Mobile Payments: An IBM Point of View
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Mobile Payments: An IBM Point of View

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Mobile money presentation at the Sept 2012 SmarterCommerce Global Summit in Orlando.

Mobile money presentation at the Sept 2012 SmarterCommerce Global Summit in Orlando.

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Mobile Payments: An IBM Point of View Mobile Payments: An IBM Point of View Presentation Transcript

  • Mobile Payments: An IBM Point of View Dr. Mark Sherman Lars van Dam IBM WebSphere Strategy
  • Outline • Overview of retail payments • Mobile money market • Mobile money opportunities • Scenarios of mobile money applications • Impacts to existing payment systems • Operational issues for implementing mobile money • Case studies • Summary © 2012 IBM Corporation2
  • Overview of retail payments: Participants Cardholder Merchant AcquirerCard NetworkIssuer (Bank)
  • Overview of retail payments: Merchant, acquirer, network and issuer interactions Batches of transactions are queued by the merchant, including a $100 transaction by Hans Card network distributes each transaction to the issuer, including Hans’s $100 purchase $100 Card network routes funds to acquirer $100 http://www.creditcards.com/credit-card-news/how-a-credit-card-is-processed-1275.php Issuer subtracts processing fees ($1.70) which are exchanged with the card network and submits funds, including funds for Hans’s transaction $98.30 Merchant sends a batch of transactions to the acquirer to receive payment Acquirer subtracts discount fees ($0.50) and pays merchant $97.80 Acquirer submits batch of transactions to card networks $$ $$ Acquirer submits batch of transactions to card networks $$ $$ Note: Names and fees are illustrative and are not from any particular vendor or relationship
  • Outline • Overview of retail payments • Mobile money market • Mobile money opportunities • Scenarios of mobile money applications • Impacts to existing payment systems • Operational issues for implementing mobile money • Case studies • Summary © 2012 IBM Corporation5
  • Mobile money market: what is mobile money Mobile Banking Balance inquiry Account applications Account transactions Bank locations Alerts Mobile Commerce Promotions Behavior tracking Loyality programs Mobile Payments Person to person transfers Bill pay Payment at POS In application payments Mobile Wallet: linking mobile device with accounts and account activity Bank accounts Credit cards Loyality cards Bank balances Credit balances Gift cards Receipts Credit limits Phone balances Using a mobile device as payment vehicle
  • Mobile money market: payments are accelerating in major markets PayPal processed $4 billion worth of mobile payments in 2011* •$750 million in 2010* •$141 million in 2009* David Marcus, vice president of PayPal Mobile* Starbucks Mobile Application with rewards and mobile payments •Started with Northern California and Seattle •Now available nationwide in the US •Mobile application is available on apple and blackberry Juniper Research reports consumers will use mobile payments to pay for $670 billion worth of goods and services by 2015. Google Wallet payments are now supported by Toys ‘R’ Us, Macy’s, and Bloomingdales
  • Mobile money market: emerging markets • Application of mobile money varies greatly among geographies • Emerging markets have a combination of circumstances that encourage adoption of mobile money © 2012 IBM Corporation8 Source: McKinsey, 2010, Capturing the promise of mobile banking in emerging markets – Formal banking reaches about 37 percent of the population • 1 branch and 1 ATM per 10,000 people – Mobile phones have a penetration rate of 50 percent • 5,100 mobiles phones per 10,000 people – Very small deposits and loans are not profitable for traditional delivery models 1.7 billion people in emerging markets have a mobile phone and no access to banking services
  • • Mobile money transaction volume growing at greater than 50% CAGR thru 2015 • Mobile payments are projected to be between 15% and 20% of total consumer payment transaction volume by 2020 • Mobile payments made by over 1 billion users by 2016 Mobile money market: sizing the market © 2012 IBM Corporation9 Global mobile transaction volume Mobile transaction volume as a % of non-cash consumer payments by geo in 2015 Mobile money is modest now but growing rapidly •Sources: Gartner “Forecast: Mobile Payments, Worldwide, 2008-2015”; Pub May 2011; Winning After the Storm, BCG Global Payments Report, 2010, Portio Research, Mobile Payments 2012-2016 Analysis and Forecasts for the Worldwide Market for Mobile Payment Services, 2012. $B
