions to Desig
6 pages.
91
bile payment
trategy, with
main facets of
tailers in the
h customers
eded only to
, the compa-
us groups. It
rall momen-

an
n,” December
gn and Expan-
1
t
h
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e
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o
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t
-
r
-

101. 92 6 Case Studies
6.2.7.1 Suica
Introduced in 2001, expanded through the addition of a credit function in 2004 and
integrated into cellphones in 2006, Suica is today’s de-facto standard.
According to JR East, a total of 33.6 million cards were in circulation by September
2010, with “Mobile Suica” accounting for 2.18 million subscribers and “View Sui-
ca” offering credit card functionality for 2.18 million subscribers.
109
More than
115,300 retailers are e-money-enabled, which represents an increase of 50% within
one year. Moreover, e-money transactions increased by 35% within the year.
Around 20 mobile payments are transacted per retail store every day at an average
transaction value of EUR 6.64.
6.2.7.2 NTT DoCoMo
In 2004, NTT DoCoMo introduced Osaifu-Keitai, the mobile FeliCa wallet, and es-
tablished it as a supplementary means of transacting payments. By 2005, the ser-
vice (i.e. the technology behind it) had been adopted by competitors KDDI and
Vodafone. A further milestone was reached in January 2006 with the integration of
the existing Suica chips. Before this, Suica had largely been an independent pre-
paid card that was also based on FeliCa technology.
Upon the launch of DCMX in April 2006, Osaifu-Keitai became a mobile credit
card enabling the transaction macro-payments.
The use of DCMX requires the entry of a PIN for larger amounts. According to
Strategy Analytics, FeliCa chips in Japan accounted for a transaction value of USD
900 million in 2006.
110
By 2009, more than 60 million mobile devices with an inte-
grated FeliCa chip had been sold in Japan.
111112

According to the Tokyo-based Euro technology Japan KK, one of Japan’s leading
technology consultants, the number of mobile payment transactions can be ex-
pected to increase ten-fold in the country every four years. This would entail
around 1 billion transactions a month in the year 2014.
According a survey carried out by the Nomura Research Institute, the use of e-
money in Japan, particularly in the country’s major cities, is also on the rise. Here,
it warrants bearing in mind that e-money services alone are not, according to the

109 Martin Retzmann: “Smartcards in Fernost – Vorbilder für mehr Akzeptanz von e-
Ticketing,” 5th ÖNPV Innovation Congress, Freiburg, 23 February 2011
110 Mathieu Hauck: “Mobile Payment süss-sauer – Steht der Durchbruch mobile Bezahl-
systeme nach asiatischen Vorbild in Deutschland bevor?” 27 May 2010, p. 6
111 Jean-Yves Granger in: Innovation Report: “Mobile FeliCa in Japan,” December 2009, p.
4.
112 Hiromishi Yasuoka (Nomura Research Institute): “Small Payment Business in Japan,”
10 February 2010, p. 12.

102. 6.2 Osaifu-Keitai – The Japanese Model for Developed Countries 93
available statistics, profitable. Retailers and customers do not show sufficient inter-
est until value-added services are involved.
6.2.8 The Reasons for Success in Japan
6.2.8.1 Better Starting Conditions
Many have regarded Japan as a special case. Japan is said to offer better interfaces,
better user interfaces, and a more favorable regulatory environment for innova-
tions and both more remarkable and more competitive services than elsewhere.
6.2.8.2 Passion for Novel Technologies as a Key to Pioneering Role
Culturally speaking, Japan seems to be a classic country of technology aficionados
and early adopters.
113

6.2.8.3 High Population Density and Potential Demand
The country’s large population density guarantees a high demand for new services
that are perceived as making life easier.
6.2.8.4 Japanese Mentality
The specific case of Osaifu-Keitai involved an ideal combination of avoiding mei-
waku and achieving tokushita.
114

In Japan, there is a certain stigma attached to the use of credit cards. People are
generally expected to have creditworthiness and not to need leverage on the mar-
ket. Paying with a credit card at a department store is therefore frowned upon. It is
not for nothing that credit cards account for only 10% of all purchases. Moreover,
by refraining from using credit cards, people avoid causing a stir or inconveniences
for others. Similarly, people don’t talk loudly on their cellphones and they don’t
want to be a cause of longer lines at the department store. After all, other custom-
ers should not be made to wait on account of me: meiwaku.
On the other hand, the Japanese love loyalty and systems of reward. The collecting
of bonus points is not exactly a matter of play, but there is something playful about
it. These systems give rise to a kind of pseudo-money. You get something for noth-
ing: tokushita.
What we have is essentially a system comprised of a push (meiwaku) and a pull
(tokushita).

113 Martin Retzmann: “Smartcards in Fernost – Vorbilder für mehr Akzeptanz von E-
Ticketing,” 5th ÖNPV Innovation Congress Freiburg, 23 February 2011.
114 Scott D. Mainwaring and Wendy March (Intel Research Group) and Bill Maurer (Uni-
versity of Irvine): “From Meiwaku to Tokushita! Lessons for Digital Money Design
from Japan,” 11 January 2008, pp. 1-4.

103. 94
6.2.9 C
Figure 66: C
Osaifu-Ke
registratio
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6.2.10 S
The recom
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Case Studies

s customer-
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104. 6.2 Osaifu-Keitai – The Japanese Model for Developed Countries 95
the services over a longer period of time, a lock-in effect may result, i.e. on
account of the higher costs associated with switching providers or the eco-
nomic disadvantages of leaving the marketplace. The customer is thereby
bound to the provider and the services. Competing offers are hopeless in
this phase.
3. The company established a business ecosystem for the Japanese market. It
entered into cross-industry alliances. If necessary, the company was pre-
pared to obtain a stake in the country’s second largest credit card company
as a means of acquiring the necessary know-how and meeting the regula-
tory requirements. Acquiring a major stake is not always necessary. It of-
ten suffices to enter into partnerships when a company has no internal
source of the necessary know-how.
4. Early market penetration through an advance investment of EUR 73 mil-
lion to make FeliCa readers available to retailers on the market with the
following goal: early solution of the chicken-or-egg conundrum.
5. The original assumption in the case of the Osaifu-Keitai was that the solu-
tion would offer a means of incorporating all of the bonus and loyalty
cards in peoples’ wallets. Here, country-specific sensibilities were taken in-
to consideration. Projects were initiated to carefully observe Japanese cus-
tomers and assess the results in terms of creating tokushita and avoiding
meiwaku.
6. NTT DoCoMo developed more than just a mobile wallet and immediately
began to market new solutions that had the effect of offering retailers addi-
tional value-added services. This created extensive penetration on the re-
tailer side and led to indirect network effects via more frequent and more
efficient transactions.
7. The cross segment cooperation among companies was an essential factor
when it came to the functioning of the business model. Observers in Japan
tend to be of the opinion that this is more pronounced in Japan than in Eu-
rope.
8. Early collaboration with the manufacturers of cellphones and chips as a
means of exerting an influence on the specifications
9. Many years of experience prepared the company for international expan-
sion.
10. The changeover to NFC technology would have been necessary to avoid
going to the marketplace with a Galapagos solution.
The individual points clearly show that a successful mobile payment service re-
quires a well-conceived strategy and an entrepreneurial approach.

105. 96
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ee operating
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111. 102 6 Case Studies
6.4 Square
The California-based mobile payment startup Square was founded by Jim McKel-
vey and Jack Dorsey, the founders of Twitter.
126
The aim of the newly developed
service is to make it easier for small-business operators to accept credit card pay-
ments at any time and at any location, with the only necessary tools being a
smartphone or iPad (with an Apple or Google operating system) and the Square
Reader, a small plastic device that plugs into the audio jack of the smartphone or
tablet and reads out the customer data stored on the credit card’s magnetic stripe.
The technology involved represents an alternative to near field communication
(NFC).
127

As in the case of NFC-based services, the business model requires an investment
on the part of the retailer and the customer. They each need to download the app
that corresponds to their mobile device (Android or Apple).
6.4.1 How Square Works
The Square
128
application allows customers to view merchant menus and then pay
via their Square accounts. This happens in two ways. The necessary items include a
Square Case Card that is provided by participating merchants and the Square Reg-
ister. This register transforms a smartphone or tablet computer into a POS device.
Customers swipe their credit cards through the register and then sign on the screen
to complete the transaction. An acknowledgement of the transaction is then sent
via e-mail or text message.
The merchants use the registration application to transact the payment and ask the
customers whether they want to use the Case Card application. Once both parties
are registered in the Square system, the transaction flow goes more smoothly and
additional services (e.g. couponing) become available.
6.4.1.1 Procedure from the Perspective of a Merchant
1. Create a Square account to enable the receipt of payments.
2. Customers swipe their credit cards through the slot on the Square Reader.
The customer data are encrypted and then transmitted to the Square Regis-
ter via mobile device.

126 “Mobile Payment Processing: Squaring up the Competitors,” INFM-718Z, Spring 2011,
pp. 6-10.
127 “Payment Startup Square Rolls Out iPad Sales App,” PHYSORG.COM, 2011.
128 “Square Pulls Buyers and Sellers into the Loop,” in: E-Commerce Times – E-Business
Means Business, 30 May 2011, pp. 1-2

112. 6.4 Squar
e
3. An
to
re
4. If
th
in
5. Th
Figure 74:
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6.4.1.2 S
1. Eq
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129 “Mobi
pp. 9-1
e
n app is activ
calculate th
d and displa
everything i
he customer t
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Advantages a
ment Processi
Square’s Syst
quipment: iP
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around with
ism that has
ud (stolen cre

ile Payment Pr
10.
vated that en
e total. If pro
ays the error.
is processed
to sign by fin
wledgement b
n is complete
and disadvan
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tem Requirem
Phone, iPad, i
meter audio ja
ccount for the
an expensiv
h you?
been leveled
edit cards) to

rocessing: Squ
nables one to
oblems arise
.
correctly, a
nger. The cu
by e-mail or
e.
ntages of Squ
up the Comp
ments
iPod Touch o
ack to conne
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ve authentica
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o small-busin
uaring Up the
o
display the
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stomer also
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ext messag
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are
129
,
© Var
a
p
etitors
o
r Android
d
ct the card r
e
c
ustomer pa
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a
tion machi
n
m
pany is that
n
ess operato
Competitors
,
products an
cessing, the
en appears a
has the optio
e.
ad Kandahai:
device
eader
yments
ne if you alre
the system t
rs.
,” INFM-718Z
103
nd prices and
screen turns
and prompts
on of receiv-

Mobile Pay-
eady carry a
transfers the
Z, Spring 2011,
3
d
s
s
-
-
a
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,

113. 104 6 Case Studies
The Square Register was initially introduced at around 50 stores in Los Angeles,
New York, St. Louis, San Francisco and Washington D.C.
6.4.1.3 The Business Model
The Square service is primarily aimed at small business owners and the system’s
first customers consisted largely of their friends, family members and colleagues.
The Square Reader is made available free of charge. A fee of 2.75% is charged for
each transaction. The fee in the case of manually recorded credit card data is 3.5%
per transaction and an additional USD 0.15 for “keyed-in” transactions.
130131
Square
is reported to have earned USD 83 million from classic card transactions in 2011.
The “secure” and thereby cumbersome keyed-in payment transactions brought in
an estimated USD 35 million. The competitive advantage here results from the ab-
sence of terminal costs for the merchant. The Square reader, for instance, is availa-
ble in any Apple store for USD 15.00. Just register and you’re in business. In the
case of regular payments, however, the cost factor of the payment transaction will
sooner or later come into focus for small-business operators. Square transfers the
amount of payment to the merchant’s bank account within 24 hours. The usual
monthly fee does not apply.
6.4.2 Square Summary
Founded in the middle of 2009, the enterprise announced on 3 March 2011 that its
per-day processing volume had risen to USD 1 million. Around 100,000 new mer-
chants (e.g. taxi operators, coffee shop owners, lawyers and bookkeepers) are said
to join every month.
132
VISA purchased a stake in the company in April of the same
year. The company accepts various credit cards, including VISA, MasterCard and
American Express.

130 For reasons of security, a card code using the patented key-in procedure is used for
payment authentication instead of a PIN. This does not automatically lead to account
access. Instead, the card code is compared to a deposited code in an authorization sys-
tem. The payment is authorized as soon as it is established that the codes are identical.
131 Duryee, Tricia: “Square´s Next Round Could Swipe a $4 Billion Valuation,” in:
www.pymnts.com, 18 April 2012.
132 “Savantor Market Eye”: 1-15 March 2011, p. 4.

