Reference: Mobile payment industry in china 2012-2015

Financial Services Industry Center of Excellence, Deloitte China
Technology, Media and Telecommunications, Deloitte China
Trends and Prospects of Mobile
Payment Industry in China 2012-2015
Creating Innovative Models,
Boosting Mobile Financial Services

2
Foreword
Mobile payment is attracting more and more attention throughout the world
What is mobile payment?
Development of mobile payment in other parts of the world
Current situations and challenges of mobile payment industry in China
Prospects of mobile payment ecosystem in China
Conclusions
Methodologies
1
2
4
7
16
50
58
59
Table of contents

Trends and Prospects of Mobile Payment Industry in China 2012-2015 - Creating Innovative Models, Boosting Mobile Financial Services 1
Foreword
Mobile payment, as a form of business spanning across different sectors, has existed for quite a long time.
However, a sufficient scale has not been formed globally due to a number of reasons such as the complexity
of industry environment, the diverse range of the value chain, the involvement of different sectors, and the
difficulties in balancing the interests of different players. The mobile payment industry is still in its infancy
in China. for the interests of the players in the mobile payment value chain have long been affected by
government policies concerning this sector. The customer base is small, and the players could only explore
mobile payment opportunities on a limited scale and in the limited regions.
With the rising penetration of smartphones and 3G networks and the exponential growth of mobile
Internet applications, mobile payment has witnessed significant development. No matter in terms of value
of transactions, volume of transactions or the sectors covered, mobile payment has achieved substantial
breakthroughs. In China, financial institutions, operators, third-party payment (TPP) providers and other
main players are making robust moves in mobile payment, devising mobile payment strategies, and
developing and introducing mobile payment applications to explore this market. In general, the mobile
payment market is booming in China.
It is generally believed that mobile payment in China will step into a crucial phase for development in the
next 3 years. The players will have many decisions to make and many challenges to tackle: how to select
partners; how to avoid risks and deal with challenges in the future business development; how to take a
leading position, explore more application scenarios, develop new products and improve competitive edge
and maintain sustainable growth in competition and cooperation; and how to develop a mobile payment
ecosystem, achieve win-win results and boost the industrialization process in a proactively, steady and orderly
manner. These issues have strong relevance to all the players in the value chain and close linkage to the
development of the mobile payment industry.
In order to help businesses and organizations better capture opportunities and address challenges, we have
produced the report: Trends and Prospects of Mobile Payment Industry in China 2012-2015. We have surveyed
over 100 organizations and conducted face-to-face interviews with over 20 business executives and managers
within the mobile payment value chain. Based on the experiences and lessons from overseas mobile payment
practice, we have analyzed thoroughly on the current situation and challenges of mobile payment industry
in China and presented an outlook on the development of mobile payment ecosystem, industry and market
trends in China. We would also like to take this opportunity to share and exchange views with the players in
the industrial chain, strengthen cooperation with them and push forward the development of mobile payment
industry in China. At the same time, we hope that the report can provide valuable references to assist them in
strategic planning and implementation.
At the time when the report is about to be released, we would like to extend sincere gratitude to the experts
and elites from different fields participating in the research for their strong supports and commitments.
Dr. Pengcheng Wang
Managing Partner,
Deloitte China Financial
Services Industry Leader
Mr. William Chou
Managing Partner,
Deloitte China Technology,
Media & Telecommunications
Industry Leader

2
Mobile payment is attracting more and
more attention throughout the world
Driven by the growing demands from the
consumer side for mobile payment and the rapid
rise and growth of e-commerce and mobile
Internet, mobile payment is attracting more
and more attention throughout the world. It is
also showing a strong momentum of growth.
According to Gartner, the number of mobile
payment users in the world will reach 212 million
by the end of 2012, three times of the size in
2009 (70 million) and with a compound annual
growth rate of 44.73%. It is expected that the
growth momentum will continue in the coming
years. The number of mobile payment users in the
world will reach 384 million by 2015 (see Figure
1). As the user base increases, the total value of
global mobile payment transactions keeps rising.
The value of global mobile payment transactions
will amount to $171,520 million by the end of
2012 while it was only $25,559 million in 2009.
It is expected that the value of global mobile
payment transactions will arrive at $472,805
As an emerging means of payment, mobile payment is attracting more and
more attention throughout the world due to it can improve user experience and
provide new opportunities for financial institutions, operators, TPP providers
and merchants. The mobile payment industry has been growing rapidly in recent
years both in terms of user base and transaction volume. It is a hot spot area with
tremendous opportunities and growth potentials in China. The competition
among the different players in the value chain is getting more and more intense.
million by 2015, which indicates that the average
value of mobile payment transaction per user will
be above $1,0001
. (See Figure 2)
The rapid rise of mobile payment and the growing
interests in this sector can be attributed to the fact
that mobile payment can bring different added
values to different participants. For the user, mobile
payment improves the easiness and security of
payment process. On one hand, mobile payment
simplifies the transaction process. Using contactless
payment is more convenient than swiping
traditional credit cards. The electronic wallet can
integrate multiple cards, tickets, certificates, and
coupons together, thus reducing the trouble of
carrying multiple cards and achieving visualized
management of cards, tickets, certificates, and
coupons; on the other hand, the smart chip can
also support authentication functionality and
enhance payment security. For financial institutions,
developing mobile payment and improving the
1
Forecast: Mobile Payments,
Worldwide, 2009-2016,
Gartner, May 2012
Figure 1: Global mobile payment user base
(by 100 Mn)
Figure 2: Value of global mobile payment
transactions (in $100 Mn)
Source: Gartner, Forecast: Mobile Payments, Worldwide, 2009-2016, May 2012
0.70
2009
2.12
2012
3.84
2015
2,55.59
1,715.20
4,728.05
2009 2012 2015

convenience and security of mobile payment can
help them create differential advantages in the
fierce competition. For operators, mobile payment
can bring new revenue sources and help them
reduce the churn. Operators are experiencing
revenue decline caused by the decline in traditional
voice services and SMS services. The fast-growing
demand for data traffic not only reduces the profit
margins of operators but also causes huge load
on operators' networks. Through mobile payment
services, operators may enter mobile e-commerce,
financial services and other areas to gain more
benefits. At the same time, offering mobile
payment services can help them enhance user
stickiness, thus reduce the churn. For merchants,
mobile payment digitalizes consumers' behaviors
and allows the merchants to get complete records
of consumer information. Merchants may launch
customer loyalty programs such as giving reward
points and issuing payment coupons in a more
targeted manner, thus enhance customer loyalty.
Mobile payment is facing unprecedented
opportunities in China and is showing a strong
growth momentum. According to the People's
Bank of China (PBC), the mobile payment customer
base amounted to 145 million in China as of
the end of 2011, an increase of 55 million users
compared with 90 million in 2010 or an increase
of 61.11% over 20102
. With the fast growth of
mobile payment customer base, mobile payment
transaction volume also increased rapidly. There
were 247 million payment transactions in 2011, an
increase of 109% over 20103
. (See Figure 3)
The Chinese government is also increasing
policy support to mobile payment in different
facets. The Outline of the 12th Five-Year Plan for
National Economic and Social Development of
China proposed to "actively develop e-commerce,
improve e-commerce services for SMEs, and
promote the building of credit service, online
payment, logistics and other supporting systems
for the public". Mobile payment infrastructure, as
a critical infrastructure for mobile e-commerce,
will benefit from government initiatives aimed
at boosting e-commerce. The 12th Five-Year
Plan for the Development of Software and IT
Service Industry, the 12th Five-Year Plan for the
Development of Communications Sector, and
other important policy documents published
subsequently all contain description of encouraging
the development of mobile payment. In light of
China's huge mobile phone subscriber base as well
as the potential demand for financial payment,
it can be predicted that the wave of the mobile
payment will sweep across the Chinese market and
the mobile payment may catch up from behind.
In order to gain a deep and comprehensive
understanding of the current situation and the
future trends of the mobile payment industry in
China, discuss the business models suited to China's
national conditions and build a virtuous ecosystem
featuring win-win cooperation, we have conducted
this report through the extensive surveys and
questionnaires and intensive face-to-face interviews
with the players participating in the value chain
and based on our experience gained from the
development of global mobile payment industry and
our deep insight into the Chinese market, which
aims at answering the following questions.
Figure 3: Mobile payment transactions
volume in China (by 100 Mn)
Source: China Payment System Development Report
2010, PBC, 2011; Hexun.com, 2012
2
3
PBC's data on mobile
payment customer base
comes from the reports
and statements of financial
institutions in China and
may differ from Gartner
in terms of the source of
mobile payment user data.
A national mobile payment
standard could be released
within the year, Hexun.
com, April 20, 2012,
http://tech.hexun.com/2012
-04-20/140602963.html
0.67
1.18
2.47
2009 2010 2011
How is mobile payment developing in other
parts of the world?
How is the current situation of China's mobile
payment and what are the challenges?
What are the characteristics of the existing
business models and what are the prospects
for future development?
How to build a mobile payment ecosystem
with Chinese characteristics?
What are the development trends of China's
mobile payment industry in the coming
three years?
1
2
3
4
5
6

4
Definitions and classification of mobile payment
There isn't a universally shared and accepted
definition on mobile payment across the industry.
Different players and research institutes define
mobile payment differently from their own
perspectives. For instance, Gartner defines mobile
payment as a form of payment where transactions
are conducted on a mobile phone and using
payment instruments that include bank accounts,
bankcards, and stored value accounts (SVAs)
and exclude transactions using the carrier billing
system for payment, payment via an interactive
voice response (IVR) system (excluding IVR used
in combination with other mobile channels such
as SMS or USSD), or payment via smartphones
using plugins to realize POS functions4
. In contrast,
Forrester's definition is much broader. It defines
mobile payment as "a transaction in which the
transfer of fund is initiated using a mobile phone
- excluding the 'voice' function of the device"5
.
Mobile payment is a form of payment where a user uses mobile device to realize
information exchange and complete fund transfer from the payer to the payee
for the purpose of payment by way of accessing communication networks or
using short-range communication technologies. By transaction targets, mobile
payment can be classified into person-to-person payment (P2P payment) and
customer-to-business payment (C2B payment); by communication range, mobile
payment can be classified into remote payment and proximity payment.
In this report, based on our understanding on
mobile payment and in light of the views of major
research institutes and mobile payment players, we
believe that mobile payment is a form of payment
where the user uses a mobile device to realize
information exchange and complete fund transfer
from the payer to the payee for the purpose of
payment by way of accessing communication
networks or using short-range communication
technologies. Compared with the definitions of
other organizations, our definition is much broader
and may include main forms of mobile payment in
the market.
Mobile payment can be classified differently
depending on different dimensions. Currently, one
of the universally accepted classification methods
is to classify mobile payment into remote payment
and proximity payment. By transaction targets,
mobile payment can be classified into P2P payment
and C2B payment. (See Figure 4)
Figure 4: Classification of mobile payment
Source: Deloitte Consulting, 2012
4
5
Forecast: Mobile Payments,
Worldwide, 2009-2016,
Gartner, May 5, 2012
Mobile Payments Enter A
Disruptive Phase, Forrest,
March, 2011
P2P payment
Proximity
payment
Remote
payment
C2B payment
• Contactless payment
• Remote money transfer
• Contactless payment
• Mobile device POS
• Remote online payment (mobile
e-commerce, digital products)