  • Outline • Overview of retail payments • Mobile money market • Mobile money opportunities • Scenarios of mobile money applications • Impacts to existing payment systems • Operational issues for implementing mobile money • Case studies • Summary © 2012 IBM Corporation10
  • Mobile money opportunities: overview Customer Care and Insight Mobile money software gives a holistic, single view of the customer and glean deeper insight into customer needs, so you can innovate with less risk. Develop high quality, tailored services to restore customer confidence, increase loyalty, and drive revenue. • Mobile Banking • Branch of the Future • Mobile Payments • Mobile Commerce • Mobile Agents/Claims • Store of the Future • Virtual currency • Location based shopping • Personalized campaigns • Mobile cross-sell, up-sell • Mobile Network Monetization • Mobile field-force enablement Retail TelecommFinancial Services Healthcare • Mobile check-in, Mobile prescriptions • Mobile payments • Mobile Health Monitoring & Prevention • Mobile enabled Clinicians • Virtual currency – FF Miles • Customer Loyalty programs • Ecommerce – Ticketing, Entertainment Travel & Transportation
  • Banks - leverage the user’s financial profile data • Help banks protect and grow revenue by maintaining brand relevance and leveraging emerging business models • Provide a safe way to transact business, secure assets, reduce fraud, ensure compliance • Offer secure digital vault services to aggregate coupons, transport, loyalty rewards, traditional currencies Merchants - leverage the user’s shopping patterns • Drives a more customer centric view; control point shifts to the end-user with the mobile device. • Shift more towards “one to one marketing” and leveraging the value of “intelligent data from digital currency” Telcos - Leverage subscriber base and delivery channel • Mobile Money will allow MNO's to increase customer retention and generate new revenue through value added services Mobile money opportunities: key players • Create new value by aggregating data and applying insights across the enterprise, • Provide secure, high availability, large scale transaction processing • Leverage Smarter Commerce New mobile money entrants – transform business
  • Outline • Overview of retail payments • Mobile money market • Mobile money opportunities • Scenarios of mobile money applications • Impacts to existing payment systems • Operational issues for implementing mobile money • Case studies • Summary © 2012 IBM Corporation13
  • Application scenario: consumer on-line purchase with tablet • In the last year, tablets’ commerce traffic increased 348% • Tablets converted visits into purchases at a rate of 3.23 percent, well ahead of smartphones at 1.39 percent. • Payment processing for tablets mirrors web on line purchases • Special considerations beyond web experience – Exploitation of location information – More accessible than PCs – Need tablet-aligned gestures (e.g., sweeps) – Need visually large carts © 2012 IBM Corporation14 Customer Merchant Acquirer Credit Card Bank Source: Monetate, Couch Commerce: How Tablet Shoppers are Changing Online Sales, 2012
  • Application scenario: mobile banking • Customers interact directly with bank like on the web • Special considerations beyond web experience – Diversity of devices – beyond browsers – Smaller screen – UI redesign necessary – Location awareness – enables services such as ATM and branch locations – Authentication streamlined for mobile devices © 2012 IBM Corporation15 Customer Bank
  • Application scenario: consumer purchase at retailer – NFC (Near Field Communication) • Mobile device uses information in mobile wallet to act as credit card – Communicated at POS thru NFC – Much hyped, little used • Not a compelling convenience compared to a credit card • Gartner Hypecycle: “For the past decade, NFC has been a technology looking for a solution” – May revive for virtual currency (loyalty points) © 2012 IBM Corporation16 Customer Merchant Acquirer Credit Card BankMobile Wallet Source: Gartner, Hype Cycle for Mobile Device Technologies, 2011
  • Application scenario: consumer purchase at retailer – bar code – platform control • Merchant generates transaction information – Customer uses custom app to send to mobile payment platform – Mobile payment platform also serves as acquirer – Purchase confirmation sent to merchant thru different path – Mobile payment platform may require return path to go through its system © 2012 IBM Corporation17 Merchant Mobile payment platform Credit card BankCustomer
