International Remittance And Mobile Banking

International Remittance and Mobile Banking NTU, Singapore 19 March 2009 Arief Hamdani Gunawan

Outline
International Remittance
Facts and Figures
General Principles
Models
Mobile Banking
m-Commerce
Mobile Payment
Challenges

World Wide Remittance

The General Principles for International Remittance Services (CPSS/World Bank - General principles for remittances - January 2007)
The General Principles are aimed at the public policy objectives of achieving safe and efficient international remittance services. To this end, the markets for the services should be contestable, transparent, accessible and sound.
Transparency and consumer protection
General Principle 1. The market for remittance services should be transparent and have adequate consumer protection.
Payment system infrastructure
General Principle 2. Improvements to payment system infrastructure that have the potential to increase the efficiency of remittance services should be encouraged.
Legal and regulatory environment
General Principle 3. Remittance services should be supported by a sound, predictable, nondiscriminatory and proportionate legal and regulatory framework in relevant jurisdictions.
Market structure and competition
General Principle 4. Competitive market conditions, including appropriate access to domestic payment infrastructures, should be fostered in the remittance industry.
Governance and risk management
General Principle 5. Remittance services should be supported by appropriate governance and risk management practices.
Committee on Payment and Settlement Systems / The World Bank

The General Principles for International Remittance Services (CPSS/World Bank - General principles for remittances - January 2007)
Roles of remittance service providers and public authorities
A. Role of remittance service providers .
Remittance service providers should participate actively in the implementation of the General Principles.
B. Role of public authorities .
Public authorities should evaluate what action to take to achieve the public policy objectives through implementation of the General Principles.
Committee on Payment and Settlement Systems / The World Bank

The most and least costly "country corridors": (Country Corridors & Average cost in US$)
$200
Top 5 (least costly):
Spain to Brazil 7.45
United States to El Salvador 9.17
United States to Ecuador 9.39
United States to Honduras 9.41
Saudi Arabia to Philippines 9.56
Bottom 5 (most costly):
Germany to China 49.30
Germany to Romania 48.79
South Africa to Zambia 47.02
Netherlands to Indonesia 45.09
Germany to Croatia 42.45
$500
Top 5 (least costly):
Spain to Brazil 7.68
United States to El Salvador 11.35
United States to Honduras 12.48
Saudi Arabia to Philippines 13.50
United States to Lebanon 13.65
Bottom 5 (most costly):
Netherlands to Indonesia 86.41
Germany to Croatia 85.66
South Africa to Zambia 81.08
Germany to China 76.74
Netherlands to Dominican Republic 70.58
Cost includes the transaction fee and exchange rate margin. Only those corridors where all the necessary information was provided are featured. Corridor averages are unweighted and do not reflect the market shares of the different firms that compose the average.

Remitting from Singapore to Indonesia 12.00 Total Average 10.00 Post office Average 10.88 MTO Average 17.50 Bank Average Apr 08, 2008 Next day. However, money can only be sent to branches of Mandiri Bank 25.00 Bank Bank Mandiri Apr 08, 2008 1-2 working days 15.00 MTO GPL Remittance Apr 08, 2008 15 minutes 12.00 MTO Western Union Apr 08, 2008 1-5 days 10.00 MTO Brunphil Express Apr 08, 2008 Same day to branches of BNI in Indonesia; 5 days to all other banks 10.00 Bank BNI (Bank Negara Indonesia) Apr 08, 2008 1-3 working days 10.00 MTO One Stop Remittance Apr 08, 2008 Next day 10.00 Post office Singapore Post (Cashome) Apr 08, 2008 Next day 10.00 MTO BTI Money Transfer Apr 08, 2008 10 minutes 10.00 MTO Ameer Tech (MG) - cash Apr 08, 2008 10 minutes 10.00 MTO Ameer Tech (MG) - account Apr 08, 2008 Next day 10.00 MTO MoneyWorld Date Transfer speed Fee (SGD) Firm type Firm name

Simple Model

Complex Model

Outline
Mobile Banking
Mobile Money
Facts and Figures
Benefit
m-Commerce
Mobile Payment
Challenges

