Mobile Payments - How is it done?

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Mode of Mobile Payments
1. SMS/USSD-based transactional payments
2. Direct mobile billing
3. Mobile web payments (WAP)
4. QR Code Payments
5. Contactless Near Field Communication
6. Cloud-based mobile payments
7. Audio signal-based payments

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SMS/USSD-based transactional payments
 In the predominant model for SMS payments, the consumer sends a payment request via an SMS
text message or an USSD to a short code
 The merchant is informed of the payment success and can then release the paid for goods
 A Multimedia Messaging Service can also deliver barcodes which can then be scanned for
confirmation of payment by a merchant
 Since a trusted physical delivery address has typically not been given because of purchasing of
goods become very quick
 A premium charge is applied to their phone bill or their online wallet
 SMS are attractive for micro payments and are fast, easy and anonymous

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Pros Cons
Easy and quick to make payment using SMS Poor reliability - transactional premium SMS payments can
easily fail as messages get lost
No internet required because it work on GSM/CDMA service
provider
Slow speed - sending messages can be slow and it can take
hours for a merchant to get receipt of payment
Nice mode of payment for micro payment Security - The SMS/USSD encryption ends in the radio
interface, then the message is a plaintext
SMS based payment is possible to all the types of phone basic
and smart phones
High cost - The cost of setting up short codes and paying for
the delivery of media via a Multimedia Messaging Service and
the resulting customer support costs to account for the
number of messages that get lost or are delayed
Quick delivery of goods like ring tones, music , wallpaper etc… Low payout rates - operators also see high costs in running
and supporting transactional payments which results in
payout rates to the merchant being as low as 30%. Usually
around 50%
SMS/USSD based payment globally used Low follow-on sales – its very difficult to remember where
something was purchased or how to buy it again

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SMS
Gateway
GPRS
Gateway
Mobile Service Processing
Mobile
Network
Customer
SBS/USSD
Digital goods
return

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Direct mobile billing
 Addressing to security hole in the premium SMS model, the direct mobile billing adds an additional
authentication step in the purchasing process
 It requires “two factor” authentication which shows to significantly reduce the potential for fraudulent
purchases , protecting both consumer and merchant
 Direct mobile billing, also known as mobile content billing, and carrier billing, requires integration with the
operator
 Direct mobile billing is one of the preferred micro-payment methods for gaming tokens, in-app items, or social
network credits.
 It is becoming popular in both emerging and developing markets, since it offers the safest and fastest way for
completing a digital purchase.
 It allows people to buy digital content by adding the cost of a purchase directly to their mobile bill, regardless of
the type of device they own. The concept is comparable to buying on-demand television shows by adding it to
your cable bill.
 Companies: AT&T, Sprint, T-Mobile, U.S. Cellula

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Direct mobile billing
Pros Cons
The operators already have a billing relationship with the
consumers, the payment will be added to their bill
Only good for digital goods and micro payment
Provides instantaneous payment Operator Spending Caps
Protect payment details and consumer identity Late charges applied if missed to make payment before due
date
Reduced customer support costs for merchants
This is a logical alternative to credit card and Premium SMS
billing.
If bill is disputed, the money is still deducted from account or
put on credit card whether customer is ready or no
Accurate reporting and notifications to consumers e.g. paid,
not billed, etc.
the payout rate will be much lower than with other
payment providers.

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Mobile web payments (WAP)
 The consumer uses web pages displayed or additional applications downloaded and installed on the mobile
phone to make a payment. It uses WAP(Wireless Application Protocol) as underlying technology and thus
inherits all the advantages and disadvantages of WAP
 Mobile online payments are simply typical eCommerce payments using a credit card over a mobile phone via a
website or application. Mobile online payment s require user to enter all the mandatory details for payment like
name, card info etc..
 There could be multiple mechanism behind web based mobile payment
 Direct Operator Billing – This involves a direct connection between the customer and billing operator
 Credit Card – This involves the usual based credit card transaction, in which users are directed to a ‘credit
card payment’ page where they are required to fill credit card details
 Online billing through third party players like Paypal, Google Checkout, Amazon etc..
 The WAP protocol is designed with the network, device and user interface limitations in mind. This means that
WAP is optimized for mobile networks with narrow bandwidths, mobile devices with small screens and limited
keys for user entry, little memory storage, and limited processing and battery power

