The Consumer Side of NFC and Mobile Payments


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presentation to the Lafferty Global Merchant Services Council, Amsterdam (25 April 2013) - joined by René Bruinsma for case studies

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  • So I was thinking about some of the old conceptions of “e-commerce” and the “e-wallet” that we used to have at Netscape and MCI (1994-1996), when we were first deploying HTTPS.
  • MNOs tend to generate their revenues from “transaction-based business” (sale of SMS, data, voice calls), whereas margins on actual “transactions” for banks are thinning in most markets, and in some cases unprofitable in general.For banks, the question about the value of payments services is a burning one these days – especially for developed world banks, but also for the developing world as well.Deposit-taking and lending are major differentiating business lines of banks, although some MNOs and other parties are starting to make moves in this direction.
  • “Pinnen met je mobiel” retail shopping and payments trial using contactless PIN (NL direct debit) from Aug 2007- Feb 2008 Payment with a secure application on the mobile phone (Samsung x700)Also featured storage of value for recycled bottles on the phone – save your value, cash it in or donate it.Highly successful trial, proven consumer acceptance/trust a mobile as secure debit card replacement.
  • Proof-of-concept programme for NFC payment for soft drinks using MiniTixPartners: Capgemini, Coca-Cola, Rabo Mobiel, Yoonison, MiniTixBeginning in Apr 2007, 30 locations nation-wideProof-of-concept ‘Kroketjeuit de muur’ met je telefoon, Oct-Nov 2007 Capgemini, FEBO and Mertens GroupMiniTix NFC trial in Amsterdam (NFC mobile phones, cards)Proof-of-concept programme to explore cash management, saves coin traffic, fraud management
  • Major Dutch retailer Albert Heijn wanted to trial a new retail formula in their “To Go” storesNFC shelf-level tag shopping, as customer filled her basketCustomer built up a list of what they were buying, and performed self-checkout without queuing at busy store countersDiscounts and specials applied automaticallyReceipt can be printed upon existOccasional control checks to validate purchases
  • The Consumer Side of NFC and Mobile Payments

