What is Digital Wallet? Need Components Technology Payment Model Inner details Implementation Challenges How it is being used right now? The Future of Digital Wallet 1
WHAT IS DIGITAL WALLET A digital wallet allows a user to make an electronic payment with a financial instrument (such as a credit card or digital cash), and hides the low-level details of executing the payment protocol that is used to make the payment. It authenticates the consumer through the use of digital certificates or other encryption methods, stores and transfers value, and secure the payment process from the consumer to the merchant. It can store multiple monetary and identification implements. Monetary implements include cash, debit and credit cards, and stored value cards while identification includes national or state identification cards and driver’s licenses. 2
THE NEED Thick, bulky, unmanageable physical wallet. Finding particular items is time consuming. Evocating a lost wallet is extremely hard. Managing multiple monetary and identification implements is not easy. Monetary implements include cash, debit and credit cards, and stored value cards while identification includes national or state identification cards and driver’s licenses. Reducing the chance of theft by having only one item to manage. 3
COMPONENTS A digital wallet has a software and information component. The software provides security and encryption for the personal information and for the actual transaction. Normally, digital wallets are stored on the client side and are easily self-maintained and fully compatible with most e-commerce Web sites. A server-side digital wallet, also known as a thin wallet, is one that an organization creates for and about you and maintains on its servers. Server-side digital wallets are gaining popularity among major retailers due to the security, efficiency, and added utility it provides to the end-user, which increases their enjoyment of their overall purchase. The information component is basically a database of user-inputted information. This information consists of your shipping address, billing address, payment methods (including credit card numbers, expiry dates, and security numbers), and other information. 4
New NFC (Near Field Communication) chipsare already appearing in smartphones which provide very close range, low power, easy to setup up point-to-point communication.
NFC acts as the communication medium for exchanging monetary and identiﬁcation information, such as credit card numbers and receipts, with other devices.
Fast Secure Authentication and Secure Tamper Proof Storage
Secure programmable chips in cell phoneswill allow the cell phone to securely store both “digital cash” and the phone owner’s monetary and identification implements.
This assumes that the cell phone owner secures his digital wallet with a good password. This chip will ensure that thieves are unable to access the digital wallet embedded in the stolen phone. Biometric scannerscould also be integrated into cell phones andused for quick and easy authentication.
PAYMENT MODELS For point-of-sale transactions:-
A NFC-compatible “reader pad” can be deployed in retail stores.
When payment is required, consumers place their cell phone on/near the pad and all their valid payment options appear on a display.
They can then select the payment method they plan to use (cash, speciﬁc credit card, etc.) for the transaction.
The pad transmits the transaction request to the appropriate ﬁnancial institutions using existing banking protocols provided by NETS, Visa, Amex, and MasterCard.
The consumer can provide any necessary signatures using a digital signature pad located next to the reader pad.
Once the transaction is verified and completed, the receipt is automatically sent to the cell phone and stored for future reference.
For peer-to-peer cash exchange, use the phone’s NFC capability together with an easy to use peer-to-peer cash application. Using the application, the payer can enter how much cash he needs to send to the other person. The payer then taps the cell phone of the payee and the cash is transferred instantaneously using NFC. The recipient is then informed of the exact amount transferred. 7
HOW TO SUPPORT CASH TRANSFER Place cash in the digital wallet either by : Topping-up the cash on device at speciﬁc top-up machines which are integrated with existing automated teller machines Online by logging intobank’s online portal and transferring cash into phone. Transferring that cash to a retailer or another digital wallet by using NFC. 8
User Interface API User Profile Manager User Interface Instrument Manager Wallet Controller Client API Instrument Instances Protocol Manager Protocols Communication Manager WALLET ARCHITECTURE Builds on top of the connection abstraction to support the concept of a session. Responsible for encryption of data. Presents a consolidated interface for the wallet to the client. The Wallet Controller hides the complexity of the other components of the wallet, and provides a high-level interface to the client. Manages information about clients and groups of clients of the wallet including their user names, passwords, ship-to and bill-to addresses, and potentially other user profile information as well Provides the wallet with an interface to send and receive messages between wallets and peer commerce components by setting up a connection with a remote Communication Manager. Provides a graphical interface to the services offered by the Wallet Controllers interface Manages all of the financial instrument options contained in the wallet, for example, it may be queried to determine which instrument classes and instances are available to execute a given payment or other operation Manages all of the protocols that the wallet may use to accomplish various operations, and invokes protocols to carry out the interaction between the digital wallet and the vendors and banks. 9