  • Application scenario: consumer purchase at retailer – bar code – merchant control • Merchant generates transaction information – Customer uses custom app to send to mobile payment platform – Mobile payment platform provides wallet information to merchant – Merchant processes transaction as if credit card presented © 2012 IBM Corporation18 Merchant Mobile payment platform Merchant Conventional processing Customer
  • Application scenario: consumer purchase soft goods • Soft goods include tickets, phone cards, music • Mobile device uses information in mobile wallet to act as credit card number – Communicated thru web interface – Optional documentation back thru mobile wallet © 2012 IBM Corporation19 Customer Merchant Acquirer Credit Card BankMobile Wallet Inventory
  • Application scenario: consumer to consumer payments – telco mediated • Common scenario in emerging economies for P2P payments • Agents conduct the cash-in and cash- out functions, enabling customers to convert cash into electronic money and back again at convenient locations • Telcos arrange funds transfers among their accounts © 2012 IBM Corporation20 Payer Payer Telco Payee Telco Payee Agent PayeePayer Agent
  • Application scenario: consumer to consumer payments – mobile platform mediated • Emerging scenario in both established and emerging markets – Requires established accounts with either bank or mobile money platform vendor © 2012 IBM Corporation21 Payer Payer Bank Payee Mobile Money Platform Payee Bank Source: Venture Beat
  • Application scenario: transformative scenarios • Mobile devices have unique properties beyond credit cards, cash, banks and PCs – Omnipresent: people always carry their phone with them – Personal: mobile identifies the specific person – Context: mobile has location, acceleration, orientation information – Multiple inputs: gestures, audio, video • Everyday micropayments – Parking (knows your car), vending • Location and destination based pricing – Bus, subway and train fares • Delivery of gift cards over the phone • Integration of loyality, context and location for promotion • Streamline general admission event ticketing • Credit extension based on mobile activity • Competitive interception based on mobile application activity • Multichannel offerings – Prepare then retrieve ATM withdrawal – Preorder fast food • Reminders to replace consumables • Personal credit card acceptance Square ShopSavvy
  • Outline • Overview of retail payments • Mobile money market • Mobile money opportunities • Scenarios of mobile money applications • Impacts to existing payment systems • Operational issues for implementing mobile money • Case studies • Summary © 2012 IBM Corporation23
  • Card Holder Credit/Debit Card Payment Mobile Payment Merchant Acquirer Credit Card Company Issuer Telco Payment Provider Payers Payees Facilitators Fund Holders MajorMarket EmergingMarket Market Dynamics • Shift from cash and checks to cards and electronic payments • Mobile and social commerce are creating a discontinuity in the market. • Agents in Emerging Markets play an important role in distribution and liquidity Impacts: new paths for payment processing introduced Acquirers and credit card companies can be utilized by or disintermediated by telcos and payment providers in mobile transactions Agent
  • Impacts: consumer and retail experiences are transforming Swipe NFC OTA In-Person Transactions Online Transactions Context-Aware Marketing RetailersConsumers Interactive Non-interactive Non-location-aware Location-aware P2P B2B Optical Scan
  • Acquirers Impacts: retailers, banks and facilitators look to expand their roles BanksRetailers Payment Providers Credit Card Companies Telcos Both Acquirers and credit card companies can be utilized in or disintermediated from electronic payments In major markets banks act as the fund holders Telcos and payment providers can either access payers’ funds directly through banks or indirectly through acquirers and credit card networks
  • Outline • Overview of retail payments • Mobile money market • Mobile money opportunities • Scenarios of mobile money applications • Impacts to existing payment systems • Operational issues for implementing mobile money • Case studies • Summary © 2012 IBM Corporation27
