Mobile Payment Industry in China

Trends and Prospects of Mobile
Payment Industry in China 2012-2015

Creating Innovative Models,
Boosting Mobile Financial Services
Financial Services Industry Center of Excellence, Deloitte China

Technology, Media and Telecommunications, Deloitte China
Table of contents
Foreword
Mobile payment is attracting more and more attention throughout the world
What is mobile payment?
Development of mobile payment in other parts of the world
Current situations and challenges of mobile payment industry in China
16
Prospects of mobile payment ecosystem in China
50
Conclusions
58
Methodologies
59
Foreword
Mobile payment, as a form of business spanning across different sectors, has existed for quite a long time.
However, a sufficient scale has not been formed globally due to a number of reasons such as the complexity
of industry environment, the diverse range of the value chain, the involvement of different sectors, and the
difficulties in balancing the interests of different players. The mobile payment industry is still in its infancy
in China. for the interests of the players in the mobile payment value chain have long been affected by
government policies concerning this sector. The customer base is small, and the players could only explore
mobile payment opportunities on a limited scale and in the limited regions.
With the rising penetration of smartphones and 3G networks and the exponential growth of mobile
Internet applications, mobile payment has witnessed significant development. No matter in terms of value
of transactions, volume of transactions or the sectors covered, mobile payment has achieved substantial
breakthroughs. In China, financial institutions, operators, third-party payment (TPP) providers and other
main players are making robust moves in mobile payment, devising mobile payment strategies, and
developing and introducing mobile payment applications to explore this market. In general, the mobile
payment market is booming in China.
It is generally believed that mobile payment in China will step into a crucial phase for development in the
next 3 years. The players will have many decisions to make and many challenges to tackle: how to select
partners; how to avoid risks and deal with challenges in the future business development; how to take a
leading position, explore more application scenarios, develop new products and improve competitive edge
and maintain sustainable growth in competition and cooperation; and how to develop a mobile payment
ecosystem, achieve win-win results and boost the industrialization process in a proactively, steady and orderly
manner. These issues have strong relevance to all the players in the value chain and close linkage to the
development of the mobile payment industry.
In order to help businesses and organizations better capture opportunities and address challenges, we have
produced the report: Trends and Prospects of Mobile Payment Industry in China 2012-2015. We have surveyed
over 100 organizations and conducted face-to-face interviews with over 20 business executives and managers
within the mobile payment value chain. Based on the experiences and lessons from overseas mobile payment
practice, we have analyzed thoroughly on the current situation and challenges of mobile payment industry
in China and presented an outlook on the development of mobile payment ecosystem, industry and market
trends in China. We would also like to take this opportunity to share and exchange views with the players in
the industrial chain, strengthen cooperation with them and push forward the development of mobile payment
industry in China. At the same time, we hope that the report can provide valuable references to assist them in
strategic planning and implementation.
At the time when the report is about to be released, we would like to extend sincere gratitude to the experts
and elites from different fields participating in the research for their strong supports and commitments.
Dr. Pengcheng Wang

Managing Partner,
Deloitte China Financial
Services Industry Leader
Mr. William Chou

Managing Partner,
Deloitte China Technology,
Media & Telecommunications
Industry Leader
Trends and Prospects of Mobile Payment Industry in China 2012-2015 - Creating Innovative Models, Boosting Mobile Financial Services 1
Mobile payment is attracting more and

more attention throughout the world
As an emerging means of payment, mobile payment is attracting more and