Mobile Money – Goes Beyond Banking High Complexity Low Complexity High Customer Value Low Customer Value Payments, Transfers and Transactions Account Management Investment Services Information Services
Remittance / Fund Transfer
Micro-payment
Mobile Recharging
Commercial Payment
Bill Payment
P2P Payment
Virtual Wallet
Electronic Cash
High Value to Unbank and Underbank

Priority Opportunities Payments, Transfers and Transactions Types Representative examples Remittances / Transfers M-Commerce / M-payments Point of Sales
Mobile peer to peer money transfer
With or without bank account
Domestic or cross border
Main Issues
Payment of commerce transactions, using the mobile browser or specific mobile applications
Mobile storefront downloads e.g., beyond ringtones
Payment of monthly bills/statements
Payment at Point of Sales by tapping a mobile device on a terminal • NFC (Near Field Communication)

Mobile Banking Subscriber Forecast 2007 – 2010 (Millions) 2007 2008 2009 2010 33.6 1.7 9.5 38.0 42.2 21.1 46.5 34.9 Mobile Internet Users Mobile Banking Users Source: Aite Group

Micropayment Market Survey 2007 - 2008 73% 86% 43% 34% 46% 37% Internet banking Mobile banking 2008 Internet payment 2007 Source: SHARING VISION TM , Micropayment Market Survey, 2007 - 2008

The Benefits of Mobile Banking
able to enact a payment from anywhere to anyone,
creating a macro-economic benefit that is as yet cannot be measured, but is most certainly significant.
increased traffic,
customer retention
improved service offerings
enabling immediate transactions (meaning the unbanked become banking customers),
alternative to carrying cash which in turn means better cash retention
increased security and payment efficiencies
reduced dependency on ATMs and branch infrastructures (meaning lowering of operating expenditure)
Operators Banks Users

Outline
Mobile Banking
m-Commerce
Overview
Infrastructure
Applications
Mobile Payment
Challenges

Mobile Commerce: Overview
Mobile commerce (m-Commerce,
m-Business)—any e-Commerce done in a wireless environment, especially via the Internet
Can be done via the Internet, private communication lines, smart cards, etc.
Creates opportunity to deliver new services to existing customers and to attract new ones

Mobile commerce from the Customer‘s point of view
The customer wants to access information, goods and services any time and in any place on his mobile device.
The customer can use his mobile device to purchase tickets for events or public transport, pay for parking, download content and even order books and CDs.
The customer should be offered appropriate payment methods. They can range from secure mobile micropayment to service subscriptions.

Mobile commerce from the Provider‘s point of view
The future development of the mobile telecommunication sector is heading more and more towards value-added services. Analysts forecast that soon half of mobile operators‘ revenue will be earned through mobile commerce.
Consequently operators as well as third party providers will focus on value-added-services. To enable mobile services, providers with expertise on different sectors will have to cooperate.
Innovative service scenarios will be needed that meet the customer‘s expectations and business models that satisfy all partners involved.

m-Commerce Terminology
Generations
1G : 1979-1992 wireless technology
2G : current wireless technology; mainly accommodates text
2.5G : interim technology accommodates graphics
3G : 3 rd generation technology (2001-2005) supports rich media (video clips)
4G : will provide faster multimedia display (2006-2010)

Terminology and Standards
GPS : Satellite-based Global Positioning System
PDA : Personal Digital Assistant—handheld wireless computer
SMS : Short Message Service
EMS : Enhanced Messaging Service
MMS : Multimedia Messaging Service
WAP : Wireless Application Protocol
Smart-phones —Internet-enabled cell phones with attached applications

Attributes of m-Commerce and Its Economic Advantages
Mobility — users carry cell phones or other mobile devices
Broad reach — people can be reached at any time
Ubiquity — easier information access in real-time
Convenience — devices that store data and have Internet, intranet, extranet connections
Instant connectivity — easy and quick connection to Internet, intranets, other mobile devices, databases
Personalization — preparation of information for individual consumers
Localization of products and services — knowing where the user is located at any given time and match service to them

Mobile Computing Infrastructure
Cellular (mobile) phones
Attachable keyboard
PDAs
Interactive pagers
Other devices
Notebooks
Handhelds
Smartpads
Screenphones—a telephone equipped with color screen, keyboard, e-mail, and Internet capabilities
E-mail handhelds
Wirelined—connected by wires to a network
Hardware

Unseen infrastructure requirements
Suitably configured wireline or wireless WAN modem
Web server with wireless support
Application or database server
Large enterprise application server
GPS locator used to determine the location of mobile computing device carrier
Mobile Computing Infrastructure (cont.)