114. 6.4 Squar
e
Figure 75: U
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April 2012
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116. 6.5 Google Wallet (Tap and Pay) 107
6.5 Google Wallet (Tap and Pay)
6.5.1 Overview
Google Wallet is a mobile payment system that essentially allows its users to store
their credit cards, loyalty cards and gift cards on their cellphones or smartphones.
The business model for Google Wallet is open, meaning that all of the cards that
we typically carry around with us in our wallets today can be integrated in our
smartphone. When getting started, the Tap-and-Pay service can only be used with
the Nexus S 4 G, which is available via Sprint. The technology that enables the data
exchange is near field communication (NFC). Google Wallet is currently available
to users free of charge. The counterpart to Google Wallet is Google Checkout that
allows retailers to accept and process the online payments.
6.5.2 Payments
Upon its introduction, the Google Wallet supported two credit cards: the Citi Pay-
Pass (MasterCard) and the Google prepaid card. The plan, however, is to include
all of the major commercially available cards as the Google Wallet service devel-
ops. The Google prepaid card is a virtual card that is supported by MasterCard
and Money Network. This virtual card is refilled using an existing credit card. The
advantage of the MasterCard PayPass for Google Wallet is that it can be used at
hundreds of thousands of retailers in the United States that accept contactless
payments. The way the payment itself works is relatively simple. As soon as the
cashier has called up the purchase, customers wave their smartphones at the Pay-
Pass terminal (as per ISO Standard 14443 or 18092). The Google Wallet transmits
the payment data wirelessly and securely. Customers then receive an acknowl-
edgement of payment. The NFC technology ensures that no hardware connection
is necessary. All you have to do is hold your smartphone at a distance of a few cen-
timeters from the contactless reader. Once the Citigroup MasterCard has been
added to the Google Wallet, customers are allowed to spend USD 100. If customers
want to boost the line of credit for the payment service, they first have to apply at
Citigroup. The activation of the line of credit is set up by the bank and then only
needs to be added to the Google Wallet.
Google also provides a Deal-of-the-Day service featuring local and online bargains.
In most stores, the barcode for the deal is scanned or entered manually by the re-
tailer.
6.5.3 Security
The following security aspects apply to the Google Wallet:
1. Customers are advised to contact their credit card companies immediately
in case of a lost or stolen credit card.

117. 108 6 Case Studies
2. The Wallet can be reset via the settings menu. This enables one to delete all
payment-related transaction information.
3. The payment-transaction data are protected by the Google Wallet itself.
The sensitive payment-transaction data are in the “secure element,” a chip
encrypted with 80 characters
138
that is contained in the Nexus S 4G. This
chip is isolated from the smartphone operating system and is installed in
the hardware. Only authorized applications (e.g. Google Wallet) have ac-
cess to the secure element, i.e. to initiate a transaction. The Google Wallet
also requires the entry of a PIN.
4. The mobile device’s antenna is only activated if the screen is turned on.
Payment transaction data can only be transmitted in the immediate vicini-
ty of a contactless reader if the Google Wallet PIN has been entered.
5. The same rules that apply to conventional credit cards also apply to any
unauthorized use of the Google Wallet.
6. Google is given no access to the payment information of the customers
who use the Google Wallet. Moreover, the transaction history can be
viewed and deleted at any time via the main menu.
6.5.4 Partnerships
By way of establishing and expanding the business ecosystem for the Google Wal-
let, Google has entered into partnerships with various companies
139
in the mobile
device, financial-services and retail sectors. These include Citigroup (credit card),
MasterCard (PayPass), First Data (Go-Tag contactless sticker, trusted service man-
ager) and Sprint (major partner). The list of suppliers also includes Verifone, Hy-
percom, Ingenico and ViVoTech on account of their POS technology. Samsung and
NXP worked together with Google to devise the Wallet technology for the Nexus S
4G. Other partnerships that are to help facilitate and expand the development of
the Google Wallet are to be entered into with payment-transaction networks, POS
system providers, chip manufacturers, mobile-device manufacturers, telecommu-
nications companies, retailers and card-issuing banks.
6.5.5 Google Wallet’s Trajectory So Far
In a talk given at the Mobile World Congress in Barcelona, Spain on 15 February
2011, Eric Schmidt (Google’s former CEO) presented a vision of exploiting a mega-
opportunity in the form of a payment service based on near field communication
technology. He did not discuss a possible entry into the market by Google.

138 Dan Balaban: “Google´s Schmidt: NFC a ‘Mega-Scale Opportunity’,” (Key Note Presen-
tation at Mobile World Congress in Barcelona), 15 February 2011.
139 Webster, Karen: “Mobile Analysis of Google Wallet Launch – Key Facts and Lingering
Questions,” in: www.pymnts.com, 19 September 2011.

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119. 110 6 Case Studies
its telecommunications partners would take a certain amount of time to develop
the service, banks, other payment-transaction service providers and retailers
would not be able in the meantime to muster a critical mass for an alternative.
Chances of success were seen only in niche markets.
6.5.6 Summary
After its introduction in September 2011 and Google’s announcement that it would
soon dominate the mobile wallet market, the Google Wallet was subject to chang-
ing fortunes. In August 2012, Google announced that the service was open to all
payment brands. In October of the same year, the company continued to delve into
cloud services until a certain degree of chaos led to a major internal shakeup in
March 2013. It would be premature, however, to say farewell to the Google Wallet
and Google’s ambition to dominate the mobile payment market. The company’s
war chest is just too full.
143

6.6 MasterCard PayPass
As of the end of 2011, MasterCard PayPass was accepted in 37 countries and at
425,000 locations around the world.
144
The PayPass enables contactless payments of
up to EUR 25. The credit card function or Maestro is necessary for payments above
EUR 25.
6.6.1 Contactless Payment with the MasterCard Pay Pass
Thanks to an RFID chip, the card enables account owners to make contactless
payments of up to EUR 25 without having to identify themselves. Customer au-
thentication (signature and entry of PIN) is necessary if card holders wish to use
their PayPass to make purchases above the EUR 25 limit. However, the selected se-
curity measure depends on the specific account settings. The encrypted transaction
data are transferred from the credit-card chip to the terminal. The payment option
is available to the holders of charge cards and credit cards. The functionality can
also be implemented via the RFID sticker on watches and cellphones.
Customers can determine the PayPass options by viewing the PayPass logo.

142 Ramsay, Rachel: “Google Predicted to Dominate Increasing Mobile Wallet Market,” in:
www.tmcnet.com, 1 December 2011.
143 Webster, Karen (PYMNTS): “The Incredible Shrinking GoogleWallet,” 11 June 2013
144 Mechler: “Mobile Payments/MasterCard, „talk given at the Payment Network Frank-
furt, 28 March 2012, p. 2.

120. 6.6 MasterCard PayPass 111
6.6.2 Contactless Payment and Security
145

The card remains in the customer’s hand throughout the entire contactless pay-
ment procedure. To complete a transaction, customers need to hold their cards
near the terminal (at a distance of around 4 centimeters). Only one transaction is
possible per contact with a terminal because the security chip generates a dynamic
code that is unique for each contactless payment transaction. Attempts at multiple
applications of the code are detected immediately. Personal data (e.g. the name of
the card holder) are not transmitted and are not stored on the chip. If many con-
tactless transactions are carried out without an intervening signature or PIN-based
transaction, then the customer will be requested to establish authentication via PIN
and signature, thereby significantly limiting possible fraud-related damage. Once
the credit card has been used, the retailer must release the transaction. The damage
from fraud without identification is limited by the EUR 25 maximum and the ran-
dom requests for authentication. However, customers are expected to follow cer-
tain security requirements.
Data are encrypted for the transmission between terminal and card. The procedure
is subject to EMV security standards. Furthermore, the data that are transmitted
would not suffice to manipulate a card.
Cash payment transactions take 33.7 seconds. Classic credit card transactions take
26.7 seconds and contactless transactions take only 12.5 seconds.
146

6.6.3 History
2002: MasterCard introduces the MasterCard PayPass for contactless payment
transactions. The field-test takes place in Florida.
2003: PayPass field test with NOKIA
2004: McDonald’s introduces PayPass to its U.S.-based restaurants
2005: Introduction of PayPass by Citibank, Chase Manhattan and HSBC
2007: More than 20 million cards in circulation
PayPass is introduced in London.
2011: Cooperation with Google, Sprint, First Data, MasterCard and Citibank for
the Google Wallet
147


145 St. Gall Kantonalbank: “FAQs about Contactless Payment with PayPass,” from 15 July
2011, 4 pages.
146 Study results published by MasterCard Worldwide from 27 May 2008. 147 Google press release: “Zusammenarbeit von Google, Citi, MasterCard, First Data und
Sprint macht Telefon zur Geldbörse,” 26 May 2011, 3 pages.

121. 112 6 Case Studies
6.6.4 MasterCard Ecosystem
148

The mobile ecosystem for the MasterCard PayPass encompasses component sup-
pliers, MNOs, card issuers, trusted service managers and card/account owners (us-
ers).
The component suppliers make the functional elements of the MasterCard PayPass
available. These include a proximity modem with antenna, the mobile MasterCard
PayPass application, the secure element and the wallet application.
The mobile network operator supplies the contactless device functionality, the
functions of the wallet application, a UICC to ensure the functioning of the secure
element, the pre-installation of the mobile MasterCard PayPass application on
UICC and the integration of the application on the secure element of the relevant
mobile device.
The card issuers supply the payment transaction accounts that users need for con-
tactless payments, register the account owners and administer the application for
the duration of the card’s service life.
The trusted service manager (TSM) makes a broad spectrum of services available,
including the download link from the issuer (secure element) and manages the ap-
plication lifecycle.
6.7 iZettle
iZettle, the Swedish counterpart to Square, is a PCI/EMV-certified payment service
provider that feeds payments into credit-card payment networks or systems.
149
The
service is ideal for private individuals and small businesses.
150

iZettle
151
is based on the EMV standard, which is widespread in Europe. Compared
to Square, the readers are therefore somewhat larger, i.e. a credit card has to fit in
the short side. The service works with VISA, MasterCard and Maestro cards.
6.7.1 The Payment Procedure
The iZettle card reader is connected to the USB jack on the iPhone, iPod or iPad.
Then the iZettle app is activated. The amount due is entered once the credit card
has been inserted. The transaction is then processed as soon as the customer press-
es the pay button.

148 MasterCard: “Mobile MasterCard PayPass Product Guide,” January 2009, pp. 3-6.
149 Bajorat, André M.: “iZettle – der POS-Silobreaker aus Schweden oder das europäische
Square,” in: www.mobiler-zeitgeist.de, 12 October 2011.
150 Maclife: “iZettle – das iPhone als Kreditkartenterminal,” in: www.maclife.de, 14 March
2012
151 Weigert, Martin: “iZettle, ein erster Blick auf Europas Square-Konkurrenten,” in:
www.netzwertig.com; 26 July 2011.

122. 6.7 iZettle 113
Prerequisites for current use include an Internet connection and a positive re-
sponse from the cardholder’s bank. The user requires a PIN, a domestic bank ac-
count and an Apple mobile device. The retailer requires a card reader.
The card is then removed and the payment is confirmed. Lower amounts are con-
firmed using a digital signature (rendered on the iPhone’s touch display). Confir-
mation of higher amounts requires the entry of a PIN.
All data transmissions are encrypted. Moreover, information is not stored on the
iPhone or card reader at any time.
6.7.2 Processing of Payments
All payments made via iZettle are transferred to an online account at iZettle. If this
account is linked to a bank account, the amounts will be transferred to the account
once a day. The daily transfer of the online amounts (at iZettle) is carried out by an
authorized bank.
6.7.3 The Business Model
As in the case of Square, the target group consists of private individuals and small
business operators. A fee amounting to 2.75% of the purchase price and a flat rate
of EUR 0.16 is applied to each transaction.
6.7.4 iZettle Summary
The startup company has duly taken account of and handled the security hurdles
faced by Square for an entry into the European market. After completing a Beta test
phase in the summer of 2011, iZettle started business in November 2011.
152
Around
25,000 retailers agreed to participate. The service has been available for use
throughout Scandinavia (Denmark, Sweden, Finland and Norway) since the end of
February 2012.
153
Entry to the German market is in the planning. It is very likely
that iZettle’s bankcard procedure will be approved by the German Banking Indus-
try Committee.


152 Bajorat, André M.: “iZettle-Update – die Payment-Welle aus dem Norden kommt nä-
her,” in: www.mobiler-zeitgeist.de; 28 February 2012
153 Gupta, Ritesh: “Making the Most of Mobile Apps in Order to Stimulate Mobile Pay-
ment Volume,” Interview with Jacob de Geer, founder of iZettle in: NFC Insight, 3 pag-
es, 27 April 2012.