more attention throughout the world due to it can improve user experience and
provide new opportunities for financial institutions, operators, TPP providers
and merchants. The mobile payment industry has been growing rapidly in recent
years both in terms of user base and transaction volume. It is a hot spot area with
tremendous opportunities and growth potentials in China. The competition
among the different players in the value chain is getting more and more intense.
Driven by the growing demands from the
consumer side for mobile payment and the rapid
rise and growth of e-commerce and mobile
Internet, mobile payment is attracting more
and more attention throughout the world. It is
also showing a strong momentum of growth.
According to Gartner, the number of mobile
payment users in the world will reach 212 million
by the end of 2012, three times of the size in
2009 (70 million) and with a compound annual
growth rate of 44.73%. It is expected that the
growth momentum will continue in the coming
years. The number of mobile payment users in the
world will reach 384 million by 2015 (see Figure
1). As the user base increases, the total value of
global mobile payment transactions keeps rising.
The value of global mobile payment transactions
will amount to $171,520 million by the end of
2012 while it was only $25,559 million in 2009.
It is expected that the value of global mobile
payment transactions will arrive at $472,805
million by 2015, which indicates that the average

value of mobile payment transaction per user will
be above $1,0001. (See Figure 2)
Figure 1: Global mobile payment user base

(by 100 Mn)
Figure 2: Value of global mobile payment

transactions (in $100 Mn)
The rapid rise of mobile payment and the growing

interests in this sector can be attributed to the fact
that mobile payment can bring different added
values to different participants. For the user, mobile
payment improves the easiness and security of
payment process. On one hand, mobile payment
simplifies the transaction process. Using contactless
payment is more convenient than swiping
traditional credit cards. The electronic wallet can
integrate multiple cards, tickets, certificates, and
coupons together, thus reducing the trouble of
carrying multiple cards and achieving visualized
management of cards, tickets, certificates, and
coupons; on the other hand, the smart chip can
also support authentication functionality and
enhance payment security. For financial institutions,
developing mobile payment and improving the
4,728.05
3.84
2.12
1,715.20
0.70
2,55.59
2009
2012
2015
2009
Source: Gartner, Forecast: Mobile Payments, Worldwide, 2009-2016, May 2012
2012
2015
Forecast: Mobile Payments,

Worldwide, 2009-2016,
Gartner, May 2012
convenience and security of mobile payment can

help them create differential advantages in the
fierce competition. For operators, mobile payment
can bring new revenue sources and help them
reduce the churn. Operators are experiencing
revenue decline caused by the decline in traditional
voice services and SMS services. The fast-growing
demand for data traffic not only reduces the profit
margins of operators but also causes huge load
on operators' networks. Through mobile payment
services, operators may enter mobile e-commerce,
financial services and other areas to gain more
benefits. At the same time, offering mobile
payment services can help them enhance user
stickiness, thus reduce the churn. For merchants,
mobile payment digitalizes consumers' behaviors
and allows the merchants to get complete records
of consumer information. Merchants may launch
customer loyalty programs such as giving reward
points and issuing payment coupons in a more
targeted manner, thus enhance customer loyalty.
The Chinese government is also increasing

policy support to mobile payment in different
facets. The Outline of the 12th Five-Year Plan for
National Economic and Social Development of
China proposed to "actively develop e-commerce,
improve e-commerce services for SMEs, and
promote the building of credit service, online
payment, logistics and other supporting systems
for the public". Mobile payment infrastructure, as
a critical infrastructure for mobile e-commerce,
will benefit from government initiatives aimed
at boosting e-commerce. The 12th Five-Year
Plan for the Development of Software and IT
Service Industry, the 12th Five-Year Plan for the
Development of Communications Sector, and
other important policy documents published
subsequently all contain description of encouraging
the development of mobile payment. In light of
China's huge mobile phone subscriber base as well
as the potential demand for financial payment,
it can be predicted that the wave of the mobile
payment will sweep across the Chinese market and
the mobile payment may catch up from behind.
Mobile payment is facing unprecedented

opportunities in China and is showing a strong
growth momentum. According to the People's
Bank of China (PBC), the mobile payment customer
base amounted to 145 million in China as of
the end of 2011, an increase of 55 million users
compared with 90 million in 2010 or an increase
of 61.11% over 20102. With the fast growth of
mobile payment customer base, mobile payment
transaction volume also increased rapidly. There
were 247 million payment transactions in 2011, an
increase of 109% over 20103. (See Figure 3)
In order to gain a deep and comprehensive