Remote payment, also known as online payment,
is a way of payment where the user uses a mobile
device to access the mobile payment back-end
system via mobile communication networks and
complete the payment behavior. Based on the
classification of P2P and C2B payment, remote
payment can be classified into remote fund transfer
and remote online payment. A typical remote
payment process usually takes place when the
user makes a purchase at an e-commerce website
through a mobile device. When the user comes to
the payment interface provided by the merchant,
the interface will switch to the payment page of
mobile banking or the TPP provider to enable the
user to complete the payment process. In addition,
mobile payment via SMS and IVR also fall into the
category of remote payment.
Proximity payment is a form of contactless
payment where the user uses a mobile device
to realize information exchange and complete
payment by way of short-range communication
technologies. The common short-range
communication technologies include Bluetooth,
infrared, RFID, and other technologies. Near Field
Communication (NFC) is currently the mainstream
technology. The United States, Europe, Japan
and some other countries are starting to promote
NFC technologies. Moreover, the smartphone
with a plugged-in card reader can have the same
functions as a POS device. This model is similar to
Square mobile payment, which also falls into the
category of proximity payment. Such payment
model started from Square, a company based
in the United States. Then, PayPal and other TPP
providers launched similar products subsequently.
There are also similar players in China like Qfpay
and iBoxPay.
Mobile payment technology
Mobile payment can be realized by different
technologies. The mainstream technologies
currently include SMS, WAP/Web, USSD and NFC,
among which SMS, WAP/Web, and USSD mainly
support remote payment while NFC is used for
proximity payment. From a global scale, SMS-based
remote payment will maintain its mainstream
position in the coming three years, while WAP/
Web-based remote payment will grow rapidly. NFC
mobile payment will keep growing in the coming
years. (See Figure 5)
Figure 5: Global mobile payment transaction volumes by technology (in $100 Mn)
Source: Forecast: Mobile Payments, Worldwide, 2009-2016, Gartner, May 2012
14,000
16,000
18,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2009 2010 2011
SMS WAP/Web USSD NFC
2012 2013 2014 2015
3,572
932
1,165
6,137
256
670
457
633 1,300
57 241
60 146
217 321
2,196
407
618
3,323
1,359
627
852
4,680
2,309
1,680
1,239
7,922
5,152

6
In addition to those four mainstream technologies,
mobile payment can also be realized through
Bluetooth, infrared, bar-code, and plugged-in card
readers. Judging from the maturity of technologies,
mobile payment technologies are mature enough
to support its commercialization. In China, the
players in the value chain have introduced mobile
payment services backed by different technologies.
Among different technologies, SMS-based
payment is the most mature mobile payment
technology. According to the survey results,
49.54% respondents consider SMS-based payment
technology as mature. The WAP-based payment
According to the survey of Deloitte, WAP-based
payment, SMS-based payment and NFC mobile
payment are the services provided the most by
respondents, accounting for 44.14%, 40.54%
and 32.43% respectively. In their future service
offerings, 27.93% respondents plan to provide
NFC mobile payment, ranking No. 1. (See Figure 6)
is relatively mature and 64.15% respondents
consider WAP-based payment as mature and ready
for deployment. NFC mobile payment is still at the
early phase of development with 50% respondents'
believing that it is still in a trial phase.
Figure 6: What types of mobile payment services your company or organization has already
provided or plan to provide?
Existing offerings Planned offerings
Source: Mobile Payment in China Survey, Deloitte China, 2012
Figure 7: According to your knowledge, which development phases do the following mobile
payment technologies belong to in China?
44.14%
22.52%
11.71%
40.54% 27.93%
9.91%
32.43% 14.41%
6.31% 9.91%
1.80%
5.41%
27.93%
13.51%
3.60%
1.80%
WAP-based payment
IVR-based payment
SMS-based payment
0% 20% 40% 60% 80% 100%
USSD-based payment
NFC-based payment
No plan Trial phase Ready for deploymentPlanning phase Mature
WAP-based payment
SMS-based payment
NFC proximity payment
Java-based payment
Embedded credit card
payment
USSD-based payment
Plugged-in card reader
2D Bar-code payment
2.4G
RFID
NFC proximity payment
Embedded credit card
payment
Java-based payment
WAP-based payment
SMS-based payment
USSD-based payment

Development of mobile payment
in other parts of the world
The development of mobile payment varies from country to country in terms
of maturity and penetration. Different countries have selected different
technologies and business models suited to their own realities. From the
participants' perspective, the development of mobile payment is mainly driven
by the interaction and competition among the major players in the value chain
including financial institutions, operators, TPP providers, mobile payment
technology and service providers and equipment vendors. On a global scale,
Japan and Korea have the most mature mobile payment sector; proximity
payment is growing at a relatively slow pace in West Europe and the United
States; developing countries like India are fueling the development of mobile
payment; mobile payment has played a big role in financial inclusion in the
underdeveloped regions in Africa.
Japan – a process led by operators and with
the active participation of banks
The mobile payment adoption rate is high in Japan,
much higher than the United States and Europe,
and the business model is relatively mature as
well. In Dec. 2010, there were about 98 million
subscribers using mobile payment services6
. The
mainstream technology used in Japan is FeliCa,
a contactless RFID technology from Sony. NTT
DoCoMo, a mobile network operator in Japan, has
a dominant position in Japan's mobile payment
market. Based on its huge subscriber base, NTT
DoCoMo extended its control along upstream and
downstream of the value chain by various means
such as conducting mixed operations and holding
equities of banks and credit card companies. It
has achieved tremendous success in this area. The
biggest advantage of the NFC mobile payment
offered by NTT DoCoMo is the ease of use. It
significantly simplified the complicated payment
process and greatly facilitated the use of mobile
payment. However, a successful mobile payment
business also requires the support of banks and
merchants. To motivate banks and merchants,
NTT DoCoMo injected capitals into them to
enhance control over the mobile payment value
chain. For instance, NTT DoCoMo invested 100
billion yen and acquired 34% stake in Sumitomo
Mitsui Card Company in April 2005; it injected
10 billion yen to UC Card, a company associated
to Mizuho Financial Group, and acquired 18%
stake of UC Card in March 2006. Judging from
the realities, NTT DoCoMo's initiatives generated
very handsome returns. Sumitomo Mitsui Banking
Corporation and NTT DoCoMo NTT jointly issued
ID debit card, which enabled NTT DoCoMo's
mobile payment business to break limits of micro-
payment. DCMX credit card business helped NTT
DoCoMo extend the mobile payment services to
the area of consumer credits7
.
There are four main reasons why mobile carriers
dominated the mobile payment industry in Japan:
1) the light financial regulation in Japan lowered
the thresholds for mobile carriers to enter the
financial area; 2) Japanese consumers are not
frequent credit card users and their dependency on
credit card is relatively lower than other developed
countries. Banks in Japan were allowed to issue
credit cards until 2004. As a result, the credit
6
7
Gary Kim, 10% of Japanese
Mobile Users Made Mobile
Payments in December
2010, Feb. 14, 2011,
http://mobilemarketingand
technology.com/2011/02/14/
10-of-japanese-mobile-users
-made-mobile-payments-in-
december-2010/
Analysis of Operating
Model of NTT DoCoMo's
Mobile Payment Services,
Communications World
Weekly, Jan. 15, 2008,
http://www.techweb.
com.cn/news/2008-01-
15/289923.shtml

8
Financial institution:
Bank of Tokyo-Mitsubishi UFJ (BTMU)
In April 2006, BTMU and KDDI, a telecom operator
in Japan, set up a joint venture - Jibun Bank. KDDI's
mobile subscribers can use their mobile phones
to pay for products and services. Fund transfer
between non-KDDI subscribers will require the
sender to use his or her mobile phone to input the
receiver's phone number and amount of money.
To make a deposit or withdraw cash, the customer
may use ATMs set up at BTMU, Seven Bank and
Japan Post Bank.
Technology provider: Toppan Systems
Toppan Systems developed field service/assets
management system. The data gathered by NFC-
enabled handsets in the field will be automatically
sent back to the CRM system. Dai Nippon and
Gemalto provided NFC technology for Credit Saison.
Equipment manufacturers:
Samsung, Mophie
Samsung released NFC-Secure Application Module
chips based on the Felica network. Mophie, an
American supplier of protective case for iPhone, is
developing a protective case solution, which will
allow the mobile device to read and write the card
information through a FeliCa application.
Bankcard organization:
Credit Saison (card issuer)
Credit Saison, a card issuer, and American Express
tested the SIM-based NFC payment on an Android
phone in SoftBank's network and they also tested
American Express' contactless payment services at
the same time.
Telecom operator: NTT DoCoMo
NTT DoCoMo introduced i-mode Felica mobile wallet solution in July 2004 and opened a new era of mobile
payment in Japan. KDDI and SoftBank, the other two major mobile operators in Japan, joined the Felica camp
in Sept. 2005 and launched 'EZ Felica' and 'S-Felica' respectively.
Source: Management Consulting, Deloitte; the official websites of the above companies, and related media reports
8
9
Japan does not want to
become a payment silo.
The three giants introduces
compatible mobile
payment solutions, CNII.
com.cn, January 5, 2012,
http://www.cnii.com.cn/
gj/content/2012-01/05/
content_947366.htm
Korean LTE market forecast
2012, ROA Consulting,
Jan. 2012
card market in Japan was small, which presented
opportunities for the development of mobile
payment in Japan; 3) banks in Japan were busy
with the restructuring and consolidations in the
banking sector and the main banking system was
also faced with huge amount of non-performing
loans, which reduced the difficulties for operators
to consolidate banks; 4) the huge subscriber
base is also a success factor for the growing and
prospering mobile payment market in Japan.
However, the FeliCa technology is incompatible
with NFC, a global mainstream mobile payment
technology. FeliCa is not supported outside of
Japan. To resolve the incompatibility problem, the
mobile carriers jointly set up a mobile payment
alliance with the goal of increasing the popularity
of NFC standards in Japan and helping Japan get
out of the plight of being an "island" in mobile
payment in collaboration with mobile device
manufacturers and agents8
.
Korea – a process jointly led by operators
and banks and with the active support of the
government
The mobile payment industry in Korea is relatively
mature and has formed a certain scale. According
to a ROA's study report, the mobile subscriber base
in Korea amounted to 53.10 million as of the end
of 2011, with one subscriber having more than
one device. From December 2010 to December
2011, the smartphone subscriber base increased
by 16.30 million. It is expected that smartphone
subscriber base will account for 90% of the total
mobile subscriber base by 20139
. At present,