123. 114
6.8 m
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124. 6.8 mpass (Mobile Payment Service Offered by Wireless Carriers) 115
2011: Comprehensive regular operation begins on 1 November with the goal of
reaching 5 million users and 0.5 million trips per day via Touch-and-Travel as well
as the use of more than 100,000 contact points.
157

2012: 1 March: expansion of the service to include all telecommunications cus-
tomers (except for E-Plus). Touch-and-Travel partners include BVG (Berlin
Transport Company), DB FernverkehrAG and DB Regio AG, ODEG GmbH (East
German Railways), RMV (Rhein-Main Transport Association), S-Bahn Berlin and
the Potsdam Transport Company. In the second half of the year, the service is
available for use in retail stores (expansion of the available services).
158

Later: Integration of NFC technology in the SIM card
6.8.2 How mpass Works
159

6.8.2.1 Registration
1. Customers registering for the first time (pre-paid customers) receive a user-
access code from mpass. The users receive the code with 1-cent transfer from
mpass to the specified bank account. The access code is entered under the in-
tended-use rubric.
2. Users register via the mpass portal atwww.mpass.de under “My mpass” by en-
tering their cellphone numbers and a 4-digit code of their choosing, i.e. the
mpass PIN. The customers can then activate their mpass accounts via their ac-
cess codes.
3. Customers can now begin to pay with the mpass.
4. The mpass is available free of charge to all mobile-device users. Only the au-
thentication SMS to conclude the payment procedure is subject to a standard
SMS charge that appears on the bill for the mobile network service.
5. Customers who forget their PIN scan generate a temporary PIN via “My
mpass.”
6.8.2.2 mpass Use
160

At the moment, mpass can only be used for online shop payments. The procedure
requires Internet access and a cellphone. In addition to the customer authentication

156 Press release issued by Telefonica “mpass bei Plus.de und L´Tur: Online mit dem
Handy bezahlbar,” 29 March 2012.
157 Handelsblatt: “Bezahlen mit dem Handy soll salonfähig werden – Gespräche mit dem
Handel laufen,” in: www.handelsblatt.de, 15 August 2011
158 Sternkopf, Matthias: “mpass, PayPasso der Google Wallet – NFC-Technik: Wer macht
mit?” in: www.computerwoche.de, 28 April 2012.
159 See www.mpass.de
160 Kulsiewicz, Carolina: “Touch-and-Travel App – Bedienungsanleitung,” 10 pages, 9
February 2012.

125. 116 6 Case Studies
via PIN, each payment has to be confirmed separately via the cellphone network
(i.e. an Internet-dependent medium) per SMS.
Procedure:
• Select mpass as the manner of payment.
• Enter cellphone number and mpass PIN.
• Receipt of SMS that contains the transaction number (mTAN)
• Enter mTAN and confirm payment. The purchase price is now withdrawn from
the customer’s bank account via direct debit. No other payment method is cur-
rently available.
6.8.3 Security
From the perspective of customers:
• Transaction via two independent channels of communication (Internet, cell-
phone)
• Use of cellphone number, PIN and user number
• Real-time communication limits fraud
• SMS confirmation via mTAN
From the perspective of retailers:
• Mpass has checked the identity and creditworthiness of the customers
• Schufa credit inquiry
• Access/activation code for prepaid customers
• SMS confirmation via mTAN
6.8.4 Summary
The further development of mpass through the inclusion of new mobile technolo-
gies (NFC) and alternative methods of payment is the right approach to improving
customer convenience. The service will also develop as it spreads to more retailers.

126. 6.10 Post Finance Profile 117
6.9 Paybox Profile

Figure 79: Paybox profile
6.10 Post Finance Profile

Figure 80: PostFinance profile

127. 118
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129. 120 6 Case Studies
route and the price.
163
No charges apply to the periodic determination of the
traveler’s location. SMS charges may only apply in connection with the activa-
tion.
• If localization proves impossible (e.g. in subways or on account of a lack of
available localization services), the user can photograph the Touchpoint’s bar-
code at the departure and destination stations or enter the Touchpoint’s unique
number.
• The credit history of each prospective user is checked. Personal data and bank
account data are also required. This data has to be recorded at the customer
portal operated by Deutsche Bundesbahn.
6.11.3 Using Touch-and-Travel
164

• After registering for the Touch-and-Travel service, customers download the
corresponding app and activate the app by entering their user numbers and
PINs.
• An attempt is then made to locate the smartphone to determine whether the lo-
calization function is working.
• After localization (the NFC-enabled smartphone or cellphone is held in front of
the Touchpoint at the train station), manual recording of the Touchpoint num-
ber or photographing of the barcode, customers select “Departure“ and are re-
quired to wait until this is recorded in the system. The location of the departure
and the time are displayed.
• A data record is generated when tickets are checked. This record is transmitted
to the background system of the Deutsche Bundesbahn.
• Once passengers arrive at their destinations, the localization is activated, the
barcode is scanned or the Touchpoint number is recorded and “Arrival” is se-
lected. Here, too, the passenger has to wait until the system confirms the depar-
ture. Then the route traveled and the amount due are displayed.
• Bills showing an itemized list of all train trips are sent once a month.
6.11.4 Risks
The concentration of applications on cellphones and smartphones represents a
convenience for users. However, the loss of this advantage can also turn into a ma-
jor disadvantage.
165
What happens when users lose their cellphones, their cell-
phone batteries fail or their cellphones malfunction? How do you prove you

163 Teltarif: “Touch-and-Travel nun für fast alle Handy-Nutzer- Nur E-Plus-Kunden kön-
nen automatischen Service nicht nutzen,” in: www.teltarif.de; 2 March 2012.
164 Kulsiewicz, Carolina: “Touch-and-Travel App – Bedienungsanleitung,” 10 pages, 29
February 2012.
165 Strate, Gregor and Steffen Hechtner: “Touch-and-Travel,” in: “Wissenschaftliche Diens-
te, Deutscher Bundestag,” page 2, 16 July 2010.

130. 6.12 YAPITAL – Digital Money for a Modern Life 121
bought a ticket once you’re already on the train? What happens if you’ve forgotten
to report a departure or if a Touchpoint malfunctions? And what about data pro-
tection? What data will you need to disclose? Are your data stored somewhere?
Will someone be able to access a profile of your movements? All of the stakehold-
ers involved need to learn how use new technology and continuously expand up-
on what they’ve learned. Initial problems have already had to be remedied.
166
Since
March of 2012, Deutsche Bundesbahn has issued a pamphlet on the data-security
risks associated with the use of the Touch-and-Travel service.
167

The pamphlet addresses the following issues:
• The data necessary for registration
• Optional data subject to the consent of the user
• Basic use, including the necessary steps for setting up an app, departure notifi-
cation, recording location data during the journey, ticket-control procedures,
ascertainment of the route and calculation of the price
• Risk concerns: procedure in case passengers forget to sign off
• Security risks: use of personal data, revocation of consent, duration of data stor-
age, protection of personal data and inquiries relating to stored data
While this is no more than an intermediate step, it does represent an improvement.
With the experience it is gathering Deutsche Bundesbahn is preparing the way for
the next major NFC, barcode payment systems in Germany.
168

6.12 YAPITAL – Digital Money for a Modern Life
YAPITAL, a subsidiary of the Otto Group, has taken aim at the European market
with an integrated, multi-channel service platform centering on a payment system
that was conceived as a digital-money and lifestyle tool that can be used in various
areas of life.
The implementation of the retailer-supported business model is based on the mar-
ket and investment strength of the Otto Group.
This launch and expansion is the logical next step in the Otto Group’s e-commerce
strategy as the corporation seeks to reinforce its multi-channel retail business
through the expansion of its financial services.

166 Schonschek, Oliver: “NFC-Schnittstelle: Smartphone im Nahkampf,” in: www.daten-
schutz-praxis.de, 19 December 2011
167 Deutsche Bundesbahn: “Infoblatt zur Datenverarbeitung - Touch-and-Travel,” 1 March
2012, 3 pages.
168 See: Kelter, Harald and Rainer Oberweis (both at BSI), Cord Bartels and Birger Rosen-
berg (both at NXP) for the Federal Office for Information Security: “TR 03126 – Techni-
sche Richtlinie für sicheren RFID-Einsatz (hier: TR 03126-3: Einsatzgebiet ‘NFC-
basiertes e-Ticketing’),” 2009, 169 pages.

131. 122 6 Case Studies
6.12.1 Close Cooperation between YAPITAL and Regulators
YAPITAL worked together closely with the regulatory agencies and received a Eu-
ropean banking and e-money license in the framework of its undertaking. The
company has therefore applied to the European Patent Office for trade mark pro-
tection (image and word brands) for the following areas:
1. Invoicing for electronic ordering systems (particularly Internet-based)
2. Computer software for the processing of electronic payments and money
transfers between third parties (credit cards with magnetic codes) and au-
thentication software
3. Credit cards (without magnetic codes)
4. Financial services, especially for the transaction of money transfers over
the Internet, the issuing of credit cards and the transaction of payments for
credit cards.
6.12.2 Value-Added Chain and Roles at YAPITAL
YAPITAL is responsible for providing the newly integrated service platform and
developing this platform via the special business ecosystem. Furthermore, this
platform is also the means of managing the entire marketing mix. The online and
stationary retailers can then use the new and optimized services made available by
YAPITAL.
6.12.3 Security, Risk Management, Fraud Detection and Mobile Technologies
The business model is based on the same security standards and best practices that
are applied to international banks. YAPITAL has implemented an electronic KYC
process because the information that needs to be known about a user is queried at
the point in time at which it is needed. In addition to this, the PCI-DSS and EMV
standards are to be met. As in the case of other providers, no data storage is to take
place in connection with the use of the wallet app.
Yapital is aiming to position the service as a “secure” form of payment and will be
the party accepting the risk with regard to the retailer in standard cases. Here,
YAPITAL distinguishes itself from a number of other providers. This arrangement
enables a very cleanly documented financial status that is to facilitate the integra-
tion of Yapital in back-end systems.
YAPITAL is currently making use of all of the standard procedures for the verifica-
tion of electronic-payment transactions. These include cards, NFC, QR codes and
user data.
6.12.4 YAPITAL Summary
YAPITAL’s initial market position is similar in structure to that of enterprises offer-
ing credit-card and other wallet solutions. The company has essentially placed its

132. 6.13 Contactless Payment with girogo 123
trust in partnerships with established players on the market such as the major
credit card companies. In addition to the convenience, speed and security of the
payment service, the cost and price aspect can be expected to play an important
role. The service was launched recently and has so far attracted the following cli-
ents: Görtz, REWE and Sportcheck.
Even in the case of setting up the business ecosystem, YAPITAL has availed itself
of the expertise and services of various partners. The YAPITAL concept goes well
beyond that of a mobile wallet. Indeed, all channels are covered so that the pay-
ment function can be used for various channels as an everywhere-commerce solu-
tion. The serious manner in which the market introduction is being handled can be
seen, not least, in the global marketing concept that is to be adapted in a country-
specific manner upon introduction.
YAPITAL constitutes the realization of a retailer-supported and customer-oriented
business model that has good prospects of quickly generating network effects and
establishing itself as a successful mobile payment player on the European market.
By the way: the name YAPITAL is an apparent allusion to the Micronesian Island
of YAP, where, till this very day, giant stone disks are used as an instrument of
payment – one of the world’s first monetary currencies. Set up in front of houses,
they testify to the wealth of the individual island dwellers. The problem with the
disks, with diameters of up to four meters, is that it’s hard to make change. That is
why the island dwellers have simply taken to remembering who owns which
share. It is thereby not only one of the first currencies, but at the same time pre-
sumably the very first virtual currency on our planet. A reference to the stone disks
of the island of YAP can also be found in YAPITAL’s logo.
6.13 Contactless Payment with girogo
169
Girogo is the new payment service introduced by the German Banking Industry
Committee. It has been tested in the form of newly issued Giro Cards in the cities
of Hannover, Braunschweig and Wolfsburg since the end of 2011. The service al-
lows customers to pay for purchases valued at up to EUR 20 without having to en-
ter a PIN or provide a signature. Purchases of more than EUR 20 require the entry
of a PIN or a signature. The card, which is essentially a pre-paid card, can be re-
filled up to the amount of EUR 200. The girogo and contactless logos on the card
notify customers and retailers alike of the card’s contactless capacity.

169 See: www.girogo.de

133. 124 6 Case Studies
6.13.1 How Contactless Payment Works with girogo
170

Cardholders hold their contactless cards, which are outfitted with an EMV chip, at
a distance of up to 10 centimeters to a terminal reader to enable an encrypted
transmission of the relevant data. Payment is then confirmed via a signal.
The options cardholders can use to top up the card include: ATMs, special girogo
terminals, Internet (with smartcard reader), points of sale at participating retailers
and NFC-enabled smartphones. Topping up the card requires the entry of a PIN.
6.13.2 Pilot Tests
Q4/2011: GiroCards are issued in Hannover, Braunschweig and Wolfsburg
17 April 2012: Pilot test is launched in Hannover (girogo) and Hamburg (Master-
Card PayPass)
April 2013: Evaluation of the pilot tests (unbiased result for credit unions)
6.13.3 Pilot Test Specifics
A total of 1.2 million customers of savings banks in metropolitan Hannover,
Braunschweig and Wolfsburg, as well as 150,000 customers of credits unions, were
given the option of using the contactless payment service in the following retail
outlets: ESSO gas stations, EDEKA, Thalia, Douglas, Ditsch, Hussel, Christ and
Appelrath & Cüpper.
6.13.4 Contactless Mobile Payment from the Perspective of the Savings
Banks
6.13.4.1 Contactless Payment with girogo as an Answer to Changing Conditions
171

• Technical innovations have provided a basis for the development of card-based
procedures.
• Security requirements (fraud, data protection and system stability) have steadi-
ly increased.
• Greater customer convenience thanks to a simpler form of payment (service as-
pect growing in significance)
• Commercial demands: lower fees and processing charges
• Increased competition from international companies
• SEPA for cards has made change unavoidable

170 Dr. Peter Söhne: “Kontaktloses Bezahlen – Lösung der deutschen Kreditwirtschaft auf
der Basis von girogo,” Frankfurt Payment Networks, 28 March 2012, slide: “PayPass,
girogo etc. – Quo vadis Mobile Payments?”
171 Fieseler, Bernd M (CEO of the German Savings Banks Association): “Zukunft der Kar-
tenzahlungen in Deutschland und Europa,” talk given at the symposium: “Zahlungs-
verkehr in Deutschland im Jahr 2011,” 23 June 2011, 33 pages.