  • – Some signs to track • Know-Your-Customer: black lists • Account activity: mobile banking supports easy account creation and dormant accounts could be used for laundering • Behavior profiles of customers: amount, timing, velocity, source and destination location of transactions • Behavior profiles of agents: in addition to customer checks, looking for splitting payments to increase fees • Mobile devices offer additional capabilities to manage security • Faster data on location for potential intercept • Potential use of biometrics (e.g. face image) to reduce false positives • Remote management Operations: security and fraud detection • Mobility adds additional vectors to conventional fraud – Technical • RFID jamming • “Nishing” • Data validation: ensure all formats adhered to • Malware © 2012 IBM Corporation28 Source: McAfee Threats Report: First Quarter 2012
  • Operations: Support of parallel channels • Expectation of consistency across multiple channels – Pay bills anywhere • Expectation of cross channel interaction – Finish ATM, food order or application transaction – Video interaction with call center from tablet and ATM • Need one view of the customer maintained across all systems supporting channels – Including in-flight interactions
  • Operations: scaling to meet transaction volume • About 750B global mobile money transactions expected in 2020 – About 25,000 transactions a second • Likely to grow rapidly for use in micropayments • Currency equivalents, like loyalty points, drive the number higher © 2012 IBM Corporation30 Source: BCG Global Payments, 2011
  • Operations: ensuring availability 31 © 2012 IBM Corporation Qualities of service can be insufficient in emerging markets Sources: http://www.informationweek.com/hardware/data-centers/data-center-outages-generate-big-losses/229500121; World Bank, Underpowered: The State of the Power Sector in Sub-Saharan Africa, 2009; Total data center outages occurred once a year on average. An average data center outage for an e-commerce company costs more than $1 million. Poneman Institute, 2011 Sub-Saharan Africa’s manufacturing enterprises experience power outages on an average of 56 days per year. World Bank, 2009 India loses power to 600M people for up to two days. NYT and CNN, 7/31/2012
  • Operations: integration driven by partnerships • Many interconnected players – Merchants, banks, telcos, mobile payment platforms, acquirers, credit card companies • Many interconnection systems – ACH, ATM, Swift, EDI, SMS aggregators, 3rd party financial interconnection networks • Competing wallets – Connecting with large number of mobile wallets will be challenging © 2012 IBM Corporation32
  • © 2012 IBM Corporation 1962: IBM created the Sabre airline reservation system for American Airlines—a precursor of everything from the ATM to e-commerce Operations: How can IBM help "Visa relies on System z for global transactions processing--and confirmed the ability to handle the 2010 Christmas peak of almost 11,000 transactions a second.". For 100 years, IBM has advanced payment systems across the world •WebSphere MQ worldwide supported over $1 quadrillion of transactions •CICS software is accessed by virtually every ATM around the world
  • Operations: IBM can help bring assets to provide business value Strategic role in mobile money  Neutral provider of capabilities from IBM and partners, including business consulting, technology consulting and software  IBM middleware can provide the enterprise backbone for mobile money enabling transactional insight and connectivity, and the ability to connect mobile devices to payment interactions  IBM is a thought leader in the space, contributing to standards and driving innovative customer transformation  IBM’s Global Business Services provides reference architectures for the mobile money ecosystem Payers: Consumers Businesses Payees: Merchants Businesses Governments Fund Holders: Banks Facilitators P2P B2B
  • Operations: from theory to practice Customer Merchant Acquirer Credit Card BankMobile Wallet Transaction/payment processing • Messaging and Integration - WebSphere MQ & ESB • Transaction processing (CICS & WAS) • Financial Transaction Manager • Banking industry process and data models • WebSphere Decision Management • Smarter Commerce: WebSphere Commerce • Analytics: Cognos • Financial Fraud Detection: SPSS, i2 Consumer payment platform • Mobile application platform (Worklight) • Integrated buying experience (WebSphere Commerce) • Banking Transformation Toolkit (BTT) Merchant Consumer Interaction • Marketing management (Unica) • Analytics and marketing optimization (Coremetrics, Cognos, SPSS, Tealeaf) • Event-driven interactions (Ilog and WebSphere Business Events) • Smarter Commerce Merchant Point of Sale • Point of sale devices, software, integration and management (IBM Retail Store Solutions/Toshiba) • IBM Payment Systems – Services -- addresses merchant/acquirers/credit card processors