Financial institution: Kookmin Bank
Kookmin Bank introduced KB Star Banking services
a couple of years ago to provide personal banking
services for customers via smartphones. In 2012,
Kookmin Bank launched the direct payment
services, which allow users enjoy the convenience
of directly paying for their purchases with their
smartphone number. The user may start to use
this service for payment only by registering a bank
account through a mobile client - UbPay.
Bankcard organizations: MasterCard, VISA
There are over 130,000 POS devices supporting
contactless PayPass and payWave technologies
in Korea. KT E-Wallet and Olleh tablets support
MasterCard's PayPass and VISA's payWave
technologies. Users may use BC cards, Shinhan
cards, KB cards and Lotte cards to complete the
payment process.
10
11
CAO Liang, Operators
Attacks Mobile Payment
and the Final Standard
Will Be Released in the
First Half of Next Year,
Communications World
Weekly, Nov. 30, 2011,
http://roll.sohu.com/2011
1130/n327394219.shtml
Advantages of Low-Cost
Mobile Banking by YV Li,
PBC, Hexun.com, Nov.
30, 2011, http://tech.
hexun.com/2011-11-
30/135832958.html
70% of e-payment transactions are completed via
mobile phones in Korea and the mobile payment
subscribers account for 60% of the total mobile
subscriber base10
.
The fast development of mobile payment in
Korea is attributable to the strong support of the
government to this sector. The Korean government
adopted a series of policies and created a good
environment to support the development of mobile
payment in Korea.
In the meantime, it is also attributable to the active
participation of multiple players in the value chain.
1) The active participation of mobile network
operators (MNOs). SKT, KTF and LGT, the three
major operators in Korea, have a firm control over
the mobile payment ecosystem and they enjoy a
dominant position in the value chain. They all offer
mobile devices supporting credit card features and
Felica-based smart prepaid card functions. SKT
launched its mobile payment brand - MONETA;
KTF introduced K-merce and LGT released mobile
banking services. To support 3G growth in Korea,
the operators adopted handset customization
strategies. SKT was the first to take the handset
customization strategy and it had a very strong
control on the handset. SKT Teletech, a subsidiary
of SKT, produces SKT customized handsets for SKT
subscribers. Based on user habits and features of
data services, SKT will provide recommendations on
handset customization and study the requirements
of new services on handsets in the development
and planning phase to guide the production of
other handset manufacturers. The main handset
suppliers for SKT are Samsung, 3COM, and SKT
Teletech. There are three models of cooperation
between SKT and handset manufacturers: first,
subsidizing handset. A subscriber may get a new
handset with new features at a low price but he
or she has to use the handset on SKT's network;
second, pre-loading some new applications onto
the handsets produced by SKT's subsidiaries;
third, selling handsets at SKT's agents. These have
provided strong support for the development of
SKT's data services.
2) Banks paid great attention to the mobile
banking sector. Banks are all investing in mobile
payment services due to the cost of mobile
banking transaction is only 1/511
of the face-to-face
transaction. Banks expect more mobile subscribers
to use mobile banking services due to it can reduce
costs significantly for banks. At present, all the major
banking terminals can identify mobile credit cards.
Telecom operators: KT, SK
In 2011, KT introduced iCarte plans for iPhone, which equipped iPhone4 and iPhone4S with NFC capabilities.
In 2011, KT subscribers conducted 30 million NFC prepaid transactions with the transaction value reaching $9.5
million. SK had issued over 1.5 million NFC SIM cards and had 4 million "Smart Wallet: users.

10
12
13
14
15
16
17
18
19
BetterBuyDesign, Mobile
Payments in the United
States Mapping Out the
Road Ahead, the Federal
Reserve Bank of Boston,
Atlanta Federal Reserve
Bank, March 25, 2011
2012 mobile future,
ComScore, Feb. 23, 2012,
http://www.comscore.com/
Press_Events/Presentations
_Whitepapers/2012/2012_
Mobile_Future_in_Focus
Mobile Commerce
Forecast, 2011 to 2016,
Forrester Research, June
17, 2011
eBay Forecasts $8B In
Mobile Commerce Volume
In 2012; PayPal Will Reach
$7B, Techcrunch, Feb. 12,
2012, http://techcrunch.
com/2012/01/12/ebay-
forecasts-8b-in-mobile-
commerce-volume-in-2012-
paypal-will-reach-7b/
Market Trends: Mobile
Payment, Worldwide 2011,
Gartner, June 6, 2011
Square Annual Payment
Transaction Value Reached
$5 billion, NetEase Tech
News, April 28, 2012,
http://tech.163.com/12/
0428/16/806MVIQQ000
94L5O.html
Last Meter of Mobile
Payment, Entrepreneur,
July 22, 2011,
http://money.msn.com.cn/
internal/20110722/
11521272214.shtml
Consumers and Mobile
Financial Services, U.S.
Federal Reserve, March 2012,
http://www.federalreserve.gov/
econresdata/mobile-devices/
2012-current-use-mobile-
banking-payments.htm
The United States – a process with the
participation of multiple players including
financial institutions, mobile carriers, TPP
providers and other technology providers
Generally speaking, mobile payment is still in the
initial stage in the U.S. The major stakeholders in
the entire ecosystem have divergent views on the
development and execution of mobile payment
in the U.S., which constrained the rapid growth
of mobile payment in the United States12
. More
specifically, the remote payment is growing fast
while the proximity payment is developing at a slow
pace and NFC payment even encountered certain
difficulties in the United States. The Square model,
which can turn a smartphone attached with an
external card reader into a POS device, grew rapidly.
The mobile penetration in the U.S. is high and
the smartphone adoption in the United States is
also higher than many parts of the world. The
comScore data shows that by the end of 2011, the
smartphone subscriber base in the United States
exceeded 98 million and accounted for 42% of
the mobile subscriber base13
. Mobile e-commerce
is also booming in the United States. According to
related data, the size of mobile e-commerce retail
market in the U.S. reached $6.7 billion in 2011,
representing an annual growth rate of 91.4% from
2010. The strong growth is expected to continue
well into 2015, when the mobile retail e-commerce
market will reach $31 billion14
. The high
penetration of smartphones and the development
of mobile e-commerce are driving the evolution
of the mobile payment industry, especially the
development of remote payment in the United
States. The total value of mobile payment (remote
payment) transactions of PayPal, a TPP provider in
the U.S., exceeded $4 billion in 2011, representing
an increase of 433% from $750 million in 2010.
In 2009, the value of PayPal's mobile payment
transactions totaled only $141 million15
.
The players in the value chain are also actively
participating in proximity payment. AT&T, Verizon
Wireless and T-Mobile set up ISIS, a joint venture
between the three major U.S. mobile network
operators, Discover Networks and Barclays. They are
trying to attract more players to develop contactless
mobile payment services16
. In Sept. 2011, Google,
Citigroup, and MasterCard formally launched
Google Wallet NFC mobile payment services. Credit
cards are very popular in the United States; therefore
the benefits of NFC and other proximity payment
methods cannot be fully reflected. However, the
Square model, which turns a smartphone attached
with an external card reader into a POS device, grew
rapidly, with the annual transaction value standing at
$5 billion17
. The benefit of such model is that there
is no need to use cash register or pay for hardware
and connection costs for the fixed and specialized
POS devices. At present, the downloaded and
installed POS system needs to share one operating
system with other applications. As a result, the
security issue has become a main obstacle to the
large-scale deployment18
.
At present, the biggest hurdle to the development
of mobile payment in the United States on the user
side is their concerns over the security of mobile
payment. According to the statistics released by
the U.S. Federal Reserve, 42% of the respondents
expressed their concerns over the security of
mobile payment19
. Specifically, there are mainly
Technology provider: Zong
Zong, a subsidiary of eBay, introduced the carrier
billing solutions to the market in collaboration with
SK Telecom and KT.
Equipment manufacturers: Samsung,
Pantech, LG
NFC-enabled handsets are very popular in Korea.
To date, Samsung has sold over 3 million NFC-
enabled Galaxy handsets; Pantech has sold over
1 million Vega Racer NFC-enabled handsets and
LG has sold about 500000 Optimus NFC-enabled
handsets in Korea.
Source: Management Consulting, Deloitte; the official websites of the above companies, and related media reports

