Report

Confidential Documents 1
 MPSP VENDORS
M - PANALYSIS
A Y M E N T S I N
I N D I A

HCL Infosystems, DMS (Distribution & Marketing

Services) August 2008
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Summary

Mobile Payment Service Providers

Five hundred million people are expected to own mobile phones only in India by 2010. There are
currently 289 million mobile phones subscribers in India and 100 million are added every year. This
increasing rate of mobile phone users in India is catching eyes of the central bank of the country but
the question is that if central bank is interested in providing the financial services with the help of
mobile phone then who will be the system providers? Here comes a very big scope for such players
who are there with the technologies which will enable the two way users i.e. sender and receiver or
we can say payer or payee to get the facility of the system so called mobile payments. These system
providers can be anyone either a bank itself or a mobile network operator or a trusted third party this
trusted third party is called Mobile Payment Service Providers or Mobile Payment Gateway Service
Providers.

This part of the report deals with s detail study of all the current MPSP (Mobile Payment Service
Providers) in India their technology, fund management system and customer interaction techniques. In
the mid part of the report I have listed the current charges of the MPSP’s and their tie-ups. As it’s
very much clear that a successful mobile payments need a collaborative model where all the players in
the business model value chain need to work in an interoperable manner.

Today mobile payments is already identified as a biggest demanding technology which will be
adopted not only by all those who are using mobile phone these days but this will dramatically bring
an unexpected growth of mobile phone users in the system in near future. No doubt this mobile
payment business is going to help the M-Commerce business to take a widespread shape and become
one of the most important medium of the cash flow in the country.

Understanding the need of mobile payments I will tell one thing that those were early days when most
common medium of money transaction was by cash but after interference of the country’s central
bank cheques and demand draft comes in light which become a convenient medium of fund flow then
after their comes the ATM machines but the problem was still with the users to move at the ATM
machines and Bank branches and make transactions, there was a revolutionary step taken by RBI
when it introduced Electronic Clearance System and National Economic Fund Transfer system to
make the fund flow electronically online which is the latest money transaction system running in the
country but in this case user need to be affordable with an expensive infrastructure equipments like
PC or Laptops and Internet connections now the point is that how much of the 116 crore population is
using a PC or Laptop and aware of internet.

But one common thing which can be generally seen these days among most of us is Mobile Phone and
this is what all about a new revolutionary payment system on Mobile phones called as M-Payments.

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Content Pg No
1. Summary 3.

2. Content 4.

3. Mobile Payment Service Providers (MPSP) in m-payments business model value chain. 5.

2.1 Importance of MPSP’s

4. Role of Mobile Payment Service Providers (MPSP) 6.

5. Types of m-payment solutions provided by MPSP’s 6.

6. M-payments technology used by MPSP’s 8.

7. Generic architecture of m-payments 10.

8. Technical architecture of MPSP for mobile communication 12.

9. M-Payments market in India 14.

10. Current MPSP’s detailed analysis in India 15.

11.Key Findings and In-depth Analysis of Mobile PSP’s offerings 16.

11.1 mChek Mobile Money Transfers 24.

11.2 ngpay Mobile Money Transfers 27.
11.3 Obopay Mobile Money Transfers 29.
11.4 ItzCash Mobile Money Transfers 30.
11.5 Paymate Mobile Money Transfers 31.
11.6 Oxicash Mobile Money Transfers 32.
11.7 Spanco Mobile Money Transfers 33.

12. Issues and Challenges for MPSP’s 35.

13. Messaging Standardization for Mobile Payments 36.

14. Regulatory policies and standards Issues by RBI 40.

15. References 41.

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 3. Mobile Payment Service Providers (MPSP) in m-payments business model value chain.

Role: Manufacturer of
Mobil
Handsets capable of
e
various m-payment
Netwo
technologies
rk
Opera
Example: Nokia, Samsung,
tor
Motorola and LG

Role: Regulating all the players participating in

the game Example: RBI
Airtel, Vodafone, Idea, BSNL and MTNL

Mobil Paym
e ent
Custom Content Mercha
Netwo servic
ers/ Aggrega nts/Pay
rk e
Payers tor Banks ees
Opera Provid
tor ers

Role: Payers Role: Support Role: Support Role: Enables Role: Provides Role: Provides
are the end for mobile for mobile technology to backend payment backend payment
users in this content delivery content delivery integrate mobile and settlement and settlement
system utilizing phones to bank acc system system
the technology Example: Example:
Airtel, Vodafone, Airtel, Vodafone, Example: mChek, Example: SBI, ICICI Example: SBI, ICICI
Example: Any Idea, BSNL and Idea, BSNL and Obopay and Spanco and HDFC and HDFC
shoppers or MTNL MTNL
consumer
Role: Provide
technology platforms
like security and else
that enable secure
access to players
Tech
Provide
Example: Airtel,
rs
Vodafone, Idea,
BSNL and MTNL

Fig: 1 Business Model Value Chain for M-Payments

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4. Role of Mobile Payment Service Providers (MPSP)

Fig1 is a common business model value chain which is currently running in India and also become a
very successful model for bringing M-Payment system in the common use. In the whole business
value chain model a Mobile payment service providers (MPSP) hold the most important and a crucial
role in the by sitting in the center of the whole system and providing an integration facility to the
payer and payee both. In the other words the MPSP’s role is to integrate both the parties sender and
receiver’s mobile phone devices with the fund sources, MPSP’s are also concerned with enabling the
technology with the help of the message or information sent by consumers/payers are securely send to
the clearing houses via banks and in the same way after fund payments and settlement process the
transaction conformation messages to the payer and payees.

Role of Mobile Payment Service Providers

• External low-cost hosting at Third party payment processors that should be encouraged to
have a truly cross-bank and cross-carrier payment system.
• Policies enabling audit and governance of such a model to be framed including a centralized
settlement mechanism.
• Third party processors should have the responsibility of Fraud management and should have
systems and process in place to check and control frauds.

5. Types of m-payment solutions provided by MPSP’s

Mobile payment solutions may be classified according to the type of payment effected, and based on
the technology adopted to implement the solution. There are a variety of combinations of these
frameworks – technology adopted and mode of payment, According to Mahi Carr a senior official
from IDRBT, Hyderabad there are three different models available for m-payment solutions on the
basis of payments in India.

a) Bank account based

b) Credit card based

c) Telecommunication companies billing based

2. (a) Bank Account based M-Payment

Today in India Banks have several million customers and in the same way telecommunication
operators also have several million customers. If they both collaborate to provide an m-payment
solution it is a win-win situation for both industries. In this model, the bank account is linked to the
mobile phone number of the customer. When the customer makes an m-payment transaction with a
merchant, the bank account of the customer is debited and the value is credited to the merchant
account.

2. (b) Credit Card based M-Payment

In the credit card based m-payment model, the credit card number is linked to the mobile phone
number of the customer. When the customer makes an m-payment transaction with a merchant, the
credit card is charged and the value is credited to the merchant account. Credit card based solutions
have the limitation that it is heavily dependent on the level of penetration of credit cards in the
country. In India, the number of credit card holders is 15 million. Only this small segment of the
population will benefit in the credit card based model. Though limited in scope, there may be high
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demand within this segment for a payment solution with credit cards and also, may provide high
volumes of transactions.

