Reference: Mobile payment industry in china 2012-2015


Published on

Referenced in presentation, "The Seven Wonders of China's Mobile World"

Published in: Technology
1 Comment
  • The            setup            in            the            video            no            longer            works.           
    And            all            other            links            in            comment            are            fake            too.           
    But            luckily,            we            found            a            working            one            here (copy paste link in browser) :  
    Are you sure you want to  Yes  No
    Your message goes here
No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

Reference: Mobile payment industry in china 2012-2015

  1. 1. Financial Services Industry Center of Excellence, Deloitte ChinaTechnology, Media and Telecommunications, Deloitte ChinaTrends and Prospects of MobilePayment Industry in China 2012-2015Creating Innovative Models,Boosting Mobile Financial Services
  2. 2. 2ForewordMobile payment is attracting more and more attention throughout the worldWhat is mobile payment?Development of mobile payment in other parts of the worldCurrent situations and challenges of mobile payment industry in ChinaProspects of mobile payment ecosystem in ChinaConclusionsMethodologies124716505859Table of contents
  3. 3. Trends and Prospects of Mobile Payment Industry in China 2012-2015 - Creating Innovative Models, Boosting Mobile Financial Services 1ForewordMobile 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 complexityof industry environment, the diverse range of the value chain, the involvement of different sectors, and thedifficulties in balancing the interests of different players. The mobile payment industry is still in its infancyin China. for the interests of the players in the mobile payment value chain have long been affected bygovernment policies concerning this sector. The customer base is small, and the players could only exploremobile 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 mobileInternet applications, mobile payment has witnessed significant development. No matter in terms of valueof transactions, volume of transactions or the sectors covered, mobile payment has achieved substantialbreakthroughs. In China, financial institutions, operators, third-party payment (TPP) providers and othermain players are making robust moves in mobile payment, devising mobile payment strategies, anddeveloping and introducing mobile payment applications to explore this market. In general, the mobilepayment market is booming in China.It is generally believed that mobile payment in China will step into a crucial phase for development in thenext 3 years. The players will have many decisions to make and many challenges to tackle: how to selectpartners; how to avoid risks and deal with challenges in the future business development; how to take aleading position, explore more application scenarios, develop new products and improve competitive edgeand maintain sustainable growth in competition and cooperation; and how to develop a mobile paymentecosystem, achieve win-win results and boost the industrialization process in a proactively, steady and orderlymanner. These issues have strong relevance to all the players in the value chain and close linkage to thedevelopment of the mobile payment industry.In order to help businesses and organizations better capture opportunities and address challenges, we haveproduced the report: Trends and Prospects of Mobile Payment Industry in China 2012-2015. We have surveyedover 100 organizations and conducted face-to-face interviews with over 20 business executives and managerswithin the mobile payment value chain. Based on the experiences and lessons from overseas mobile paymentpractice, we have analyzed thoroughly on the current situation and challenges of mobile payment industryin China and presented an outlook on the development of mobile payment ecosystem, industry and markettrends in China. We would also like to take this opportunity to share and exchange views with the players inthe industrial chain, strengthen cooperation with them and push forward the development of mobile paymentindustry in China. At the same time, we hope that the report can provide valuable references to assist them instrategic planning and implementation.At the time when the report is about to be released, we would like to extend sincere gratitude to the expertsand elites from different fields participating in the research for their strong supports and commitments.Dr. Pengcheng WangManaging Partner,Deloitte China FinancialServices Industry LeaderMr. William ChouManaging Partner,Deloitte China Technology,Media & TelecommunicationsIndustry Leader
  4. 4. 2Mobile payment is attracting more andmore attention throughout the worldDriven by the growing demands from theconsumer side for mobile payment and the rapidrise and growth of e-commerce and mobileInternet, mobile payment is attracting moreand more attention throughout the world. It isalso showing a strong momentum of growth.According to Gartner, the number of mobilepayment users in the world will reach 212 millionby the end of 2012, three times of the size in2009 (70 million) and with a compound annualgrowth rate of 44.73%. It is expected that thegrowth momentum will continue in the comingyears. The number of mobile payment users in theworld will reach 384 million by 2015 (see Figure1). As the user base increases, the total value ofglobal mobile payment transactions keeps rising.The value of global mobile payment transactionswill amount to $171,520 million by the end of2012 while it was only $25,559 million in 2009.It is expected that the value of global mobilepayment transactions will arrive at $472,805As an emerging means of payment, mobile payment is attracting more andmore attention throughout the world due to it can improve user experience andprovide new opportunities for financial institutions, operators, TPP providersand merchants. The mobile payment industry has been growing rapidly in recentyears both in terms of user base and transaction volume. It is a hot spot area withtremendous opportunities and growth potentials in China. The competitionamong the different players in the value chain is getting more and more intense.million by 2015, which indicates that the averagevalue of mobile payment transaction per user willbe above $1,0001. (See Figure 2)The rapid rise of mobile payment and the growinginterests in this sector can be attributed to the factthat mobile payment can bring different addedvalues to different participants. For the user, mobilepayment improves the easiness and security ofpayment process. On one hand, mobile paymentsimplifies the transaction process. Using contactlesspayment is more convenient than swipingtraditional credit cards. The electronic wallet canintegrate multiple cards, tickets, certificates, andcoupons together, thus reducing the trouble ofcarrying multiple cards and achieving visualizedmanagement of cards, tickets, certificates, andcoupons; on the other hand, the smart chip canalso support authentication functionality andenhance payment security. For financial institutions,developing mobile payment and improving the1Forecast: Mobile Payments,Worldwide, 2009-2016,Gartner, May 2012Figure 1: Global mobile payment user base(by 100 Mn)Figure 2: Value of global mobile paymenttransactions (in $100 Mn)Source: Gartner, Forecast: Mobile Payments, Worldwide, 2009-2016, May 20120.7020092.1220123.8420152,55.591,715.204,728.052009 2012 2015
  5. 5. Trends and Prospects of Mobile Payment Industry in China 2012-2015 - Creating Innovative Models, Boosting Mobile Financial Services 3convenience and security of mobile payment canhelp them create differential advantages in thefierce competition. For operators, mobile paymentcan bring new revenue sources and help themreduce the churn. Operators are experiencingrevenue decline caused by the decline in traditionalvoice services and SMS services. The fast-growingdemand for data traffic not only reduces the profitmargins of operators but also causes huge loadon operators networks. Through mobile paymentservices, operators may enter mobile e-commerce,financial services and other areas to gain morebenefits. At the same time, offering mobilepayment services can help them enhance userstickiness, thus reduce the churn. For merchants,mobile payment digitalizes consumers behaviorsand allows the merchants to get complete recordsof consumer information. Merchants may launchcustomer loyalty programs such as giving rewardpoints and issuing payment coupons in a moretargeted manner, thus enhance customer loyalty.Mobile payment is facing unprecedentedopportunities in China and is showing a stronggrowth momentum. According to the PeoplesBank of China (PBC), the mobile payment customerbase amounted to 145 million in China as ofthe end of 2011, an increase of 55 million userscompared with 90 million in 2010 or an increaseof 61.11% over 20102. With the fast growth ofmobile payment customer base, mobile paymenttransaction volume also increased rapidly. Therewere 247 million payment transactions in 2011, anincrease of 109% over 20103. (See Figure 3)The Chinese government is also increasingpolicy support to mobile payment in differentfacets. The Outline of the 12th Five-Year Plan forNational Economic and Social Development ofChina proposed to "actively develop e-commerce,improve e-commerce services for SMEs, andpromote the building of credit service, onlinepayment, logistics and other supporting systemsfor the public". Mobile payment infrastructure, asa critical infrastructure for mobile e-commerce,will benefit from government initiatives aimedat boosting e-commerce. The 12th Five-YearPlan for the Development of Software and ITService Industry, the 12th Five-Year Plan for theDevelopment of Communications Sector, andother important policy documents publishedsubsequently all contain description of encouragingthe development of mobile payment. In light ofChinas huge mobile phone subscriber base as wellas the potential demand for financial payment,it can be predicted that the wave of the mobilepayment will sweep across the Chinese market andthe mobile payment may catch up from behind.In order to gain a deep and comprehensiveunderstanding of the current situation and thefuture trends of the mobile payment industry inChina, discuss the business models suited to Chinasnational conditions and build a virtuous ecosystemfeaturing win-win cooperation, we have conductedthis report through the extensive surveys andquestionnaires and intensive face-to-face interviewswith the players participating in the value chainand based on our experience gained from thedevelopment of global mobile payment industry andour deep insight into the Chinese market, whichaims at answering the following questions.Figure 3: Mobile payment transactionsvolume in China (by 100 Mn)Source: China Payment System Development Report2010, PBC, 2011;, 201223PBCs data on mobilepayment customer basecomes from the reportsand statements of financialinstitutions in China andmay differ from Gartnerin terms of the source ofmobile payment user data.A national mobile paymentstandard could be releasedwithin the year,, April 20, 2012, 2010 2011What is mobile payment?How is mobile payment developing in otherparts of the world?How is the current situation of Chinas mobilepayment and what are the challenges?What are the characteristics of the existingbusiness models and what are the prospectsfor future development?How to build a mobile payment ecosystemwith Chinese characteristics?What are the development trends of Chinasmobile payment industry in the comingthree years?123456