20
Mobile Payments in the
United States Mapping Out
the Road Ahead, the Federal
Reserve Bank of Boston,
Atlanta Federal Reserve Bank,
BetterBuyDesign, March 25,
2011
four barriers to the development of NFC payment
in the United States: high infrastructure upgrading
cost, slow uptake of contactless payment,
difficulties in changing the old payment habits of
consumers and merchants and uncertainties in
revenue generation and business models20
.
Technology provider: Square
Founded in February 2009, Square is a mobile
payment services provider, which allows merchants
to use their smartphones to accept credit card and
bankcard payment. Square's card swipe dongles
is a small square card reader, which plugs into the
mobile phone. With the Squareup app downloaded
from Android Market and iTunes App Store and
installed on the mobile phone, the dongle can
convert a mobile phone into a card swipe device
similar to a POS device. At present, the annual
payment transaction value has reached $5 billion.
Equipment manufacturer: Samsung
Samsung introduced Galaxy NFC handsets in
the U.S. Market. HTC, LG, Motorola, RIM, and
Sony have introduced or are about to introduce
NFC handsets.
Bankcard organization: VISA
VISA adopted aggressive strategies and acquired
Trusted Service Managers (TSM), Fundamo and
Monitise. Fundamo started to offer mobile financial
service platform in 2000 and was one of the early
pioneers in this field in the world. There are 55 mobile
financial projects using the technology platform
offered by Fundamo around the world. Monitise is a
leading technology and service company delivering
mobile banking, payments and commerce networks
worldwide. There are over 250 financial institutions
using Monitise services in the United States. Monitise
served over 6 million customers in the world. VISA
also developed a VISA mobile platform, which can
be accessed by equipment manufacturers, mobile
network operators (MNOs) and financial institutions.
It supports remote payment and contactless payment
via mobile devices. VISA's contactless technology,
payWave is also compatible with NFC devices and
supports proximity payment.
Source: Deloitte's Management Consulting; the official websites of the above companies, and related media reports
Telecom operator: ISIS
AT&T, Verizon Wireless and T-Mobile cooperated with Discover and Barclays to set up a joint venture, ISIS, which
is committed to the R&D of mobile payment products targeted at smartphones and NFC technology. HTC, LG,
Motorola, RIM, Samsung, and Sony have expressed their intention to support ISIS-based NFC devices. A user may
make proximity payment with the merchants supporting ISIS and use ISIS mobile app to manage his or her accounts.
Financial institution: American Express
American Express (AmEx) acquired Revolution
Money, an online payment company, at a price of
$300 million in 2009 and expanded its footprint in
Internet-based payment. In 2011, AmEx introduced
"Serve", similar to PayPal. When a user opens a
Serve account and he or she can attach a credit
card account or a debit card account to the Serve
account or use MoneyPak prepaid card to top
up his or her Serve account. Then the user could
use account management and remote payment
features via a Serve mobile client. When the user
opens a Serve account, he or she will receive a
prepaid card and the user can make purchases
at any location supporting AmEx cards and even
withdraw cash at ATMs.

12
Europe - mobile payment services jointly
developed and operated by European operators
in partnership with banks
The mobile payment services in Europe are jointly
operated by European operators. Banks are
partners and they do not engage in operational
activities. The survey of comScore shows that in
March 2011, 8.5% of mobile subscribers in the
U.K., France, Spain, Germany and Italy made
mobile payments via their handsets21
. From the
technology perspective, European operators and
banks are more inclined to use SIM cards as tools
for proximity payment for the sake of balancing the
interests among different stakeholders and fueling
the development of mobile payment in Europe.
In Europe, the biggest road-blocker for mobile
payment is the difficulties in changing consumer
habits. For instance, Barclays issued 8 million
contactless cards in the U.K. since Sept. 2007;
however, there were only 150,000 transactions in
Sept. 2010, less than 4 transactions per POS device
on average. According to the survey conducted
by Ifop in 2011, 59% consumers in France had
no interest in mobile payment22
. Therefore, the
awareness of mobile payment should be further
increased among the consumers in Europe.
The players in the value chain need to provide
incentives to drive the change in consumer habits.
21
22
ComScore data, Europe:
mobile payment users
using smartphones
increased by 40%, www.
c114.net, May 28, 2011,
http://www.c114.net/
news/17/a604947.html
Market Trends: Mobile
Payment, Worldwide 2011,
Gartner, June 6, 2011
Technology providers: Buyster, G&D
Buyster (a French mobile payment company jointly
set up by Atos Origin, Orange, SFR and Bouygues
Telecom) introduced online payment system
in mid-September, 2011. It was committed to
developing a payment platform suited to mobile
e-commerce, which will link the bankcard with
the mobile phone number. The user may make
payment via the mobile phone number. Telefonica
Digital and G&D reached an agreement to set up
a Europe-wide NFC service platform. G&D will
provide TSM technology for this solution.
Equipment manufacturers: Samsung, Fujitsu
Starting from May 2010, Orange France conducted
a pre-commercial trial on mobile payment on
Samsung's Player One Cityzi in Nice. In February
2012, Fujitsu made an announcement to introduce
NFC handsets in Europe.
VISA and Groupe BPCE, the second largest bank
in France, announced in June 2011 to have the
trial operation of microSD- and NFC-based mobile
payment in Nice.
Source: Deloitte Research; the official websites of the above companies, and related media reports
Telecom operators: Vodafore, Telefonica O2, Everything Everywhere
On June 19, 2011, Vodafore, Telefonica O2 and Everything Everywhere announced the plan to set up a joint venture
to explore mobile payment market. The joint venture will develop a mobile wallet product based on NFC technology
and create a central portal for advertisers to offer discount services.
Financial institutions:
BNP Paribas, Barclays Capital
France Telecom and BNP Paribas announced in
July 2011 that they would jointly develop mobile
banking services, which will allow users to have
remote control of their accounts and make
remote payment. Orange and Barclays Capital also
introduced mobile payment services, which utilize
NFC handsets with Quick Tap features to support
micro-payments with a value less than 15 pounds
at over 50000 shops in the United Kingdom.

India - operators and banks working together
to explore mobile financial markets in rural
regions
The mobile payment industry in India witnessed
landmark progress in recent years. In Jan. 2011, the
two telecom giants in India signed agreements with
the top 2 Indian banks to explore mobile payment
services in India. Bharti Airtel is the largest mobile
network operator (MNO) in terms of user base in
India. State Bank of India is the biggest bank in
India in terms of asset value. The two companies
co-funded 1 billion rupees (about RMB145 million
yuan) to set up a joint venture, which provides
banking and financial services via mobile handsets.
Vodafone (Essar) is the third largest MNO in India.
ICICI Bank is India's largest private bank. The two
companies will work together to deliver mobile
banking services. Such cooperation will not only
opened new revenue sources for operators, but
also bring more customers for banks23
.
The cooperation between operators and banks
in India is largely dependent on government
policies. India has a huge mobile subscriber
base. As of March 2012, the number of mobile
subscribers in India amounted to 919 million24
.
India has 600000 villages, among which only
50000 villages have the presence of financial
institutions. Thus, the central bank of India urged
the banking sector to expand their business to
villages and suburbs. The banking sector also
expected to accelerate the pace of expansion
through the collaboration with MNOs.
23
24
The wind of mobile
payment is getting
stronger, CNII,
People's Posts and
Telecommunications News
(PPTN), Jan. 19, 2011,
http://www.cnii.com.cn/
index/content/2011-01/19/
content_833252.htm
India's mobile subscriber
base touches 951.34
million, TT Correspondent ,
May 7, 2012,
http://www.telecomtiger.
com/PolicyNRegulation_
fullstory.aspx?passfrom=to
pstory&storyid=14145&sec
tion=S174
Technology provider: Ngpay, Paypal
Ngpay, India's largest mall on mobile, supports
credit card top-up option. PayPal plans to
introduce an external card swipe device plugged
into iPhone in India.
Equipment manufacturer: Nokia
Nokia established cooperative relations with YES
Bank, a commercial bank in India, to introduce
mobile payment services in 2010. Later, Nokia
worked with Union Bank to launch bill payment,
money transfer and other services.
VISA and Monitise set up a joint mobile payment
company - Movida, which is working with HDFC in
the field of mobile payment. PayMate, India's large
mobile e-commerce company, is collaborating with
local partners to deliver related services.
Telecom operator: Bharti Airtel
Bharti Airtel launched Airtel Money service, which allows prepaid customers to top up their accounts, buy tickets
and pay bills over the air (OTA). The service can be delivered through SMS, USSD and GPRS/3G, which indicates that
there is no particular requirement on the hardware.
Financial institution: HDFC
HDFC, the second largest bank in India and
Movida, a mobile payment platform provider,
formed a partnership to deliver mobile payment
service, which allows HDFC users to pay bills, buy
tickets and make other purchases via handsets.
The service does not require superb hardware
configurations and the user may use this service on
any operator's network.

14
Africa - the operating model of mobile
payment affected by financial regulatory
environment
Despite of the economic underdevelopment in
Africa, Africa is one of the most active mobile
payment markets in the world. The severity of
financial regulation determines the choice of
business models. Some countries selected the
operator-dominant model while some countries
chose operator/bank cooperation model. Africa has
nearly 500 million mobile phone subscribers. The
mobile penetration in Africa is expected to reach
56% by 2014. Financial services are underdeveloped
in rural areas in Africa. According to related
statistics, more than 60% of the rural population is
unbanked25
. Such huge market demands attracted
telecom operators and banks into the delivery of
mobile payment services. In fact, since Safaricom
launched M-Pesa in Kenya in 2007, the mobile
payment has been growing rapidly in Africa. There
are more than 40 million people using mobile
payment services in Africa26
. The success of M-Pesa
in Kenya is mainly attributable to the operator-
centric model. Safaricom has 70% mobile market
shares in Kenya and the physical shops of its agents
spread across the entire country.
The development of mobile payment in Africa
shows that mobile payment has enormous
potentials in helping remote regions address
the needs for financial services. It can therefore
be concluded that delivering the basic financial
services via mobile phones may become a
technically feasible solution to address the under-
served financial needs in rural areas.
25
26
Mobile Africa Report 2011,
Dr Madanmohan Rao,
Mobile Monday
Visa gets serious: Let the
Africa Mobile Payment
Wars Begin, Mbwana Alliy,
Innovation, Nov. 20, 2012,
http://afrinnovator.com/
blog/2011/11/20/visa-
gets-serious-let-the-africa-
mobile-payments-wars-
begin/
VISA was also active in African mobile payment
market. In June 2011, VISA spent $110 million
cash acquiring Fundamo, a financial service
provider in South Africa. Fundamo has over 5
million registered users and provides 50 types
of mobile financial services in over 40 countries
(including 27 countries in Africa, Asia and the
Middle-East), such as person-to-person payment,
cellphone credits top-up, bill payment and inter-
bank services. In Nov. 2011, VISA and MTN Group
(a leading telecom operator in the Middle East)
worked together to introduce VISA encrypted
mobile wallet products in Nigeria and Uganda.
Financial institutions:
Standard Bank, First National Bank, Absa
Standard Bank introduced MiMoney in 2009, which
allows the people with no credit cards, especially
the young consumers with no credit cards to make
online shopping. The later-introduced Instant Money
is targeted at the unbanked people. Through the
cooperation with Spar, a retailer with 850 shops,
Standard Bank supported money transfer between
mobile subscribers. First National Bank offers
e-wallet service and recently launched pay2Cell
product, which omits the need to remember long
account details and allows FNB account holders to
make payments directly into the accounts of other
FNB account holders, using only the recipient's
cellphone number. Absa allows its customers to
withdraw the money remitted onto their cellphones
from its ATMs. At the end of 2011, Absa worked
with MasterCard to embed chips in the handsets to
support mobile payment services.