Software
Micro browser
Mobile client operating system (OS)
Bluetooth—a chip technology and WPAN standard that enables voice and data communications between wireless devices over short-range radio frequency (RF)
Mobile application user interface
Back-end legacy application software
Application middleware
Wireless middleware

Networks and access
Wireless transmission media
Microwave
Satellites
Radio
Infrared
Cellular radio technology
Wireless systems

Mobile Service Scenarios
Financial Services.
Entertainment.
Shopping.
Information Services.
Payment.
Advertising.
And more ...

Early content and applications have all been geared around information delivery but as time moves on the accent will be on revenue generation.
Entertainment
Music
Games
Graphics
Video
Communications
Short Messaging
Multimedia Messaging
Unified Messaging
e-mail
Chat rooms
Video - conferencing
Transactions
Banking
Broking
Shopping
Auctions
Betting
Booking & reservations
Mobile wallet
Mobile purse
Information
News
City guides
Directory Services
Maps
Traffic and weather
Corporate information
Market data
m-Commerce

Mobile Application: Financial Tool
As mobile devices become more secure
Mobile banking
Bill payment services
m-Brokerage services
Mobile money transfers
Mobile micro payments
Replace ATM’s and credit cards??

Financial Tool: Wireless Electronic Payment Systems
“transform mobile phones into secure, self-contained purchasing tools capable of instantly authorizing payments…”
Types:
Micro payments
Wireless wallets (m-Wallet)
Bill payments

Examples
Swedish Postal Bank
Check Balances/Make Payments & Conduct some transactions
Dagens Industri
Receive Financial Data and Trade on Stockholm Exchange
Citibank
Access balances, pay bills & transfer funds using SMS

Mobile Applications : Marketing, Advertising, and Customer Service
Shopping from Wireless Devices
Have access to services similar to those of wireline shoppers
Shopping carts
Price comparisons
Order status
Future
Will be able to view and purchase products using handheld mobile devices

Mobile Applications : Marketing, Advertising, And Customer Service
Targeted Advertising
Using demographic information can personalize wireless services (barnesandnoble.com)
Knowing users’ preferences and surfing habits marketers can send:
User-specific advertising messages
Location-specific advertising messages

Mobile Applications : Marketing, Advertising, And Customer Service
CRM applications
MobileCRM
Comparison shopping using Internet capable phones
Voice Portals
Enhanced customer service improved access to data for employees

Mobile Portals
“A customer interaction channel that aggregates content and services for mobile users.”
Charge per time for service or subscription based
Example: I-Mode in Japan
Mobile corporate portal
Serves corporations customers and suppliers

Mobile Intrabusiness and Enterprise Applications
Support of Mobile Employees
by 2005 25% of all workers could be mobile employees
sales people in the field, traveling executives, telecommuters, consultants working on-site, repair or installation employees
need same corporate data as those working inside company’s offices
solution: wireless devices
wearable devices: cameras, screen, keyboard, touch-panel display

Mobile B2B and Supply Chain Applications
“ mobile computing solutions enable organizations to respond faster to supply chain disruptions by proactively adjusting plans or shifting resources related to critical supply chain events as they occur.”
accurate and timely information
opportunity to collaborate along supply chain
must integrate mobile devices into information exchanges
example: “telemetry” integration of wireless communications, vehicle monitoring systems, and vehicle location devices
leads to reduced overhead and faster service responsiveness (vending machines)

Applications of Mobile Devices for Consumers/Industries
Personal Service Applications
example airport
Mobile Gaming and Gambling
Mobile Entertainment
music and video
Hotels
Intelligent Homes and Appliances
Wireless Telemedicine
Other Services for Consumers

Outline
Mobile Banking
m-Commerce
Mobile Payment
Overview
Applications
Architectures
Challenges

Mobile Payment for m-Commerce
Mobile Payment can be offered as a stand-alone service.
Mobile Payment could also be an important enabling service for other m-commerce services (e.g. mobile ticketing, shopping, gambling…) :
It could improve user acceptance by making the services more secure and user-friendly.
In many cases offering mobile payment methods is the only chance the service providers have to gain revenue from an m-Commerce service.