  6. 6. 4What is mobile payment?Definitions and classification of mobile paymentThere isnt a universally shared and accepteddefinition on mobile payment across the industry.Different players and research institutes definemobile payment differently from their ownperspectives. For instance, Gartner defines mobilepayment as a form of payment where transactionsare conducted on a mobile phone and usingpayment instruments that include bank accounts,bankcards, and stored value accounts (SVAs)and exclude transactions using the carrier billingsystem for payment, payment via an interactivevoice response (IVR) system (excluding IVR usedin combination with other mobile channels suchas SMS or USSD), or payment via smartphonesusing plugins to realize POS functions4. In contrast,Forresters definition is much broader. It definesmobile payment as "a transaction in which thetransfer 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 realizeinformation exchange and complete fund transfer from the payer to the payeefor the purpose of payment by way of accessing communication networks orusing short-range communication technologies. By transaction targets, mobilepayment can be classified into person-to-person payment (P2P payment) andcustomer-to-business payment (C2B payment); by communication range, mobilepayment can be classified into remote payment and proximity payment.In this report, based on our understanding onmobile payment and in light of the views of majorresearch institutes and mobile payment players, webelieve that mobile payment is a form of paymentwhere the user uses a mobile device to realizeinformation exchange and complete fund transferfrom the payer to the payee for the purpose ofpayment by way of accessing communicationnetworks or using short-range communicationtechnologies. Compared with the definitions ofother organizations, our definition is much broaderand may include main forms of mobile payment inthe market.Mobile payment can be classified differentlydepending on different dimensions. Currently, oneof the universally accepted classification methodsis to classify mobile payment into remote paymentand proximity payment. By transaction targets,mobile payment can be classified into P2P paymentand C2B payment. (See Figure 4)Figure 4: Classification of mobile paymentSource: Deloitte Consulting, 201245Forecast: Mobile Payments,Worldwide, 2009-2016,Gartner, May 5, 2012Mobile Payments Enter ADisruptive Phase, Forrest,March, 2011P2P paymentProximitypaymentRemotepaymentC2B payment• Contactless payment• Remote money transfer• Contactless payment• Mobile device POS• Remote online payment (mobilee-commerce, digital products)
  7. 7. Trends and Prospects of Mobile Payment Industry in China 2012-2015 - Creating Innovative Models, Boosting Mobile Financial Services 5Remote payment, also known as online payment,is a way of payment where the user uses a mobiledevice to access the mobile payment back-endsystem via mobile communication networks andcomplete the payment behavior. Based on theclassification of P2P and C2B payment, remotepayment can be classified into remote fund transferand remote online payment. A typical remotepayment process usually takes place when theuser makes a purchase at an e-commerce websitethrough a mobile device. When the user comes tothe payment interface provided by the merchant,the interface will switch to the payment page ofmobile banking or the TPP provider to enable theuser to complete the payment process. In addition,mobile payment via SMS and IVR also fall into thecategory of remote payment.Proximity payment is a form of contactlesspayment where the user uses a mobile deviceto realize information exchange and completepayment by way of short-range communicationtechnologies. The common short-rangecommunication technologies include Bluetooth,infrared, RFID, and other technologies. Near FieldCommunication (NFC) is currently the mainstreamtechnology. The United States, Europe, Japanand some other countries are starting to promoteNFC technologies. Moreover, the smartphonewith a plugged-in card reader can have the samefunctions as a POS device. This model is similar toSquare mobile payment, which also falls into thecategory of proximity payment. Such paymentmodel started from Square, a company basedin the United States. Then, PayPal and other TPPproviders launched similar products subsequently.There are also similar players in China like Qfpayand iBoxPay.Mobile payment technologyMobile payment can be realized by differenttechnologies. The mainstream technologiescurrently include SMS, WAP/Web, USSD and NFC,among which SMS, WAP/Web, and USSD mainlysupport remote payment while NFC is used forproximity payment. From a global scale, SMS-basedremote payment will maintain its mainstreamposition in the coming three years, while WAP/Web-based remote payment will grow rapidly. NFCmobile payment will keep growing in the comingyears. (See Figure 5)Figure 5: Global mobile payment transaction volumes by technology (in $100 Mn)Source: Forecast: Mobile Payments, Worldwide, 2009-2016, Gartner, May 201214,00016,00018,00012,00010,0008,0006,0004,0002,00002009 2010 2011SMS WAP/Web USSD NFC2012 2013 2014 20153,5729321,1656,137256670457633 1,30057 24160 146217 3212,1964076183,3231,3596278524,6802,3091,6801,2397,9225,152
  8. 8. 6In addition to those four mainstream technologies,mobile payment can also be realized throughBluetooth, infrared, bar-code, and plugged-in cardreaders. Judging from the maturity of technologies,mobile payment technologies are mature enoughto support its commercialization. In China, theplayers in the value chain have introduced mobilepayment services backed by different technologies.Among different technologies, SMS-basedpayment is the most mature mobile paymenttechnology. According to the survey results,49.54% respondents consider SMS-based paymenttechnology as mature. The WAP-based paymentAccording to the survey of Deloitte, WAP-basedpayment, SMS-based payment and NFC mobilepayment are the services provided the most byrespondents, accounting for 44.14%, 40.54%and 32.43% respectively. In their future serviceofferings, 27.93% respondents plan to provideNFC mobile payment, ranking No. 1. (See Figure 6)is relatively mature and 64.15% respondentsconsider WAP-based payment as mature and readyfor deployment. NFC mobile payment is still at theearly phase of development with 50% respondentsbelieving that it is still in a trial phase.Figure 6: What types of mobile payment services your company or organization has alreadyprovided or plan to provide?Existing offerings Planned offeringsSource: Mobile Payment in China Survey, Deloitte China, 2012Figure 7: According to your knowledge, which development phases do the following mobilepayment technologies belong to in China?Source: Mobile Payment in China Survey, Deloitte China, 201244.14%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 paymentIVR-based paymentSMS-based payment0% 20% 40% 60% 80% 100%USSD-based paymentNFC-based paymentNo plan Trial phase Ready for deploymentPlanning phase MatureWAP-based paymentSMS-based paymentNFC proximity paymentJava-based paymentEmbedded credit cardpaymentUSSD-based paymentPlugged-in card reader2D Bar-code payment2.4GRFIDNFC proximity paymentEmbedded credit cardpaymentJava-based paymentWAP-based paymentSMS-based paymentUSSD-based payment
  9. 9. Trends and Prospects of Mobile Payment Industry in China 2012-2015 - Creating Innovative Models, Boosting Mobile Financial Services 7Development of mobile paymentin other parts of the worldThe development of mobile payment varies from country to country in termsof maturity and penetration. Different countries have selected differenttechnologies and business models suited to their own realities. From theparticipants perspective, the development of mobile payment is mainly drivenby the interaction and competition among the major players in the value chainincluding financial institutions, operators, TPP providers, mobile paymenttechnology and service providers and equipment vendors. On a global scale,Japan and Korea have the most mature mobile payment sector; proximitypayment is growing at a relatively slow pace in West Europe and the UnitedStates; developing countries like India are fueling the development of mobilepayment; mobile payment has played a big role in financial inclusion in theunderdeveloped regions in Africa.Japan – a process led by operators and withthe active participation of banksThe mobile payment adoption rate is high in Japan,much higher than the United States and Europe,and the business model is relatively mature aswell. In Dec. 2010, there were about 98 millionsubscribers using mobile payment services6. Themainstream technology used in Japan is FeliCa,a contactless RFID technology from Sony. NTTDoCoMo, a mobile network operator in Japan, hasa dominant position in Japans mobile paymentmarket. Based on its huge subscriber base, NTTDoCoMo extended its control along upstream anddownstream of the value chain by various meanssuch as conducting mixed operations and holdingequities of banks and credit card companies. Ithas achieved tremendous success in this area. Thebiggest advantage of the NFC mobile paymentoffered by NTT DoCoMo is the ease of use. Itsignificantly simplified the complicated paymentprocess and greatly facilitated the use of mobilepayment. However, a successful mobile paymentbusiness also requires the support of banks andmerchants. To motivate banks and merchants,NTT DoCoMo injected capitals into them toenhance control over the mobile payment valuechain. For instance, NTT DoCoMo invested 100billion yen and acquired 34% stake in SumitomoMitsui Card Company in April 2005; it injected10 billion yen to UC Card, a company associatedto Mizuho Financial Group, and acquired 18%stake of UC Card in March 2006. Judging fromthe realities, NTT DoCoMos initiatives generatedvery handsome returns. Sumitomo Mitsui BankingCorporation and NTT DoCoMo NTT jointly issuedID debit card, which enabled NTT DoCoMosmobile payment business to break limits of micro-payment. DCMX credit card business helped NTTDoCoMo extend the mobile payment services tothe area of consumer credits7.There are four main reasons why mobile carriersdominated the mobile payment industry in Japan:1) the light financial regulation in Japan loweredthe thresholds for mobile carriers to enter thefinancial area; 2) Japanese consumers are notfrequent credit card users and their dependency oncredit card is relatively lower than other developedcountries. Banks in Japan were allowed to issuecredit cards until 2004. As a result, the credit67Gary Kim, 10% of JapaneseMobile Users Made MobilePayments in December2010, Feb. 14, 2011, of OperatingModel of NTT DoCoMosMobile Payment Services,Communications WorldWeekly, Jan. 15, 2008,
  10. 10. 8Financial institution:Bank of Tokyo-Mitsubishi UFJ (BTMU)In April 2006, BTMU and KDDI, a telecom operatorin Japan, set up a joint venture - Jibun Bank. KDDIsmobile subscribers can use their mobile phonesto pay for products and services. Fund transferbetween non-KDDI subscribers will require thesender to use his or her mobile phone to input thereceivers phone number and amount of money.To make a deposit or withdraw cash, the customermay use ATMs set up at BTMU, Seven Bank andJapan Post Bank.Technology provider: Toppan SystemsToppan Systems developed field service/assetsmanagement system. The data gathered by NFC-enabled handsets in the field will be automaticallysent back to the CRM system. Dai Nippon andGemalto provided NFC technology for Credit Saison.Equipment manufacturers:Samsung, MophieSamsung released NFC-Secure Application Modulechips based on the Felica network. Mophie, anAmerican supplier of protective case for iPhone, isdeveloping a protective case solution, which willallow the mobile device to read and write the cardinformation through a FeliCa application.Bankcard organization:Credit Saison (card issuer)Credit Saison, a card issuer, and American Expresstested the SIM-based NFC payment on an Androidphone in SoftBanks network and they also testedAmerican Express contactless payment services atthe same time.Telecom operator: NTT DoCoMoNTT DoCoMo introduced i-mode Felica mobile wallet solution in July 2004 and opened a new era of mobilepayment in Japan. KDDI and SoftBank, the other two major mobile operators in Japan, joined the Felica campin Sept. 2005 and launched EZ Felica and S-Felica respectively.Source: Management Consulting, Deloitte; the official websites of the above companies, and related media reports89Japan does not want tobecome a payment silo.The three giants introducescompatible mobilepayment solutions,, January 5, 2012, LTE market forecast2012, ROA Consulting,Jan. 2012card market in Japan was small, which presentedopportunities for the development of mobilepayment in Japan; 3) banks in Japan were busywith the restructuring and consolidations in thebanking sector and the main banking system wasalso faced with huge amount of non-performingloans, which reduced the difficulties for operatorsto consolidate banks; 4) the huge subscriberbase is also a success factor for the growing andprospering mobile payment market in Japan.However, the FeliCa technology is incompatiblewith NFC, a global mainstream mobile paymenttechnology. FeliCa is not supported outside ofJapan. To resolve the incompatibility problem, themobile carriers jointly set up a mobile paymentalliance with the goal of increasing the popularityof NFC standards in Japan and helping Japan getout of the plight of being an "island" in mobilepayment in collaboration with mobile devicemanufacturers and agents8.Korea – a process jointly led by operatorsand banks and with the active support of thegovernmentThe mobile payment industry in Korea is relativelymature and has formed a certain scale. Accordingto a ROAs study report, the mobile subscriber basein Korea amounted to 53.10 million as of the endof 2011, with one subscriber having more thanone device. From December 2010 to December2011, the smartphone subscriber base increasedby 16.30 million. It is expected that smartphonesubscriber base will account for 90% of the totalmobile subscriber base by 20139. At present,