Due to the difference in political, regulatory and
policy environments, level of development of
market-based economy, subscribers' income level
and consumer spending habits, no country's
experience in mobile payment can be simply
copied to China. China's mobile payment industry
is faced with some of the opportunities and
challenges common to the world, but it also
has its unique features, such as huge market
size, different development roadmaps and
unique business models. It therefore requires
specific analysis on the current situation of this
industry and the challenges it faces as to develop
practical and feasible development strategies
and appropriate business models for the mobile
payment industry in China.
Telecom operators: Safaricom, Vodacom
Safaricom introduced M-Pesa system in Kenya in 2007 and since then M-Pesa grew rapidly. In 2010, M-Pesa had
attracted 13.50 million users including 5 million rural users. Mobile money transfer is the most welcomed service.
M-Pesa allows mobile subscribers to quickly transfer fund with a minimum amount of 50 Kenya shillings. The value
of money transfer via M-Pesa system totaled 135.38 billion Kenya shillings, about 5% of Kenya's GDP. M-Pesa
adopts USSD technology and basically applies to all models of mobile phones. Vodacom, the largest operator in
South Africa, also launched a type of mobile payment service similar to M-Pesa in October 2010. South Africa has 13
million unbanked population, but the uptake of M-Pesa was very slow. There were only 150000 registered accounts
nine months after the launch. Because South Africa has very stringent supervision on the banking business, including
the payment business, Vodacom had to rely on its partner bank - Nedbank to complete the related transactions,
resulting in money transfer costs far higher than the operator-centric business model in Kenya.

16
Current situations and challenges of
mobile payment industry in China
The mobile payment market in China
holds tremendous potentials and
space for development and growth
Deloitte believes that the mobile payment market
in China holds tremendous potentials and space for
development and growth if measured by potential
scale, infrastructure, market demands, policy
setting and interest of the players.
China has over 1 billion mobile subscribers,
bigger than the entire mobile subscriber base
in Europe
China has the world's largest mobile subscriber
base. According to the statistics of the Ministry
of Industry and Information Technology of China
(MIIT), the number of mobile subscribers in China
reached 1019 million as of March 2012, with its
size three times as big as the mobile subscriber
base in North America and bigger than the entire
mobile subscriber base in Europe. At the same
time, 3G is also developing robustly in China and
the number of 3G users reached 152 million27
.
During the "12th Five-Year Plan" period, China
aimed to bring the number of 3G users to over 450
million28
. The proportion of 3G users in the mobile
subscriber base will continue to rise. The increase
in the proportion of 3G users will further propel
the growth of mobile Internet users in China.
According to the report of China Internet Network
Information Center (CNNIC), the total number of
mobile Internet users in China reached 356 million
as of the end of December 2011, a year-on-year
The mobile payment market in China has huge potentials, but the
industry is still in its infancy. The adoption of mobile payment is low
and the application scenarios are limited. The players are very active,
but the majority of mobile payment services and products are still in the
pre-commercial phase. A sound mobile payment ecosystem has not been
established. In a nutshell, the business models of financial institutions,
operators, third-payment payment (TPP) providers, third-party trusted
service manager (TSM) providers may vary from one to another, but the
players in the value chain are more inclined to win-win cooperation.
growth of 17.5%29
. The size of mobile subscriber
base represents the size of potential mobile
payment users. The number of mobile Internet
users in a certain degree represents the level of
acceptance of new technologies and mobile
Internet lifestyle by mobile users. Measured from
these two aspects, the mobile payment market is
blessed with huge potentials in China and enjoys a
broad space for future growth.
The improvement of infrastructure drives the
upgrading of mobile payment industry
The fast development of 3G and WiFi has
significantly improved the wireless broadband
conditions in China while the gradual decline of
telecom tariff levels has reduced user costs. As
the 3G licenses were awarded and with the local
governments driving the "Wireless City" initiatives,
the mobile bandwidth in China is increasing
constantly. The increase of mobile bandwidth
will significantly improve the user experience in
mobile payment, especially in remote payment.
The convenience of mobile payment will be further
improved. When the 3G licenses were issued in
January 2009, the three operators started the
construction of 3G networks. According to MIIT
statistics, as of the end of November 2011, the
number of 3G base stations reached 792000; the
3G network covered all the cities and counties,
as well as part of the towns; the number of 3G
users reached 118.73 million, 71.68 million more
than that in the beginning of the year (see Figure
8 ). The proportion of 3G net adds in the mobile
27
28
29
3G enters a scale-based
development phase, MIIT,
Dec. 26, 2011,
http://www.miit.gov.cn/
n11293472/n11293832/
n11294132/n12858447/
14405125.html
The 12th
Five-Year Plan for the
Communications Sector, MIIT,
May 4, 2012,
n11293472/n11293832/
n11293907/n11368223/14
578927.html
China Internet Network
Information Center
(CNNIC) - The 29th
Statistical Report on
Internet Development in
China, Jan. 16, 2012,
http://www.cnnic.net.cn/
dtygg/dtgg/201201/
t20120116_23667.html

Figure 8: Number of 3G users in China
from 2009 to 2011 (by 10,000)
Source: The official websites of the Ministry of
Industry and Information Technology (MIIT), China
1232
4705
11873
2009
20000
10000
0
2010 2011
net adds rose from 43.7% at the beginning of the
year to 72.5%30
. On the other hand, operators
began to push the deployment of WLAN. WiFi
household penetration continued to improve.
In 2011, China Telecom announced its optical
network plan to deploy 1 million WLAN hotspots
by the end of 2012. China Mobile also announced
the plan to deploy 1 million WiFi hotspots
before 2013. According to statistics released by
Strategy Analytics, a U.S. market research firm,
the WiFi household penetration in China arrived
at 21.8% in April 2012 and it is expected that
China will have 110 million WiFi home users by
201631
. With the increase of wireless bandwidth
and the decline of telecom tariff level, the cost
of using telecommunications services dropped.
30
31
32
33
3G enters a scale-based
development phase, MIIT,
Dec. 26, 2011,
n11293472/n11293832/
n11294132/n12858447/
14405125.html
Strategy Analytics: As of
the end of 2011, there
were 439 million homes
installing WiFi networks,
199IT, April 2012,
http://www.199it.com/
archives/29877.html
LI Yizhong: The opening
of basic telecom sector to
private investment now has
a timetable, Securities Times,
http://money.163.com/12/
0309/01/7S4BPE2E00253
B0H.html
The overall price level of
telecom services continues
to drop, MIIT, Dec. 26, 2011,
n11293472/n11293832/
n11294132/n12858447/
14405139.html
Figure 9: Shipments of smartphones in China from 2010 to 2015
Source: Publicly Available Data of iResearch
3550
7210
103.1%
11250
56.0%
15210
35.2%
20153
32.5%
25857
28.3%
2010
40000
30000
20000
10000
0
2011 2012 2013 2014 2015
Shipments of smartphones (by 10,000) Growth rate
It is reported that the telecom tariff in China
dropped by approximately 9% each year over
the past few years32
. MIIT statistics indicate that
the telecommunications service price as a whole
dropped by 5.1% from January to November
201133
. The popularity of smart devices will greatly
contribute to the expansion of mobile payment.
The extensive use of smartphones is an important
driver for the wide adoption of mobile payment.
The related statistics show that the smartphone
shipments reached 72.1 million units in China in
2011. It is expected that the smartphones will grow
rapidly in 2012. The shipments of smartphones
will reach 113 million units with a growth rate of
56.0% (see Figure 9).

18
The booming of mobile e-commerce
stimulated the fast growth of demands for
mobile payment
E-commerce has maintained a high growth rate
over the past years in China. According to IDC
data, the Chinese Internet users spent RMB784.93
billion yuan on on-line shopping in 2011, growing
by 66% compared with 201034
. The development
of e-commerce, to a large extent, has cultivated
consumer habits of using e-payment and has
fueled the rapid development of TPP providers
such as Alipay. The mobile e-commerce in China
is growing rapidly and more and more consumers
choose to buy goods via their mobile handsets.
Big domestic e-commerce websites, like Taobao,
Tmall, 360buy, Suning and Amazon, launched
their mobile clients, which have integrated mobile
payment solutions such as mobile payment
applications offered by TPP providers, banks,
China UnionPay and operators. At the merchant
level, the mobile clients of airlines, hotels and
other businesses have integrated remote payment
features and the players offered various discounts
to encourage usage. For example, in order to
encourage customers to use the client, Air China
would offer credits for the customers who buy
full price tickets via their client. An express hotel
rewards the customer who use mobile client on
their handsets to book and pay for hotel rooms
with multiplied bonus points to encourage the
usage of mobile client.
Central and local governments developed
related policies in support of the development
of mobile payment industry
In the 12th
five-year plan for the development
of e-commerce in China, jointly drafted by nine
government agencies (including the National
Reform and Development Commission) with
MIIT as the lead agency, the electronic payment
industry was considered as the crucial part for
the development of e-commerce service industry.
Mobile payment was also considered an important
component of the Internet of Things (M2M) in the
plan for next-generation information Technology.
The People's Bank of China (PBC) developed
the Measures for the Management of Payment
and Settlement Organizations, which imposed a
licensing regime for e-payment service providers.
The Measures improved market environment and
was conducive to the long-term stability of the
market. At the same time, the development of
information and communication technology (ICT)
has become one of the indicators to measure the
performance of the local governments, which,
as a result, gave high priorities to various ICT
initiatives such as "wireless city" and "digital city"
initiatives. The framework cooperation agreements
between local governments and operators usually
contain specific agreements concerning mobile
payment. The "wireless city" initiatives will greatly
improve mobile bandwidth and enhance the user
experience of mobile payment.
The players in the mobile payment value
chain are active and the increasing cooperation
between them will boost the development of
the mobile payment industry
Financial institutions, operators, TPP providers and
other players were attracted by the tremendous
market potentials and huge expansion space
presented by mobile payment. They also
made strong presence in mobile payment and
contributed to the development of this industry
in China. According to the survey conducted by
Deloitte, 66.67% of the respondents indicate that
their companies have developed mobile payment
strategies and have provided mobile payment
services; 20.72% of the companies have developed
strategies but haven't offered any service, with the
two adding up to 87.39% (see Figure 10). Among
34
IDC released the
e-commerce white paper:
the online transaction
value in China surpassed
780 billion yuan, Alibaba
Group Research Center,
March 1, 2012, http://
www.aliresearch.com/
index.php? m=cms&q=view
&id=70886