    1. 1. The Consumer Side of NFC and Mobile PaymentsLafferty Global Merchant Services Council, Amsterdam NL (25 April 2013)Dan Armstrong (
    2. 2.  Some nagging thoughts on paradigm shifts Re-thinking the nature of transactions and transactionactors Proximity mobile payments: card emulation or not? 3 case studies from The Netherlands to validateconsumer acceptance of NFC Rebooting the conversation from a consumer point-of-view• What do we expect from a wallet, or a payment instrument?• Is NFC a “tech-push’ or a “consumer pull’?• How to differentiate with NFC? 1 case study from Rwanda, where cards and cardacceptance are virtually non-existantContents
    3. 3. marketplaceMCI (1994-96)
    4. 4. marketplaceMCI (1994-96)
    5. 5. 1-800-MUSiC-NOW (1996)
    6. 6. The e-commerce shake out Many shifting paradigms. However, once the supplychain and logistics matched people’s awareness,appetite and feelings of trust for e-commerce settled,clear winning business models emerged (my personalway of summarising):• Efficiency (Paypal, Netflix, online photo printing,online flight tickets/car rental/hotels, UPS/FedExtracking,• Products (HP, Netflix,,• The Long Tail ( eBay, Marktplaats, publishing ondemand … and of course• … plus of course, Monetising Clicks (Facebook, Google,YouTube, TripAdvisor, pornography)
    7. 7. How shall we define “transaction”?Bank Account ValueTransfer, PaymentsValue Depletion,Prepaid, Wallets,TransportationLoyalty, Points,Coupons,TransformationMomentsEyeballs, Trust,Engagement, Action<?>
    8. 8.  50% of consumers will pay more for products they trust 78% of consumers will look first to trusted brands whenin need of products or services 78% of consumers are willing to give trusted brands achance, even if unsure of what value the product orservice will bring to them 82% of consumers will choose to use a trusted brand’sproducts or services frequently, rather than movebetween brands 83% of consumers will recommend a trusted brand toothers, often un-promptedTrust?Concerto Marketing Group, Vancouver BC, Canada / Ontrack Advisory, Singapore
    9. 9. … 2 fundamental types of transaction players?Transactions are theChannel”I have a pipe and/or network and I want to monetise theinvestments I made in creating it. I want as much to getthrough that pipe and the (mobile) phones accessing it aspossible.”Transactions via theChannel”I have stuff I want to do via channels. Enable bank accountcontrol, enable payments, provide ticketing, sell ads, creditloyalty points, etc. and I need as many (cost effective) channelsand pipes to do it.”
    10. 10. “Mobile” Banking & Payments ScopeCallCentre BankingIVR Banking & PaymentsSMS & Calling Alerts(spending, ATM usage, fraud, etc.)Transactions with Teller orAgent using Mobile DevicesMobile Banking & Payments Remote Payments &Electronic WalletsMobile Contactless /Proximity PaymentsMNO “Mobile Money”Mobile Remittances Advertising-led Models= banks deploy = bank-led models = cooperative models= mobile operator-led models = mobile operators deploy = third-parties deploy= public transportation-led modelsMobile Contactless /Proximity Payments
    11. 11. 2 Approaches to Mobile Proximity PaymentsCard Emulation Bypass Card Emulation Phone takes the place of aphysical card to transact at aphysical merchant location Consumers are comfortablewith card operating models Standardisation and ubiquityof acceptance points a mustfor economies of scale Requires compatiblecard/mobile acceptanceinfrastructure Trigger remote payment withphone (apps, other manner) Confirmation can be pushed tomerchant, but how to localisethe payment location withoutNFC? Receipt can be printed at POS Latency in making paymentthis way vs. cards EMV / secure PIN keypad Card acceptance still required
    12. 12. Proximity PaymentsOfflineCounterTriggersPaymentvalue on the card value in “the cloud’MobileAuthenticationTriggersPaymentcard-emulationbypasscard-emulationCardAuthenticationTriggersPayment
    13. 13. 3 Cases in Consumer Acceptance of Mobile as a Proximity PaymentTool
    14. 14. Mobile NFC as Debit Card and Shopping Tool – C1000
    15. 15. Mobile NFC for Low-Value Payments in Vending
    16. 16. NFC Mobile as Retail Shopping Tool, Issued Devices & AcceptancePoint
    17. 17. What do we expect from a wallet? A place to store cash? A place to store paymenttokens? A place to store other tokens? A personal object? A private object? Something small enough tobe portable/mobile? … but … do we need aphysical object?
    18. 18. Then, what do we expect from a transaction device? Identification of myself, myrights and capabilities,memberships. Identification of myself, anauthentication tool forpayment. Secure, multi-factor Tamper-resistant/evident Personal and private Easy to use … but … do we need aphysical object?
    19. 19.  Consumers seem to love and trust it• But who will pay for it’s implementation … merchants, banks, mobile operators,handset manufacturers? Given the “app revolution” in so many of our markets, whatvalue does NFC bring to payments?• Convenience?• Put all cards in one apparatus? The phone-shaped wallet ..• Addiction to mobile phones, but not to our wallets?• Leave cards at home?• Add value to transactions? Cards will remain in play for the foreseeable future, simplyincreasing the issuer and acquirer costs. Perhaps the business case can be made on a country-by-country level, but this is fundamentally different from stepsforward in functionality (e.g. cards, SMS, mobile data, apps,online shopping & payment).The Consumer’s Perspective on NFC?
    20. 20. Virtualisation benefits are clear, from the business POV ..0501001502002503003504004505001980 1985 1990 1995 2000 2005 2010*1millionContacts viadevices (e.g. webbrowser/internet,mobile phone, IVR)Total Customer ContactsContact via abank advisor,bank branch
    21. 21.  The case is clear for our creativity to make virtualisedecosystems work. But it will take a lot more creativity, usability and valueto become a real business driver. For banks, they also need to achieve this withoutsacrificing trust, security, longer-term relationships,and certain degree of transparency.Virtualisation benefits are clear, from the business POV ..
    22. 22. For your consideration .. impulse purchase / spam
    23. 23. For your consideration ..
    24. 24.  Although you could still easily pay with a card whenyou get to the POS …For your consideration ..
    25. 25.  Limited smartphones Limited (and expensive)mobile data Limited (and expensive)fixed internet &electricity Limited literacy Limited trust in banks High cost of ATM andbranch operations,limited in-country ITcapabilities Limited amount ofpeople with official IDs Everyone wants a cardanyway. It’s modern.But limited cards issuedLeap-Frogging Card Acceptance Infrastructure in Africa
    26. 26. Bank Branch: RwandaNo power, internet connectivity
    27. 27. Bank Branch: RwandaTeller
    28. 28. Bank Branch: RwandaWaiting for teller cash withdrawals
    29. 29. Bank Branch: RwandaTeller
    30. 30. BPR Simbuka
    31. 31. 1. Balance Inquiry2. Mini-Statement3. Money Transfer (BPR Accounts)4. iZi Cash5. Prepaid Airtime• MTN• Tigo (pending)6. Bill Payments• RECO Prepaid Electricity• StarTimes Africa TV• DStv• MTN Postpaid Bill• Tigo Postpaid Bill (pending)7. Merchant Payments8. Bank Services• Change BPR Mobile Banking PIN• Change Language• Order Cheque Book9. HelpBPR USSD Mobile Banking & Payments
    32. 32. BPR Mobile Road Shows & Sign-up Success
    33. 33. BPR Mobile Road Shows & Sign-up Success
    34. 34. Thank You!Dan ArmstrongTakashi Mobile | Financial ServicesRapenburgerplein 811011 VJ AmsterdamThe 652 085 071skype: dd.armstrong / gtalk: dan.armstrongRené BruinsmaMob ile Health | BMFSKerklaan 522912CK Nieuwerkerk ad YsselThe 63 888 5555