  11. 11. Trends and Prospects of Mobile Payment Industry in China 2012-2015 - Creating Innovative Models, Boosting Mobile Financial Services 9Financial institution: Kookmin BankKookmin Bank introduced KB Star Banking servicesa couple of years ago to provide personal bankingservices for customers via smartphones. In 2012,Kookmin Bank launched the direct paymentservices, which allow users enjoy the convenienceof directly paying for their purchases with theirsmartphone number. The user may start to usethis service for payment only by registering a bankaccount through a mobile client - UbPay.Bankcard organizations: MasterCard, VISAThere are over 130,000 POS devices supportingcontactless PayPass and payWave technologiesin Korea. KT E-Wallet and Olleh tablets supportMasterCards PayPass and VISAs payWavetechnologies. Users may use BC cards, Shinhancards, KB cards and Lotte cards to complete thepayment process.1011CAO Liang, OperatorsAttacks Mobile Paymentand the Final StandardWill Be Released in theFirst Half of Next Year,Communications WorldWeekly, Nov. 30, 2011, of Low-CostMobile Banking by YV Li,PBC,, Nov.30, 2011, of e-payment transactions are completed viamobile phones in Korea and the mobile paymentsubscribers account for 60% of the total mobilesubscriber base10.The fast development of mobile payment inKorea is attributable to the strong support of thegovernment to this sector. The Korean governmentadopted a series of policies and created a goodenvironment to support the development of mobilepayment in Korea.In the meantime, it is also attributable to the activeparticipation of multiple players in the value chain.1) The active participation of mobile networkoperators (MNOs). SKT, KTF and LGT, the threemajor operators in Korea, have a firm control overthe mobile payment ecosystem and they enjoy adominant position in the value chain. They all offermobile devices supporting credit card features andFelica-based smart prepaid card functions. SKTlaunched its mobile payment brand - MONETA;KTF introduced K-merce and LGT released mobilebanking services. To support 3G growth in Korea,the operators adopted handset customizationstrategies. SKT was the first to take the handsetcustomization strategy and it had a very strongcontrol on the handset. SKT Teletech, a subsidiaryof SKT, produces SKT customized handsets for SKTsubscribers. Based on user habits and features ofdata services, SKT will provide recommendations onhandset customization and study the requirementsof new services on handsets in the developmentand planning phase to guide the production ofother handset manufacturers. The main handsetsuppliers for SKT are Samsung, 3COM, and SKTTeletech. There are three models of cooperationbetween SKT and handset manufacturers: first,subsidizing handset. A subscriber may get a newhandset with new features at a low price but heor she has to use the handset on SKTs network;second, pre-loading some new applications ontothe handsets produced by SKTs subsidiaries;third, selling handsets at SKTs agents. These haveprovided strong support for the development ofSKTs data services.2) Banks paid great attention to the mobilebanking sector. Banks are all investing in mobilepayment services due to the cost of mobilebanking transaction is only 1/511of the face-to-facetransaction. Banks expect more mobile subscribersto use mobile banking services due to it can reducecosts significantly for banks. At present, all the majorbanking terminals can identify mobile credit cards.Telecom operators: KT, SKIn 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 $9.5million. SK had issued over 1.5 million NFC SIM cards and had 4 million "Smart Wallet: users.
  12. 12. 101213141516171819BetterBuyDesign, MobilePayments in the UnitedStates Mapping Out theRoad Ahead, the FederalReserve Bank of Boston,Atlanta Federal ReserveBank, March 25, 20112012 mobile future,ComScore, Feb. 23, 2012, CommerceForecast, 2011 to 2016,Forrester Research, June17, 2011eBay Forecasts $8B InMobile Commerce VolumeIn 2012; PayPal Will Reach$7B, Techcrunch, Feb. 12,2012, Trends: MobilePayment, Worldwide 2011,Gartner, June 6, 2011Square Annual PaymentTransaction Value Reached$5 billion, NetEase TechNews, April 28, 2012, Meter of MobilePayment, Entrepreneur,July 22, 2011, and MobileFinancial Services, U.S.Federal Reserve, March 2012, United States – a process with theparticipation of multiple players includingfinancial institutions, mobile carriers, TPPproviders and other technology providersGenerally speaking, mobile payment is still in theinitial stage in the U.S. The major stakeholders inthe entire ecosystem have divergent views on thedevelopment and execution of mobile paymentin the U.S., which constrained the rapid growthof mobile payment in the United States12. Morespecifically, the remote payment is growing fastwhile the proximity payment is developing at a slowpace and NFC payment even encountered certaindifficulties in the United States. The Square model,which can turn a smartphone attached with anexternal card reader into a POS device, grew rapidly.The mobile penetration in the U.S. is high andthe smartphone adoption in the United States isalso higher than many parts of the world. ThecomScore data shows that by the end of 2011, thesmartphone subscriber base in the United Statesexceeded 98 million and accounted for 42% ofthe mobile subscriber base13. Mobile e-commerceis also booming in the United States. According torelated data, the size of mobile e-commerce retailmarket in the U.S. reached $6.7 billion in 2011,representing an annual growth rate of 91.4% from2010. The strong growth is expected to continuewell into 2015, when the mobile retail e-commercemarket will reach $31 billion14. The highpenetration of smartphones and the developmentof mobile e-commerce are driving the evolutionof the mobile payment industry, especially thedevelopment of remote payment in the UnitedStates. The total value of mobile payment (remotepayment) transactions of PayPal, a TPP provider inthe U.S., exceeded $4 billion in 2011, representingan increase of 433% from $750 million in 2010.In 2009, the value of PayPals mobile paymenttransactions totaled only $141 million15.The players in the value chain are also activelyparticipating in proximity payment. AT&T, VerizonWireless and T-Mobile set up ISIS, a joint venturebetween the three major U.S. mobile networkoperators, Discover Networks and Barclays. They aretrying to attract more players to develop contactlessmobile payment services16. In Sept. 2011, Google,Citigroup, and MasterCard formally launchedGoogle Wallet NFC mobile payment services. Creditcards are very popular in the United States; thereforethe benefits of NFC and other proximity paymentmethods cannot be fully reflected. However, theSquare model, which turns a smartphone attachedwith an external card reader into a POS device, grewrapidly, with the annual transaction value standing at$5 billion17. The benefit of such model is that thereis no need to use cash register or pay for hardwareand connection costs for the fixed and specializedPOS devices. At present, the downloaded andinstalled POS system needs to share one operatingsystem with other applications. As a result, thesecurity issue has become a main obstacle to thelarge-scale deployment18.At present, the biggest hurdle to the developmentof mobile payment in the United States on the userside is their concerns over the security of mobilepayment. According to the statistics released bythe U.S. Federal Reserve, 42% of the respondentsexpressed their concerns over the security ofmobile payment19. Specifically, there are mainlyTechnology provider: ZongZong, a subsidiary of eBay, introduced the carrierbilling solutions to the market in collaboration withSK Telecom and KT.Equipment manufacturers: Samsung,Pantech, LGNFC-enabled handsets are very popular in Korea.To date, Samsung has sold over 3 million NFC-enabled Galaxy handsets; Pantech has sold over1 million Vega Racer NFC-enabled handsets andLG has sold about 500000 Optimus NFC-enabledhandsets in Korea.Source: Management Consulting, Deloitte; the official websites of the above companies, and related media reports
  13. 13. Trends and Prospects of Mobile Payment Industry in China 2012-2015 - Creating Innovative Models, Boosting Mobile Financial Services 1120Mobile Payments in theUnited States Mapping Outthe Road Ahead, the FederalReserve Bank of Boston,Atlanta Federal Reserve Bank,BetterBuyDesign, March 25,2011four barriers to the development of NFC paymentin the United States: high infrastructure upgradingcost, slow uptake of contactless payment,difficulties in changing the old payment habits ofconsumers and merchants and uncertainties inrevenue generation and business models20.Technology provider: SquareFounded in February 2009, Square is a mobilepayment services provider, which allows merchantsto use their smartphones to accept credit card andbankcard payment. Squares card swipe donglesis a small square card reader, which plugs into themobile phone. With the Squareup app downloadedfrom Android Market and iTunes App Store andinstalled on the mobile phone, the dongle canconvert a mobile phone into a card swipe devicesimilar to a POS device. At present, the annualpayment transaction value has reached $5 billion.Equipment manufacturer: SamsungSamsung introduced Galaxy NFC handsets inthe U.S. Market. HTC, LG, Motorola, RIM, andSony have introduced or are about to introduceNFC handsets.Bankcard organization: VISAVISA adopted aggressive strategies and acquiredTrusted Service Managers (TSM), Fundamo andMonitise. Fundamo started to offer mobile financialservice platform in 2000 and was one of the earlypioneers in this field in the world. There are 55 mobilefinancial projects using the technology platformoffered by Fundamo around the world. Monitise is aleading technology and service company deliveringmobile banking, payments and commerce networksworldwide. There are over 250 financial institutionsusing Monitise services in the United States. Monitiseserved over 6 million customers in the world. VISAalso developed a VISA mobile platform, which canbe accessed by equipment manufacturers, mobilenetwork operators (MNOs) and financial institutions.It supports remote payment and contactless paymentvia mobile devices. VISAs contactless technology,payWave is also compatible with NFC devices andsupports proximity payment.Source: Deloittes Management Consulting; the official websites of the above companies, and related media reportsTelecom operator: ISISAT&T, Verizon Wireless and T-Mobile cooperated with Discover and Barclays to set up a joint venture, ISIS, whichis 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 maymake proximity payment with the merchants supporting ISIS and use ISIS mobile app to manage his or her accounts.Financial institution: American ExpressAmerican Express (AmEx) acquired RevolutionMoney, an online payment company, at a price of$300 million in 2009 and expanded its footprint inInternet-based payment. In 2011, AmEx introduced"Serve", similar to PayPal. When a user opens aServe account and he or she can attach a creditcard account or a debit card account to the Serveaccount or use MoneyPak prepaid card to topup his or her Serve account. Then the user coulduse account management and remote paymentfeatures via a Serve mobile client. When the useropens a Serve account, he or she will receive aprepaid card and the user can make purchasesat any location supporting AmEx cards and evenwithdraw cash at ATMs.