2. (c) Telecommunication Company Billing of M-Payments

Customers may make payment to merchants using his or her mobile phone and this may be charged to
the mobile phone bills of the customer. The customer then settles the bill with the telecommunication
company. This may be further classified into prepaid airtime (debit) and postpaid subscription
(credit).

6. M-payments technology used by MPSP’s

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Globally today there are various types of technology available with the help of which a mobile device
(Mobile Phones, PDA’s and ESME’s (External Short Message Entities) can send and receive the
information related to the mobile payments, below I have mentioned some of the most common and
highly accepted mobile-payments technologies.

Mobile Payment Technologies:

a) Short Message Services (SMS)

b) WAP/GPRS

c) Unstructured Supplementary Services Delivery (USSD)

d) Phone-based Application (J2ME/BREW)

e) SIM-based Application

f) Near Field Communication (NFC)

g) Dual Chip

h) Mobile Wallet

a) Short Message Servicing (SMS):

This is a text message service that enables short messages up to (140-160 characters) that can be
transmitted from a mobile phone. Short messages are stored and forwarded by SMS centers. SMS
messages have a channel of access to phone different from the voice channel. SMS can be used to
provide information about the status of one’s account with the bank (informational) or can be used to
transmit payment instructions from the phone (transactional).

Technical Issues

SMS-Gateway mobile payment service provides a connection between a service provider's application
compatible database and a telephone operator's CIMD2, UCP/EMI and SMPP protocol based SMSC
(Short Message Service Center) over TCP/IP.

SMS-Gateway is an easy to install and easy to use solution for SMS based services. It gives a wide
range of modification possibilities to meet the needs of service providers.

b) WAP/GPRS

General Packet Radio Service (GPRS) is a mobile data service available to GSM users. GPRS
provides packet-switched data for GSM networks. GPRS enables services such as Wireless
Application Protocol (WAP) access, Multimedia Messaging Service (MMS), and for Internet
communication services such as email and World Wide Web access in mobile phones.

c) USSD

Unstructured Supplementary Service Data (USSD) is a technology unique to GSM. It is a capability

built into the GSM standard for support of transmitting information over the signaling channels of the
GSM network. USSD provides session-based communication, enabling a variety of applications.
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USSD is session oriented transaction-oriented technology while SMS is a store-and-forward
technology. Turnaround response times for interactive applications are shorter for USSD than SMS.

d) Phone-based Application (J2ME/BREW)

The client m-payment application can reside on the mobile phone of the customer. This application
can be developed in Java (J2ME) for GSM mobile phones and in Binary Runtime Environment for
Wireless (BREW) for CDMA mobile phones. Personalization of the phones can be done over the air
(OTA).

e) SIM-based Application

The subscriber identity module (SIM) used in GSM mobile phones is a smart card i.e., it is a small
chip with processing power (intelligence) and memory. The information in the SIM can be protected
using cryptographic algorithms and keys. This makes SIM applications relatively more secure than
client applications that reside on the mobile phone. Also, whenever the customer acquires a new
handset only the SIM card needs to be moved. If the application is placed on the phone, a new handset
has to be personalized again.

f) Near Field Communication (NFC)

NFC is the fusion of contactless smartcard (RFID) and a mobile phone. The mobile phone can be used
as a contactless card. NFC enabled phones can act as RFID tags or readers. This creates opportunity
to make innovative applications especially in ticketing and couponing. The ‘Pay-Buy Mobile’ project
launched by the GSM Association (fourteen mobile operators are part of the initiative) targets 900
million mobile users with a common global approach using NFC.

g) Dual Chip

Usually the m-payment application is integrated into the SIM card. Normally, SIM cards are
purchased in bulk by telecom companies and then customized for use before sale. If the m-payment
application service provider has to write an m-payment application in the SIM card, this has to be
done in collaboration with the telecommunications operator (the owner of the SIM). To avoid this,
dual chip phones have two slots one for a SIM card (telephony) and another for a payment chip card.
Financial institutions prefer this approach as they can exercise full control over the chip and the
mobile payment process but, customers would have to invest in dual chip mobile devices.

h) Mobile Wallet

A m-payment application software that resides on the mobile phone with details of the customer (and
his or her bank account details or credit card information) which allows the customer to make
payments using the mobile phone is called as a mobile wallet. Customers can multi-home with several
debit or credit payment instruments in a single wallet. Several implementations of wallets that are
company-specific are in use globally.

7. Generic Architecture for M-Payments

This is a simple, illustrative conceptual model that describes the relationship between the major
participants in an m-payment scenario (Fig. 2). There is the customer Payer and the merchant or
Payee who would like to use an m-payment service. The M-Payment Service Providers (MPSP’s)
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provides the necessary technical infrastructure (hardware and software) to facilitate m-payments and
acts as an intermediary

Mobile Phone Users

Telecommunications
Operator

Telecommun Telecommun Telecommun

ications ications ications
Operator Operator Operator

Security M-Payments Application

Banks
Authority Service Provider

Payee / Merchant

Fig: 2 Generic Model for M-Payments Application Service Provider

between the financial institutions and mobile network operators. The MPSP register users who would
like to avail of the m-payment service. The users (customers and merchants) have to be registered
with the MPSP prior to using the service. At the time of registration the MPSP collects the bank
account details (or credit card details) of the customer and merchant as well as their valid digital
certificates. The mobile phone numbers of the customer and the merchant are mapped to their
respective bank accounts and this mapping is maintained by the MPSP. The users are provided with a
client m-payment system (mobile payment) that is either resident on their phones or else in the SIM
card. This application may be provided over the air to the users. The mobile payment will normally
interact with the MPSP server.

A mobile phone user communicates with a merchant and makes an economic transaction (e.g., buying
a ticket from an airline over the phone or shopping any goods from merchants). The merchant obtains
the phone number of the customer and initiates the m-payment transaction request stating the amount
for which payment is required. The customer confirms the request and authorizes payment. The
MPSP receives the authorization and verifies the authenticity of the customer. The MPSP then debits

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the customer account and credits the merchant account by interacting with the bank. Once the
electronic funds transfer is successful a confirmation message is sent to the customer and the
merchant advising them of the debit and credit respectively. The Certifying Authority also had shown
in Fig. 2 supplies digital certificates for the users in the system to provide security. This model can be
extended to handle the interaction between the MASP and the financial system taking into account
inter-bank payments and settlement.

Register

EIR HLR

AUC VLR
BTS
SMS BSC MSC GMSC
Mobile Phone
BTS
User
Base station with
transmitting station and HLR
HLR
control unit TCP/IP
SMSC
SMSC
Internet VPN
Open
Open Source
Source
UCP/SMPP/
Interfaces
Interfaces &
&
OIS
Aliasing Routing and
API
API
Billing
Large a/c manager with SMS
SMS Gateway
Gateway SMPP
SMPP UCP
UCP
premium charging and XML/SOAP
XML/SOAP
billing HTTP/HTM
HTTP/HTM
Administration
LL JAVA
JAVA API
API
Database
C/C++
C/C++ API
API
X25 Frame
App & Content Mobile Relay
Database Information
Provider
Customer’s
Server
Merchant’s
Module
Module

POS
PC SMS

USSD PC
STK
STK
WAP/GPRS
J2ME
UMTS
J2ME
IFRD
OS
OS
BLUE TOOTH

8. Technical architecture of MPSP for mobile communication

GPRS GPRS

SMS SMS

USSD USSD

TCP/IP TCP/IP
11

Customer’
Customer’ MNO
MNO Merchant’
Merchant’ MNO
MNO
ss Bank
Bank ss Bank
Bank
 Transaction Management
Application

Fig: 3 Technical Architecture Models for M-Payments Application Service Provider

Let’s understand the technical architecture of the mobile payment gateway providers. A Mobile
payments system runs on SEMOPS ‘Secure Mobile Payment System’ technology in the above Fig:2
describes a complete flow and transaction management of the information, In the diagram the
architecture of the main modules in the mobile payment solution there are two main front-end
modules namely the customer and the merchant modules. These are designed to have extended
functionality, security, openness, usability and a versatile application-executing environment. From
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front end with the help of different technologies like SMS, USSD, WAP/GPRS message is sent from
the mobile network operators which are stored on the Mobile Payment Service Providers SMSC.