134. 6.14 Anot
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135. 126 6 Case Studies
6.14.1 Advantages for the Club, Fans and Vendors
Payment using the contactless card helps vendors to avoid the effort and costs as-
sociated with handling cash, the electronic ticket on the chip makes it easier to
manage the entrance of fans into the stadium and the high-tech card helps to in-
crease convenience, security and service efficiency for stadium visitors and ven-
dors. Fans do not need to take money with them and the lines at cash registers are
shorter.
6.14.2 Main Functions at a Glance
Topping up and paying: The Mainz 05 FanCard works like a prepaid card. It first
needs to be topped up with a minimum of EUR 10. This can be done primarily at
various refilling stations in and around the new stadium. Moreover, the system in-
cludes a solution to the problem of an otherwise unusable credit balance. The
amount on the card can be spent in its entirety. The card can be used at all conces-
sion stands and fan shops in the new Coface Arena. And if fans still have money
on the card when the game is over, they can either wait and spend it at the next
game or empty the card at one of the cash-out stations.
No contact necessary: The payment is contactless, i.e. simply placing the card in
the card receptacle in front or the cash register and acknowledging the purchase
suffices for the transaction. This means less waiting and more convenient handling.
Season pass: All fans who order a season pass for the Coface Arena automatically
receive a Mainz 05 FanCard because the prepaid money card for the new stadium
is also the seat-assignment card for season pass holders.
Single-day card: All single-day visitors to the Coface Arena have the option of ob-
taining a Mainz 05 FanCard by paying a refundable fee of EUR 10 Euro. Any re-
mainder on the card is refunded upon its return.
Payment can also be made using normal bank smartcards: Fans can also pay at the
stadium using their normal bank cards (no matter the particular bank) so long as
the cards permit cashless payments. Here, too, one needs to first top up the card
with sufficient funds. Payment using such cards is not contactless, i.e. it will be
necessary to insert the card in a card reader. It will not be necessary, however, to
enter a PIN. In this regard, the Mainz 05 FanCard offers a certain advantage: if the
card is lost, only the amount that has been topped up can be lost. Those who lose
their bank smartcards run the risk of losing far larger amounts.
6.15 Splash
The startup “mb&m gmbh” was founded at the end of 2012 as a spin-off of the
German software manufacturer supra quam gmbh, which is specialized in the de-
velopment of bank software. Based on a platform for the development of core bank

136. 6.15 Spla
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137. 128 6 Case Studies
ment-service providers. In short, the payment service is to be integrated into the
area of customer-relationship management.
Both retailers and customers profit from services such as loyalty programs (e.g.
with bonus points recognized as currency), financing options and customized in-
surance policies against product theft, loss or damage.
In August 2013, mb&m will offer two of the services listed in Figure 89 above,
namely, loyalty points and couponing.
6.15.2 Flexible Payment Transaction
A further special feature of Splash is the flexibility with which payments can be
transacted. The payment requirements depend on the payment situation and the
factors speed, convenience and risk.
“All but a card“ 2-way communication
and biometric security
features
Description Advantages
Payment
Service
Splash Payment Services
Payment initiation by the retailer; customer
selects payment service and confirms.
Authorization via NFC, TAN or QRC.
“Tap and go“ Retailer accepts (barcode scan or NFC). Back-end confirms payment (fastest service).
“Fast lane“ Authorization via customer – fast and
secure
“Self service“
Customer NFC payment or QRC scan and
authorization
Highly frequented shop
Security: picture and
signature
2-way communication
and biometric security
features
2-way communication eCommerce
Reduction of POS staff

Figure 85: Examples of Splash-supported payment services
The procedures that are followed for payment transactions at ATMs, supermarkets
and luxury goods boutiques are all different. Splash masters all of the various
payment procedures. These can even be adjusted in real time during the payment
transaction (e.g. in the wake of a risk evaluation). Such adjustments might deter-
mine, for instance, whether a customer is to be requested to provide a signature.
6.15.3 Business Model
The business model is based on the following two pillars:

138. 6.15 Splash 129
1. Operation of a platform for a Splash community
2. Licensing the platform to third parties for white-label or OEM operation
The target group for Splash includes retailers, franchise operators and retailer as-
sociations, as well as regional interest groups such as city marketing associations
and regional business associations.
The target group also includes mall operators who want to offer their store opera-
tors additional services to increase cash flow within the community.
Further target groups include banks and insurance companies interested in offer-
ing their customers additional services relating to their daily lives so as to preserve
or recover market shares.
mb&m offers two versions of the Splash platform:
Retailers who participate in the community version pay a monthly fee ranging
from EUR 5 to EUR 25 per terminal depending on the additional services they’ve
ordered. Transaction payments depend on the conditions established by the con-
nected payment provider– without any surcharges – so that (e.g. in case of a direct
debit arrangement) the retailers incur no further transaction costs. The platform it-
self is operated by mb&m.
The other version is a classic license-based version that is either offered under the
Splash label or a white label. In this case, customers acquire a license for the entire
service and operate it under their own names.
6.15.4 Splash Conditions
1. Retailers create a retailer account.
2. Customers subscribe and specify one or more means of payment.
3. Retailers have the option of integrating their systems with Splash or working
with standard tablets.
4. Payment procedure variants are configured.
5. The security requirements that are to apply to payment procedures are estab-
lished.
6. Retailers provide their marketing information.
7. Loyalty and couponing systems are configured.
8. A range is specified: the accounting of loyalty points of various retailers can be
configured.
9. Additional services are in development.
10. The linking of the payment provider (credit card Company) is specified.

139. 130 6 Case Studies
6.15.5 Advantages and Disadvantages of Splash
Splash: Benefits and Risks
No investment required for retailers
Integration in POS and inventory
management
Integrated added-value services:
-Loyalty bonuses
- Couponing
-Insurance
-Financing
No additional transaction costs
High level of security (sensitive
data stored in back-end systems
Adaptive payment methods
Mandatory registration
Lack of integration makes an
additional device necessary
Integration effort
Monthly fees
Closed Splash community required
Benefits Risks

Figure 86: Advantages and disadvantages of Splash
It remains to be seen whether Splash communities manage to expand beyond spe-
cific locations and advance to the status of cross-regional or international commu-
nities that are able to compete with the heavyweights on the market. This devel-
opment promises to be exciting.
6.15.6 Development of Splash
Founded in December 2012, the startup company introduced the first Splash proto-
type with the “Tap and Go” payment variation at the CeBIT in March 2013.
The company launched its first pilot project in August 2013 to establish the com-
munity version as a solution for the regional binding of customers.
A further pilot project was launched in the fall of 2013 together with a golf course
operator who wanted to offer members the option of making internal payments via
Splash. The project was realized as a closed system with a credit-based Splash type
of payment that is transacted entirely via the platform and enables guaranteed
payments in real-time.
Further pilot projects are in development.
Expansion beyond Germany is planned for 2014.

140. 6.16 Ava
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Case Studies
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-

142. 6.17 Pingit – Barclays Domestic/International Mobile Payment Service 133
6.17 Pingit – Barclays Domestic/International Mobile Payment
Service
6.17.3 Service Description
Barclays Pingit is a system for the mobile transfer of money in the United King-
dom. It was launched by the bank in February 2012 and was initially only available
for use by Barclays account holders over the age of 18 for the sending and receiv-
ing of payments. The latest version of the app supports UK-based merchants who
maintain a Barclays bank account and other individuals (aged 16 or older) who
have a bank account at any bank in the UK. The app is protected by a five-digit
password that is set by the user. Both Barclays and non-Barclays current account
customers can use the app.
174

Barclays Pingit mobile payments are often received within minutes from a
smartphone or tablet – making them much cheaper and more efficient to process
than payments involving cash, checks and other means. The Barclays Pingit app is
free to download from the Apple App Store, Android Market and BlackBerry App
World and is available to anyone with a UK bank account or a Kenyan Internet
bank account.
Money transfer is made to the account associated with the phone number rather
than the app installed on that phone, meaning that all phones rather than just
smartphones equipped with the relevant app would be eligible to receive pay-
ments.
The Pingit service works on the Faster Payment Scheme, so payments are effective-
ly instantaneous, even between Barclays and non-Barclays customers, and they are
free.
6.17.4 Results of Pingit
From day one in February, customers were downloading the app fast – 120,000 in
the first 5 days, over 400,000 by mid-April and 500,000 by the middle of May.
175
Af-
ter 13 software releases, Pingit reached 1,800,000 customer downloads by 16 Sep-
tember 2013
176
. The average transaction value was around GBP 75. Retailers will
soon have to be convinced.
Even the demographics were interesting:

174 Miles Brignall: “Barclays Launches Pingit Money – Sending Service for Smartphones,”
in: “The Guardian,” 16 February 2013.
175 Case Study: “Barclays Pingit for Customers and Corporates,” in: Financial Services
Club, 22 May 2012.
176 Karl Flinders: “Barclays Expands Pingit to Attract Businesses,” in: Computerweek-
ly.com,” 16 September 2013

143. 134 6 Case Studies
• 29% of users are 18-25 years old
• 37% are 26-35
• 26% are 35-50
• 7% are over 50.
The company is now pushing for merchants to offer Pingit via simple QR codes
and corporate identifiers.
6.17.5 “Mobile Checkout” and “Buy It”
Barclays Bank has added two features to its Pingit app that will appeal to business-
es by making it easier for customers to purchase goods and services using their
phones.
The bank has launched two features aimed at merchants. One feature, known as
“Mobile Checkout,” enables participating merchants to put a button on their mo-
bile site which links to Pingit, making it easy for customers to make purchases via
their cellphones.
The other feature, known as “Buy It,” allows merchants to put a quick-response
(QR) code on advertisements that consumers can scan with their cellphones and be
taken straight into Pingit. It is then only a couple of clicks and the products are or-
dered.
The “Buy It” feature will enable businesses to make sales directly through their
advertisements. Consumers will be able to scan QR codes in window displays, on
posters and even on TV screens to purchase products.
6.17.6 International Expansion
177

Barclays Bank of Kenya has launched a mobile banking app (Barclays Kenya) with
similar functionality to its full online banking platform. The app is free to use and
can be accessed by customers who have already registered for the Barclays Internet
banking service.
It will be available at the App Store for uploading on both tablets and mobile de-
vices that run on Android and Apple. Customers will be able to view their balanc-
es and most recent transactions, make transfers between accounts and pay bills. It
will also offer customers access to their credit card and loan transactions in real
time, which is a first in the industry.

177 Kenya: “Barclays Kenya Adopts Pingit App for Mobile Banking,” 21 June 2013 (Al-
lAfrica.com)

144. 6.18 La Caixa’s Mobile payment Services 135
6.18 La Caixa’s Mobile payment Services
The Spanish bank La Caixa is one of the most innovative banks in the mobile-
banking and mobile payment sector. Many services offered by the bank have re-
ceived special awards. The following offers an overview of the steps that the Span-
ish bank has taken in recent years.
NFC Pilot Test in Sitges
In summer 2010 La Caixa partnered with Telefonica, Gemalto, Giesecke &
Devrient, Samsung, Ingenico and the local city council to run an NFC pilot in the
resort town of Sitges. Analysis of usage found that consumers conducted 30% more
transactions, with a 23% increase in the average purchase value, than with plastic
cards. 60% of transactions were valued at EUR 20 or less.
NFC City Launch in Barcelona
In January 2012 the bank launched its contactless-payments offering and an-
nounced plans to equip 17,000 points of sale and 500 ATMs in Barcelona with con-
tactless technology. BBVA and Bankia plan to equip 7,000 points of sale in central
Madrid. Customers will need to use a PIN for transactions of more than EUR 20
(USD 26), and will also get a text message confirming each transaction. The bank
has also developed a mobile app for iOS, Android and Blackberry phones which
allows customers to view and manage transactions.
La Caixa Rolls out NFC Stickers for Payments
178

La Caixa reports that it has processed more than one million contactless payments
in the city since then, and the number of transactions under EUR 20 using contact-
less devices has grown 15%. The Spanish bank is to issue contactless TAP Visa
stickers in Barcelona. Distribution will be extended in January 2013, reaching
200,000 customers during February.
179

The NFC-compatible TAP Visa stickers attach to the back of mobile devices and
carry an EMV chip holding encrypted card data. Users will be able to make con-
tactless payments at more than 50,000 retailers equipped with contactless terminals
across Spain.
The program is significant because it sidesteps two common issues with mobile
NFC; that not all phones are NFC enabled yet, and that the bank does not have to
rent space on a secure element controlled by a device manufacturer or a mobile
network. The use of stickers does introduce limitations as well, though, such as not
being able to provision or manage the “card” over the air, or communicate directly
with the user via the phone's screen and keyboard.