understanding of the current situation and the
future trends of the mobile payment industry in
China, discuss the business models suited to China's
national conditions and build a virtuous ecosystem
featuring win-win cooperation, we have conducted
this report through the extensive surveys and
questionnaires and intensive face-to-face interviews
with the players participating in the value chain
and based on our experience gained from the
development of global mobile payment industry and
our deep insight into the Chinese market, which
aims at answering the following questions.
Figure 3: Mobile payment transactions

volume in China (by 100 Mn)
2.47
PBC's data on mobile

payment customer base
comes from the reports
and statements of financial
institutions in China and
may differ from Gartner
in terms of the source of
mobile payment user data.
A national mobile payment
standard could be released
within the year, Hexun.
com, April 20, 2012,
http://tech.hexun.com/2012
-04-20/140602963.html
1 What is mobile payment?

2 How is mobile payment developing in other
parts of the world?

3 How is the current situation of China's mobile
payment and what are the challenges?
1.18
4 What are the characteristics of the existing
business models and what are the prospects

for future development?
0.67
2009
5 How to build a mobile payment ecosystem

2010
2011
Source: China Payment System Development Report

2010, PBC, 2011; Hexun.com, 2012
with Chinese characteristics?

6 What are the development trends of China's
mobile payment industry in the coming

three years?
What is mobile payment?
Mobile payment is a form of payment where a user uses mobile device to realize
information exchange and complete fund transfer from the payer to the payee
for the purpose of payment by way of accessing communication networks or
using short-range communication technologies. By transaction targets, mobile
payment can be classified into person-to-person payment (P2P payment) and
customer-to-business payment (C2B payment); by communication range, mobile
payment can be classified into remote payment and proximity payment.
Definitions and classification of mobile payment
There isn't a universally shared and accepted
definition on mobile payment across the industry.
Different players and research institutes define
mobile payment differently from their own
perspectives. For instance, Gartner defines mobile
payment as a form of payment where transactions
are conducted on a mobile phone and using
payment instruments that include bank accounts,
bankcards, and stored value accounts (SVAs)
and exclude transactions using the carrier billing
system for payment, payment via an interactive
voice response (IVR) system (excluding IVR used
in combination with other mobile channels such
as SMS or USSD), or payment via smartphones
using plugins to realize POS functions4. In contrast,
Forrester's definition is much broader. It defines
mobile payment as "a transaction in which the
transfer of fund is initiated using a mobile phone
- excluding the 'voice' function of the device"5.
In this report, based on our understanding on

mobile payment and in light of the views of major
research institutes and mobile payment players, we
believe that mobile payment is a form of payment
where the user uses a mobile device to realize
information exchange and complete fund transfer
from the payer to the payee for the purpose of
payment by way of accessing communication
networks or using short-range communication
technologies. Compared with the definitions of
other organizations, our definition is much broader
and may include main forms of mobile payment in
the market.
Mobile payment can be classified differently
depending on different dimensions. Currently, one
of the universally accepted classification methods
is to classify mobile payment into remote payment
and proximity payment. By transaction targets,
mobile payment can be classified into P2P payment
and C2B payment. (See Figure 4)
Figure 4: Classification of mobile payment

P2P payment
Contactless payment
Mobile device POS
Remote money transfer
Remote online payment (mobile

e-commerce, digital products)
Remote
payment
Proximity
payment
Contactless payment
Source: Deloitte Consulting, 2012