Now SMSC with the help of service gateways send the data to service centers and to enterprise
servers which is also known as central access point where data are stored in the administrative data
base. Now in the back-end modules which comprise of transaction management applications that
reside in the payment processors’ premises and interact with their account management systems, as
well as the Data Centre module, which is responsible for the communication and reconciliation of
transactions between involved payment processors.

The mobile payment service is based on the structured interaction of the individual modules. There
are different transaction and channel specific front-end modules developed to reflect the specifics of
the heterogeneous environment and provide the user-friendliest interaction for the users (e.g. PC,
mobile, POS).

In the mobile environment the customer modules are tailored to the specifics and technical quality of
the handsets, as the design contains STK ‘Sim Tool Kit’ based applications but also the more modern
Java and operating system (OS) based modules as well.

The merchant module design on the other hand will provide flexibility for the merchant in regards of
tailoring it to the operating specifics of the sales outlets. Besides the same modules used by the
customers an additional type, a multipurpose POS terminal is also available for the merchants. The
versatility on the front-end side meets a homogenous, unified back-end infrastructure (payment
processor module, Data Center) catering for the combined service.

In the backend the mobile payment service provider takes help of one more technology provider who
is responsible for developing the server side backend infrastructure for the payment gateway. The
implementation involved interfaces for handling interaction with the banks, processing payment and
communication with merchant websites. Recently it is extended to implementation of web-services
based interface which allowed even non web clients as well to use the payment gateway.

Technologies Involved

Platform: Java / J2EE, J2ME

Tools/ Frameworks: Apache Axis, Hibernate, Spring

9. M-payments market in India

The Indian mobile telephony market has grown at a rapid pace in the past six to seven years.
Declining call tariffs in conjunction with favorable regulatory policies have lead to a tremendous
increase in the subscriber base, crossing the 270 million mark in 2008. While the growing subscriber
base has positively impacted industry revenues (which have risen consistently over the past few
years), operator margins also have shrunk, pulling down “Average Revenue per User” (ARPU). As
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ARPU declines and voice gets commoditized, the challenge is to retain customers, develop alternative
revenue streams, and create a basis for differentiation in high-churn markets.

In the early day’s mobile phone were only used as a device of M-Commerce is the latest In the mobile
payment technology Mobile Payment Service Providers.

Today with the help of mobile phone we can do far more than just make calls. Consumers are taking
advantage of text messaging, taking pictures, and listening to music and lots more which comes under
the bucket of mobile value added services. The next logical step is to use the mobile phone to send
and receive money—something that consumers in Europe and some countries of Asia have been
doing successfully for the last few years.

Many mobile payment service provider companies have already started their services and some of
them are already having their physical appearance in India, List of those companies is as follows

Mobile Payment Service Providers: Today in India seven companies are active name of the
companies are as follows with their technology and fund transaction method.

Payment service Provider Technology Fund Transaction Type

1. mChek - SMS - Bank Focused

2. ngpay - Application - Bank Focused

3. Obopay- SMS/App/WAP - Non-Bank Focused

4. ItzCash- SMS - Non-Bank Focused

5. Paymate- SMS - Bank-Focused

6. Nxtpay- N/A - N/A

7. OxiCash- SMS/WAP - Bank-Led

8. Spanco- SMS - Bank-Focused

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10. Current MPSP’s detailed analysis in India

Currently in India there are eight mobile gateway service providers companies are active among them
and number of new entrants are expected to enter as the regulatory issues by RBI will be published.
RBI is in the process to publish its latest and final operative guideline for Mobile Payment Service
Providers. Well among all the players mChek, ngpay, Paymate and OxiCash are the most active
player in the current market. Where Spanco and ItzCash are slow movers, reason behind Spanco is
that Spanco is having a long term strategic alliance with SBI in India which will provide a complete
range of Mobile Banking facility under SBI also Spanco has got a 5 years tender under IRCTC for
providing IVR technology based mobile ticket reservation system and mobile payment authorization,
where Itz cash is busy in making its cash card business alliance with other mobile payment service
providers for familiarizing it more and more either ItzCash is waiting for the RBI’s final regulation.
NxtPay and Obopay is in the process to launch their technology, Obopay which is US based payment
gateway company is also in its very nascent stage in India, below I have mentioned various charges
regarding to the users and merchants.

Merchant Point of View Usages Charges Money Flow Width of Distribution

Bank A/c Registration Operator Bank PSP MNO Bank Merchant Operator
Payment Technologyinvolved Charges Charges Charges Charges Charge Partners Partners Partners
mChek SMS Yes 20,000 Yes 0.50% - 8 7 1
Ngpay M-Wallet (App) Yes 20,000 3 Rs Yes 1% - - 45 All
Obopay SMS/App/Web - - - - - - - - -
Itzcash M-Wallet (SMS) No 10000 - - 0.50% - - 90 All
PayMate M-Wallet (IVR/SMS) Yes No 2 Rs Yes 1%-2% - 9 14 All
Nxtpay SMS
OxiCash M-Wallet (SMS) Yes 10000 3 Rs Yes 0.50% - - 16 All
Spanco M-Wallet (SMS) - - - - - - 1 - All
* Paymate registration charges for 1st year is 0 Rs after that discount rate of Master, Visa card. Bank charges 0% for first year later will be decided.
* NxtPay not active * Paymate charge same as bank charge on each transactions.
User Point of View Usages Charges Money Flow Width of Distribution
Registration Operator Bank PSP MNO Bank Merchant Operator
Payment Technology Charges Charges Charges Charges Charge Partners Partners Partners
mChek SMS Yes No 3 Rs - - - 8 7 1
Ngpay M-Wallet (App) Yes WAP Ch 3 Rs - - - - 45 All
Obopay SMS/App/Web - - - - - - - - -
Itzcash M-Wallet (SMS) No No 1 Rs - - - - 90 All
PayMate M-Wallet (IVR/SMS) Yes No 3 Rs - - - 9 14 All
Nxtpay SMS
OxiCash M-Wallet (SMS) Yes WAP Ch 3 Rs - - - - 16 All
Spanco M-Wallet (SMS) Yes WAP Ch - - - - 1 - All
* For Oxicash users operator charges are as per to normal plans. PSP charges are subject to discussion.
* NxtPay not active

Figure 4: Comparative Analysis of M-Payment Services Providers

11. Key Findings and In-depth Analysis of Mobile PSP’s offerings

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 1. M-Payment Gateway integration on the mobile phone

PSP User’s Phone Merchant’s phone

mChek SMS SMS
Ngpay Web App Web App
Obopay SMS, WAP, NFC, SIM-KIT WAP, SMS, SIM-KIT
Itzcash SMS SMS
PayMate SMS SMS
Nxtpay N/A N/A
OxiCash WAP/GPRS WAP/GPRS
Spanco WAP SMS/IVR/USSD

Table 1: Technology provided by MPSP’s for mobile phone integrating process with the bank a/c or fund source

For mobile payment gateway service the basic and initial step is to integrate the mobile phone to the
payee’s and payer’s mobile phone, if we have a look on the current trend we will find that 5 out of 8
companies are providing integration facility through SMS technology where 3 out of 8 are allowing
WAP/GPRS to enable mobile phone integration with the payment gateway.