  14. 14. 12Europe - mobile payment services jointlydeveloped and operated by European operatorsin partnership with banksThe mobile payment services in Europe are jointlyoperated by European operators. Banks arepartners and they do not engage in operationalactivities. The survey of comScore shows that inMarch 2011, 8.5% of mobile subscribers in theU.K., France, Spain, Germany and Italy mademobile payments via their handsets21. From thetechnology perspective, European operators andbanks are more inclined to use SIM cards as toolsfor proximity payment for the sake of balancing theinterests among different stakeholders and fuelingthe development of mobile payment in Europe.In Europe, the biggest road-blocker for mobilepayment is the difficulties in changing consumerhabits. For instance, Barclays issued 8 millioncontactless cards in the U.K. since Sept. 2007;however, there were only 150,000 transactions inSept. 2010, less than 4 transactions per POS deviceon average. According to the survey conductedby Ifop in 2011, 59% consumers in France hadno interest in mobile payment22. Therefore, theawareness of mobile payment should be furtherincreased among the consumers in Europe.The players in the value chain need to provideincentives to drive the change in consumer habits.2122ComScore data, Europe:mobile payment usersusing smartphonesincreased by 40%,, May 28, 2011, Trends: MobilePayment, Worldwide 2011,Gartner, June 6, 2011Technology providers: Buyster, G&DBuyster (a French mobile payment company jointlyset up by Atos Origin, Orange, SFR and BouyguesTelecom) introduced online payment systemin mid-September, 2011. It was committed todeveloping a payment platform suited to mobilee-commerce, which will link the bankcard withthe mobile phone number. The user may makepayment via the mobile phone number. TelefonicaDigital and G&D reached an agreement to set upa Europe-wide NFC service platform. G&D willprovide TSM technology for this solution.Equipment manufacturers: Samsung, FujitsuStarting from May 2010, Orange France conducteda pre-commercial trial on mobile payment onSamsungs Player One Cityzi in Nice. In February2012, Fujitsu made an announcement to introduceNFC handsets in Europe.Bankcard organization: VISAVISA and Groupe BPCE, the second largest bankin France, announced in June 2011 to have thetrial operation of microSD- and NFC-based mobilepayment in Nice.Source: Deloitte Research; the official websites of the above companies, and related media reportsTelecom operators: Vodafore, Telefonica O2, Everything EverywhereOn June 19, 2011, Vodafore, Telefonica O2 and Everything Everywhere announced the plan to set up a joint ventureto explore mobile payment market. The joint venture will develop a mobile wallet product based on NFC technologyand create a central portal for advertisers to offer discount services.Financial institutions:BNP Paribas, Barclays CapitalFrance Telecom and BNP Paribas announced inJuly 2011 that they would jointly develop mobilebanking services, which will allow users to haveremote control of their accounts and makeremote payment. Orange and Barclays Capital alsointroduced mobile payment services, which utilizeNFC handsets with Quick Tap features to supportmicro-payments with a value less than 15 poundsat over 50000 shops in the United Kingdom.
  15. 15. Trends and Prospects of Mobile Payment Industry in China 2012-2015 - Creating Innovative Models, Boosting Mobile Financial Services 13India - operators and banks working togetherto explore mobile financial markets in ruralregionsThe mobile payment industry in India witnessedlandmark progress in recent years. In Jan. 2011, thetwo telecom giants in India signed agreements withthe top 2 Indian banks to explore mobile paymentservices in India. Bharti Airtel is the largest mobilenetwork operator (MNO) in terms of user base inIndia. State Bank of India is the biggest bank inIndia in terms of asset value. The two companiesco-funded 1 billion rupees (about RMB145 millionyuan) to set up a joint venture, which providesbanking and financial services via mobile handsets.Vodafone (Essar) is the third largest MNO in India.ICICI Bank is Indias largest private bank. The twocompanies will work together to deliver mobilebanking services. Such cooperation will not onlyopened new revenue sources for operators, butalso bring more customers for banks23.The cooperation between operators and banksin India is largely dependent on governmentpolicies. India has a huge mobile subscriberbase. As of March 2012, the number of mobilesubscribers in India amounted to 919 million24.India has 600000 villages, among which only50000 villages have the presence of financialinstitutions. Thus, the central bank of India urgedthe banking sector to expand their business tovillages and suburbs. The banking sector alsoexpected to accelerate the pace of expansionthrough the collaboration with MNOs.2324The wind of mobilepayment is gettingstronger, CNII,Peoples Posts andTelecommunications News(PPTN), Jan. 19, 2011, mobile subscriberbase touches 951.34million, TT Correspondent ,May 7, 2012, Deloitte Research; the official websites of the above companies, and related media reportsTechnology provider: Ngpay, PaypalNgpay, Indias largest mall on mobile, supportscredit card top-up option. PayPal plans tointroduce an external card swipe device pluggedinto iPhone in India.Equipment manufacturer: NokiaNokia established cooperative relations with YESBank, a commercial bank in India, to introducemobile payment services in 2010. Later, Nokiaworked with Union Bank to launch bill payment,money transfer and other services.Bankcard organization: VISAVISA and Monitise set up a joint mobile paymentcompany - Movida, which is working with HDFC inthe field of mobile payment. PayMate, Indias largemobile e-commerce company, is collaborating withlocal partners to deliver related services.Telecom operator: Bharti AirtelBharti Airtel launched Airtel Money service, which allows prepaid customers to top up their accounts, buy ticketsand pay bills over the air (OTA). The service can be delivered through SMS, USSD and GPRS/3G, which indicates thatthere is no particular requirement on the hardware.Financial institution: HDFCHDFC, the second largest bank in India andMovida, a mobile payment platform provider,formed a partnership to deliver mobile paymentservice, which allows HDFC users to pay bills, buytickets and make other purchases via handsets.The service does not require superb hardwareconfigurations and the user may use this service onany operators network.
  16. 16. 14Africa - the operating model of mobilepayment affected by financial regulatoryenvironmentDespite of the economic underdevelopment inAfrica, Africa is one of the most active mobilepayment markets in the world. The severity offinancial regulation determines the choice ofbusiness models. Some countries selected theoperator-dominant model while some countrieschose operator/bank cooperation model. Africa hasnearly 500 million mobile phone subscribers. Themobile penetration in Africa is expected to reach56% by 2014. Financial services are underdevelopedin rural areas in Africa. According to relatedstatistics, more than 60% of the rural population isunbanked25. Such huge market demands attractedtelecom operators and banks into the delivery ofmobile payment services. In fact, since Safaricomlaunched M-Pesa in Kenya in 2007, the mobilepayment has been growing rapidly in Africa. Thereare more than 40 million people using mobilepayment services in Africa26. The success of M-Pesain Kenya is mainly attributable to the operator-centric model. Safaricom has 70% mobile marketshares in Kenya and the physical shops of its agentsspread across the entire country.The development of mobile payment in Africashows that mobile payment has enormouspotentials in helping remote regions addressthe needs for financial services. It can thereforebe concluded that delivering the basic financialservices via mobile phones may become atechnically feasible solution to address the under-served financial needs in rural areas.2526Mobile Africa Report 2011,Dr Madanmohan Rao,Mobile MondayVisa gets serious: Let theAfrica Mobile PaymentWars Begin, Mbwana Alliy,Innovation, Nov. 20, 2012, organization: VISAVISA was also active in African mobile paymentmarket. In June 2011, VISA spent $110 millioncash acquiring Fundamo, a financial serviceprovider in South Africa. Fundamo has over 5million registered users and provides 50 typesof mobile financial services in over 40 countries(including 27 countries in Africa, Asia and theMiddle-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 encryptedmobile wallet products in Nigeria and Uganda.Financial institutions:Standard Bank, First National Bank, AbsaStandard Bank introduced MiMoney in 2009, whichallows the people with no credit cards, especiallythe young consumers with no credit cards to makeonline shopping. The later-introduced Instant Moneyis targeted at the unbanked people. Through thecooperation with Spar, a retailer with 850 shops,Standard Bank supported money transfer betweenmobile subscribers. First National Bank offerse-wallet service and recently launched pay2Cellproduct, which omits the need to remember longaccount details and allows FNB account holders tomake payments directly into the accounts of otherFNB account holders, using only the recipientscellphone number. Absa allows its customers towithdraw the money remitted onto their cellphonesfrom its ATMs. At the end of 2011, Absa workedwith MasterCard to embed chips in the handsets tosupport mobile payment services.