178 Sarah Clark: “Big Push for NFC,” in: Banking Technology, 18 February 2013.
179 Mike Clark: “La Caixa Rolls out NFC Stickers for Payments,“ in: Banking Technology, 3
December 2012

145. 136 6 Case Studies
MoneyToPay for delegates of Mobile World Congress
CaixaBank, Gemalto, Telefónica and Visa Europe have partnered to offer 3,500 del-
egates attending the Mobile World Congress in Barcelona next week a Sony Xperia
NFC phone equipped with a mobile payments application.
The app, developed by Telefónica Digital, will allow delegates to make mobile con-
tactless payments using a prepaid card issued by MoneyToPay, a new mobile
payments service created by CaixaBank.
The app will come pre-loaded with EUR 15, allowing delegates to make payments
at contactless terminals across the Fira Gran Via venue as well as any of the 16,000
Visa contactless payment terminals located in stores and markets around Barcelo-
na. 700 local taxis have also been equipped to accept NFC payments.
Joint Venture of Telefonica, Santander and La Caixa
180

Spanish banks La Caixa and Santander have partnered with telecoms firm Tele-
fónica to create a joint venture offering mobile payment services and a digital wal-
let designed to relegate conventional payment methods to the history books.
Users of the new service will be able to gather all their credit cards into the new
digital wallet; they will also be able to send and receive funds via their mobile
phone. Bank account details will not be necessary; all the sender needs is the recip-
ient’s phone number.
Spain has a strong recent history in alternative forms of payment; in 2012, Barcelo-
na became one of Spain’s first “contactless cities” following a project between
Caixa Bank, the Barcelona City Council, the Metropolitan Taxi Institute and Mer-
cats de Barcelona. The city has 1 million contactless cards in circulation, 1,000 taxis
using contactless points of sale alongside 40 municipal markets; the technology is
also used in 17,000 points of sale in every area, from gas stations to restaurants and
supermarkets.

180 Eliot Holley: “Telefonica, Santander and La Caixa Will Offer Mobile Payments and a
Digital Wallet in Spain,” in: Banking Technology, 30 May 2013.

146. 7 International Comparisons
7.1 Mobile Payments via POS Terminals
Numerous alternative payment systems have appeared on the market since Square
entered the market with its innovative payment system in the year 2009. In April
2011, Intuit entered the market with its GoPayment. iZettle appeared last year as a
European Square solution. PayPal followed this year with its “PayPal Here” prod-
uct. The following table offers a comparison of SQUARE, iZettle and PayPal Here
SQUARE iZettle PayPal Here
Target groups Private individu-
als, small business operators
Private individu- als, small business operators
Private individu- als, small business operators
Taxi drivers, cof- fee shop owners, lawyers, bookkeepers
Not yet specified Not yet specified
Introduction October 2010 November 2011 March 2012 Brief description of the solution
Square Reader (credit card, mag-
netic stripe read-
er) attaches to
iPad, iPhone, iPod
Touch and An-
droid mobile de-
vices as well as an
app solution.
Card reader in
Apple stores, Wal-
Mart, etc., availa-
ble for EUR 15.
From July 2013:
sale of iPad (Stand
POS System) in
Apple Stores at a
price of USD 299.
Expansion of the
cash register at-
tachment
Reader is larger
than the Square
Reader.
Credit card reader
attaches to USB
jack on iPhone,
iPad and iPod.
Attachment is
placed on iPhone
and will soon be
ready for attach-
ment to Android
devices.
An app supports
users when it
comes to billing
tasks, accepting
payments/checks
and balancing ac-
counts payable
and receivable.



T. Lerner, Mobile Payment, DOI 10.1007/978-3-658-03251-7_7,
© Springer Fachmedien Wiesbaden 2013

147. 138 7 International Comparisons
SQUARE iZettle PayPal Here
Geographical
range
U.S., Canada, Ja-
pan
Sweden, Den-
mark, Finland,
Norway, UK,
France, Spain,
Germany, Mexico
Global
Accepted credit cards
American Express, VISA, Master- Card, Discover
VISA, Maestro, MasterCard
PayPal, VISA, MasterCard, American Express, Discover, bills and checks scanned by camera
Fees 2.7% of the pur-
chase price; 3.5% for manually rec- orded amounts; keyed-in transac- tions with sur- charge (control via authorization sys-
tem)
2.75% of the pur-
chase price + EUR
0.16 per transac-
tion
2.7% of the pur-
chase price, dis-
counted to 1.7% if
the retailer uses a
PayPal debit card
Security Magnetic stripe is
not secure; prob-
lem of fraud is left
to the customer;
improved security
via keyed-in
transactions;
strong encryption
on Square devices;
technology is PCI-
compatible; no
customer or mag-
netic stripe data
stored on device.
Internet connec-
tion and positive
response from the
account owner’s
bank is necessary;
checking of na-
tional ID, bank ac-
count, PCI/EMV
payments; en-
crypted data
transmission
Completely en-
crypted data
transmission

148. 7.2 Contactless Payment: Interim Technology for Mobile NFC 139
SQUARE iZettle PayPal Here
Status More than 1 mil-
lion retailers use
the service; 5 bil-
lion processed
transactions since
introduction (data
as of: April 2012)
50,000 retailers
use the service in
Scandinavia (data
as of: April 2012)
200,000 retailers
use the service
(data as of: April
2012)
Awards Numerous awards
Figure 90: Comparison of Square, iZettle and PayPal Here
7.2 Contactless Payment: Interim Technology for Mobile NFC
Introduced in Hong Kong in 1997, the Octopus Card was the world’s first contact-
less, refillable smartcard. The basis for this new type of payment service was Sony’s innovative FeliCa technology that went on to establish itself on various
Asian markets, particularly in Japan and South Korea. In the wake of these devel-
opments, NFC technology was established as a kind of global benchmark by vari-
ous standards-issuing organizations.
In April of 2011, for instance, more than 12.2 million cards of this type were in cir-
culation in the U.K. where they could be used at more than 60,000 terminals. In
Turkey, 2 million cards were in circulation and 50,000 terminals had been installed.
The figures for France were 200,000 cards and 1,500 terminals. The figures for Italy
were 100,000 cards and 1,200 terminals.
181
In Germany, various feasibility studies
and pilot projects had just been initiated.
Girogo Mainz 05 Savings
Bank Card
Suica
Target groups Consumers who
pay at cash regis-
ters
Stadium visitors
(Mainz 05 Fan
Card for mem-
bers, season pass
holders and sin-
gle-day visitors
Customers of JR
East in metropoli-
tan Tokyo(initially
introduced as a
travel card and
later expanded as
a means of pay-
ment at retail
stores near train
stations)
Introduction April 2012 July 2011 2001

181 Payments Cards & Mobile: “Contactless – Cutting through the Hype,” March/April
2011, p. 20.

149. 140 7 International Comparisons
Girogo Mainz 05 Savings
Bank Card
Suica
Brief description
of the solution
Prepaid card;
maximum credit
balance: EUR 200;
purchase value:
up to EUR 20
Prepaid card;
maximum credit
balance: EUR 200
Prepaid and post-
paid card, as well
as mobile Suica
Geographical range
Hannover, Braun- schweig, Wolfs- burg (pilot test un- til April 2013)
Mainz Metropolitan To-
kyo
Security PIN, EMV chip PIN, EMV chip FeliCa security
Status 1.2 million cards
for savings bank customers; 150,000 for credit union customers (data as of April 2012); planning: 16 mil- lion contactless
savings bank
cards by the end
of 2012, 45 million
by the end of 2014;
continuation to be
determined by
credit union banks
25,000 season
passes
25,000 single-day
cards
6 million custom-
ers upon its intro-
duction by JR
East/Suica in 2001;
2010: 15 million
customers (33.6
million cards in
circulation
Figure 91: Comparison of girogo, Mainz 05 FanCard and Suica
7.3 Comparison of the Mobile payment Strategies of Global
Corporations
The comparison includes the two credit card companies MasterCard (PayPass) and
VISA (payWave).
VISA payWave PayPal MasterCard Pay-
Pass Technology payWave: contact-
less technology by
VISA (NFC-based
mobile payment)
Focus on Internet,
Cloud, BLE –
Smart Bluetooth
and Beacons.
Some NFC trials
in various coun-
PayPass: contact-
less technology by
MasterCard
(mobile wallet ac-
cess to Master-
Card contactless

150. 7.3 Comparison of the Mobile payment Strategies of Global Corporations 141
VISA payWave PayPal MasterCard Pay-
Pass
tries. PayPal
doesn´t believe in
NFC (Not for
Commerce)
technology by
PayPass)
Strategy V.me is the VISA
digital wallet ser- vice that was in- troduced in 2011. The digital wallet was conceived for various channels:
mobile at POS, e-
commerce, mobile
commerce, micro-
payments, social
networks, P2P
payments.
The platform
strategy involves
an open approach
(integration of a
developer net-
work).
PayPal is working
on various pay-
ment alternatives
and is cooperating
with retailers.
PayPal also in-
tends to improve
customer experi-
ence and the con-
nection between
online and in-
store services. The
company is also
working on cer-
tain location-
based services for
retailers and cus-
tomers.
Integration of
MasterCard cred-
it/debit and pre-
paid cards for
mobile devices.
Strategy imple-
mentation
1. Establishment
of an acceptance
infrastructure for
U.S. and Europe-
an retailers
2. Various strate-
gic acquisitions
3. Mobile SD card
solution for nu-
merous
smartphone types
introduced in De-
cember 2010.
4. Numerous
partnerships, e.g.
with retailers and
Intel (develop-
1. Pilot test of dif-
ferent services (re-
tailer)
2. NFC pilot in
Sweden
3. New BLE and
Beacon services in
2013/14.
4. Acquisitions
(i.e. Zong,
FigCard).
5. PayPal wallet
(cloud solution)

1. Numerous pilot
programs (more
than 12 large mo-
bile payment pilot
programs world-
wide)
2. Regional, coun-
try-specific im-
plementation (e.g.
Wanda Service
with Telefonica in
12 countries in
Latin America)
3. First credit card
partner of Google
Wallet.
4. Overall strate-

151. 142 7 International Comparisons
VISA payWave PayPal MasterCard Pay-
Pass
ment of NFC-
enabled devices)
5. Numerous pilot
studies with
banks in U.S. and
Europe
6. Investments in
further technolo-
gies and market-
ing (e.g. sponsor
of the 2012 Olym-
pic Games in
London)
gy: support for all
channels (ATMs,
physical points of
sale, electronic
and mobile com-
merce
- Updating of re-
tailer terminals
- Security/fraud
avoidance
- Updating of ac-
quirer infrastruc-
ture

1.6 billion VISA
cards on global markets that can be migrated to a
digital wallet
(V.me)
More than 130
million customer
accounts (e-/m-
commerce)
425.000 ac-
ceptance locations
88 million card-
holders
Target group of
mobile payment
platform: finance
industry, tele-
communications
providers and re-
tailers
Target group: Re-
tailer, customer.
End-to-end solu-
tion for finance
industry, tele-
communications
providers and re-
tailers
Major investments
in in mobile pay-
ment services;
currently intro-
duced to more
than 20 countries;
licensing agree-
ment with Google
and ISIS
Major investments
in in mobile pay-
ment services;
currently intro-
duced to more
than 20 countries;
licensing agree-
ment with Google
and ISIS

Model EMV strategy:
chip and signature
Strategy: chip and
PIN
Figure 92: Comparison of global solutions: VISA payWave, MasterCard PayPass and Pay-
Pal

152. 8 Summary
182183
Mobile payment is on its way – despite the fact that the multi-sided nature of the
new business ecosystems, the complexity of the value-added chains and the wran-
gling over the best technologies and strategies for overcoming the various hurdles
can sometimes leave one wondering whether it’s ever going to work out.
Growth in the mobile payment sector will increase dramatically in the coming
years. This is not a matter of wishful thinking, as it may have been at the beginning
of the new century. The trend has been amply confirmed by various market partic-
ipants and the latest figures.
In addition to the major players, niche or market-specific providers with attractive
business models can also be expected to play a role on the market. Mobile wallets
will account for an increasing percentage of low-value purchases (purchases rang-
ing from below EUR 1.00 to EUR 50), no matter what the specifics of these mobile
wallets are.
Added-value services that are currently altogether within the realm of the feasible
represent a clear additional source of revenue for payment-service providers and
retailers. At the moment, we are still seeing evidence of divergent strategies and
solitary approaches as the prospective players focus on themselves. However, it
won’t be long before we see and alignment of strategies, as we have seen in the
case of mobile POS terminals.
The first-mover approach will probably not be the deciding factor when it comes to
the ultimate success of a mobile payment system. Indeed, the extent to which the
business ecosystem is capable of generating network effects or trigger such on the
basis of existing networks will be far more important.
Credit card companies are establishing their solutions on the basis of their existing
infrastructure, while Google is seeking, with its “Google Wallet,” to gain infor-
mation about customers “at the moment of truth: the purchase” so as to sell this
added value via its marketing ads. Telecommunications companies also want a
share of the pie. PayPal is currently setting off on an integrated, NFC-independent
path. And, not least, retailers want to be able to offer and use a secure and cost-
effective channel for mobile payments.