the survey respondents, 35.14% believe that
their companies are delivering mobile payment
services on a pilot basis and 33.33% consider that
their companies are ready for deploying mobile
payment, with the two adding up to 68.47%.
Only 4.50% think that their companies have no
plan (see Figure 11). Therefore it can be concluded
that most of the players in the value chain have
developed strategies and plans for mobile payment
and have started operations. For example, China
Figure 10: Have your company/organization
already offered mobile payment services
or already developed a mobile payment
strategy?
Figure 11: In light of the development of
China's mobile payment industry as a whole,
how do you view the current situation of the
mobile payment business of your company/
organization?
20.72%
66.67% 33.33%
35.14%
18.92%
8.11%
4.50%
Mature Ready for deployment
Trial phase Planning phase No plan
6.31%
6.31%
There is ever-increasing cooperation among
financial institutions, operators, TPP providers,
device vendors, and technology providers. Starting
from the 2nd half of 2009, the cooperation in
mobile payment at the industry level has been
increasing. There were over 70 cooperation
cases publicly reported by the media, such as the
cooperation between financial institutions and
operators, the cooperation between payment
companies and financial institutions, cooperation
among financial institutions, device vendors and
technology providers. The most widely-covered
UnionPay established strategic cooperation with
many players in the value chain; many banks and
TPP providers such as Alipay have set up mobile
payment units; ChinaPnR, a TPP provider, released
the "Asi@" mobile payment strategy to identify
its positioning. The payment industry is more
and more inclined to mobile payment. With the
common efforts of the players in the value chain,
the mobile payment industry will certainly embark
on a fast-growth track.
story was the cooperation between China Mobile
and Shanghai Pudong Development Bank (SPD
Bank). China Mobile acquired some stake in
SPD Bank and the two companies established a
strategic partnership. On one hand, the increasing
cooperation at the industry level indicates the no
single player can do it alone due to the range of
the value chain is extremely diverse; on the other
hand, as the industry grows, it is likely to generate
the co-competition model and open ecosystem
based on collaborative partnership in China's
mobile payment industry.
Have a strategy and have already offered mobile
payment services
Have a strategy but haven't offered mobile
payment services
No services and no plan to offer services in the
coming three years
Not clear

20
Mobile payment is still in its infancy
in China
The potentials and prospects of the mobile
payment market in China presented a thrilling
picture, however this industry is still in the initial
stage of development in China. The adoption as a
whole is still low, most mobile payment products
and services are still in the pre-commercial
stage, and the players in the value chain haven't
developed mature business models. In general, the
players are still exploring various options.
Mobile payment is a quite young industry in China.
It existed for only a decade starting from 2002
when China Mobile rolled out the micro-payment
based on carrier bills. The user base is small and
the mobile payment value is small. According to
the People's Bank of China, the mobile payment
value in China totaled RMB570 billion yuan in
201035
. The influence of mobile payment in the
entire payment system is still weak.
Judging from the development of mobile payment
industry, remote payment is relatively mature in
China. There are mature remote payment products
available for the mass market, such as mobile
Alipay. The mobile e-commerce volume and the
mobile payment value are both rising. In contrast,
the development of proximity payment is relatively
slow, with financial institutions, operators, and
TPP providers conducting commercial pilots in
cities. China Unicom and China Telecom tested
NFC mobile payment in many provinces, but the
service was not commercialized. China Mobile
also conducted pilots in some provinces. A typical
success case is Mobile Shenzhen Tong Project.
Innovative payment companies such as Qfpay
and iBoxPay also released the quasi-Square POS
products, but these companies are still young.
There are three major types of players participating
in China's mobile payment market: financial
institutions represented by China UnionPay (CUP),
telecom operators, and TPP providers represented
by Alipay. They all wanted to develop a business
model where they could play a leading role. These
players have their own respective strengths. China
UnionPay has a sound and mature payment and
clearing system. Operators and TPP providers
have huge customer base and sales channels. The
cooperation and competition among them will co-
exist, but the key problem is how to develop a win-
win mechanism and business model in line with
the interests of all the players in the value chain36
.
Multiple business models co-exist and
the players in the value chain face
many challenges
Financial institutions: transforming to the
providers of full-range mobile financial services
Fast and easy-to-use mobile financial services may
increase customer loyalty to banks and provide
the conditions to further tap customer value.
Banks pay close attention to mobile payment
and consider it an important component of
mobile financial services. Banks have two big
advantages to develop mobile payment: 1) banks
are the centers where customers conduct their
financial activities. They manage a huge capital
chain and enjoy great advantages in payment and
settlement management; 2) banks have established
a relationship of trust with the customers and
have an enormous amount of user data and data
security centers. Mobile banking is regarded as
an important vehicle for the development of
mobile financial services. Banks have integrated
e-commerce and remote payment into the basic
mobile banking functions. The remote payment, as
an important part of the mobile financial services
strategies, achieved rapid development based on
banks' mobile banking platforms.
A customer may access a bank's financial services
via SMS, WAP and APP client. Application and
solution providers worked with banks to deliver
technology and security solutions. At present,
most banks in China have rolled out WAP-based
mobile banking and client-based mobile banking.
Banks have all integrated traditional online banking
functions and added remote payment functions
such as transfer and remittance. In addition to some
traditional features, banks also developed innovative
services customized for mobile handsets, such as
35
36
PBC, China Payment
System Development
Report 2010, July 20,
2011,
http://www.pbc.gov.cn/
publish/zhifujiesuansi/
1071/2011/20110720171
556680476432/201107201
71556680476432_.html
UnionPay casts a net
to top nationwide
mobile payment market
- revenues still coming
from commission charges,
Southern Metropolis Daily,
Nov. 28, 2011,
http://www.afinance.cn/
bank/yhxw/201111/400
551.html

"roaming remittance" of the Agricultural Bank of
China (ABC), "mobile number money transfer" of
China Merchants Bank (CMB), and "card-less life" of
the Bank of Communications (BoComm).
Mobile banking services can be divided into
financial and non-financial services. Financial
services include account inquiries, remittance and
transfer, wealth management services (bonds,
funds, insurance), foreign exchange management,
financial information inquiry, etc. Non-financial
services include payment services (utilities bill
payment, i.e., water, electricity and gas, fine
payment, and mobile payment), account top-
up, game cards, business travel services, payment
collection on all-in-one cards, payment for lottery
tickets, payment for hospital registration, etc.
Non-financial services are delivered by banks in
partnership with third parties (online shopping
malls) on the banks' platforms.
Figure 12: Business model of banks for remote mobile financial services
Means of access
SMS CUP
WAP Banks
APP Third-parties
Other players: Software and solution providers, Handset manufacturers, Operators, etc.
Main players
Financial services:
• Account inquiry
• Money transfer
• Credit card management
• Wealth management services
• Financial information services
• Authorization of corporate
transactions
• ……
Non-financial services:
• Utilities bill payment
• Fine payment
• Business travel service
• Phone account top-up
• All-in-one card payment collection
• Hospital registration
• Game
• Lottery
• ……
Services

22
37
38
Timetable for IC bankcards
is released, the issuance of
magnetic stripe bankcards
will be terminated before
2015, Nov. 8, 2010,
http://finance.people.com.
cn/bank/GB/13151437.
html
CUP accelerates the
application of financial IC
cards, Financial News, Feb.
8, 2012, http://finance.
people.com.cn/bank/
h/2012/0208/c227925-
3402923325.html#
Banks' remote payment can leverage their
financial advantage to create, integrate, and
develop online financial products and services.
The online banking platform is also a strong
supplement to their physical network of outlets.
Small and medium-sized banks, city commercial
banks, and rural commercial banks may break
geographical limitations and expand business
coverage by offering mobile payment and mobile
banking services. Moreover, the country strongly
supports the development of rural financial
services. Mobile banking has great opportunities
in rural and remote regions. The poor wired
network infrastructure and the low penetration
of PCs in the countryside coupled with the wide
coverage of mobile networks and the high
penetration of mobile phones in the countryside
have made mobile payments more suitable to
develop in the countryside.
China UnionPay played a dominant role in the
development of proximity payment in China.
UnionPay built up the inter-bank payment and
clear system. As a result, it has a powerful
advantage in fund clearance and settlement and
bankcard payment services. UnionPay has a strong
control over POS devices and it is much easier for
UnionPay to upgrade the POS devices in a more
cost-effective manner. The 13.56MHz standard
led by UnionPay has been basically finalized.
The key lies in how to create a well-organized
IC card application environment. An open and
sound IC card application environment is critical
for the development of NFC mobile payment. In
accordance with PBC's arrangements in 2011,
UnionPay partnered with commercial banks and
other stakeholders in 2011 and they made the
financial IC cards widely supported by most POS
devices of domestic merchants. They even planned
to upgrade ATMs to support financial IC cards.
PBC planned to stop issuing magnetic stripe cards
completely in 201537
. The issuance of financial IC
cards is accelerating. In 2011, about 14 million
new IC cards were issued, up 150% over the
same period of 2010. Many national commercial
banks, including the Industrial and Commercial
Bank of China (ICBC), Agricultural Bank of China
(ABC), Bank of China (BoC), China Construction
Bank (CCB), Bank of Communications (BoComm),
China Merchants Bank (CMB), China Everbright
Bank and Shanghai Pudong Development Bank,
have introduced various financial IC cards with
special features in over 30 provinces in China38
.
UnionPay is pushing the cooperation with public
service departments such as social security, public
transportation, health, and education to embed
more functions in the IC cards.
At present the proximity payment can be divided
into two models, NFC mobile model and quasi-
Square mobile payment model. There are different
NFC models: NFC-SD, SIMpass and NFC SWP.
These three technologies all support proximity
payment and could participate in the NFC full-
device solution in the future. Different technologies
require different partners. With respect to the
source of fund, users may top up their accounts
with debit cards, credit cards, by cash or by other
means. (See Figure 13)
In the NFC mobile model, the smart financial SD
card model is led and pushed by UnionPay as a
primary model. UnionPay has established positive
cooperation with the players in the value chain,
including banks, device vendors, technology
providers and hardware providers. For example,
UnionPay, Chongqing Rural Commercial Bank and
HTC jointly released the first NFC-SD UnionPay-
standard mobile financial product in 2011, which
integrated remote payment, proximity payment,
self-service banking, e-wallet and other features. It
supports over-the-air credit loading and gets rid of
the need for the user to find a top-up location. The
user may transfer the fund in his banking account
to his electronic wallet via the mobile handsets.
The SIM-based model requires the cooperation
among UnionPay, banks and operators. Users need
to bundle their bankcard data so as to as realize
proximity payment function. A very small number
of third-party organizations also participated in the
remote payment services. For instance, the Bank