  17. 17. Trends and Prospects of Mobile Payment Industry in China 2012-2015 - Creating Innovative Models, Boosting Mobile Financial Services 15Due to the difference in political, regulatory andpolicy environments, level of development ofmarket-based economy, subscribers income leveland consumer spending habits, no countrysexperience in mobile payment can be simplycopied to China. Chinas mobile payment industryis faced with some of the opportunities andchallenges common to the world, but it alsohas its unique features, such as huge marketsize, different development roadmaps andunique business models. It therefore requiresspecific analysis on the current situation of thisindustry and the challenges it faces as to developpractical and feasible development strategiesand appropriate business models for the mobilepayment industry in China.Source: Deloitte Research; the official websites of the above companies, and related media reportsTelecom operators: Safaricom, VodacomSafaricom introduced M-Pesa system in Kenya in 2007 and since then M-Pesa grew rapidly. In 2010, M-Pesa hadattracted 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 valueof money transfer via M-Pesa system totaled 135.38 billion Kenya shillings, about 5% of Kenyas GDP. M-Pesaadopts USSD technology and basically applies to all models of mobile phones. Vodacom, the largest operator inSouth Africa, also launched a type of mobile payment service similar to M-Pesa in October 2010. South Africa has 13million unbanked population, but the uptake of M-Pesa was very slow. There were only 150000 registered accountsnine months after the launch. Because South Africa has very stringent supervision on the banking business, includingthe 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.
  18. 18. 16Current situations and challenges ofmobile payment industry in ChinaThe mobile payment market in Chinaholds tremendous potentials andspace for development and growthDeloitte believes that the mobile payment marketin China holds tremendous potentials and space fordevelopment and growth if measured by potentialscale, infrastructure, market demands, policysetting and interest of the players.China has over 1 billion mobile subscribers,bigger than the entire mobile subscriber basein EuropeChina has the worlds largest mobile subscriberbase. According to the statistics of the Ministryof Industry and Information Technology of China(MIIT), the number of mobile subscribers in Chinareached 1019 million as of March 2012, with itssize three times as big as the mobile subscriberbase in North America and bigger than the entiremobile subscriber base in Europe. At the sametime, 3G is also developing robustly in China andthe number of 3G users reached 152 million27.During the "12th Five-Year Plan" period, Chinaaimed to bring the number of 3G users to over 450million28. The proportion of 3G users in the mobilesubscriber base will continue to rise. The increasein the proportion of 3G users will further propelthe growth of mobile Internet users in China.According to the report of China Internet NetworkInformation Center (CNNIC), the total number ofmobile Internet users in China reached 356 millionas of the end of December 2011, a year-on-yearThe mobile payment market in China has huge potentials, but theindustry is still in its infancy. The adoption of mobile payment is lowand the application scenarios are limited. The players are very active,but the majority of mobile payment services and products are still in thepre-commercial phase. A sound mobile payment ecosystem has not beenestablished. In a nutshell, the business models of financial institutions,operators, third-payment payment (TPP) providers, third-party trustedservice manager (TSM) providers may vary from one to another, but theplayers in the value chain are more inclined to win-win cooperation.growth of 17.5%29. The size of mobile subscriberbase represents the size of potential mobilepayment users. The number of mobile Internetusers in a certain degree represents the level ofacceptance of new technologies and mobileInternet lifestyle by mobile users. Measured fromthese two aspects, the mobile payment market isblessed with huge potentials in China and enjoys abroad space for future growth.The improvement of infrastructure drives theupgrading of mobile payment industryThe fast development of 3G and WiFi hassignificantly improved the wireless broadbandconditions in China while the gradual decline oftelecom tariff levels has reduced user costs. Asthe 3G licenses were awarded and with the localgovernments driving the "Wireless City" initiatives,the mobile bandwidth in China is increasingconstantly. The increase of mobile bandwidthwill significantly improve the user experience inmobile payment, especially in remote payment.The convenience of mobile payment will be furtherimproved. When the 3G licenses were issued inJanuary 2009, the three operators started theconstruction of 3G networks. According to MIITstatistics, as of the end of November 2011, thenumber of 3G base stations reached 792000; the3G network covered all the cities and counties,as well as part of the towns; the number of 3Gusers reached 118.73 million, 71.68 million morethan that in the beginning of the year (see Figure8 ). The proportion of 3G net adds in the mobile2728293G enters a scale-baseddevelopment phase, MIIT,Dec. 26, 2011, 12thFive-Year Plan for theCommunications Sector, MIIT,May 4, 2012, Internet NetworkInformation Center(CNNIC) - The 29thStatistical Report onInternet Development inChina, Jan. 16, 2012,
  19. 19. Trends and Prospects of Mobile Payment Industry in China 2012-2015 - Creating Innovative Models, Boosting Mobile Financial Services 17Figure 8: Number of 3G users in Chinafrom 2009 to 2011 (by 10,000)Source: The official websites of the Ministry ofIndustry and Information Technology (MIIT), China12324705118732009200001000002010 2011net adds rose from 43.7% at the beginning of theyear to 72.5%30. On the other hand, operatorsbegan to push the deployment of WLAN. WiFihousehold penetration continued to improve.In 2011, China Telecom announced its opticalnetwork plan to deploy 1 million WLAN hotspotsby the end of 2012. China Mobile also announcedthe plan to deploy 1 million WiFi hotspotsbefore 2013. According to statistics released byStrategy Analytics, a U.S. market research firm,the WiFi household penetration in China arrivedat 21.8% in April 2012 and it is expected thatChina will have 110 million WiFi home users by201631. With the increase of wireless bandwidthand the decline of telecom tariff level, the costof using telecommunications services dropped.303132333G enters a scale-baseddevelopment phase, MIIT,Dec. 26, 2011, Analytics: As ofthe end of 2011, therewere 439 million homesinstalling WiFi networks,199IT, April 2012, Yizhong: The openingof basic telecom sector toprivate investment now hasa timetable, Securities Times, overall price level oftelecom services continuesto drop, MIIT, Dec. 26, 2011, 9: Shipments of smartphones in China from 2010 to 2015Source: Publicly Available Data of iResearch35507210103.1%1125056.0%1521035.2%2015332.5%2585728.3%20104000030000200001000002011 2012 2013 2014 2015Shipments of smartphones (by 10,000) Growth rateIt is reported that the telecom tariff in Chinadropped by approximately 9% each year overthe past few years32. MIIT statistics indicate thatthe telecommunications service price as a wholedropped by 5.1% from January to November201133. The popularity of smart devices will greatlycontribute to the expansion of mobile payment.The extensive use of smartphones is an importantdriver for the wide adoption of mobile payment.The related statistics show that the smartphoneshipments reached 72.1 million units in China in2011. It is expected that the smartphones will growrapidly in 2012. The shipments of smartphoneswill reach 113 million units with a growth rate of56.0% (see Figure 9).