4
C2B payment
Forecast: Mobile Payments,

Worldwide, 2009-2016,
Gartner, May 5, 2012
Mobile Payments Enter A

Disruptive Phase, Forrest,
March, 2011
Remote payment, also known as online payment,

is a way of payment where the user uses a mobile
device to access the mobile payment back-end
system via mobile communication networks and
complete the payment behavior. Based on the
classification of P2P and C2B payment, remote
payment can be classified into remote fund transfer
and remote online payment. A typical remote
payment process usually takes place when the
user makes a purchase at an e-commerce website
through a mobile device. When the user comes to
the payment interface provided by the merchant,
the interface will switch to the payment page of
mobile banking or the TPP provider to enable the
user to complete the payment process. In addition,
mobile payment via SMS and IVR also fall into the
category of remote payment.
Proximity payment is a form of contactless
payment where the user uses a mobile device
to realize information exchange and complete
payment by way of short-range communication
technologies. The common short-range
communication technologies include Bluetooth,
infrared, RFID, and other technologies. Near Field
Communication (NFC) is currently the mainstream
technology. The United States, Europe, Japan

and some other countries are starting to promote
NFC technologies. Moreover, the smartphone
with a plugged-in card reader can have the same
functions as a POS device. This model is similar to
Square mobile payment, which also falls into the
category of proximity payment. Such payment
model started from Square, a company based
in the United States. Then, PayPal and other TPP
providers launched similar products subsequently.
There are also similar players in China like Qfpay
and iBoxPay.
Mobile payment technology

Mobile payment can be realized by different
technologies. The mainstream technologies
currently include SMS, WAP/Web, USSD and NFC,
among which SMS, WAP/Web, and USSD mainly
support remote payment while NFC is used for
proximity payment. From a global scale, SMS-based
remote payment will maintain its mainstream
position in the coming three years, while WAP/
Web-based remote payment will grow rapidly. NFC
mobile payment will keep growing in the coming
years. (See Figure 5)
Figure 5: Global mobile payment transaction volumes by technology (in $100 Mn)
18,000
16,000
SMS
WAP/Web
USSD
NFC
1,680
1,239
14,000
12,000
1,165
932
10,000
852
627
8,000
6,000
618
4,000
217
60
57
633
2,000
0
2009
1,300
2010
321
146
241
670
2,196
2011
457
256
1,359
3,323
2012
5,152
3,572
2,309
407
6,137
7,922
4,680
2013
2014
2015
Source: Forecast: Mobile Payments, Worldwide, 2009-2016, Gartner, May 2012
In addition to those four mainstream technologies,

mobile payment can also be realized through
Bluetooth, infrared, bar-code, and plugged-in card
readers. Judging from the maturity of technologies,
mobile payment technologies are mature enough
to support its commercialization. In China, the
players in the value chain have introduced mobile
payment services backed by different technologies.
According to the survey of Deloitte, WAP-based

payment, SMS-based payment and NFC mobile
payment are the services provided the most by
respondents, accounting for 44.14%, 40.54%
and 32.43% respectively. In their future service
offerings, 27.93% respondents plan to provide
NFC mobile payment, ranking No. 1. (See Figure 6)
Figure 6: What types of mobile payment services your company or organization has already
provided or plan to provide?
Existing offerings
Planned offerings
WAP-based payment
44.14%
SMS-based payment
40.54%
NFC proximity payment
32.43%
Java-based payment
Embedded credit card
payment
USSD-based payment
Plugged-in card reader
27.93%
Embedded credit card

payment
6.31%
2.4G
1.80%
RFID
1.80%
13.51%
WAP-based payment
9.91%
3.60%
14.41%
Java-based payment
22.52%
2D Bar-code payment
27.93%
NFC proximity payment
SMS-based payment
USSD-based payment
11.71%
9.91%
5.41%
Source: Mobile Payment in China Survey, Deloitte China, 2012
Among different technologies, SMS-based

payment is the most mature mobile payment
technology. According to the survey results,
49.54% respondents consider SMS-based payment
technology as mature. The WAP-based payment
is relatively mature and 64.15% respondents

consider WAP-based payment as mature and ready
for deployment. NFC mobile payment is still at the
early phase of development with 50% respondents'
believing that it is still in a trial phase.
Figure 7: According to your knowledge, which development phases do the following mobile
payment technologies belong to in China?
NFC-based payment
IVR-based payment
WAP-based payment
USSD-based payment
SMS-based payment
0%
20%
No plan
Planning phase
40%
Trial phase
60%
80%
Ready for deployment
100%
Mature
Development of mobile payment