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Pros Cons
Transaction is reliable, which add to customer satisfaction Limitations of WAP today are related to the devices used and
the mobile networks
Bookmark the pages to make the payment next time Time consuming because of network issues on mobile
Access your bank accounts and related services Not everyone aware with web based payment
Transfer funds between various bank accounts of the same as
well as different banks
It requires internet on device to make the payment
The Mobile Banking application emulates a majority of
banking services provided by the bank
Security point of view its possible for hackers to grab the
detail enter of customer and make the use of it

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Client/Customer
WML
WML Script
WAP Gateway
WML
Encoder
WML Script
Encoder
Web Server
WML
Decode
with WML
Script
Protocol
Adapter
WAP HTTP
BankHTTP

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QR Code Payments
 Quick Response Codes (short: QR codes) are two-dimensional machine-readable codes usually consisting of a
matrix of black and white squares. They contain data (e.g. a link to a website or a short text) that can be read and
displayed by a Smart phone
 QR code is another way of delivering payments that display on a Smartphone screen and are scanned at point of
sale.
 Originally used to track products in warehouses, QR codes were designed to replace traditional (1D bar codes)
 QR code contains all the business details you need to get paid, including your mobile number or Short Code.
 We can put a QR code on business cards, bills, website, point of sale or product labeling for interactive and easy
payment
 Generating a QR code is very easy
 Companies:Walmart, CVS and Rite Aid, CurrentC

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QR Code Payments
Pros Cons
Ease of implementation – It’s relatively quick and inexpensive
for a merchant to implement a mobile wallet solution based
on this technology
Availability - Not everyone on has a smart phone. People also
have to download an app to scan the QR codes
Simplicity – This type of solution relatively easy to use,
although it is important to properly align the QR code with the
scanner or camera
Security –Malicious QR codes can contain malware or Trojans
Addressable market – Since no NFC chip is required on the
phone, the addressable market for this technology interface is
quite large
Inconsistency – There currently exists no standardization for
payments via QR codes, resulting in unpredictable technical
specifications and an inconsistent user experience
Usability – Using QR codes at the point of sale is not as easy
as “tap and pay”: consumers and merchants are both required
to perform more work in order to complete a transaction

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QR Code Payments
Merchant
Customer
Merchant
Server
Payment
Gateway

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Contactless Near Field Communication (NFC)
 NFC is a short range wireless technology , enabling communication between devices over a distance of <
10 cm
 It has three main mode of communication
 Card Emulation
 Enables devices to act like contactless cards
 NFC –enabled mobile phones used for payment
 Reader/Writer
 Enables devices to interact with RF tags
 E.g. NFC-enabled phone used to read “smart poster”
 Peer-to-peer
 Two NFC devices communicate to exchange information
 Companies:Apple Pay, Google Wallet, Softcard, LoopPay

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Apple Pay
 Apple Pay is a mobile payment service that lets certain Apple mobile devices make payments at retail and online
checkout
 It lets Apple devices wirelessly communicate with point of sale systems using a near field communication (NFC)
antenna, a "dedicated chip that stores encrypted payment information" (known as the Secure Element), and
Apple's Touch ID and Passbook
 Passbook is use to store credit or debit cards while registering it for payment
 It keeps customer payment information private from the retailer, and creates a "dynamic security code generated
for each transaction“
 iPhone users authenticate by holding their fingerprint to the phone's Touch ID sensor
 To keep transactions secure, Apple uses a method known as "tokenization," preventing actual credit card
numbers from being sent over the air. Card numbers are not stored on the device, instead, a unique Device
Account Number is created, encrypted and stored in the Secure Element (SE) of the device
 User's payment information, and credit card numbers and data are never uploaded to iCloud or Apple's servers
 Apple utilizes Device Account Numbers, a user's credit card number is never shared with merchants or
transmitted with payments