182 Deutsche Bank-Markets-Research: “Mobile Payment Strategy – The Fight to Control the
Mobile Wallet,” pp. 1-30, 6 March 2012.
183 Thomas Lerner: “Mobile Payment – Das Geld liegt in der Luft,” in: Die Bank, Volume
5/2012, pp. 62-67.
T. Lerner, Mobile Payment, DOI 10.1007/978-3-658-03251-7_8,
© Springer Fachmedien Wiesbaden 2013

153. 144 8 Summary
However the race develops, payment-transaction practices will change dramatical-
ly in the coming years. The following projections are derived from the latest devel-
opments on the market:
1. Mobile payment will develop into a mass market.
2. The market will be divided up into four main segments.
3. Customer and retailer demand will increase as a result of growing smartphone
and cost-free POS penetration as well as the availability of the relevant technol-
ogies.
4. The right technology will be important for success in the short term.
5. Mobile payment services will require the establishment and continuous devel-
opment of a business ecosystem.
6. All of the available business models will present opportunities and risks. Reali-
ty will determine the winners.
7. While the MNO-driven models are currently dominant, other providers will
catch up by the year 2015.
8. We will see varying business models presented by the competitors and various
attempts at market positioning.
9. The mobile-POS-terminal segment will turn out to be very dynamic, with many
providers entering the market.
10. Retailer-led strategy models will be successful after Starbucks proves their via-
bility.
11. Network effects and harmonious strategy alliances will be more important than
the first-mover advantage.
12. Added value will trump security.
13. Contactless payment via smartcards will become the interim technology on the
way to more encompassing mobile payment services.
14. Cash will remain the dominant form of payment transaction throughout the
world. The main approach of the new providers will involve transforming cash
into-money.
15. It will be a mistake to underestimate the cultural aspects of cash.
16. Banks will pursue defensive strategies.
17. All market participants will have to gather and analyze a tremendous amount
of information.
18. The mobile readiness of enterprises will be a prerequisite for successful mobile
payment systems.
19. Strategies focusing exclusively on technology or billing services will be destined
to fail.
1. Mobile payment will develop into a mass-market.
Various providers attempted to introduce mobile payment services around the
year 2000. While only a few of these providers have survived, things really are dif-
ferent this time around. The success of services introduced by telecommunications

154. Table of Contents 145
companies (e.g. M-PESA and Osaifu-Keitai) and independent companies (e.g.
Square and Starbucks) has caused a stir. Big players such as Google, VISA, ISIS,
MasterCard and PayPal are magnetized by the projected rates of growth in the var-
ious segments. Other trends such as the increasing rate of smartphone penetration,
the development of security solutions, new technologies such as near field com-
munication (NFC) and an increasing degree of standardization and regulation (e.g.
the E-Money Directive, SEPA, the Payment Service Directive, and the Green Paper)
will facilitate the access of new providers in a formerly closed market for financial
services and payment-transaction services.
2. The market will divided up into four main segments.
These segments include virtual-goods payments, e- and m-commerce, proximity
payments and P2P payments.
Services enabling customers to pay for virtual goods have been dominant in recent
years. According to researchers at Gartner Inc., P2P payments and e- and m-
commerce can be expected to be about equal in Europe. However, the largest main
segment in the year 2015 will be proximity payments.
3. Customer and retailer demand will increase as a result of growing
smartphone and cost-free POS penetration as well as the availability of the
relevant technologies.
The demand on the part of retailers and customers for a mobile or digital-payment
service with value-added services will increase along with the increasing market
penetration of smartphones and contactless POS infrastructure. Smartphone pene-
tration, for instance, is projected to increase from 47% (2011) to 70% (2015) in a pe-
riod of only four years. A similar development is shaping up in the case of the pen-
etration of POS with the necessary infrastructure. The availability of contactless
POS technology is expected to increase from 10% in 2010 to 85% in 2016. The dis-
semination of mobile NFC devices is also expected to increase from around 50 mil-
lion in 2011 to 250 million devices by 2015.
SMS can also be expected to retain its status as the dominant technology in the
mobile payment services segment in the coming years. According to Gartner Inc.,
SMS will account for around 51% of the total mobile payment-transaction volume
in 2015. WAP and Internet are expected to increase to 38% and NFC, as a new
technology, is expected to account for around 8%. The share of USSD, which is
used primarily in developing countries, is expected to increase to around 4%.
Along with the dissemination of smartphones and accompanying services, the use
of barcode technology is also expected to show strong growth.
4. The right technology will be important for success in the short term.
Even if NFC will at some point emerge as the dominant technology for mobile
payment applications (nearly all of the mobile device manufacturers have declared

155. 146 8 Summary
their readiness), the use of other technologies such as barcode, Internet, WAP, SMS
and telephone number/PIN will be essential for success in the short term.
5. Mobile payment services will require the establishment and continuous de-
velopment of a business ecosystem.
Business ecosystems are created in the world of commerce by multiple enterprises
for the purpose of jointly providing a product or a service. The inhabitants of these
ecosystems include suppliers, producers, competitors and other stakeholders who,
in accordance with their abilities, assume responsibility for certain roles and tasks
in the framework of a mutual undertaking.
The mobile payment market has introduced an opportunity for new players, in-
cluding the manufacturers of mobile devices, mobile network operators, system
providers, and payment-service providers, to join together and create such ecosys-
tems. One important key to the success of business ecosystems (see the M-PESA
and Osaifu-Keitai case studies) is to determine the following at an early stage:
roles, contributions to added value, distribution of revenue and a plan for continu-
ous system development.
6. All of the available business models will present opportunities and risks. Re-
ality will determine the winners.
In the beginning, one can draw a distinction between three different basic strate-
gies or business models when it comes to the implementation of a mobile payment
service. These include the bank-driven model, the MNO-driven model and the col-
laborative model. However, this way of slicing up reality has proven insufficient in
light of developments. For this reason, a fourth model has been added, namely the
independent or third-party model, as has been implemented by Yapital.
7. While the MNO-driven models are currently dominant, other providers will
catch up by the year 2015.
Numerous mobile payment services were developed around the world at the end
of the 1990s. These tended to be focused on pure billing services and created no
added value for retailers and customers. Only a few of these startups have sur-
vived.
It was the mobile network operators that were responsible for driving technologi-
cal and business innovation in the area of mobile payment services. The bank-
driven Paybox service failed in Germany (2003) while it thrived in Austria in an
environment populated by 4 mobile network operators. In Japan, it was NTT Do-
CoMo that established what has remained the most successful business model to
this day (i.e. centered on its Osaifu-Keitai product). In various developing coun-
tries, innovation since 2007 has also been successfully implemented by MNOs such
as Vodafone (e.g. M-PESA in Kenya and other African countries). This develop-
ment has left banks with a diminished market share in their core business. The

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157. 148 8 Summary
wallet in the “cloud,” which makes excellent Internet connectivity at the POS ter-
minal mandatory.
ISIS, the telecommunications consortium, has had to postpone delivery on numer-
ous occasions. The introduction of Google Wallet, which had drawn so much atten-
tion and anticipatory praise, hasn’t made such a big splash on account of resource
and Verizon-related issues.
9. The mobile-POS-terminal segment will turn out to be very dynamic, with
many providers entering the market.
According to the latest POSTracker issued by PYMNTS, the number of retailer
terminals has increased within one year (from 2011 to 2012) from 4.5 million to 9.5
million. The projections indicate 38 million delivered readers on the market by the
year 2017.
185

There are currently around 100 suppliers around the world. In the last two years,
many of these suppliers have been vying with one another as they expand their
range by including new countries. A few of these have been addressed in the pre-
sent book. They differ in terms of their market positioning, scale, distribution (i.e.
channel partners) and value-added services for retailers.
So far, no one supplier has emerged a big winner. The total value of payment pro-
cessing is expected to reach USD 170 billion in 2015.
186

10. Retailer-led strategy models will be successful after Starbucks proves their
viability.
It was inconceivable for banks and credit card companies that MNOs would suc-
ceed at occupying a new market segment in their own classic core business. But
low and behold, the most successful mobile payment services on the market today
were conceived by and are currently operated by telecommunications companies.
Starbucks is the first retailer in the United States to successfully integrate its 2D-
barcode system and various customer loyalty services into its cash register and de-
livery processes. It is therefore not surprising that the share of mobile payments
has reached 20 percent. After all, this manner of placing orders and paying will al-
so be supplied faster at a later time.
11. Network effects and harmonious strategy alliances will be more important
than the first-mover advantage.
VISA, MasterCard and the banks have at least one initial advantage. Customers
have a considerable degree of trust in them. They will often have availed them-
selves of their services for a long time and they perceive them as always having

185 PYMNTS: Mobile POSTracker, June/July 2013, 16 pages.
186 Kucera, Danielle (Bloomberg): “Square Payment Pace Rises 25% in Niche,” May 2012

158. Table of Contents 149
been in the business of offering payment and money-related services. However,
this does not mean that the above-mentioned will necessarily emerge as the win-
ners. Moreover, being the first mover in this connection will not necessarily be the
deciding factor. More important will be the capacity to quickly generate network
effects: the virtually synchronous development of customer and retailer numbers
from the moment of a service’s introduction. Moreover, it is essential to field a
harmonized platform and alliance strategy. The implementation of a multi-sided
platform strategy is usually necessary (see NTT DoCoMo and Osaifu-Keitai).
12. Added value will trump security.
Security is the critical element that is referred to by customers as the most im-
portant element when responding to surveys. Even mistakes made by one’s com-
petitors can diminish customer trust in mobile payment services in general and
slow the pace of development. It is therefore crucial to strike a balance between
convenience and security.
However, the best practices (see Annex) show that customers have a need for a
killer application beyond security and convenience requirements.
13. Contactless payment via smartcards will become the interim technology on
the way to more encompassing mobile payment services.
FeliCa technology was introduced to the market in the form of the Octopus Card in
Hong Kong in 1997. Suica (Japan Railway East) has been operating the card service
for ticketing and payments in metropolitan Tokyo since 2001. The number of cus-
tomers using the service increased from 6 million in 2001 to 15 million in 2010, with
more than 30 million contactless cards in circulation.
In Europe, it was the U.K. that led the way in the area of contactless card technolo-
gy, with more than 12 million cards and 760,000 terminals. In the present year of
2012, an initiative introduced by savings banks in Germany has encouraged con-
sumers in Germany to consider and become more familiar with the new payment
options. VISA and MasterCard solutions are also increasingly being tested by
banks and offered to their customers.
14. Cash will remain the dominant form of payment transaction throughout the
world. The main approach of the new providers will involve transforming
cash into e-money.
In Europe, 85% of all payment transactions are made in cash, with 90% of these
transactions being made for amounts less than EUR 20.
187
According to a study car-
ried out on behalf of VISA in 2009, the cashless transactions can be broken down as

187 Philippe Pestanes (Kurt Salomon – PHB Development): “Mobile Payments. A ‘South-
ern’ Revolution – Development of Mobile Payments: Issues and Prospects for the Fu-
ture,” 2011.

159. 150 8 Summary
follows: SEPA credit transfers (27%), SEPA direct debits (30%), card payments
(33%), checks (8%) and e-money transfers (1%). While this is also the case in Kenya
– where 90% of all payment transactions are also made in cash – the share of mo-
bile payments in Kenya has risen to 7% of all payments in the wake of M-PESA’s
success.
188

15. It will be a mistake to underestimate the cultural aspects of cash.
On average, 85% of all payment transactions in Europe are made in cash. And
people in Europe regard cash as having a status that is more than a mere promise.
Providers who introduce e-money or mobile payment alternatives are essentially
trying to encourage people to go down an unaccustomed and uncertain path.
One common assumption is that younger people will be the first to respond and
adapt accordingly. The sea change away from the accustomed means of rendering
payment can be expected to take a certain amount of time. Here, we should avoid
using the developments in some African countries as a reference and instead look
to Japan where e-money has established itself as a viable means of payment over
the course of 6 years, although cash remains the dominant form of payment trans-
action. This can be expected to change at an accelerated rate in the coming 4 years
as the significance of e-money is supposed to quadruple.
16. Banks will pursue defensive strategies.
Banks are the ones who have the most to lose on the new market. At the beginning
of 2000, the banks had the option of exploiting the first-mover advantage and de-
cided instead to punt. MNOs and novel providers are the ones who have gained
the most attention of late and have shown the rest how to succeed on the market
with e-money services. We can therefore expect to see the issues of security, risk
and fraud gain greater attention as the banks introduce lobbying efforts, engage
regulatory agencies and work their media outlets. Many providers can reduce their
regulatory risk by acquiring banking licenses.
17. All market participants will have to gather and analyze a tremendous amount
of information.
All of the market participants have shown great interest in the subject of mobile
payment services. However, these participants often face considerable challenges
when it comes to analyzing the situation and devising smart strategies. Various
participants have shown a degree of confusion. This is not surprising in light of the
new and confusing terms and the array of stakeholders involved. It will therefore
pay to recall the answer to the question about how to eat an elephant (i.e. some-
thing of the magnitude of mobile payment): One bite at a time.