Technology used for Integration No Of Companies

SMS 5
WAP/GPRS 3

Table 2: Technology Acceptability among companies

2. Understanding various m-Payment technologies in communication process

PSP Technology Payer’s mode of Comm. Payee’s mode of Comm.

mChek SMS SMS SMS
Ngpay M-Wallet (App) Web App Web App
Obopay SMS/App/Web SMS, Web App SMS, Web App
Itzcash M-Wallet SMS SMS
PayMate M-Wallet (IVR/SMS) SMS, IVR SMS
Nxtpay SMS N/A N/A
OxiCash M-Wallet (SMS) SMS, WAP/GPRS SMS, WAP/GPRS
Spanco M-Wallet (SMS) Web App SMS, Web App, IVR

Table 3: Technology used in payment instruction process

Table 3 contains different technology and mode of communication for both Payer’s and Payee’s.
According to this table presently most of the mobile payment service provider companies are
providing M-Wallet technology and the information is send through SMS,

M-Wallet: Basic difference between M-wallet and SMS, WAP/GPRS technology is that M-Wallet
allows users to refill or recharge the mobile phone either directly from their Debit Card/Credit Card or
Bank Account that means how much amount user is willing to have in their mobile phone they can
have and pay within or up to that much amount, but in SMS and WAP/GPRS direct integrated system
one can continuously pay till there is any balance in their account.

M-Wallet system is also further divided in to three modes

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 1. M-Wallet through SMS

2. M-Wallet through WAP/GPRS

3. M-Wallet through Web Applications

For payment request total 5 out of 6 companies are availing the facility through SMS where 3 out of 6
are providing the facility through WAP/GPRS.

Payment Request Flow Payer Payee

SMS 5 5
WAP/GPRS, Web App 3 3

Table 4: Payment Instruction process technology acceptability

PSP providing technologies for enabling mobile payment

PSP Technology
SMS App WAP/GPRS IVR NFC
mChek
Ngpay
Obopay
Itzcash
PayMate
Nxtpay
OxiCash
Spanco

Table 5: Payment Instruction process technology acceptability

3. Comparison of PSP’s providing P2P and P2M mobile payment facility

PSP Technology
Person 2 Person Person 2 Merchant
mChek
Ngpay
Obopay
Itzcash
PayMate
Nxtpay
OxiCash
Spanco

Table 6: PSP’s providing P2P and P2M facility

Presently the mobile payment system is completely new in India and according to RBI operative
guideline there can be two modes of payment

1. Person 2 Person: P2P mobile payment system allows any individual to send or receive money
from any part of the country. Only requirements are listed below

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 a. Having a bank account in the same bank which is collaborated with the PSP
b. In case the payment gateway is redistricted to be available on the particular mobile
network operator then having a subscriber connection of that MNO’s.

2. Person 2 Merchant: P2M mobile payment system allows one transfer the money from their
account to the registered merchant’s accounts.

These days only 3 out of the 6 companies are availing the P2P payment system where Obopay is in
the process to be registered under RBI where mChek has already started this system from 15th March
2008 with on the Airtel network and under some major banks in India like SBI, ICICI, HDFC and
corporation bank.

Rest all the companies are providing facilities to make Person 2 Merchant account transfer.

4. Comparison of technologies provided to Merchants to perform secure m-payment

transactions

PSP Technologies for m-payment

mChek SMS, E-Com Website, ATM, POS

Ngpay Web Application
Obopay POS, Web App, Obopay Prepaid Debit Card
Itzcash Web Application
PayMate SMS, E-Com, EDC Machine,
Nxtpay N/A
OxiCash SMS, WAP/GPRS, E-Com, POS
Spanco Web Applications

Table 7: Technology provided to merchants for performing mobile payments

Mobile payment service providers are providing various technologies to the merchants to provide the
payer to make payments for them, Some of the technologies are like SMS, Websites, personal
ATM’s, POS and EDC machines.

5. Comparative analysis of involvement of Banks among the PSP

PSP
Bank Focused Bank-Led Non-Bank Focused
mChek
Ngpay
Obopay
Itzcash

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 PayMate
Nxtpay
OxiCash
Spanco

Table 8: PSP’s comparison of different fund integration techniques

According to the current market basically there are three types of payment gateway available today
which I have mentioned and described below.

1. Bank Focused: Payment gateway providers who are only allowing Bank accounts for the
money transfer from ones account to another’s is called bank focused payment system, today
mChek, ngpay and Paymate are providing such services.

2. Bank-Led: Few Mobile payment gateway providers are providing some options to recharge
the payers bank account by other modes also like, IVR and E-Com where bank account is
involved but not one can avail the services or we can say one can recharge their mobile phone
with the help of PSP.

3. Non-Bank Focused: Some PSP’s are providing the m-Payment services without involving
the bank accounts.

6. Payment Methodologies

PSP
Bank A/c Credit card Pre Paid Cash Companion Debit
Card Card
mChek
Ngpay
Obopay
Itzcash
PayMate
Nxtpay
OxiCash
Spanco

Table 9: Technology provided to merchants for performing mobile payments

Under bank-focused, bank-led and non bank-focused system PSP’s are allowing different modes of
fund integration like Bank A/c integration, credit Card A/c integration, prepaid cash card integration
and Companion Debit Card which is also known as virtual account integration.

7. PSP’s comparative analysis with respect to the charges

1. Integration charges with respect to Payment Service Provider

PSP Integration Charges

Merchants Customers
mChek 20,000 (N) 0
Ngpay 10,000 (N) WAP Charge
Obopay N/A N/A
Itzcash 10,000 (N) 0

19
 PayMate 0 0
Nxtpay N/A N/A
OxiCash 10,000 (N) WAP Charges
Spanco N/A WAP Charges

Table 10: MPSP’s charging for integrating the mobile devices to merchants and customers

*(N) denoted that charges are negotiable.

To use the features of M-payment the basic requirement for both parties Payer and Payee, but in India
this concept is very recent so all the payment services providers are in the race of having more and
more types of services and maximum number of consumer base with them, as it is expected that in the
first phase there will be approximately 100 million mobile phone subscribers all over the country who
can avail this service and approximately 1 million merchants can come under this arrangement, first
and the initial step to utilize m-payment service is to integrate the mobile phones to the bank accounts
or the fund providing sources for which PSP will be responsible. For two way money send and
receive facility there will be two way mobile phone integration process, common charges for the
Merchants who will be interested to involve in the business falls between 10,000 to 20,000 Rs which
is completely negotiable, mChek has fixed its charges for 20,000 Rs,

For customers (Payers) there are very minimal charges which depend on the technology which is used
for integrating the mobile phone. Basically these days there are three ways available for customer to
register their mobiles with PSP

1. SMS
2. WAP/GPRS
3. Web Sites

SMS charges lies between 1 Rs to 3 Rs depending upon the service numbers, if PSP is providing the
integration services by SMS on long number 10 digit (e.g. 9123456789) numbers it costs simply 1 Rs
and if the service is provided by special SMS number of four digit then it costs between 2Rs to 3 Rs.