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Contactless Near Field Communication (NFC)
Pros Cons
Easy-to-use : Anyone can use it with a single touch. Expensive: It may prove to be much too expensive for
companies to adopt NFC-enabled technology
Versatile: NFC is very versatile, in that it covers a range of
different industries and services.
Not Advantageous Enough: Not all the phones are NFC
enabled
Better User Experience: This system is beneficial for
enterprises too – companies that readily adopt the latest
technology are viewed by customers as being dynamic and
progressive
Lack of Security: While NFC transactions are undoubtedly more
secure than regular credit card payments, this technology is
not completely free from risk. It gives hackers more incentive
to access people’s smart phones because more valuable data is
stored there.
More Secure: Using mobile wallets is, to an extent, safer than
using physical credit cards.
Fraud risk : debit cards clear money immediately. NFC,
however, requires an overnight update to actually clear the
funds.
Mobile as Wallet: Customers have all their important
information on their phone for payment

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Cloud Based Mobile Payment
 The cloud based payments enable the industry to efficiently deploy innovative payment solutions. It gives the
industry more flexibility in offering the consumer convenient and secure ways to pay with mobile devices.
 When secure element (SE) is placed in cloud then payment made by such process is called could based payment
 Cloud based mobile payments can be deployed by Host Card Emulation (HCE), tokenization
 Cloud-based payments enables to perform NFC card emulation without using a hardware Secure Element (SE) in
mobile handsets , this SE get placed in cloud space where all the information of credit card store to make the
payment secure
 Major players involved in cloud based mobile payment are:
 PayPal
 GlobalPay
 GoPago
 Google

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Pros Cons
Easier to integration with third parties which includes mobile
network operators, NFC device manufacturers and trusted
service managers (MSMs)
One of the major concerns with cloud computing is the
security of data. Often mobile users will provide sensitive
information through the network, and if not protected, can
lead to major damages in the case of a security breach.
Cardholders as well as financial institutions might find it easier
to get their cards into this wallet as Secure Element (SE) is
deployed in cloud which leads to lower cost as well
A wireless connection (via WiFi or 3G/4G) is required to deliver
credentials from the cloud to the phone
The computing power of an SE in the cloud is higher than that
on a mobile device
Storing information in the cloud could make your company
vulnerable to external hack attacks and threats.
Storage capacity on a physical SE is limited. In the cloud,
storage is scalable and can be expanded to meet individual
requirements and to support any card, application and
payment scheme
Credentials stored in the cloud can be available to any device,
assuming the user is properly authenticated on the device. And
the credentials stored in the cloud can be delivered from the
phone to the POS via a variety of mechanisms, including NFC

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HCE

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Audio Signal Based Payment
 The audio channel of the mobile phone is another wireless interface that is used to make payments.
Several companies have created technology to use the acoustic features of cell phones to support mobile
payments and other applications that are not chip-based
 It uses different technologies like Near sound data transfer (NSDT), Data Over Voice and NFC 2.0 produce
audio signatures that the microphone of the cell phone can pick up to enable electronic transactions
 Each time a client make a transaction, encrypted information is embedded in an audio one-time password
(OTP) that is sent to the payment server through the phone’s audio channel
 Today, NSDT is primarily used for mobile banking transactions through the mobile money platform Tagpay.
It is also used to securely open doors and enable authentication on websites etc…
 By using TagPay as an integrated solution, banks, microfinance organizations and other financial actors can
benefit from secure, convenient, and affordable mobile transactions
 The NSDTTM technology built into the TagPay platform is widely recognized as the leading solution for
enabling mobile payments
 Companies: Illiri sound API, Verifone (Way2ride), Edgetech , Alipay etc…

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Pros Cons
It uses the mobile phones audio channel to transmit secure
information used to electronically sign transactions its more
secured
More noisy environment can create the problem in data
transfer
It provide an excellent level of efficiency and reliability even in
noisy environment
Payment is performed regardless of network operator
No extra hardware require in mobile device like NFC so it
becomes less expensive

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Audio Channel
Internet
Customer
Merchant
Merchant
Gateway

Mobile Payments - How is it done?

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