  • Outline • Overview of retail payments • Defining mobile money • Mobile money market • Mobile money opportunities • Scenarios of mobile money applications • Impacts to existing payment systems • Operational issues for implementing mobile money • Case studies • Summary © 2012 IBM Corporation36
  • ING Direct France • Leading iPhone banking app in France with a unique user experience • Flexibility: Valued HTML5, but preferred starting native • Mobile adaptation of data integration and authentication layers
  • 38 Lotte Credit Card Augmenting offerings with IBM Worklight WSP14583-USEN-00 Solution components:  IBM Worklight  Finance All Solutions (FAS) The need: Korean companies are facing a demand for mobile apps from over 7 million smartphone users, up from only 800,000 in 2009, forcing them to vigorously explore options for value-added services. The solution: To capitalize quickly on this rapidly growing trend, Lotte Credit Card turned to IBM Worklight to develop an advanced application with a rich and engaging user experience using over 100 screens, location-based features and scannable mobile coupons. The application incorporates augmented reality components—a first in the region—helping users find the retail locations of its reward partners on the go. The benefit:  Reduced time to market and associated costs  Deployment of one of the region’s most advanced financial mobile applications  Enabling better customer and employee user experience across more devices “We chose IBM Worklight because it was the best technology for Lotte to consolidate application development, enhancement and maintenance, while ensuring cost savings and timely delivery to our customers.” —Kim, Young Sam, IT Planning Team Leader, Lotte Credit Card
  • © 2003 – 2012 Monitise Group Limited. All Rights Reserved. Confidential. Architecture for monitise IBM solution 39 Worklight Studio Worklight Server deploy to app store provision app B2B/ B2C download Android MATM-265-100 JSON/HTTPS ? IBM MQ security/ activation IBM CICS DB2 JRULES push SMS email MESSAGING SERVER COGNOS DATA WAREHOUSE monitise IBM IBM CICS Adaptor monitise ENTERPRISE PLATFORM (WAS)WebSphere Application Server DataPower
  • Visa’s real-time messaging technology (RTM) creates a seamless experience for merchants who want to increase engagement with their consumers through Visa provides real-time technology to achieve breakthrough marketing effectiveness for merchants. Personalized offers Business problem Merchants operate in a highly competitive environment where the keys to success are bringing customers in the door and then keeping them loyal to the merchant’s brand. Solution: Visa’s real-time messaging technology (RTM) allows merchants to provide more relevant offers to enrolled consumers by combining historical purchasing behavior with real-time purchase location information. Offers are delivered to enrolled consumers through their mobile devices and personalized to them. Visa created a new revenue stream by maximizing the value of Real-time purchase location information
  • Outline • Overview of retail payments • Defining mobile money • Mobile money market • Mobile money opportunities • Scenarios of mobile money applications • Impacts to existing payment systems • Operational issues for implementing mobile money • Case studies • Summary © 2012 IBM Corporation41
  • Summary • Mobile money encompasses existing and new forms of payment processing • Today’s opportunity is modest, but growth in selected applications is expected to be explosive • Many scenarios for mobile money alter existing payment processes while others create new patterns and opportunities for commerce • Deploying mobile money solutions requires a mix of business and technical depth © 2012 IBM Corporation42
  • © IBM Corporation 2012. All Rights Reserved. IBM, the IBM logo, ibm.com are trademarks or registered trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. Other logos, product and service names might be trademarks of IBM or other companies. A current list of IBM trademarks is available on the Web at “Copyright and trademark information” at www.ibm.com/legal/copytrade.shtml. Copyright and Trademarks