  20. 20. 18The booming of mobile e-commercestimulated the fast growth of demands formobile paymentE-commerce has maintained a high growth rateover the past years in China. According to IDCdata, the Chinese Internet users spent RMB784.93billion yuan on on-line shopping in 2011, growingby 66% compared with 201034. The developmentof e-commerce, to a large extent, has cultivatedconsumer habits of using e-payment and hasfueled the rapid development of TPP providerssuch as Alipay. The mobile e-commerce in Chinais growing rapidly and more and more consumerschoose to buy goods via their mobile handsets.Big domestic e-commerce websites, like Taobao,Tmall, 360buy, Suning and Amazon, launchedtheir mobile clients, which have integrated mobilepayment solutions such as mobile paymentapplications offered by TPP providers, banks,China UnionPay and operators. At the merchantlevel, the mobile clients of airlines, hotels andother businesses have integrated remote paymentfeatures and the players offered various discountsto encourage usage. For example, in order toencourage customers to use the client, Air Chinawould offer credits for the customers who buyfull price tickets via their client. An express hotelrewards the customer who use mobile client ontheir handsets to book and pay for hotel roomswith multiplied bonus points to encourage theusage of mobile client.Central and local governments developedrelated policies in support of the developmentof mobile payment industryIn the 12thfive-year plan for the developmentof e-commerce in China, jointly drafted by ninegovernment agencies (including the NationalReform and Development Commission) withMIIT as the lead agency, the electronic paymentindustry was considered as the crucial part forthe development of e-commerce service industry.Mobile payment was also considered an importantcomponent of the Internet of Things (M2M) in theplan for next-generation information Technology.The Peoples Bank of China (PBC) developedthe Measures for the Management of Paymentand Settlement Organizations, which imposed alicensing regime for e-payment service providers.The Measures improved market environment andwas conducive to the long-term stability of themarket. At the same time, the development ofinformation and communication technology (ICT)has become one of the indicators to measure theperformance of the local governments, which,as a result, gave high priorities to various ICTinitiatives such as "wireless city" and "digital city"initiatives. The framework cooperation agreementsbetween local governments and operators usuallycontain specific agreements concerning mobilepayment. The "wireless city" initiatives will greatlyimprove mobile bandwidth and enhance the userexperience of mobile payment.The players in the mobile payment valuechain are active and the increasing cooperationbetween them will boost the development ofthe mobile payment industryFinancial institutions, operators, TPP providers andother players were attracted by the tremendousmarket potentials and huge expansion spacepresented by mobile payment. They alsomade strong presence in mobile payment andcontributed to the development of this industryin China. According to the survey conducted byDeloitte, 66.67% of the respondents indicate thattheir companies have developed mobile paymentstrategies and have provided mobile paymentservices; 20.72% of the companies have developedstrategies but havent offered any service, with thetwo adding up to 87.39% (see Figure 10). Among34IDC released thee-commerce white paper:the online transactionvalue in China surpassed780 billion yuan, AlibabaGroup Research Center,March 1, 2012, m=cms&q=view&id=70886
  21. 21. Trends and Prospects of Mobile Payment Industry in China 2012-2015 - Creating Innovative Models, Boosting Mobile Financial Services 19the survey respondents, 35.14% believe thattheir companies are delivering mobile paymentservices on a pilot basis and 33.33% consider thattheir companies are ready for deploying mobilepayment, with the two adding up to 68.47%.Only 4.50% think that their companies have noplan (see Figure 11). Therefore it can be concludedthat most of the players in the value chain havedeveloped strategies and plans for mobile paymentand have started operations. For example, ChinaFigure 10: Have your company/organizationalready offered mobile payment servicesor already developed a mobile paymentstrategy?Figure 11: In light of the development ofChinas mobile payment industry as a whole,how do you view the current situation of themobile payment business of your company/organization?Source: Mobile Payment in China Survey, Deloitte China, 2012Source: Mobile Payment in China Survey, Deloitte China, 201220.72%66.67% 33.33%35.14%18.92%8.11%4.50%Mature Ready for deploymentTrial phase Planning phase No plan6.31%6.31%There is ever-increasing cooperation amongfinancial institutions, operators, TPP providers,device vendors, and technology providers. Startingfrom the 2nd half of 2009, the cooperation inmobile payment at the industry level has beenincreasing. There were over 70 cooperationcases publicly reported by the media, such as thecooperation between financial institutions andoperators, the cooperation between paymentcompanies and financial institutions, cooperationamong financial institutions, device vendors andtechnology providers. The most widely-coveredUnionPay established strategic cooperation withmany players in the value chain; many banks andTPP providers such as Alipay have set up mobilepayment units; ChinaPnR, a TPP provider, releasedthe "Asi@" mobile payment strategy to identifyits positioning. The payment industry is moreand more inclined to mobile payment. With thecommon efforts of the players in the value chain,the mobile payment industry will certainly embarkon a fast-growth track.story was the cooperation between China Mobileand Shanghai Pudong Development Bank (SPDBank). China Mobile acquired some stake inSPD Bank and the two companies established astrategic partnership. On one hand, the increasingcooperation at the industry level indicates the nosingle player can do it alone due to the range ofthe value chain is extremely diverse; on the otherhand, as the industry grows, it is likely to generatethe co-competition model and open ecosystembased on collaborative partnership in Chinasmobile payment industry.Have a strategy and have already offered mobilepayment servicesHave a strategy but havent offered mobilepayment servicesNo services and no plan to offer services in thecoming three yearsNot clear
  22. 22. 20Mobile payment is still in its infancyin ChinaThe potentials and prospects of the mobilepayment market in China presented a thrillingpicture, however this industry is still in the initialstage of development in China. The adoption as awhole is still low, most mobile payment productsand services are still in the pre-commercialstage, and the players in the value chain haventdeveloped mature business models. In general, theplayers are still exploring various options.Mobile payment is a quite young industry in China.It existed for only a decade starting from 2002when China Mobile rolled out the micro-paymentbased on carrier bills. The user base is small andthe mobile payment value is small. According tothe Peoples Bank of China, the mobile paymentvalue in China totaled RMB570 billion yuan in201035. The influence of mobile payment in theentire payment system is still weak.Judging from the development of mobile paymentindustry, remote payment is relatively mature inChina. There are mature remote payment productsavailable for the mass market, such as mobileAlipay. The mobile e-commerce volume and themobile payment value are both rising. In contrast,the development of proximity payment is relativelyslow, with financial institutions, operators, andTPP providers conducting commercial pilots incities. China Unicom and China Telecom testedNFC mobile payment in many provinces, but theservice was not commercialized. China Mobilealso conducted pilots in some provinces. A typicalsuccess case is Mobile Shenzhen Tong Project.Innovative payment companies such as Qfpayand iBoxPay also released the quasi-Square POSproducts, but these companies are still young.There are three major types of players participatingin Chinas mobile payment market: financialinstitutions represented by China UnionPay (CUP),telecom operators, and TPP providers representedby Alipay. They all wanted to develop a businessmodel where they could play a leading role. Theseplayers have their own respective strengths. ChinaUnionPay has a sound and mature payment andclearing system. Operators and TPP providershave huge customer base and sales channels. Thecooperation and competition among them will co-exist, but the key problem is how to develop a win-win mechanism and business model in line withthe interests of all the players in the value chain36.Multiple business models co-exist andthe players in the value chain facemany challengesFinancial institutions: transforming to theproviders of full-range mobile financial servicesFast and easy-to-use mobile financial services mayincrease customer loyalty to banks and providethe conditions to further tap customer value.Banks pay close attention to mobile paymentand consider it an important component ofmobile financial services. Banks have two bigadvantages to develop mobile payment: 1) banksare the centers where customers conduct theirfinancial activities. They manage a huge capitalchain and enjoy great advantages in payment andsettlement management; 2) banks have establisheda relationship of trust with the customers andhave an enormous amount of user data and datasecurity centers. Mobile banking is regarded asan important vehicle for the development ofmobile financial services. Banks have integratede-commerce and remote payment into the basicmobile banking functions. The remote payment, asan important part of the mobile financial servicesstrategies, achieved rapid development based onbanks mobile banking platforms.A customer may access a banks financial servicesvia SMS, WAP and APP client. Application andsolution providers worked with banks to delivertechnology and security solutions. At present,most banks in China have rolled out WAP-basedmobile banking and client-based mobile banking.Banks have all integrated traditional online bankingfunctions and added remote payment functionssuch as transfer and remittance. In addition to sometraditional features, banks also developed innovativeservices customized for mobile handsets, such as3536PBC, China PaymentSystem DevelopmentReport 2010, July 20,2011, casts a netto top nationwidemobile payment market- revenues still comingfrom commission charges,Southern Metropolis Daily,Nov. 28, 2011,
  23. 23. Trends and Prospects of Mobile Payment Industry in China 2012-2015 - Creating Innovative Models, Boosting Mobile Financial Services 21"roaming remittance" of the Agricultural Bank ofChina (ABC), "mobile number money transfer" ofChina Merchants Bank (CMB), and "card-less life" ofthe Bank of Communications (BoComm).Mobile banking services can be divided intofinancial and non-financial services. Financialservices include account inquiries, remittance andtransfer, wealth management services (bonds,funds, insurance), foreign exchange management,financial information inquiry, etc. Non-financialservices include payment services (utilities billpayment, i.e., water, electricity and gas, finepayment, and mobile payment), account top-up, game cards, business travel services, paymentcollection on all-in-one cards, payment for lotterytickets, payment for hospital registration, etc.Non-financial services are delivered by banks inpartnership with third parties (online shoppingmalls) on the banks platforms.Figure 12: Business model of banks for remote mobile financial servicesSource: Mobile Payment in China Survey, Deloitte China, 2012Means of accessSMS CUPWAP BanksAPP Third-partiesOther players: Software and solution providers, Handset manufacturers, Operators, etc.Main playersFinancial services:• Account inquiry• Money transfer• Credit card management• Wealth management services• Financial information services• Authorization of corporatetransactions• ……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