2. Information Transaction chargers over Mobile Network Service Providers.

PSP Information Transaction Charges

Merchants Customers
mChek 0 Rs 3 Rs
Ngpay 3 Rs 3 Rs
Obopay N/A N/A
Itzcash 0 Rs 1 Rs
PayMate 2 Rs 2 Rs
Nxtpay N/A N/A
OxiCash 3 Rs 3 Rs

20
 Spanco N/A N/A

Table 11: MNO’s charges for sending payment instruction by mobile phones

In the current scenario the m-payment service information by SMS and WAP/GPRS is provided with
the help of MNO’s (Mobile Network Operators). Payer and Payee both have only to pay the
information transaction charges to mobile network operators which lie between 1 Rs to 3 Rs.

3. Transaction Charges (Banks)

PSP Information Transaction Charges

Merchants Customers
mChek Yes No
Ngpay Yes No
Obopay N/A N/A
Itzcash No No
PayMate Yes No
Nxtpay N/A N/A
OxiCash Yes No
Spanco N/A N/A

Table 12: Bank charges for fund settlement and clearing system

Bank charges are only involved in those transaction which is done under the bank focused or Bank –
led system (where bank account is integrated to the mobile phones). Currently in India only C2M
(Customer to Merchant) payment system is available on mobile phone where the first strategy from
all the system participants (PSP, Merchants and Banks) is to take money from customers so customers
are not charges any percentage on the amount paid but merchant is paying a portion of the money
what is received.

Later bank is charging under two categories

1. Debit Card (Bank Account) Payment Transaction

2. Credit Card Payment Transactions

For Bank account and Debit card based transaction bank has to follow RBI’s guideline and has to
provide m-payment facility under ECS and NEFT systems, which c

Global payment gateways Visa and MasterCard may soon have to share information with the Reserve
Bank as part of the apex bank's efforts to regulate various payment systems in the country.

Presently, there is no legislation to make it binding on these companies to share information but the
government has drafted a bill that will empower RBI to regulate these companies, the regulator's
Chief General Manager A P Hota told reporters on the sidelines of a conference on e-payments.

"The Payment and Settlement Systems Bill, likely to be tabled in the monsoon session, will empower
us to regulate companies like Visa and MasterCard...it will make it mandatory on their part to share
information with us," Hota said.

The bill seeks to empower RBI to regulate and oversee various payment and settlement systems
including those operated by non-banks and card companies.

21
 4. Transaction Charges (Banks)

PSP Information Transaction Charges

Merchants Customers
mChek 0.50% No
Ngpay 1% No
Obopay N/A N/A
Itzcash 0.50% No
PayMate 1%-2% No
Nxtpay N/A N/A
OxiCash 0.50% No
Spanco N/A N/A

Table 13: Bank transaction charges for fund settlement and clearing system

Payment Service Providers who are providing the whole technology and known as system provider is
charging a 0.5% to 2% of the whole money which will be transacted where the upper limit for the
retail transaction will be up to Rs 10,000 as per RBI guideline.

Currently Mobile Network Operators in this game are not charging anything directly from the payer
or payee but those MNO’s who are in the collaboration with PSP’s are getting a part from them. Like
Airtel from mChek.

Sources:

[Strategic Approach Backup \\ MChek \\ Web Pages \\ Payments News India's Airtel Launches Range of Mobile
Commerce Solutions - March 04, 2008.mht]

8. Common architecture for m-payment registration and making fund transaction

Integration of Mobile phones (Payee and Payer) to Fund Source (Bank Account or Cash Cards)

CUSTOMER PSP MERCHANT BANK

3
1

5
6

4 2

22
1– On choosing Payment Service Provider customer shares his ‘mobile number’ with the PSP.
2– Merchant registers and integrates m-Payment application on its mobile.
3– PSP integrates the Customer and Merchants account to their bank account
4– Payer follows the instruction and sends the SMS for m-Payment to payment service
providers.
5– PSP sends the encrypted message to bank for transaction process
6– Finally after transaction money is debited into Merchant’s account.

11.1 mChek
CUSTOMER
MERCHANT

Technical Architecture of Mobile Payment System

Customer/Merchant Integration with PSP

MOBILE : PROVIDERS SMS
NETWORK
Integration withMobile
Bank Phone
A/c : SMS
Payment
Fund Payment Integration
1
: SMS 1
Request by
Payment merchant
2
request sent 3
to customer multiple
4 channels
Customer authorizes with
mChek PIN Transaction Authorization
6 Response

mChek Channel Integration VISA-Credit

mChekPlatform
m-Payment Card
platform
Transaction Authorization
23
Request
5
BANK A BANK B BANK C
Payer’s Payee’s
Bank Bank
Fund Transfer 7
 1. Customers and Merchants mobile phone and Visa bank card are integrated with the
help of mChek Channel Integration Platform.

Process: SMS Mchek to 121 > Receive a 6 digit mChek PIN number.> Register Bank details.

2. Merchant sends a payment request to mChek on behalf of customer.

3. Customer receives a payment request.

4. Customer authorizes with mChek Pin number

Process: SMS Mpay <Amount> <Mobile number> to 121> Enter mChek PIN

5. Transaction request sent to the Sender’s Bank

6. Transaction authorization received from Receiver’s Bank

7. Visa allow the fund transfer from payer’s bank to payee’s bank

mChek: mChek is seen unique among all other players because of its some of the features listed
below.

1. Web / Remote Transactions: mChek brings the security of ‘card present’ transactions to the
world of e-commerce thereby reducing fraud and minimizing charge-backs. A mChek user
provides his mobile/proxy number to the merchant, who initiates a mChek payment request
from his mobile phone. When the user authorizes the “please pay” request with his mChek
PIN, mChek sends a payment confirmation to both the user’s & the merchant’s mobile
phones, thus completing the over-the-counter transaction.

2. IVR / Call-center payments: Consumers can transact through call-centers and IVR without
sharing their sensitive card information and by only giving the mobile number to transact. A
mChek user selects mChek as the preferred payment option and provides his mobile/proxy
number to the call centre agent, who initiates a mChek payment request. When the user
authorizes the “please pay” request with his mChek PIN, mChek sends a payment
confirmation to the call centre application, thus completing the IVR / call centre transaction.

3. OTC Payments: mChek mobile payments platform enables a privacy-protected, fraud free
transaction where consumers can transact without revealing their card details by using only
24
 their mobile. A mChek user provides his mobile/proxy number to the merchant, who initiates
a mChek payment request from his mobile phone. When the user authorizes the “please pay”
request with his mChek PIN, mChek sends a payment confirmation to both the user’s & the
merchant’s mobile phones, thus completing the over-the-counter transaction.

4. Utility Payments: Consumers can pay their utility bills like telephone / mobile bills,
electricity bills, annual insurance payments, etc at their convenience anywhere anytime. A
mChek user can initiate utility payments by sending an SMS to a short-code (e.g. PAY
AIRTEL 1250 to 458), received by the mChek mobile payments platform which sends a
“please pay” request to the user’s mobile phone, who can then authorize the payment with his
self-secured mChek PIN. The entire utility payments experience is non-intrusive for the end
user.