Mobile Payment (cont.)
the consumer must be informed of:
what is being bought, and
how much to pay
options to pay;
the payment must be made
payments must be traceable.

Mobile Payment (cont.)
Customer requirements :
a larger selection of merchants with whom they can trade
a more consistent payment interface when making the purchase with multiple payment schemes, like:
Credit Card payment
Bank Account/Debit Card Payment
Merchant benefits:
brands to offer a wider variety of payment
Easy-to-use payment interface development
Bank and financial institution benefits
to offer a consistent payment interface to consumer and merchants

Smart Money/G-Cash
Smart money
Allows users to make purchases, pay and receive domestic payments and to receive remittances by loading or transferring money from a bank account into a mobile phone or reloading a pre-paid card electronically
G-Cash
Uses Cash-in and Cash-out Centers via mobile phone
Cash-in and Cash-out Outlets accredited to convert actual money to electronic money

Rural Bankers Association of the Philippines – Microenterprise Access to Banking Services (MABS) entered into a joint project with Globe Telecom thru the Text A Payment Project (TAP).
Allows micro loan clients to pay loan amortization using G-Cash platform thru SMS or texting
Lowers transaction costs and increase productivity of clients
“Text A Payment”

Payment via Internet Payment Provider WAP GW/Proxy SSL tunnel Mobile e-Payment Server GSM Security SMS-C Browsing (negotiation) Mobile Wallet CC/Bank Dispatcher Grabber User Merchant

Payment via Integrated Payment Server WAP GW/Proxy ISO8583 Based CP Mobile Commerce Server GSM Security SMS-C Browsing (negotiation) CC/Bank Mobile Wallet Voice Pre-Paid VPP IF SSL tunnel User Merchant

Outline
Mobile Banking
m-Commerce
Mobile Payment
Challenges
Limitations
Security Aspects
Risk

Limitations of m-Commerce
Usability Problem
small size of mobile devices (screens, keyboards, etc)
limited storage capacity of devices
hard to browse sites
Technical Limitations
lack of a standardized security protocol
insufficient bandwidth
3G licenses

Limitations of m-Commerce
Technical Limitations…
transmission and power consumption limitations
poor reception in tunnels and certain buildings
multi-path interference, weather, and terrain problems and distance-limited connections
WAP Limitations
Speed
Cost
Accessibility

Limiting Technological Factors
Mobile Devices
Battery
Memory
CPU
Display Size
Networks
Bandwidth
Interoperability
Cell Range
Roaming
Localization
Upgrade of Network
Upgrade of Mobile
Devices
Precision
Mobile Middleware
Standards
Distribution
Security
Mobile Device
Network
Gateway

Security in m-Commerce: Environment WAP1.2 (WIM) (SIM) Operator centric model CA Bank (FI) Merchant Shopping Content Aggregation Internet SAT GW WAP GW Mobile Network Mobile Bank WAP1.1 (+SIM where avail.) Security and Payment Mobile e-Commerce Server Mobile IP Service ProviderNetwork

WAP Architecture Web Server Content CGI Scripts etc. WML Decks with WML-Script WAP Gateway WML Encoder WMLScript Compiler Protocol Adapters Client WML WML-Script WTAI Etc. HTTP WSP/WTP

Comparison between Internet and WAP Technologies HTML JavaScript HTTP TLS - SSL TCP/IP UDP/IP Wireless Application Protocol Wireless Application Environment (WAE) Session Layer (WSP) Security Layer (WTLS) Transport Layer (WDP) Other Services and Applications Transaction Layer (WTP) SMS USSD CSD IS-136 CDMA CDPD PDC-P Etc.. Bearers:

WAP Risks
WAP Gap
Claim : WTLS protects WAP as SSL protects HTTP
Problem : In the process of translating one protocol to another, information is decrypted and re-encrypted
Solution : Doing decryption/re-encryption in the same process on the WAP gateway
Wireless gateways as single point of failure

Platform Risks
Without a secure OS, achieving security on mobile devices is almost impossible
Learned lessons:
Memory protection of processes
Protected kernel rings
File access control
Authentication of principles to resources
Differentiated user and process privileges
Sandboxes for untrusted code
Biometric authentication

WMLScript
Scripting is heavily used for client-side processing to offload servers and reduce demand on bandwidth
Wireless Markup Language (WML) is the equivalent to HTML, but derived from XML
WMLScript is WAP’s equivalent to JavaScript
Derived from JavaScript™

WMLScript (cont.)
Integrated with WML
Reduces network traffic
Has procedural logic, loops, conditionals, etc
Optimized for small-memory, small-CPU devices
Bytecode-based virtual machine
Compiler in network
Works with Wireless Telephony Application (WTA) to provide telephony functions

Risks of WML Script
Lack of Security Model
Does not differentiate trusted local code from untrusted code downloaded from the Internet. So, there is no access control!!
WML Script is not type-safe.
Scripts can be scheduled to be pushed to the client device without the user’s knowledge
Does not prevent access to persistent storage
Possible attacks:
Theft or damage of personal information
Abusing user’s authentication information
Maliciously offloading money saved on smart cards

Bluetooth
Bluetooth is the codename for a small, low-cost, short range wireless technology specification
Enables users to connect a wide range of computing and telecommunication devices easily and simply, without the need to buy, carry, or connect cables.
Bluetooth enables mobile phones, computers and PDAs to connect with each other using short-range radio waves, allowing them to "talk" to each other
It is also cheap

Bluetooth Security
Bluetooth provides security between any two Bluetooth devices for user protection and secrecy
mutual and unidirectional authentication
encrypts data between two devices
Session key generation
configurable encryption key length
keys can be changed at any time during a connection
Authorization (whether device X is allowed to have access service Y)
Trusted Device: The device has been previously authenticated, a link key is stored and the device is marked as “trusted” in the Device Database.
Untrusted Device: The device has been previously authenticated, link key is stored but the device is not marked as “trusted” in the Device Database
Unknown Device: No security information is available for this device. This is also an untrusted device.
automatic output power adaptation to reduce the range exactly to requirement, makes the system extremely difficult to eavesdrop

Security Risks in m-Commerce
Abuse of cooperative nature of ad-hoc networks
An adversary that compromises one node can disseminate false routing information.
Malicious domains
A single malicious domain can compromise devices by downloading malicious code
Roaming (are you going to the bad guys ?)
Users roam among non-trustworthy domains

Security Risks (cont.)
Launching attacks from mobile devices
With mobility, it is difficult to identify attackers
Loss or theft of device
More private information than desktop computers
Security keys might have been saved on the device
Access to corporate systems
Bluetooth provides security at the lower layers only: a stolen device can still be trusted

Security Risks (cont.)
Problems with Wireless Transport Layer Security (WTLS) protocol
Security Classes:
No certificates
Server only certificate (Most Common)
Server and client Certificates
Re-establishing connection without re-authentication
Requests can be redirected to malicious sites

Privacy Risks
Monitoring user’s private information
Offline telemarketing
Who is going to read the “legal jargon”
Value added services based on location awareness (Location-Based Services)

Thank You [email_address]

Questions
Assume there remittance, payment and POS are still developing (current condition); Will u take mobile wallet offering as the ‘default’?
Assume there are remittance, payment and POS; Will u take mobile wallet offering as the ‘default’?
Assume the ‘conventional bank’ is need more administration (time and fee) for remittance, payment and limited POS; Will u leave ‘conventional bank’ and take mobile banking offering as the ‘default’?

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International Remittance And Mobile Banking

by Arief Gunawan

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