Figure 13: Four proximity payment models of UnionPay
Source of funds
Debit cards
Credit cards
NFC-SD
SIMpass
Others Card Reader
Cash NFC-SWP
Other players: Banks, CUP, Hardware manufacturers,
Application/Technology providers, etc.
Technical means
Physical merchants
Buses/Subways
Gas Stations
Expressways
Schools
Hospitals
……
Application scenarios
of Communications joined hands with UnionPay
and China Unicom to introduce SIM-SWP solution
in June 2010 in Shanghai - the Pacific-Unicom co-
branded debit card with SIM cards having bank
payment functions. The IC and SIM cards are
integrated into one card, which can be used on
POS devices with UnionPay log and supporting
contactless chips. On Sept. 2, 2010, ICBC and
China Unicom launched joint mobile payment
services and introduced the first SIM-card+PBOC2.0
contactless card in Shenzhen to meet customers'
needs for on-site micro-payment. At present, this
card can be used on the POS devices supporting
contactless chips and the supporting merchants
include chain supermarkets, fast food restaurants,
grocery shops, cinemas, and Guangzhou-Shenzhen
high-speed trains.
The Square payment model is an innovative model
where the smartphones, with an external card
reader and an app, can be turned into a POS
device. Similarly, UnionPay and iBox introduced
iBox payment, which supports all UnionPay
bankcards and credit cards. Users may check the
balance, repay credit cards, top up their mobile
phone accounts, pay for public utilities and use
other payment features.
Although banks and UnionPay actively engage in
proximity payment, their initiatives are primarily
regional with limited application scenarios and
geographical area. The main challenges for financial
institutions are banks and operators are separately
regulated and the policy and legal environment
for the fast development and expansion of mobile
financial services are not in place. Other challenges
are as follows: business models are uncertain; the
policy direction is unclear; the boundaries between
operators and banks are not well defined; there is a
lack of standardization; and uncertainty also exists
for the development of mobile devices. Due to
these uncertainties, most banks are still watching
and testing mobile payment and are reluctant to
make large-scale deployments.

24
BoComm has been a leader in mobile banking/mobile
payment in China. In 2009, BoComm Shanghai Branch
and China Telecom Shanghai Branch signed a strategic
cooperation agreement. In 2010, BoComm joined hands
with China UnionPay and China Unicom to launch a
SWP-SIM mobile payment solution, which integrates the
features of IC card and SIM card into one card and supports
proximity and contactless micro-payment. Users may
load credits into the card over the counter, via ATMs and
multimedia terminals. In 2011, BoComm introduced the
card-less withdrawal function and established the concept
of accessing remote financial services anytime anywhere.
In 2012, BoComm introduced the first mobile banking app
for BlackBerry devices. BoComm's new-generation mobile
banking services are available for iOS, Android, BlackBerry,
Symbian and other mobile operating systems.
Mr. Bing WANG, a senior manager at the electronic banking
unit of the BoComm, indicated that BoComm was an early
adopter of mobile finance and had introduced mobile banking
products as early as 2009. BoComm took the following
measures to develop mobile financial services: 1) migrate
the Internet services on fixed devices to mobile devices;
2) leverage the advantages of mobile devices to deliver
innovative services. BoComm was the first to launch Cardless
ATM withdrawal and Cardless consumption services, which
greatly facilitate people's lives and ensure security through
dual validation of mobile handsets and password. The best
feature of Cardless ATM withdrawal is that there is no need
for customers to change their habits of using ATM for cash
withdrawal. This product was well accepted by customers
after being introduced. "Cardless consumption" services
include financial service applications and daily life applications
(including plane tickets, film tickets, lottery, bill payment,
etc.) These services are delivered in collaboration with
device vendors through mobile clients. In addition, BoComm
introduced some corporate services suitable for mobile
devices, such as multi-level delegation in capital management
and Cardless ATM withdrawal from corporate accounts.
Around 10% of the 70 million BoComm's customers opened
mobile banking services.
A wide range of different devices from low-end to high-end
can all support BoComm's mobile banking services. Therefore,
BoComm has an advantage in offering rural mobile financial
services. Based on the practices of BoComm, it was found
that migrant workers are frequent users of mobile banking
services, particularly remittance service. At present, BoComm
offers money transfer between mobile handsets at no charge.
The Cardless ATM withdrawal via the mobile phone is offered
free of charge, with the goal of fostering the habit of mid-
and low-end users. BoComm believes that the demands of
rural market are huge, but the farmers haven't developed a
habit of using mobile devices for payment purposes. It takes
time for users to get to know and accept this product. Mr.
Wang pinpointed two problems facing rural mobile financial
services: 1) unaddressed security issues; only micro-payment is
supported; 2) inconvenience of SMS code.
Looking into the future, BoComm indicated their intention to
continue its cooperation with Internet players, TPP providers,
and application providers. Cardless lifestyle will drive the
trend. At present, BoComm's Cardless financial and electronic
account (bundled with handset and no physical bankcard) is a
type of Cardless service. In one or two years, remote payment
or proximity payment will both be on a fast track. At the time
when proximity payment experiencing hard time, the players
may try to find other approaches and get over the disputed
areas. In addition, BoComm is testing a LBS-based mobile
payment model.
Case:
Bank of Communications (BoComm) - leverage the advantage of mobile devices to create a
card-less lifestyle

Mobile payment becomes one of the important areas of
technology and business innovation for banks. Developing
mobile payment is a strategic initiative that could help banks
lead the innovation of payment services. Based on mobile
payment, Hua Xia Bank developed a full range of mobile
financial services. In the areas of investment and wealth
management services, Hua Xia Bank offers personal and family
capital management, investment and wealth management,
consulting on market conditions and other services. Due to
the portability of mobile phones, investment banking services
can be delivered via online banking channels and can offer
more choices for mid- and high-end customers.
Since the signing of a framework cooperation agreement with
China UnionPay in June 2011, Hua Xia Bank has introduced a
series of mobile payment and mobile banking services. Hua Xia
Bank launched mobile remote payment service in partnership
with China UnionPay in December 2011. The smart financial
SD card was used as the payment vehicle and the security of
mobile banking was greatly enhanced. The mobile remote
payment supports the bundling of one mobile phone with 10
UnionPay cards and customers can use mobile phones to pay
for utilities bills and credit card loans, top up mobile phone
accounts, buy lottery tickets, shop at mobile shops, book airline
and train tickets, make hotel reservations, and buy tickets of
tourist attractions. Hua Xia's mobile banking services broke the
boundaries between banks and allowed customers to access
their account details at different banks anytime, have complete
control of their own accounts and make better arrangements
for their funds. Customers can also use bankcards of other
banks or Hua Xia Bank to repay his credit card at Hua Xia Bank,
which is a great facilitation for customers.
Based on its market positioning and strategic development,
Hua Xia Bank believes that the future of the bank lies in not
only offering sound, complete and secure financial services,
but also expanding, enriching and integrating non-financial
value-added services. At present, Hua Xia is doing well in
the integration of financial and non-financial services. The
feature services offered by Hua Xia include: 1) making hospital
registration reservations via mobile phone in some cities
including Chengdu and paying the registration fee remotely;
2) booking movie tickets in some cities including Chengdu.
Movie-goers may buy the tickets and select their seats via
their mobile phones; 3) booking electronic tickets of some
tourist attractions; 4) delivering over 40 mobile payment
features in Chengdu. According to Hua Xia, security, ease of
use and functional completeness are the priority issues they
consider when they are developing mobile financial services.
In the area of proximity payment, Hua Xia is running some
pilot projects in Chongqing and partnering with UnionPay
to test proximity payment in Shanghai, Shenyang and some
other cities. Hua Xia used the smart SD card of UnionPay as
the mobile wallet. It supports micro-payment requiring no
physical card or password and high-value payment requiring
no cards but magnetic stripe data. Hua Xia is actively
developing financial and non-financial proximity payment
scenarios. The possible applications include attendance card,
campus card, city all-in-one card, fuel card, expressway ETC,
social security card, and medical card. In addition, the SD
card is capable of delivering public and community services.
Therefore, it can be used for social and public undertakings,
medical insurance and health care, transportation services and
corporate management applications.
In additional to personal mobile banking, Hua Xia is actively
preparing for the launch of corporate mobile banking services,
especially those targeted at small and micro-businesses. For
example, 1) applying for credit services via mobile phone.
The customer may submit their application documents by
way of taking photos and scanning, which can streamline
the processes for credit application; 2) mobile banking binds
the user and allows pledge loans; 3) for instance, in a small
commodity wholesale market, the market management
board can have its members to provide guarantee for each
other with their accounts as collateral and their products as
mortgage. The bank may provide mortgage loans for the
whole value chain. By creating an isolated environment, the
bank may connect products, logistics and financing together.
Mobile banking also allows cash withdrawal and eliminates
the constraints of time and space. In addition, Hua Xia also
believes that the development of agriculture-related finance
could be accelerated by offering agriculture-related loans and
money transfer services via mobile banking or home banking.
Case:
Hua Xia Bank - deliver a full range of mobile financial services