188 Central Bank of Kenya, April 2013

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161. Index of Abbreviations
ACH Automated Clearing House
AES Advanced Encryption Standard
AML Anti-Money Laundering
App Application
ASP Application Service Provider
ATM Automated Teller Machine
CDR Call Detail Record
CIC Circuit Identification Code
CT Credit Transfer
DD Direct Debit
DDA Dynamic Data Authentication
DFID Department for International Development
ECMA European Computer Manufacturers Association
EDGE Enhanced Data Rates for GSM Evolution
EMV Europay, MasterCard, VISA (a global standard for the interop-
eration of ICCs)
EPC European Payment Council
ETSI European Telecommunication Standards Institute
FeliCa Felicity Card
GPRS General Packet Radio Services
GSM Global System for Mobile Communication
GSMA GSM Association
HTTP Hypertext Protocol
ICC Integrated Circuit Card
IEC International Electrotechnical Commission
IMEI International Mobile Equipment Identity
ISO International Organization for Standardization
IMF International Monetary Fund
KSH Kenyan Shilling
KYC Know Your Customer
LTE Long Term Evolution
MCP Mobile Contactless Payment
MNO Mobile Network Operator
M-KESHO Swahili for “Mobile Tomorrow”
MMS Multi-media Message Service
M-PESA Swahili for “Mobile Money”
MSISDN Mobile Subscriber Integrated Services Digital Number
Nana Na Swahili for “Buy”
T. Lerner, Mobile Payment, DOI 10.1007/978-3-658-03251-7,
© Springer Fachmedien Wiesbaden 2013

162. 154 Index of Abbreviations
NFC Near Field Communication
OMA Open Mobile Alliance
Osaifu-Keitai Japanese for “Mobile Money”
OTA Over-the-Air Programming
PIN Personal Identification Number
POS Point of Sale
PPs Proximity Payments
PSD Payment Service Directive
P2P Peer-to-Peer/Person-to-Person
QRC Quick Response Code
RF Radio Frequency
RFID Radio Frequency Identification
ROI Return on Investment
RTGS Real Time Gross Settlement
SE Secure Element
SEPA Single Euro Payments Area
SIM Subscriber Identity Module
SIM Lock Code for Subscriber Identity Module
SMS Short Message Service
SMSC Short Message Service Center
SQRC Secure Quick Response Code
Triple DES Triple Data Encryption Standard
TSM Trusted Service Manager
UICC Universal Integrated Circuit Card
UMTS Universal Mobile Telecommunication System
URL Uniform Resource Locator
USD US Dollar
USSD Unstructured Supplementary Service Data
vCard Electronic Business Card File Format Standard
WAP Wireless Application Protocol
WML Wireless Markup Language
WTLS Wireless Transport Layer Security
3G Third-generation Mobile Communication System

163. Glossary
Acquirer A bank or financial-service provider that processes credit
and debit card payments made for the products and ser-
vices sold by retailers. In other words, the bank accepts or
acquires credit card transactions from the card-issuing
banks within a network (MasterCard, VISA, American
Express, Diners Club, etc.).
Acceptance locations Businesses, companies, restaurants, hotels, online shops,
supermarkets, etc. that have reached an agreement with
card issuers (e.g. credit card companies) to accept pay-
ments made with the various cards (credit cards, contact-
less cards, etc.).
Android Google operating system for smartphones, cellphones and
tablets. The Android software, which is based on a
LINUX kernel, is free of charge.
App Short form for “application.” The term usually refers to
applications for smartphones and tablet computers that,
depending on one’s operating system, can be ordered and
downloaded via an integrated online shop.
Automated clearing
house
Network for financial transactions made in the United
States. The system is used for bank liquidity manage-
ment, intercompany payments, loan payments, insurance
premium payments, salary payments, tax payments and
e-commerce payments.
2D barcode Optical, two-dimensional representation of data in vari-
ous geometric patterns that can be read and processed by
optical readers such as scanners and cameras.
Billing In the telecommunications industry, billing encompasses
all of the process steps from the receipt of user data to the
drafting and sending of invoices.
Contactless payment Contactless (i.e. wireless) payment
Cross selling Sale of complementary products. The success of M-PESA
payment services led to an increase in the sale of cell-
phone airtime for the Safaricom telecommunications
company.
Cloud IT infrastructure (i.e. computing, storage and network ca-
pacity as well as finished applications) made available to
enterprises via a network (e.g. Internet).
Debit card Debit cards are used to make non-cash payments or to

164. 156 Glossary
withdraw cash at an ATM.
Denial of service
(DOS) attack
Data manipulation. The easiest way to manipulate data is
to interrupt the communication between the sender and
the receiver. Here, it is necessary to interrupt the data
spectrum at the right time and at the right frequency. This
is the classic case of a denial-of-service attack.
DFID The Department for International Development is a de-
partment of the British government with its own Cabinet
Minister. The aim of this department is to promote sus-
tainable development and eliminate world poverty.
German Banking In-
dustry Committee
This association of the German banking industry was
known as the Central Credit Committee until August
2011 when it changed its name to the German Banking
Industry Committee. The five main banking associations
are represented in this overarching association.
Disruptive innovation A disruptive innovation is an innovation that has the ca-
pacity to lead to the quick elimination of an existing tech-
nology, product or service.
EDGE Enhanced data rates for GSM evolution is a technology
used to increase data transmission rates in GSM mobile
networks.
e-Float The term used for M-PESA cellphone credit
Electronic commerce Network-based electronic business transactions. The term
is largely used to describe Internet-based business activi-
ties.
e-Money The term electronic money is a synonym for digital cur-
rency, i.e. money that is only exchanged electronically.
Numerous e-money systems use contactless technology to
raise the convenience of payment transactions for retailers
and customers.
EMV EMV is an international standard that applies to integrat-
ed circuit cards (i.e. cards outfitted with a processor chip)
and the accompanying chip-card devices such as POS
terminals and ATMs. The standard was developed by Eu-
ropay International, MasterCard and VISA. The current
EMV standard is Version EMV 4.3.
EPC The European Payments Council (EPC) has worked to
promote the formation of a unified Euro payment area
(SEPA – Single Euro Payments Area). The EPC is a non-
profit organization whose member banks and banking
associations are from 32 European countries.
FeliCa Short form for the contactless RFID smartcard technology

165. Glossary 157
that is used by JR East and NTT DoCoMo in Japan for Su-
ica and Osaifu-Keitai. It was developed by Sony for use in
payment systems.
Flat rate Pricing structure involving a single fixed fee for a service,
i.e. regardless of usage
Flat fee A synonym of flat rate
Fraud An act of deception or misrepresentation for illicit gain
Money laundering Introducing illegally acquired money or assets to official
or legal channels
GPRS General packet radio service is a packet-oriented service
for the transmission of data in GSM networks.
GSM Global system for mobile communications is a standard
for digital-cellular networks. It is used for elephone,
packet-based data transmission, accessory services such
as USSD and text messaging. It is the successor to ana-
logue system of the first generation.
Information security The goal of information security is to ensure protection
against intentional attacks. This goal includes the follow-
ing sub-goals:
Availability: The provider must ensure the availability of
the applications and information.
Confidentiality: Communicated or stored information
must be protected against attacks and unauthorized ac-
cess.
Integrity: The accuracy and consistency of the infor-
mation must be protected against unauthorized or inad-
vertent changes.
Authenticity: The parties involved are who they claim to
be.
Non-repudiation: Protection of agreements and transac-
tions via authentication. A given party to a transaction or
agreement cannot deny having been a party to the trans-
action or agreement.
Accountability: Combination of the security aims of non-
repudiation and authenticity
i-mode Proprietary protocol developed by NTT DoCoMo and
currently competing with wireless application protocol
(WAP). In Germany, i-mode is used by E-Plus.
International mobile
equipment identity
(IMEI)
IMEI identifies mobile devices (cellphones, smartphones).
Network effects See “Multi-sided Platforms.” In economics and business,

166. 158 Glossary
one speaks of a network effect when the use of a product
or service by a user has an impact on the value of the
product or service.
IMF The International Monetary Fund is an organization of
the United Nations with the mission of promoting inter-
national cooperation in matters of currency policies, the
expansion of global trade, the stabilization of exchange
rates, extending loans and monitoring monetary policies.
Credit card Card used to pay for goods and services. The term is not
used uniformly throughout the world. Real credit cards,
which essentially extend credit, are also referred to as
charge cards. In Germany, the term credit card is general-
ly used to refer to cards that bear the logo of a credit card
company and are accepted as a means of payment at the
corresponding acceptance locations.
Killer application Application that elicits mass demand. In Germany, such
applications include SMS.
Keyed-in transactions Payment security services in the Square business model.
KYC (know your cus-
tomer)
Banks and insurance companies have an obligation to
make a background check of their customers before
providing services to them in an effort to avoid money
laundering.
LTE Long term evolution is the successor to the UMTS mobile
network standard. It enables much greater download and
up-load speeds than its predecessor. It is also referred to
as 4G.
Man-in-the-middle
attack
Man-in-the-middle attacks arise when two parties who
want to exchange information wind having the exchange
orchestrated by a third party.
Meiwaku Japanese sensibility according to which people should
generally avoid creating inconvenience for others or be
the cause of trouble: pay quickly at the cash register, en-
sure you are solvent, avoid paying with credit cards and
avoid being the cause of a long line.
One of the Japanese sensibilities NTT DoCoMo took into
consideration when introducing its Osaifu-Keitai service.
Multi-sided platform
(with network effects)
A multi-sided platform is where two or more customer
groups meet who have been led to the platform (or mar-
ketplace) by the operator of the platform. The platform
operator must provide an attractive service for all cus-
tomer groups – whether they are paying or non-paying
groups – so that the customers within the various groups

167. Glossary 159
are represented in numbers sufficient to generate the nec-
essary network effects.
If the turning point is reached, the platform operator may
consider the introduction of a fee, which generally applies
only to one group of market participants. The others may
continue to use the service free of charge. They usually
have little opportunity to provide a service that could
compete against the network effect. Examples of success-
ful network effects include Amazon, EBAY (bargains),
Google (search engine), Apple (iTunes platform), NTT
DoCoMo (i-mode, Osaifu-Keitai: mobile wallets), Face-
book.
MicroSD card The microSD is a stan dardized memory card used in a
wide range of portable devices.
M-KESHO The M-KESHO is an interest-bearing bank account intro-
duced by Equity and Safaricom. The service enables the
tabulation of interest on small savings, loans and casualty
insurance policies.
MMS Multimedia Messaging Service is used to transmit multi-
media contents (e.g. photos, films, postcards). The service
is a successor to SMS.
Mobey Forum Founded in the year 2000, the Mobey Forum is a bank-led
association whose aim is to bring leading financial-service
companies, mobile network operators, mobile device
manufacturers and payment providers to define user-
friendly mobile-finance services for the mass market and
to make a contribution to open and secure technology
standards. Mobey Forum is managed by Bank of Ameri-
ca, Deutsche Bank, DnB NOR, HSBC, La Caixa, Nokia,
Nordea, PostFinance, Rabobank and UBS.
Mobile banking Banking services that can be accessed and used via mo-
bile devices. Such services may include the provision of
information, brokerage, loans and payment transactions.
Mobile commerce Buying and selling products and services via a mobile
device
Mobile NFC The term mobile NFC refers to proximity-payment ser-
vices that make use of near field communication (NFC)
technology and suitably enabled cellphones or
smartphones (wallet app, security features, etc.). Mobile
NFC is the most promising area of the developing mobile
payment market.
Mobile payment Payments that are transacted with the use of a mobile de-

168. 160 Glossary
vice.
Mobile wallet Portable wallet that is used as an application in the con-
text of mobile payment services
M-PESA Introduced in the year 2007, M-PESA is the mobile pay-
ment service offered by Safaricom, Kenya’s largest tele-
communications company. Use of the service does not re-
quire a regular bank account. Thanks to its success, the
service has become a model for other developing coun-
tries.
Nanua Na M-PESA payment service based in Kenyan supermarkets
Near field communi-
cation (NFC)
NFC is a wireless technology that enables the exchange of
data over short distances. The solution is largely used to
transact small cashless payments.
NFC Forum Public platform for the promotion of near field communi-
cation (NFC). The Forum’s current membership includes
100 companies. These companies are currently working
out architecture designs and other technical specifications
for the technology.
Octopus Card Introduced to the market in Hong Kong in 1997, this re-
fillable, contactless smartcard is outfitted with a non-
standard RFID chip based on Sony’s FeliCa technology.
The Octopus Card is used to make electronic-payment
transactions.
Business ecosystem The business ecosystem describes an organism in the
business world or in a particular economic community
that has been formed by multiple enterprises for the pur-
pose of jointly providing a product or a service on the
market. The inhabitants of this ecosystem include suppli-
ers, producers, competitors and other stakeholders who,
in accordance with their abilities, assume responsibility
for certain roles and tasks in the framework of a mutual
undertaking. Such systems or organisms were first de-
scribed by James F. Moore.
OMA Open Mobile Alliance – conglomeration of mobile-service
operators and other product and service providers whose
aim is to develop and standardize market-ready, interop-
erable, digital services.
Osaifu-Keitai A mobile payment service that was introduced by NTT
DoCoMo in Japan in 2004 in the context of the company’s
lifestyle strategy.
PayPass Contactless card service introduced by MasterCard
payWave Contactless card service introduced by VISA