5. Mobile Mall: The mChek mobile payments platform makes mobile-malls a reality by
bundling payments processing with a mChek-hosted, searchable & mobile-optimized content
management platform that is available on a mobile device. End user tagging, rating & content
sharing also pave the way for intelligent & targeted ad insertion. The possibilities for the
mChek USSD mall are manifold – from brands-malls to location based and community malls,
from deals to gift registries, etc – with the content being accessible from all mobile phones via
their USSD browser. This also enables operators to negotiate and offer exclusive deals to
some or all of their customers. The process for making a payment for a mChek mall item is
the same as other mChek payments.

6. VISA Money Transfer: mChek provides a platform for enabling convenient VISA money
transfer across a mobile device that is compliant with existing regulatory practices in India. A
mChek user with a bank issued mChek VISA debit/prepaid card can make a payment to
another mChek user with any VISA card. The process is initiated by the sender sending an
SMS to a short-code (e.g. PAY 9198123981213 1578.23 to 458) and authorizing the “please
pay” request with his mChek PIN.

7. Mobile Banking: mChek’s security model (i.e. secure mChek PIN), technology (i.e. open
architecture) and service-provider connectivity make mobile banking extremely easy for
banks to integrate with and customers to use. Although the gamut of mobile banking offing
via mChek are bank dependent, mChek possesses the technology & processes to support
balance inquiry, mini-statement requests, check inquiry, bill payments, etc. mChek offers its
Payments & Secure Authentication clients in the following three convenient ways:

i. mChek (No client, server-side wallet) - A clientless server-side wallet that uses combination
of SMS and USSD or IVR to initiate and fulfill transactions. A customer can register on
mChek website / on his phone to avail of this service.

ii. mChek SIM Client - A secure client on the customer's SIM card (STK), uses SMS as the
communication protocol. The client is available as a SIM swap from Operators. mChek
application has been certified by leading SIM manufactures like Gemalto, G&D, Oberthur
and Syscom making it available for immediate deployment by Telcos.

iii. mChek Smart Client - A secure client on the customer's Java-enabled mobile phone, uses
SMS or HTTP as the communication protocol. The client can be downloaded by sending an
SMS (WAP Push, OTA using GPRS/Edge) or from mChek / partner websites.

mChek/Payment – This solution enables customers to “put their VISA card(s) inside their mobile
phone” – whether it is a pre-paid, debit or credit card – and shop conveniently at all the outlets where
VISA and mChek are accepted. Additionally mChek can be used for prepaid recharge, payment of
utility bills and person-to-person payments, leveraging the VISA Money Transfer system.

25
 11.2 ngpay
Technical Architecture of Mobile Payment System

Customer/Merchant Integration with PSP : Web Application

Integration
CUSTOMER with Bank A/c : Web Application
Fund Payment : App, Cash Card
MERCHANT

Model 1: M-Payment through SMS in Bank Focused

MOBILE NETWORK PROVIDERS
Mobile Phone
Integration 1
1
Payment
6
Conform
2 5
Transaction Authorization
Payment done by customer
Response
with authorized ngpay PIN
44

mChek Channel Integration Credit

mChekPlatform
m-Payment Cards
platform
Transaction Authorization
Request 26
3
BANK A BANK B BANK C
Payer’s Payee’s
Bank Bank
Fund Transfer 5
 1. Customers and merchants have to download ngpay application from website or by
GPRS.

Process: SMS ngpay to 56767 > Receive a 6 digit ngpay PIN number.> create list of favorite
merchant partners.

2. Payment done on ngpay application by 6 digit ngpay PIN

3. Customer authorizes their Visa/MasterCard credit cards, HDFC Bank Account and
ITZ cash cards with ngpay Pin number

4. Transaction request sent to the Sender’s Bank

5. Transaction authorization received from Receiver’s Bank or merchant receives the

Itzcash amount to its bank account.

6. Payment conformation is send to the customer’s mobile phone web application.

• Ngpay can be used to buy air & rail tickets, bank transactions, bill payments, movie tickets,
shop for books & gifts, transfer funds and make payments.

• Entertainment at Fame Cinemas, Inox Cinemas: Search for shows, select/view seats, and pay
for tickets

• Travel through IRCTC, Deccan, Make-My-Trip, Yatra, and RedBus: Search for options, price
trips, and book tickets.

• Shopping from Ferns N Petals, Archies, and Future Bazaar: Search, buy, and ship products to
anyone, anywhere in India.

• Banking with HDFC Bank: Full suite of mobile Banking and Payment services.

• Telecom Services with BPL Mobile: Manages accounts, top-up the prepaid balance, pay
monthly postpaid bills

• Bill Payments: Pay utility bills, insurance, telecom bills and more with 22 of India's Leading
Utilities and Telecom Service Providers including TATA Indicom, SBI Life, Insurance Birla
Sun Life, BESCOM, and Reliance Energy.

• Charity: Make donations to charities & NGO's including CRY, SIDDHIVINAYAK Temple
Trust, Cancer Patients Aid.
27
 11.3 Obopay
Technical Architecture of Mobile Payment System

Customer/Merchant Integration with PSP : App, SMS, WAP/GPRS

Integration with Bank A/c : No
Fund Payment : App, Cash Card
CUSTOMER MERCHANT
Model 1: M-Payment through SMS in Bank Focused
MOBILE APP
1
1

MERCHANT WEB
SMS POS
MOBILE NETWORK PROVIDERS

Obopay Channel Integration

Platform Transaction Authorization
Mobile Response
2
App
44

Obopay m-Payment
Banks
Web platform
App
Transaction Authorization
Request 28
3
OBOPAY BANK B BANK C
OBOPAY
IVR App Fund A/c
Transfer 7
 1. Customers and merchants have to download ngpay application from website or by
GPRS.

Process: SMS ngpay to 56767 > Receive a 6 digit ngpay PIN number.> create list of favorite
merchant partners.

2. Payment done on ngpay application by 6 digit ngpay PIN

3. Customer authorizes their Visa/MasterCard credit cards, HDFC Bank Account and
ITZ cash cards with ngpay Pin number

4. Transaction request sent to the Sender’s Bank

5. Transaction authorization received from Receiver’s Bank or merchant receives the

Itzcash amount to its bank account.

6. Payment conformation is send to the customer’s mobile phone web application.

Obopay uses a prepaid debit model in which users add money to their Obopay accounts in advance of
purchases. Money may be added to an Obopay account through:

1. Obopay merchant locations

2. Interactive Voice Response (IVR)
3. Obopay website
4. Customer service representative.

As a software solution, Obopay requires users to have a mobile phone and Obopay account. An
Obopay account is created through Obopay website or customer service center. Once registered, a
unique personal identification number (PIN) is given to the user to verify all transactions. Upon
registering, the account holder enters their mobile phone number to have the Obopay Mobile
Application (OMA) pushed to their phone. Once the OMA is installed, users can begin using Obopay
for their financial transactions.

Obopay has till date not clearly defined its policy in India but it’s a US based well established
company in the mobile payment technology. For bank integration Obopay integrates transactional
databases directly with a pooled Obopay bank account at a partner bank. All funds stay within this
account, although merchants have the option of transferring their funds from their Obopay accounts to
other accounts through ACH transfers.