SECURE ELECTRONIC TRANSACTION (SET) PROTOCOL 10 Clearing House Merchant Secure Line Merchant Bank 3. Merchant software forwards encrypted message 5 . Issuing bank credits merchant account 2. Merchant & consumer computers verify each other’s identity SET encrypts order & payment information 4 . Clearinghouse verifies account & balance with issuing bank 6 .Monthly statement issued with debit for purchase Consumer’s Credit Card Issuing Bank 1. Consumer makes purchase selects SET payment option
11 Open Session Instrument Class Negotiation Protocol Negotiation Protocol Selection Instrument Selection Transaction Execution Close Session WALLET INTERACTION MODEL Open Session Instrument Class Negotiation Protocol Negotiation Protocol Selection Instrument Selection Transaction Execution Close Session
12 INSTRUMENT CLASS NEGOTIATION User Wallet Vendor Wallet User Profile Manager UI Customer Profile Manager UI Instrument Manager Wallet Controller Instrument Manager Vendor Controller Protocol Manager Protocol Manager Communication Manager Communication Manager
13 TRANSACTION EXECUTION User Wallet Vendor Wallet User Profile Manager UI Customer Profile Manager UI Instrument Manager Wallet Controller Instrument Manager Vendor Controller Protocol Manager Protocol Manager Communication Manager Communication Manager
A DIGITAL WALLET MENU The Cards module is used for storing personal card information, such as payment card (credit, debit, etc.), loyalty. The card details consist of card info (name, number, etc.), account info (billing address, etc.) and shipping info (shipping address, email, phone number, etc.). From the wallet, the user can fetch the required information (stored in the ECML: Electronic Commerce Modeling Language) format via the WAP browser and easily fill in the required fields. The Personal notes function is a notebook where the user can store private information. From the Settings, the user can switch the wallet code request on and off and change the wallet code when necessary. 15 An existing Internet standard, already commonly used in Internet shopping, aiming to produce common methods for transferring transaction information from the client wallet to the server application.
IMPLEMENTATION Reuse the back-end infrastructure that routes credit card and debit card information between retailers and ﬁnancial institutions. Also retain the existing ATM networks and online banking solutions. Provide retailers with a single NFC-enabled point-of-sale device that replaces the current separate machines for credit cards and debit card purchases. Extend the physical ATM machines to also provide cash top up/removal services for digital wallets. In addition, consider methods to extend existing online banking solutions to support the digital wallet. 16
CHALLENGES Mass Market Appeal Ensuring a mass market appeal for the digital wallet is important to leverage scale economies and the network externality effect. One way to increase the mass market appeal is to make the digital wallet usable for all day-to-day transactions. Stake Holder Dynamics Satisfying the business and strategic goals of multiple stake holderssuch as banks, retailers, regulatory bodies, is difficult. Compelling user experience A user-friendly wallet interface, easy to use and intuitive is difficult to produce. 17
FUTURE OF DIGITAL WALLET Online shopping from mobile devices Price comparison shopping Bill Payments Loyalty Redemption Personal Information Access Virtual Personal Organizer Pre-emptive Purchasing Device to Device Person to Person Payments The electronic wallet will be able to facilitate purchasing from mobile phones and PDA’s. 25 The electronic wallet will allow comparison shopping at any Internet access point. This will provide true price transparency and consumer control. The electronic wallet allow scheduling payment intervals for electronic bills and invoices and receiving bill reporting from any Internet access point. The electronic wallet will give consumers real time reporting of points accrued under loyalty schemes and their conversion entitlements. The electronic wallet will become a single access personal financial portal including medical, insurance, motor vehicle, mortgage, superannuation and investment reporting. The electronic wallet will store the user’s calendar, contacts, tasks and lists on the network allowing this to be retrieved and updated from any device. The electronic wallet will be able to pre-empt purchasing based on habits and actually remind the consumer to make purchases on a regular basis.
REFERENCES Electronic Wallets: Past, Present and Future, by Brent Clark. Thin is in, The future of Digital Wallets, by Christina N. White for SapientNitro. Digital Wallet Technology, by Riyazuddin Khan SWAPEROO, A Simple Wallet Architecture for Payments, Exchanges, Refunds, and Other Operationsby Neil Daswani, Dan Boneh, Hector Garcia-Molina, Steven Ketchpel, Andreas Paepcke from Stanford University. http://en.wikipedia.org/wiki/Digital_wallet Digital Wallet: Requirements and Challenges by Rajesh Krishna Balan, NarayanRamasubbu, Giri Kumar Tayi from Singapore Management University and SUNY at Albany. 26