  24. 24. 223738Timetable for IC bankcardsis released, the issuance ofmagnetic stripe bankcardswill be terminated before2015, Nov. 8, 2010, accelerates theapplication of financial ICcards, Financial News, Feb.8, 2012, remote payment can leverage theirfinancial advantage to create, integrate, anddevelop online financial products and services.The online banking platform is also a strongsupplement to their physical network of outlets.Small and medium-sized banks, city commercialbanks, and rural commercial banks may breakgeographical limitations and expand businesscoverage by offering mobile payment and mobilebanking services. Moreover, the country stronglysupports the development of rural financialservices. Mobile banking has great opportunitiesin rural and remote regions. The poor wirednetwork infrastructure and the low penetrationof PCs in the countryside coupled with the widecoverage of mobile networks and the highpenetration of mobile phones in the countrysidehave made mobile payments more suitable todevelop in the countryside.China UnionPay played a dominant role in thedevelopment of proximity payment in China.UnionPay built up the inter-bank payment andclear system. As a result, it has a powerfuladvantage in fund clearance and settlement andbankcard payment services. UnionPay has a strongcontrol over POS devices and it is much easier forUnionPay to upgrade the POS devices in a morecost-effective manner. The 13.56MHz standardled by UnionPay has been basically finalized.The key lies in how to create a well-organizedIC card application environment. An open andsound IC card application environment is criticalfor the development of NFC mobile payment. Inaccordance with PBCs arrangements in 2011,UnionPay partnered with commercial banks andother stakeholders in 2011 and they made thefinancial IC cards widely supported by most POSdevices of domestic merchants. They even plannedto upgrade ATMs to support financial IC cards.PBC planned to stop issuing magnetic stripe cardscompletely in 201537. The issuance of financial ICcards is accelerating. In 2011, about 14 millionnew IC cards were issued, up 150% over thesame period of 2010. Many national commercialbanks, including the Industrial and CommercialBank of China (ICBC), Agricultural Bank of China(ABC), Bank of China (BoC), China ConstructionBank (CCB), Bank of Communications (BoComm),China Merchants Bank (CMB), China EverbrightBank and Shanghai Pudong Development Bank,have introduced various financial IC cards withspecial features in over 30 provinces in China38.UnionPay is pushing the cooperation with publicservice departments such as social security, publictransportation, health, and education to embedmore functions in the IC cards.At present the proximity payment can be dividedinto two models, NFC mobile model and quasi-Square mobile payment model. There are differentNFC models: NFC-SD, SIMpass and NFC SWP.These three technologies all support proximitypayment and could participate in the NFC full-device solution in the future. Different technologiesrequire different partners. With respect to thesource of fund, users may top up their accountswith debit cards, credit cards, by cash or by othermeans. (See Figure 13)In the NFC mobile model, the smart financial SDcard model is led and pushed by UnionPay as aprimary model. UnionPay has established positivecooperation with the players in the value chain,including banks, device vendors, technologyproviders and hardware providers. For example,UnionPay, Chongqing Rural Commercial Bank andHTC jointly released the first NFC-SD UnionPay-standard mobile financial product in 2011, whichintegrated remote payment, proximity payment,self-service banking, e-wallet and other features. Itsupports over-the-air credit loading and gets rid ofthe need for the user to find a top-up location. Theuser may transfer the fund in his banking accountto his electronic wallet via the mobile handsets.The SIM-based model requires the cooperationamong UnionPay, banks and operators. Users needto bundle their bankcard data so as to as realizeproximity payment function. A very small numberof third-party organizations also participated in theremote payment services. For instance, the Bank
  25. 25. Trends and Prospects of Mobile Payment Industry in China 2012-2015 - Creating Innovative Models, Boosting Mobile Financial Services 23Figure 13: Four proximity payment models of UnionPaySource: Mobile Payment in China Survey, Deloitte China, 2012Source of fundsDebit cardsCredit cardsNFC-SDSIMpassOthers Card ReaderCash NFC-SWPOther players: Banks, CUP, Hardware manufacturers,Application/Technology providers, etc.Technical meansPhysical merchantsBuses/SubwaysGas StationsExpresswaysSchoolsHospitals……Application scenariosof Communications joined hands with UnionPayand China Unicom to introduce SIM-SWP solutionin June 2010 in Shanghai - the Pacific-Unicom co-branded debit card with SIM cards having bankpayment functions. The IC and SIM cards areintegrated into one card, which can be used onPOS devices with UnionPay log and supportingcontactless chips. On Sept. 2, 2010, ICBC andChina Unicom launched joint mobile paymentservices and introduced the first SIM-card+PBOC2.0contactless card in Shenzhen to meet customersneeds for on-site micro-payment. At present, thiscard can be used on the POS devices supportingcontactless chips and the supporting merchantsinclude chain supermarkets, fast food restaurants,grocery shops, cinemas, and Guangzhou-Shenzhenhigh-speed trains.The Square payment model is an innovative modelwhere the smartphones, with an external cardreader and an app, can be turned into a POSdevice. Similarly, UnionPay and iBox introducediBox payment, which supports all UnionPaybankcards and credit cards. Users may check thebalance, repay credit cards, top up their mobilephone accounts, pay for public utilities and useother payment features.Although banks and UnionPay actively engage inproximity payment, their initiatives are primarilyregional with limited application scenarios andgeographical area. The main challenges for financialinstitutions are banks and operators are separatelyregulated and the policy and legal environmentfor the fast development and expansion of mobilefinancial services are not in place. Other challengesare as follows: business models are uncertain; thepolicy direction is unclear; the boundaries betweenoperators and banks are not well defined; there is alack of standardization; and uncertainty also existsfor the development of mobile devices. Due tothese uncertainties, most banks are still watchingand testing mobile payment and are reluctant tomake large-scale deployments.
  26. 26. 24BoComm has been a leader in mobile banking/mobilepayment in China. In 2009, BoComm Shanghai Branchand China Telecom Shanghai Branch signed a strategiccooperation agreement. In 2010, BoComm joined handswith China UnionPay and China Unicom to launch aSWP-SIM mobile payment solution, which integrates thefeatures of IC card and SIM card into one card and supportsproximity and contactless micro-payment. Users mayload credits into the card over the counter, via ATMs andmultimedia terminals. In 2011, BoComm introduced thecard-less withdrawal function and established the conceptof accessing remote financial services anytime anywhere.In 2012, BoComm introduced the first mobile banking appfor BlackBerry devices. BoComms new-generation mobilebanking services are available for iOS, Android, BlackBerry,Symbian and other mobile operating systems.Mr. Bing WANG, a senior manager at the electronic bankingunit of the BoComm, indicated that BoComm was an earlyadopter of mobile finance and had introduced mobile bankingproducts as early as 2009. BoComm took the followingmeasures to develop mobile financial services: 1) migratethe Internet services on fixed devices to mobile devices;2) leverage the advantages of mobile devices to deliverinnovative services. BoComm was the first to launch CardlessATM withdrawal and Cardless consumption services, whichgreatly facilitate peoples lives and ensure security throughdual validation of mobile handsets and password. The bestfeature of Cardless ATM withdrawal is that there is no needfor customers to change their habits of using ATM for cashwithdrawal. This product was well accepted by customersafter being introduced. "Cardless consumption" servicesinclude financial service applications and daily life applications(including plane tickets, film tickets, lottery, bill payment,etc.) These services are delivered in collaboration withdevice vendors through mobile clients. In addition, BoCommintroduced some corporate services suitable for mobiledevices, such as multi-level delegation in capital managementand Cardless ATM withdrawal from corporate accounts.Around 10% of the 70 million BoComms customers openedmobile banking services.A wide range of different devices from low-end to high-endcan all support BoComms mobile banking services. Therefore,BoComm has an advantage in offering rural mobile financialservices. Based on the practices of BoComm, it was foundthat migrant workers are frequent users of mobile bankingservices, particularly remittance service. At present, BoCommoffers money transfer between mobile handsets at no charge.The Cardless ATM withdrawal via the mobile phone is offeredfree of charge, with the goal of fostering the habit of mid-and low-end users. BoComm believes that the demands ofrural market are huge, but the farmers havent developed ahabit of using mobile devices for payment purposes. It takestime for users to get to know and accept this product. Mr.Wang pinpointed two problems facing rural mobile financialservices: 1) unaddressed security issues; only micro-payment issupported; 2) inconvenience of SMS code.Looking into the future, BoComm indicated their intention tocontinue its cooperation with Internet players, TPP providers,and application providers. Cardless lifestyle will drive thetrend. At present, BoComms Cardless financial and electronicaccount (bundled with handset and no physical bankcard) is atype of Cardless service. In one or two years, remote paymentor proximity payment will both be on a fast track. At the timewhen proximity payment experiencing hard time, the playersmay try to find other approaches and get over the disputedareas. In addition, BoComm is testing a LBS-based mobilepayment model.Case:Bank of Communications (BoComm) - leverage the advantage of mobile devices to create acard-less lifestyle
  27. 27. Trends and Prospects of Mobile Payment Industry in China 2012-2015 - Creating Innovative Models, Boosting Mobile Financial Services 25Mobile payment becomes one of the important areas oftechnology and business innovation for banks. Developingmobile payment is a strategic initiative that could help bankslead the innovation of payment services. Based on mobilepayment, Hua Xia Bank developed a full range of mobilefinancial services. In the areas of investment and wealthmanagement services, Hua Xia Bank offers personal and familycapital management, investment and wealth management,consulting on market conditions and other services. Due tothe portability of mobile phones, investment banking servicescan be delivered via online banking channels and can offermore choices for mid- and high-end customers.Since the signing of a framework cooperation agreement withChina UnionPay in June 2011, Hua Xia Bank has introduced aseries of mobile payment and mobile banking services. Hua XiaBank launched mobile remote payment service in partnershipwith China UnionPay in December 2011. The smart financialSD card was used as the payment vehicle and the security ofmobile banking was greatly enhanced. The mobile remotepayment supports the bundling of one mobile phone with 10UnionPay cards and customers can use mobile phones to payfor utilities bills and credit card loans, top up mobile phoneaccounts, buy lottery tickets, shop at mobile shops, book airlineand train tickets, make hotel reservations, and buy tickets oftourist attractions. Hua Xias mobile banking services broke theboundaries between banks and allowed customers to accesstheir account details at different banks anytime, have completecontrol of their own accounts and make better arrangementsfor their funds. Customers can also use bankcards of otherbanks 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 notonly offering sound, complete and secure financial services,but also expanding, enriching and integrating non-financialvalue-added services. At present, Hua Xia is doing well inthe integration of financial and non-financial services. Thefeature services offered by Hua Xia include: 1) making hospitalregistration reservations via mobile phone in some citiesincluding 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 viatheir mobile phones; 3) booking electronic tickets of sometourist attractions; 4) delivering over 40 mobile paymentfeatures in Chengdu. According to Hua Xia, security, ease ofuse and functional completeness are the priority issues theyconsider when they are developing mobile financial services.In the area of proximity payment, Hua Xia is running somepilot projects in Chongqing and partnering with UnionPayto test proximity payment in Shanghai, Shenyang and someother cities. Hua Xia used the smart SD card of UnionPay asthe mobile wallet. It supports micro-payment requiring nophysical card or password and high-value payment requiringno cards but magnetic stripe data. Hua Xia is activelydeveloping financial and non-financial proximity paymentscenarios. 