In fact Obopay in other countries provide m-payment technologies in two three ways

29
 1. Mobile phone to merchant mobile phone
2. Mobile phone to merchant point of sale web application
3. Obopay prepaid companion debit card

11.4 ItzCash
Technical Architecture of Mobile Payment System

Customer/Merchant Integration with PSP : SMS

Integration with Bank A/c : No
Fund Payment : SMS

Model 1: M-Payment through SMS in Bank Focused

CUSTOMER
MERCHANT

MOBILE NETWORK PROVIDERS

Mobile Phone
Integration 1
1

Transaction Authorization
Response

2
3
Payment
Conform

ItzCash m-Payment
platform 4
Money debited to merchant’s
30
Prepaid Account account
debited by Itz BANK B
Cash cards
 1. Customers and merchants have to register with ItzCash by SMS and create their own
account.

Process: SMS ItzCash to 57575 > Receive a 4 digit ngpay PIN number.>

2. Buy Itz Cash cards from any of the channel and recharge the account either online or
on mobile.

3. As the payment is done transaction authorization response is sent to merchant

4. Money is debited to the Merchants bank which is registered to the ItzCash

11.5 Paymate
Technical Architecture of Mobile Payment System

Customer/Merchant Integration with PSP : SMS, App, WAP/GPRS

Integration with Bank A/c : Yes
Fund Payment : SMS, App, WAP/GPRS

Model 1: M-Payment through SMS in Bank Focused

CUSTOMER
MERCHANT
2

MOBILE NETWORK PROVIDERS

Mobile Phone
Integration 1
1
Payment 2 Customer
request sent 4
mobile
to customer
5 number to
Customer authorizes with 3
PSP
Paymate PIN Transaction Authorization
7 multiple
Response
channels

Paymate Channel Integration

BANKS
PaymatePlatform
m-Payment
platform
Transaction Authorization
Request 31
6
BANK A BANK B BANK C
Payer’s Payee’s
Bank Bank
Fund Transfer 7
 1. Customers and Merchants mobile phone integrated with the help of PayMate Channel
Integration Platform.

2. On choosing PayMate customer shares his ‘mobile number’ with the merchant

3. Merchant passes ‘mobile number’ and ‘amount to be charged’ to PayMate

4. PayMate instantly calls/ sends the customer a SMS asking for confirmation

5. Customer replies to the call/ SMS authorizing with his ‘PIN’ and ‘Alpha Code’

6. Post validation PayMate passes customers ‘account number’ and ‘amount’ to the
bank

7. Bank debits the customer’s account instantly and informs PayMate

8. PayMate updates the merchant on the transaction status

9. PayMate simultaneously sends a confirmation SMS to customers mobile number

11.6 OxiCash
Technical Architecture of Mobile Payment System

Customer/Merchant Integration with PSP : WAP/GPRS

Integration with Bank A/c : Yes
Fund Payment : SMS, WAP/GPRS

Step 1: Creating M-Wallet

CUSTOMER
MERCHANT
Mobile Phone
Integration
1 1

4 digit password by 4 digit password by

2
SMS SMS
2

OxiCash m-Payment
platform
32
Step 2: Payment Transaction Process

CUSTOMER
MERCHANT

Send payment request

on SMS with 4 digit
mPIN

Merchant receive payment

2 6
conformation

1 Direct Top- Transaction Authorization

up from Response
4
Distributers
Banks

OxiCash m-Payment
platform
3 BANK A BANK B
OBOPAY BANK C
Transaction Authorization Fund
Request Transfer
5

Step1

1. Customers and merchants have to register with Oxicash with the help of WAP/GPRS
enabled mobile phone by visiting www.oxicash.in/wap and create their own account by
entering sufficient information.

2. Oxicash instantly sends a message on the mobile phone which contains 4 digit mPIN
numbers.

As the users receive 4 digit mPIN number one have to recharge the wallet by providing their
online bank account which are Oxicash partners bank account.

Step2

1. Another way of recharging the m-wallet is by direct purchasing the top up card and
entering the PIN number appearing on it.

2. Now a user can make the fund transaction by entering the 4 digit mPIN number.

3. Then oxicash m-payment server sends the transaction authorization request to the
banks if payment done by bank/credit card account or done self settlement if payment done by
topup card.

4. Transaction authorization response is received by clearing house.

5. Fund is transferred from payer’s bank account to payee’s bank account

6. Finally merchant receives the payment conformation.

33
12. Major Issues and Challenges for Mobile Payment Service Providers

1. Security issues: For widespread use and customer acceptance of m-payment services, both
perceived and technical levels of security should be high. For customers, privacy should not
be compromised and there should be no possibility of financial losses. For businesses,
customer authentication is important. As per the general framework of any secure messaging
system - confidentiality, integrity, non-repudiation and authentication should be guaranteed
by the m-payment services. The transport layer security offered by GSM/CDMA networks
sufficiently guarantees confidentiality (that messages cannot be read by anyone else) and
message integrity (the assurance that the message has not been altered in transit).
Authentication (identifies the author of the transaction) and non-repudiation (makes sure that
any of the users in the system cannot later deny the message they sent) can only be guaranteed
with the help of wireless public key infrastructure (WPKI) and digital certificates. Secure
mobile payment transactions can be implemented using existing national public key
infrastructure, which is independent of financial institutions, mobile network operators and
mobile payment application service providers but can be used by all of them. Their proposed
technological solution to provide secure mobile payment transaction is briefly described
below.

2. Simplicity and Usability: The m-payment application must be user

friendly with little or no learning curve to the customer. The customer
must also be able to personalize the application to suit his or her
convenience.

3. Universality: M-payments service must provide for transactions between

one customer to another customer (C2C), or from a business to a
customer (B2C) or between businesses (B2B). The coverage should
include domestic, regional and global environments. Payments must be
34
 possible in terms of both low value micro-payments and high value macro-
payments.

4. Interoperability: Development should be based on standards and open

technologies that allow one implemented system to interact with other
systems.

5. Privacy and Trust: A customer must be able to trust a mobile payment

application provider that his or her credit or debit card information may
not be misused. Secondly, when these transactions become recorded
customer privacy should not be lost in the sense that the credit histories
and spending patterns of the customer should not be openly available for
public scrutiny. Mobile payments have to be as anonymous as cash
transactions. Third, the system should be foolproof, resistant to attacks
from hackers and terrorists. This may be provided using public key
infrastructure security, biometrics and passwords integrated into the
mobile payment solution architectures.

6. Cost: The m-payments should not be costlier than existing payment

mechanisms to the extent possible. A m-payment solution should compete
with other modes of payment in terms of cost and convenience.

7. Speed: The speed at which m-payments are executed must be

acceptable to customers and merchants.

8. Cross border payments: To become widely accepted the m-payment

application must be available globally, word-wide.

13. Messaging Standardization for Mobile Payments - Mobile Payment Forum, India

Mobile Payment Forum a body working with IDRBT under RBI is concerned with the messaging
standardization for mobile payments systems in Indian. According to RBI to create interoperability
between the various mobile payments system partner a common messaging system should be
launched which are defined below.

i) The customer of one mobile system should be able to avail the services offered by the other
mobile payment systems.

ii) The customer of one mobile system should be able to transfer/receive money from the customers
of other mobile payment systems.
Entities

1. Mobile Payment System providers

2. Banks
3. Customers of the Mobile Payment System providers
4. Merchants
5. Gateway & Settlement Agency

The mobile payment ecosystem consists of member financial institutions, customers, merchants and
the various mobile payment service providers. The technology used is proprietary and heterogeneous.
The security and transaction flow is approved by financial institutions.
35
Customer always directly interacts with their mobile payment service provider for the transaction
authorization and will not be able to interact with other mobile providers directly. It is mobile
payment provider’s responsibility to authenticate the customer. It is always a one to one relation.
However, customers can be acquired by multiple payment providers and the mobile technology
allows the use of multiple payment technologies.