26
From a global perspective, mobile payment
has tremendous opportunities in rural
and underdeveloped regions. Rural Credit
Banks Funds Clearing Center (RCBFCC)
has worked productively in this regard.
RCBFCC was established on May 29, 2006
with the approval of the People's Bank of
China. The Center was initiated by over 30
provincial rural credit cooperative unions,
rural cooperative banks, rural commercial
banks and Shenzhen Rural Commercial Bank
(hereafter referred to as rural cooperative
financial institutions or RCFI) with the
registered capital of RMB100 million and
with the goal of resolving the cross-province
payment and clearing between RCFIs. The
Center established a nationwide payment and
clearing system between RCFIs and resolved
the problems of cross-province payment and
clearing. Due to the unbalanced development
of RCFIs, some newly founded RCFIs need to
improve their IT facilities to face competition
from commercial banks. The Center then
developed various systems in support of the
upgrading of RCFIs.
In such a context, the RCBFCC mobile
banking sharing platform was developed
with the aim of improving the development
of mobile banking system for RCFIs. The
Center expects this platform to attract more
RCFIs to develop mobile banking and form an
exemplary effect so as to boost the mobile
financial services of these institutions.
RCBFCC (the Center) now offers two types of
mobile banking services: installing a client on
the mobile handset or placing a film on the
SIM card to deliver mobile banking features
over the mobile phone. For the first type,
banks may develop the client software based
on different mobile operating systems. A user
may check his or her account and transfer
fund via the mobile client, which currently
supports iOS, Android and J2EE (Symbian in
particular). The Center also indicated that
other mobile operating systems will also be
supported in the future such as Windows
Mobile. In addition to basic financial services
such as account check and money transfer,
the Center also developed value-added
services such as mobile phone account top-
up. The user may top up his or her mobile
phone account via the mobile banking client.
For the second type, banks may place a film
on the SIM card. The user may put the filmed
SIM card into the phone and select services
through a menu. The service instructions will
be sent to the back end as encrypted SMS.
The back end then sends back the required
information in the form of SMS to fulfill
account inquiry, money transfer and other
payment functions. The second method is
device independent and can be supported by
95% mobile devices. The user is not required
to access the Internet or download and install
the client software. The user may use the
financial services after he/she asks the counter
of the bank to place a special sticker film on
his SIM card. This option is more suitable for
the customers of credit cooperatives. In these
two types of methods, customer account
and other related information is stored at
the provincial rural cooperative unions. The
instructions for account inquiries, money
transfers and other operations are sent
through the RCBFCC mobile banking system
to the provincial rural cooperative unions,
which then send the required information
back to complete the payment process.
Case:
Rural Credit Banks Funds Clearing Center - enable rural financial
innovations and develop rural mobile finance

At present, the client-based mobile banking
system is developing well. As of April 2011,
there were three provincial rural credit
cooperative unions that adopted the sharing
mobile banking system of the Center: rural
credit cooperative unions of Hainan, Guizhou
and Hubei. Hainan Rural Credit Cooperative
Union has commercialized the mobile
banking services. The other two unions are
conducting internal test run. About 10 other
credit cooperative unions are planning to
join the sharing mobile banking platform,
including the unions in Xinjiang, Shanxi,
Shaanxi, Inner Mongolia, Jiangxi, Sichuan
and Jilin. The filmed-SIM-card-based mobile
banking has been growing rapidly in recent
years. The Rural Credit Cooperatives of
Shandong developed 620000 customers
in less than one year. The cost of placing
the sticker film on the SIM card is borne
by RCFIs. These financial institutions are
very active for this model really can help
them attract effective customers with such
demands and with a relatively high degree
of security awareness. The cost is not a road
blocker for the development of the filmed-
SIM-based mobile banking. As more and
more cooperative financial institutions join
this camp, the cost will be further reduced.
The payment services most required by
rural residents are money transfer and
mobile phone account top-up. There is also
a huge demand to purchase game point
card via mobile handset at the county level.
Concerning the security related to SMS-
based payment, the Center indicated that up
to now there wasn't any single case of SMS
interception. In client-based mobile banking,
the generated transaction information will
be sent to the customer in SMS and the
customer needs to input the validation code
in the SMS to complete the transaction. It
has been proved highly security. In filmed-
SIM-based mobile banking, the transaction
instruction is completed through encrypted
SMS text. The key used each time is different
and it is therefore highly secure.
With respect to the thinking on the future
development of mobile banking, the Center
indicated that first, they would focus on
market development, keep a close eye on the
development of emerging payment means,
and select the payment methods suited to
rural needs; once the time comes, they will
put such system in production quickly for the
RCFIs have nearly 80000 outlets across China
and if there is a need, expansion can be
achieved easily; second, they would focus on
new type of services, such as the cooperation
with Alipay; third, they would consider
increasing the operating systems supporting
the client on the mobile handset and make
partial customization on their products.

28
Founded in June 2008, Chongqing Rural Commercial
Bank (CRCB) is the largest bank in Chongqing in terms
of total assets, total deposits and outlet coverage. It was
listed on Hong Kong h-share main board in Dec. 2010,
making it the first public rural commercial bank, the first
local bank listed in overseas market, and the first listed
bank in western China. Since its listing, CRCB, depending
on its advantages brought by institutional reform and the
strong capital capability, is committed to helping farmers,
agriculture and rural areas, supporting mid-sized, small and
micro businesses, driving the development of county-level
economy and enhancing innovation on financial products.
Developing mobile payment services is an important
part of CRCB's mission of promoting financial inclusion.
CRCB took a two-step strategy. Step 1: promoting the
filmed-SIM-based mobile banking. In July, 2011, CRCB
introduced the first such mobile banking product in
western China. The product allows the user to access his
account information, transfer and remit funds, manage
his account, and access wealth management services
and credit card services. The product has other powerful
features. The customer may enjoy account services on
the STK menu. The data is transmitted in encrypted SMS
and almost all the mobile phones can support the filmed
SIM card. Low cost of use, high level of security and wide
audience coverage enable the public, especially rural
residents, to benefit from the latest development in mobile
payment and help to achieve service equalization in urban
and rural areas. As of end of May 2012, the effective
customers reached 290000, the number of transactions
reached 8.71 million and the transaction value amounted
to RMB 51.8 billion yuan. This product was well accepted
by the customers. Step 2: CRCB was the first to launch
the NFC-SD mobile financial product based on UnionPay
standard. In Sept. 2011, CRCB, together with China
UnionPay, Chongqing City Smartlink Card Co. LTD, High
Tech Computer Corporation (HTC), and Shanghai F-ROAD,
launched this product in Chongqing. It is supported by
the NFC handsets developed by HTC with the SWP-SD
(single wire protocol) chip based on UnionPay standard. It
complies with the security standard developed by UnionPay
for NFC payment. It integrates self-service banking, remote
payment, proximity payment, e-wallet and other features.
It also combines basic financial services, multi-area mobile
payment applications and cross-industry mobile payment
applications together. It supports the mobile networks of
China Mobile, China Unicom, and China Telecom. In terms
of technology, functionality, security and other aspects,
this product is a leading product in China and around the
world. It is a new financial platform, which can change the
way of life of the people.
For the next step, CRCB will further improve "Jiangyu"
mobile financial product so that it will be better adapted
to mid- and low-tier customers. CRCB will work with
Chongqing Rail Transportation Group to accelerate the
upgrading of the POS devices in the stations of light
rails and subways. The cost of the SD cards and other
transaction fees will be exempted for customers. CRCB
hoped to attract over 50000 customers for this product
in 2012. China UnionPay Chongqing Branch is working
actively on upgrading the existing POS devices to support
NFC payment. It is expected that they will upgrade over
20000 POS devices in 2012.
"Financial innovation is an inexhaustible force for
sustainable development of a rural commercial bank and
an inherent requirement of the development of inclusive
finance. For the next step, we will, based on the related
mobile payment policies and standards, further strengthen
product development so as to support a broader customer
base and truly deliver differentiated, easy-to-use and
personalized products and services. This year, our bank will
further strengthen cooperation with Chongqing Electric
Power Company. The tests of installing NFC chips into the
meters have been completed. In the future, customers may
tap their NFC-enabled phones over the NFC sticker on the
meter to read the meter and make the payment. Our bank
is also considering developing mobile financial services and
products for corporate customers. I firmly believe that the
mobile payment business has a bright prospect," said the
head of electronic banking division at CRCB.
Case:
Chongqing Rural Commercial Bank (CRCB) - develop mobile payment services to
boost financial inclusion

Operators - open cooperation to achieve a win-
win outcome
Operators are important participants in mobile
payment industry. The three major telecom
operators in China: China Mobile, China Unicom
and China Telecom all established wholly-owned
subsidiaries specialized in mobile payment: China
Mobile E-Commerce, Unicom Payment Ltd., and
Tianyi e-Commerce Limited (hereinafter referred to
as operators' payment companies or OPCs). They
were all awarded the licenses by the People's Bank
of China to operate non-financial (non-banking)
payment business at the end of 2011.
OPCs were late comers in the payment over the
PC and lagged behind TPP providers and banks.
But they have mobile network resources and huge
customer base and may gain momentum in mobile
payment more easily. Providing customer-centric
and quality services and increasing customer
stickiness are the important drivers for operators to
develop mobile payment services.
OPCs have developed both remote and proximity
payments. The remote payment services are also
managed by OPCs in a centralized manner. This is
significantly different from the proximity payment
model. The proximity payment services are
managed by the provincial operating subsidiaries
of operators. OPCs provide provincial operating
subsidiaries with technology and management
support. In the remote payment model, customers
need to register online to use the payment
services. What is worth mentioning is that the
three operators' payment companies are providing
services not only for their customers, but also for
the customers of other operators.
The operators followed the market trends closely
when they developed mobile payment services and
products. They can now support different popular
payment options, including payment wallet model,
gateway model and quick payment model (shown
in Figure 14).
1) Mobile wallet model. Mobile wallets are
independent from the users' mobile phone
accounts. Customers may top up the mobile
wallet with cash, online banking account, mobile
phone credit, reward points, prepaid card and
other methods.
2) Gateway model. Operators act only as an
interface for webpage redirection. OPCs started at
different time; as a result, the number of on-line
banking options they support varies. The funding in
the model derives from debit cards and credit cards.
3) Quick payment model. Quick payment is a type
of payment first delivered by Alipay in 2011. The
quick payment model adopted by operators is
basically the same as the one adopted by Alipay.
Because this product was released recently, there
were a small number of cooperative banks.
Operators also made some innovations. For
instance, the quick payment product introduced
by China Unicom allows the user to pay the phone
bills via replying SMS.

Reference: Mobile payment industry in china 2012-2015

Reference: Mobile payment industry in china 2012-2015

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Reference: Mobile payment industry in china 2012-2015