169. Glossary 161
Phishing Illicit attempts using “bait” and “hooks” to “reel in” pass-
words. Attempts are made via bogus addresses, e-mails
or short messages to gain access to the key data of an In-
ternet user, ranging as far as identity theft.
POS Point of sale
Postpaid Contracts specifying the billing of services after their use
Prepaid Usually used in connection with a smartcard or money
card and prepaid cellphone airtime. In Germany, for in-
stance, prepaid money cards have been in use since 1996.
Various contactless services such as girogo involve pre-
paid solutions.
Proximity payments The term is generally used in connection with mobile
NFC payments, contactless payments via smartcards,
barcode-payment services and services involving the use
of a mobile device as a payment terminal.
PSD The Payment Service Directive is a guideline issued by
the European Union for the implementation of SEPA
(Single Euro Payments Area).
P2P Person-to-person: interpersonal exchange via mobile
network services or computer technology.
P2P Peer-to-peer: communication among equals (e.g. a net-
work of computers where all computers are equal in sta-
tus).
P2P remittance Transfer of money from one personal account to another
personal account. In the case of M-PESA, for instance, the
“Send money home” initiative was crucial to the early
success of the business model.
RFID Radio-frequency identification enables the automatic
identification and localization of objects and living crea-
tures. RFID technology consists of a tag (i.e. a transpond-
er that is attached to an object) and a reader. In RFID
technology, short range magnetic fields or radio waves
are generated. A program in a reader can then be used to
control the read-out process. RFID technology is integrat-
ed in the new NFC technology and is therefore subject to
further development.
RSA RSA is an asymmetric encryption process named after its
inventors Rivest, Shamir and Adleman. It can be used
both for data encryption and digital signatures.
RTGS Real Time Gross Settlement system for the interbank
transfer of funds. In most countries, RTGS applications
are used for transacting large-volume payments. The

170. 162 Glossary
largest RTGS system is Target2, which links 26 European
central banks.
Secure element The computer chip that is used to store encrypted user
data in the Google Wallet is referred to as the “secure el-
ement.“ The payment information on the secure element
can only be accessed by trustworthy programs. The se-
cure element is separate from the mobile device’s storage
unit.
SEPA Single Euro Payments Area. Private individuals and
companies in the countries included in the payments area
are to be assured of a uniform process, no matter where
payments are sent within the SEPA. A total of 32 coun-
tries are participating in the implementation of SEPA.
SEPA products include SEPA credit transfers, SEPA di-
rect debits, SEPA card payments and SEPA direct debits
for businesses. Further new services are also to be intro-
duced in the signatory countries.
Service provider Provider of servic es (telecommunications, mobile net-
work, Internet, software, etc.)
SIM card Subscriber identity module card. The SIM card identifies
only the user. If the card is lost or stolen, it can be remote-
ly deactivated via the network.
SIM lock A network code that limits the use SIM cards on mobile
devices.
Smartcard Plastic card with an embedded chip with an integrated
circuit that may contain memory, microprocessors and
other logic elements. The cards are also referred to as chip
cards or ICCs (integrated circuit cards).
SMS Short Message Service. Telecommunications service for
the transmission of short text messages.
SQRC Secure Quick Response Code is a further development of
the two-dimensional code that includes data encryption
functions. Decryption is then performed by a decoder in-
stalled on the reader.
Tokushita Japanese sensibility marked by an enthusiasm for “get-
ting something for free,” thereby leaving Japanese recep-
tive to bonus and reward systems. This is a feature of the
NTT DoCoMo mobile wallet.
Touchpoint Point of contact for Deutsche Bundesbahn’s Touch-and-
Travel ticketing service. Touchpoints mark a train jour-
ney’s points of departure and arrival, which are then used
to determine routes and prices.

171. Glossary 163
Triple DES Triple execution of the symmetric data encryption stand-
ard (DES).
Trusted service man-
ager (TSM)
The TSM plays an important role in the NFC business
ecosystem, acting as an impartial broker who drafts busi-
ness agreements and secures business connections among
mobile network operators, mobile device manufacturers
and parties who control and secure the secure element on
mobile devices. The TSM ensures that service providers
are able to integrate their applications into the business
ecosystem and that the appropriate parties have access to
the secure element in NFC-enabled devices. The term is
used uniformly by the GSM Association, the European
Payments Council and the NFC Forum.
UMTS Universal Mobile Telecommunications System is the mo-
bile network standard of the third generation which per-
mits higher data transmission rates and bandwidths than
GSM and GRPS.
USSD Unstructured Supplementary Service Data (USSD) is a
protocol used by GSM cellphones to communicate with
the service provider's computers and also supports a
range of simple auxiliary services. In connection with
mobile payment services, it is largely used in developing
countries.
WAP Wireless Application Protocol is a wireless transmission
standard for accessing information on the smaller dis-
plays of cellphones and smartphones. WAP can be used
with various network technologies, including GRPS,
UMTS and LTE.

172. Index of Figures
Figure 1: The history of money and forms of payment until 1876,
© Jan de Meester “Mobile Wallets” 2010, Olswang Digital Money, 2010 .. 2

Figure 2: The history of money and forms of payment since 1945,
©Jan de Meester “Mobile Wallets” 2010, Olswang Digital Money, 2010 ... 3

Figure 3: Overview of the payment services map .......................................................... 5
Figure 4: Four core segments in the continued development of mobile payment
solutions .............................................................................................................. 8

Figure 5: Overview of active mobile payment services worldwide, © Mobile Money
for the Unbanked 2012 (GSMA), GSMA 2010: “GSMA- Mobile Money
and Wireless Intelligence ................................................................................ 13

Figure 6: Distribution of mobile payment services in Africa, © “GSMA-Mobile
Money and Wireless Intelligence” ................................................................. 14

Figure 7: Market estimates and projections for the mobile payment sector,
© McKinsey/ Informa/ Paypal 2010 ............................................................... 15

Figure 8: U.S.-market segmentation and size, © Federal Reserve Bank of
Philadelphia, IDC Survey(2006), eMarketer(2006), Nilson-Report(2005) . 16

Figure 9: P2P transactions in the U.S. in the year 2010, © AITE-Group Survey
August 2010....................................................................................................... 17

Figure 10: Contactless services in Europe, © NFC Insight, April 2011 /
NFC World Europe, June 2011 ....................................................................... 18

Figure 11: The development of mobile money, © NFC Insight Monitise 2011 ......... 19
Figure 12: Conservative forecast of the global development of mobile payment
services, © Research and Markets, in: PYMTS 28
th
October 2011 .............. 20
Figure 13: Retailer response to mobile payment services, ©ibi Research 2011 ......... 21
Figure 14: Percentage of cash transactions according to payment value,
© Bundesbank Study 2 009 .............................................................................. 22

Figure 15: Retailer sales according to method of payment .......................................... 22
Figure 16: The bank-driven model .................................................................................. 24
Figure 17: Advantages of bank-driven model ............................................................... 25
Figure 18: Benefits and risks of offering mobile payment services for banks ........... 26
Figure 19: Benefits and risks of the bank-driven model (for MNOs, retailers
and customers).................................................................................................. 27

Figure 20: The MNO-driven model ................................................................................ 29
Figure 21: The advantages of the MNO-driven model ................................................ 29
Figure 22: Benefits and risks of the MNO-driven model for MNOs .......................... 30
Figure 23: Benefits and risks of the MNO-driven model for banks, MNOs
and customers ................................................................................................... 31

Figure 24: Value chain resulting from the collaborative model .................................. 32

173. 166 Index of Figures
Figure 25: Benefits and risks of the collaborative model for banks, MNOs and
trusted service managers ................................................................................. 33

Figure 26: Benefits and risks of collaborative model for retailers and customers .... 34
Figure 27: The independent model ................................................................................. 35
Figure 28: Benefits and risks associated with the independent model ...................... 36
Figure 29: Benefits and risks of the independent model for retailers
and customers ................................................................................................... 36

Figure 30: Criteria for the success of a mobile payment model .................................. 37
Figure 31: USSD profile .................................................................................................... 41
Figure 33: SMS profile ...................................................................................................... 44
Figure 34: WAP profile ..................................................................................................... 45
Figure 35: NFC/QRC profile ............................................................................................ 48
Figure 36: Comparison of NFC and RFID technology ................................................. 48
Figure 37: Possible active-passive mode combinations in NFC .................................. 49
Figure 38 Comparison of mobile technologies used in Japan and the rest of
the world, © Etona Ueda/2008 ........................................................................ 50

Figure 39: Integration of NFC technology in mobile devices ...................................... 51
Figure 40: Diagrams of secure NFC architecture in mobile devices,
© Dave Holmes, NXP, NFC Market Upddate Q407, page 5 ...................... 51

Figure 41: Benefits and risks of NFC .............................................................................. 55
Figure 42: General security goals .................................................................................... 56
Figure 43: Contactless FeliCa technology, © SONY FeliCa: Contactless
Technology 2011 ............................................................................................... 60

Figure 44: Approaches to managing outside innovation: markets versus
communities ...................................................................................................... 62

Figure 45: Motivation for external innovators, © Kevin J. Boudreau /
Karim R. Lakhani ............................................................................................. 63

Figure 46: Various platform strategies, © Kevin J. Boudreau / Karim R. Lakhani ... 64
Figure 47: Real-world examples of the various platform models, © Kevin J.
Boudreau / Karim R. Lakhani ......................................................................... 65

Figure 48: M-PESA’s business success and contribution to Kenya’s national
economy ............................................................................................................ 68

Figure 49: Prerequisites for success ................................................................................ 69
Figure 50: Value-added chain and M-PESA roles ........................................................ 72
Figure 51: M-PESA customer and retailer development up until March 2011 ......... 74
Figure 52: Distribution of M-PESA sales outlets in Kenya, © Weltbank, August
2010, Ignacio Mas / Dan Radcliffe (Bill & Melinda Gates Stiftung) ........... 75

Figure 53: Comparison of payment transaction volumes and value per channel,
© Central Bank of Kenya, December 2010, Nairobi, Kenya ....................... 79

Figure 54: Access to financial services, © World Bank in : Kenya, Economic
Update, December 2010 ................................................................................... 80

Figure 55: A chronology of success, Safaricom ............................................................. 81

174. Index of Figures 167
Figure 56: Mobile money replaces other forms of money transfer,© World Bank .. 82
Figure 57: M-PESA summary .......................................................................................... 83
Figure 58: M-PESA’s international expansion ............................................................... 84
Figure 59: Illustration of Sony’s FeliCa technology ...................................................... 85
Figure 60: Global comparison of FeliCa technology and other technologies,
© Etona Ueda/ 2008 .......................................................................................... 85

Figure 61: Suica prepares the way for DoCoMo’s Osaifu-Keitai,© Tadashi
Morita (Sony) .................................................................................................... 86

Figure 62: The new value-added chain/innovation via Osaifu-Keitai, Hironari
Tomioka,NTT Data, 2010 ................................................................................ 88

Figure 63: Implementation of lifestyle strategy by NTT DoCoMo,© Masaki
Yoshikawa (NTT Docomo), 2008.................................................................... 89

Figure 64: NTT DoCoMo’s business model ................................................................... 90
Figure 65: The economic development of FeliCa (Suica/Osaifu-Keitai) in Japan ..... 91
Figure 66: Current proposals for impr ovement ............................................................ 94
Figure 67: Lessons to be learned from the NTT DoCoMo story ................................. 96
Figure 68: A successful mobile FeliCa business model ................................................ 96
Figure 69: Illustration of the Starbucks mobile payment process (smartphone,
Starbucks Card and account status function) ............................................... 97

Figure 70: The most successful mobile payment service in the United States
in 2011, © Starbucks ......................................................................................... 98

Figure 71: Starbucks supports various smartphone operating systems. ................... 99
Figure 72: Breakdown of the smartphone market in the United States,
© Comscore Period; Dec. 2009- Dec. 2010 ................................................... 100

Figure 73: Summary of the Starbucks Touch-and-Pay service ................................. 101
Figure 74: Advantages and disadvantages of Square, © Varad Kandahai:
Mobile Payment Processing: Squaring up the Co mpetitors ..................... 103

Figure 75: Use of Square with mobile devices............................................................. 105
Figure 76: Square’s development at a glance .............................................................. 106
Figure 77: Trajectory of Google’s Mobile Wallet so far .............................................. 109
Figure 78: Development of mpass ................................................................................ 114
Figure 79: Paybox profile ............................................................................................... 117
Figure 80: PostFinance profile ....................................................................................... 117
Figure 81: Photo of a Touchpoint .................................................................................. 118
Figure 82: Development of Touch and Travel ............................................................. 119
Figure 83: Mainz 05 FanCard ......................................................................................... 125
Figure 84: Expansion of the payment process to include value-added services .... 127
Figure 85: Examples of Splash-supported payment services .................................... 128
Figure 86: Advantages and disadvantages of Splash ................................................. 130
Figure 87: Avance Pay solutions ................................................................................... 131
Figure 88: Need for cost effective terminals ................................................................ 132
Figure 89: Avance Pay’s role in the value-added chain ............................................. 132

175. 168 Index of Figures
Figure 90: Comparison of Square, iZettle and PayPal Here ...................................... 139
Figure 91: Comparison of girogo, Mainz 05 FanCard and Suica .............................. 140
Figure 92: Comparison of global solutions: VISA payWave, MasterCard
PayPass and PayPal ....................................................................................... 142

Figure 93: Matrix representation of the mobile payment landscape ........................ 147
Figure 94: Mobile-ready enterprises ............................................................................. 151

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