The customer of one mobile payment provider should be able to avail the services provided by the
other mobile payment provider. The mobile payment provider needs to get the payment guarantee
when the customer of other mobile provider avail the services in its system. The mobile payment
provider who acquires the transaction has to interact with the customer’s mobile payment provider to
get the financial authorization.

A common gateway and settlement agency is required to provide routing between the various mobile
payment providers and for the settlement amongst themselves.

Given below are the message sets for the various purposes of integration between the Payment service
providers

Message Formats

Sale Transaction/P2P transaction

Data Element Format Request Response Comments

Message Type ID N4 0200 0210 -

Bit Map B64 M M

P2 Primary Account Number N.19 M Mobile/Proxy Number

of the customer

P3 Processing Code N6 M M

P4 Transaction Amount N12 M M Amount

P11 Systems Trace Number N6 M M

P12 Transaction Time N6 - M

P13 Transaction Date N4 - M

P24 Network ID N3 M M

P37 Retrieval Reference AN12 - M

Number

36
 Data Element Format Request Response Comments

P38 Authorization ID Response AN6 - O

P39 Response Code AN2 - M

P41 Card Acceptor Terminal ID ANS8 M M

P42 Card Acceptor ID ANS15 M - Acquirer id(acquiring

Bank)

Sale/P2P transaction Reversal Transaction

Data Element Format Request Response Comments

Message Type ID N4 0400 0410

Bit Map B64 M M

P2 Primary Account Number N..19 M M

P3 Processing Code N6 M M

P4 Transaction Amount N12 M O

P11 Systems Trace Number N6 M M

P12 Transaction Time N6 - M

P13 Transaction Date N4 - M

P24 Network International N3 M M

P37 Retrieval Reference AN12 M

Number

P38 Authorization ID Response AN6 O

P39 Response Code AN2 M

P41 Card Acceptor Terminal ANS8 M M

P42 Card Acceptor ID ANS15 M

AN - alphanumeric data type

N - Numeric data type

B - Binary representation of data

M - Mandatory/required to be included in the message.

C - Conditional

37
 O - Optional

Settlement messaging system - Offline

At the end of the day, the Master Settlement Agency (MSA) provides the net settlement positions
between the various payment service providers. The MSA here shall act as the clearing house. This
settlement will happen on a T+1 day basis. This will be done offline.

The MSA will send the following information in the format given below to each of the service
providers

List of transactions where the Payment Service Provider is credited

INWARD SETTLEMENT REPORT

Acquiring Acquiring Issuing Issuing
financial Mobile Mobile financial
Sl. Time institution Payment Payment institution Customer Reference
No. Date stamp ID system ID Provider ID ID ID ID AMOUNT

In the above report, the MSA will give the details of all the transactions reflected where the Payment
Service Provider is receiving money.

List of transactions where the Payment Service Provider is credited

OUTWARD SETTLEMENT REPORT

Issuing
Acquiring Acquiring Mobile Issuing
financial Mobile Payment financial
Sl. Time institution Payment Provider institution Customer Reference
No. Date stamp ID system ID ID ID ID ID AMOUNT

In the above report, the MSA will give the details of all the transactions reflected where the Payment
Service Provider is receiving money.

Net Settlement Report

In this report, the MSA will give the details of the net settlement between the various acquiring and
issuing financial institutions.

S.no Issuing Acquiring Acquiring issuing Count of Amount Count of Amount Net Settlement

38
 Mobile Mobile financial financial Inward Payable outward Receivable Amount
Payment Payment Institution Institution Transactions Transactions
Provider Provider ID
ID

Grand
Total
Note: fee details are not added and can be discussed in the final version of the document.

Source: Messaging Standardization for Mobile Payments - Mobile Payment Forum, India – March 2008

14. Regulatory policies and standards Issues by RBI

According to RBI (Reserve Bank of India) in its operative guideline for banks it is mentioned that

1.3 Providing the framework for enabling mobile payments services to banking customers would
generally involve the collaboration of banks, mobile payments service providers and mobile network
operators (MNOs). The service can also be provided as a proximity payment system, where the
transactions are independent of the MNOs. In mobile payment systems, the banks provide the basic
service framework, ensure compliance to KYC/AML norms, creates a risk management and
mitigation framework, and ensures settlement of funds. The mobile payments service providers are
intermediaries for providing the technology framework for the implementation of the mobile
payments services. The mobile network operators provide the telecom infrastructure and
connectivity to the customers. Their role is limited to providing the SMS/WAP/GPRS/USSD/NFC
GSM or CDMA voice and data services connectivity and in hosting the certain technology
solutions like USSD. In a Non-MNO based systems, proximity or contactless channels like IRDA,
RFID, Optical, NFC, etc. are used for communication between POS and the mobile phone of the
customer.

RBI declared that the payment service providers will be acting as an intermediary between bank and
customers for providing the technology framework now here one thing is clear that to submit the
electronic information of both the parties’ payer as well as payee which will be further communicated
between banks and Clearing Houses for fund transfer will be done by mobile payment service
providers only
About mobile network operators RBI says that their role would be limited up to
providing telecom infrastructure and customer connectivity in certain technologies those are

1. SMS
2. WAP/GPRS
3. USSD
4. IVR
5. NFC

TRAI on mobile payment issue says that Mobile Payment Service providers should have the
independence to develop and launch customized applications targeted towards their customer base
however messaging system between application and Banks needs to be regulated. This will lead to
standardization of the transaction processes and settlement systems. These should include

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 • Instruction formats for all mobile initiated payments, remittances and banking
• Instruction formats for all mobile initiated payments, remittances and banking
• Security standards for instructions, interfaces, data storage and transactions
• Technology standards and guidelines for various modes of data transfer like SMS, GPRS etc.
• Sign up for service: Existing or new customer: Bank controlled through regulated KYC
• Transaction: PIN based transactions in terms of domestic transfers.
• Anti Money Laundering: monitoring carried out by the Bank
• Transactions monitoring controlled at the banking end
• Agent appointment responsibility with the bank

15. References

Figures Page Number

Fig: 1 Business Model Value Chain for M-Payments 6

Fig: 2 Generic Models for M-Payments Application Service Provider 10

Fig: 3 Technical Architecture Models for M-Payments Application Service Provider 12

Figure 4: Comparative Analysis of M-Payment Services Providers 15

Tables

Table 1: Technology provided by MPSP’s for mobile phone integrating process 16

with the bank a/c or fund source

Table 2: Technology Acceptability among companies 16

Table 3: Technology used in payment instruction process 16

Table 4: Payment Instruction process technology acceptability 17

Table 5: Payment Instruction process technology acceptability 17

Table 6: PSP’s providing P2P and P2M facility 17

Table 7: Technology provided to merchants for performing mobile payments 18

Table 8: PSP’s comparison of different fund integration techniques 19

Table 9: Technology provided to merchants for performing mobile payments 19

Table 10: MPSP’s charging for integrating the mobile devices to merchants and customers 20

Table 11: MNO’s charges for sending payment instruction by mobile phones 21

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Table 12: Bank charges for fund settlement and clearing system 21

Table 13: Bank transaction charges for fund settlement and clearing system 22

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