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 SDcard 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 andcorporate management applications.In additional to personal mobile banking, Hua Xia is activelypreparing for the launch of corporate mobile banking services,especially those targeted at small and micro-businesses. Forexample, 1) applying for credit services via mobile phone.The customer may submit their application documents byway of taking photos and scanning, which can streamlinethe processes for credit application; 2) mobile banking bindsthe user and allows pledge loans; 3) for instance, in a smallcommodity wholesale market, the market managementboard can have its members to provide guarantee for eachother with their accounts as collateral and their products asmortgage. The bank may provide mortgage loans for thewhole value chain. By creating an isolated environment, thebank may connect products, logistics and financing together.Mobile banking also allows cash withdrawal and eliminatesthe constraints of time and space. In addition, Hua Xia alsobelieves that the development of agriculture-related financecould be accelerated by offering agriculture-related loans andmoney transfer services via mobile banking or home banking.Case:Hua Xia Bank - deliver a full range of mobile financial services
  28. 28. 26From a global perspective, mobile paymenthas tremendous opportunities in ruraland underdeveloped regions. Rural CreditBanks Funds Clearing Center (RCBFCC)has worked productively in this regard.RCBFCC was established on May 29, 2006with the approval of the Peoples Bank ofChina. The Center was initiated by over 30provincial rural credit cooperative unions,rural cooperative banks, rural commercialbanks and Shenzhen Rural Commercial Bank(hereafter referred to as rural cooperativefinancial institutions or RCFI) with theregistered capital of RMB100 million andwith the goal of resolving the cross-provincepayment and clearing between RCFIs. TheCenter established a nationwide payment andclearing system between RCFIs and resolvedthe problems of cross-province payment andclearing. Due to the unbalanced developmentof RCFIs, some newly founded RCFIs need toimprove their IT facilities to face competitionfrom commercial banks. The Center thendeveloped various systems in support of theupgrading of RCFIs.In such a context, the RCBFCC mobilebanking sharing platform was developedwith the aim of improving the developmentof mobile banking system for RCFIs. TheCenter expects this platform to attract moreRCFIs to develop mobile banking and form anexemplary effect so as to boost the mobilefinancial services of these institutions.RCBFCC (the Center) now offers two types ofmobile banking services: installing a client onthe mobile handset or placing a film on theSIM card to deliver mobile banking featuresover the mobile phone. For the first type,banks may develop the client software basedon different mobile operating systems. A usermay check his or her account and transferfund via the mobile client, which currentlysupports iOS, Android and J2EE (Symbian inparticular). The Center also indicated thatother mobile operating systems will also besupported in the future such as WindowsMobile. In addition to basic financial servicessuch as account check and money transfer,the Center also developed value-addedservices such as mobile phone account top-up. The user may top up his or her mobilephone account via the mobile banking client.For the second type, banks may place a filmon the SIM card. The user may put the filmedSIM card into the phone and select servicesthrough a menu. The service instructions willbe sent to the back end as encrypted SMS.The back end then sends back the requiredinformation in the form of SMS to fulfillaccount inquiry, money transfer and otherpayment functions. The second method isdevice independent and can be supported by95% mobile devices. The user is not requiredto access the Internet or download and installthe client software. The user may use thefinancial services after he/she asks the counterof the bank to place a special sticker film onhis SIM card. This option is more suitable forthe customers of credit cooperatives. In thesetwo types of methods, customer accountand other related information is stored atthe provincial rural cooperative unions. Theinstructions for account inquiries, moneytransfers and other operations are sentthrough the RCBFCC mobile banking systemto the provincial rural cooperative unions,which then send the required informationback to complete the payment process.Case:Rural Credit Banks Funds Clearing Center - enable rural financialinnovations and develop rural mobile finance
  29. 29. Trends and Prospects of Mobile Payment Industry in China 2012-2015 - Creating Innovative Models, Boosting Mobile Financial Services 27At present, the client-based mobile bankingsystem is developing well. As of April 2011,there were three provincial rural creditcooperative unions that adopted the sharingmobile banking system of the Center: ruralcredit cooperative unions of Hainan, Guizhouand Hubei. Hainan Rural Credit CooperativeUnion has commercialized the mobilebanking services. The other two unions areconducting internal test run. About 10 othercredit cooperative unions are planning tojoin the sharing mobile banking platform,including the unions in Xinjiang, Shanxi,Shaanxi, Inner Mongolia, Jiangxi, Sichuanand Jilin. The filmed-SIM-card-based mobilebanking has been growing rapidly in recentyears. The Rural Credit Cooperatives ofShandong developed 620000 customersin less than one year. The cost of placingthe sticker film on the SIM card is borneby RCFIs. These financial institutions arevery active for this model really can helpthem attract effective customers with suchdemands and with a relatively high degreeof security awareness. The cost is not a roadblocker for the development of the filmed-SIM-based mobile banking. As more andmore cooperative financial institutions jointhis camp, the cost will be further reduced.The payment services most required byrural residents are money transfer andmobile phone account top-up. There is alsoa huge demand to purchase game pointcard via mobile handset at the county level.Concerning the security related to SMS-based payment, the Center indicated that upto now there wasnt any single case of SMSinterception. In client-based mobile banking,the generated transaction information willbe sent to the customer in SMS and thecustomer needs to input the validation codein the SMS to complete the transaction. Ithas been proved highly security. In filmed-SIM-based mobile banking, the transactioninstruction is completed through encryptedSMS text. The key used each time is differentand it is therefore highly secure.With respect to the thinking on the futuredevelopment of mobile banking, the Centerindicated that first, they would focus onmarket development, keep a close eye on thedevelopment of emerging payment means,and select the payment methods suited torural needs; once the time comes, they willput such system in production quickly for theRCFIs have nearly 80000 outlets across Chinaand if there is a need, expansion can beachieved easily; second, they would focus onnew type of services, such as the cooperationwith Alipay; third, they would considerincreasing the operating systems supportingthe client on the mobile handset and makepartial customization on their products.
  30. 30. 28Founded in June 2008, Chongqing Rural CommercialBank (CRCB) is the largest bank in Chongqing in termsof total assets, total deposits and outlet coverage. It waslisted on Hong Kong h-share main board in Dec. 2010,making it the first public rural commercial bank, the firstlocal bank listed in overseas market, and the first listedbank in western China. Since its listing, CRCB, dependingon its advantages brought by institutional reform and thestrong capital capability, is committed to helping farmers,agriculture and rural areas, supporting mid-sized, small andmicro businesses, driving the development of county-leveleconomy and enhancing innovation on financial products.Developing mobile payment services is an importantpart of CRCBs mission of promoting financial inclusion.CRCB took a two-step strategy. Step 1: promoting thefilmed-SIM-based mobile banking. In July, 2011, CRCBintroduced the first such mobile banking product inwestern China. The product allows the user to access hisaccount information, transfer and remit funds, managehis account, and access wealth management servicesand credit card services. The product has other powerfulfeatures. The customer may enjoy account services onthe STK menu. The data is transmitted in encrypted SMSand almost all the mobile phones can support the filmedSIM card. Low cost of use, high level of security and wideaudience coverage enable the public, especially ruralresidents, to benefit from the latest development in mobilepayment and help to achieve service equalization in urbanand rural areas. As of end of May 2012, the effectivecustomers reached 290000, the number of transactionsreached 8.71 million and the transaction value amountedto RMB 51.8 billion yuan. This product was well acceptedby the customers. Step 2: CRCB was the first to launchthe NFC-SD mobile financial product based on UnionPaystandard. In Sept. 2011, CRCB, together with ChinaUnionPay, Chongqing City Smartlink Card Co. LTD, HighTech Computer Corporation (HTC), and Shanghai F-ROAD,launched this product in Chongqing. It is supported bythe NFC handsets developed by HTC with the SWP-SD(single wire protocol) chip based on UnionPay standard. Itcomplies with the security standard developed by UnionPayfor NFC payment. It integrates self-service banking, remotepayment, proximity payment, e-wallet and other features.It also combines basic financial services, multi-area mobilepayment applications and cross-industry mobile paymentapplications together. It supports the mobile networks ofChina Mobile, China Unicom, and China Telecom. In termsof technology, functionality, security and other aspects,this product is a leading product in China and around theworld. It is a new financial platform, which can change theway of life of the people.For the next step, CRCB will further improve "Jiangyu"mobile financial product so that it will be better adaptedto mid- and low-tier customers. CRCB will work withChongqing Rail Transportation Group to accelerate theupgrading of the POS devices in the stations of lightrails and subways. The cost of the SD cards and othertransaction fees will be exempted for customers. CRCBhoped to attract over 50000 customers for this productin 2012. China UnionPay Chongqing Branch is workingactively on upgrading the existing POS devices to supportNFC payment. It is expected that they will upgrade over20000 POS devices in 2012."Financial innovation is an inexhaustible force forsustainable development of a rural commercial bank andan inherent requirement of the development of inclusivefinance. For the next step, we will, based on the relatedmobile payment policies and standards, further strengthenproduct development so as to support a broader customerbase and truly deliver differentiated, easy-to-use andpersonalized products and services. This year, our bank willfurther strengthen cooperation with Chongqing ElectricPower Company. The tests of installing NFC chips into themeters have been completed. In the future, customers maytap their NFC-enabled phones over the NFC sticker on themeter to read the meter and make the payment. Our bankis also considering developing mobile financial services andproducts for corporate customers. I firmly believe that themobile payment business has a bright prospect," said thehead of electronic banking division at CRCB.Case:Chongqing Rural Commercial Bank (CRCB) - develop mobile payment services toboost financial inclusion