in other parts of the world
The development of mobile payment varies from country to country in terms

of maturity and penetration. Different countries have selected different
technologies and business models suited to their own realities. From the
participants' perspective, the development of mobile payment is mainly driven
by the interaction and competition among the major players in the value chain
including financial institutions, operators, TPP providers, mobile payment
technology and service providers and equipment vendors. On a global scale,
Japan and Korea have the most mature mobile payment sector; proximity
payment is growing at a relatively slow pace in West Europe and the United
States; developing countries like India are fueling the development of mobile
payment; mobile payment has played a big role in financial inclusion in the
underdeveloped regions in Africa.
Japan a process led by operators and with
the active participation of banks
Gary Kim, 10% of Japanese

Mobile Users Made Mobile
Payments in December
2010, Feb. 14, 2011,
http://mobilemarketingand
technology.com/2011/02/14/
10-of-japanese-mobile-users
-made-mobile-payments-indecember-2010/
Analysis of Operating
Model of NTT DoCoMo's
Mobile Payment Services,
Communications World
Weekly, Jan. 15, 2008,
http://www.techweb.
com.cn/news/2008-0115/289923.shtml
The mobile payment adoption rate is high in Japan,

much higher than the United States and Europe,
and the business model is relatively mature as
well. In Dec. 2010, there were about 98 million
subscribers using mobile payment services6. The
mainstream technology used in Japan is FeliCa,
a contactless RFID technology from Sony. NTT
DoCoMo, a mobile network operator in Japan, has
a dominant position in Japan's mobile payment
market. Based on its huge subscriber base, NTT
DoCoMo extended its control along upstream and
downstream of the value chain by various means
such as conducting mixed operations and holding
equities of banks and credit card companies. It
has achieved tremendous success in this area. The
biggest advantage of the NFC mobile payment
offered by NTT DoCoMo is the ease of use. It
significantly simplified the complicated payment
process and greatly facilitated the use of mobile
payment. However, a successful mobile payment
business also requires the support of banks and
merchants. To motivate banks and merchants,
NTT DoCoMo injected capitals into them to
enhance control over the mobile payment value
chain. For instance, NTT DoCoMo invested 100
billion yen and acquired 34% stake in Sumitomo
Mitsui Card Company in April 2005; it injected
10 billion yen to UC Card, a company associated

to Mizuho Financial Group, and acquired 18%
stake of UC Card in March 2006. Judging from
the realities, NTT DoCoMo's initiatives generated
very handsome returns. Sumitomo Mitsui Banking
Corporation and NTT DoCoMo NTT jointly issued
ID debit card, which enabled NTT DoCoMo's
mobile payment business to break limits of micropayment. DCMX credit card business helped NTT
DoCoMo extend the mobile payment services to
the area of consumer credits7.
There are four main reasons why mobile carriers
dominated the mobile payment industry in Japan:
1) the light financial regulation in Japan lowered
the thresholds for mobile carriers to enter the
financial area; 2) Japanese consumers are not
frequent credit card users and their dependency on
credit card is relatively lower than other developed
countries. Banks in Japan were allowed to issue
credit cards until 2004. As a result, the credit
card market in Japan was small, which presented

opportunities for the development of mobile
payment in Japan; 3) banks in Japan were busy
with the restructuring and consolidations in the
banking sector and the main banking system was
also faced with huge amount of non-performing
loans, which reduced the difficulties for operators
to consolidate banks; 4) the huge subscriber
base is also a success factor for the growing and
prospering mobile payment market in Japan.
However, the FeliCa technology is incompatible

with NFC, a global mainstream mobile payment
technology. FeliCa is not supported outside of
Japan. To resolve the incompatibility problem, the
mobile carriers jointly set up a mobile payment
alliance with the goal of increasing the popularity
of NFC standards in Japan and helping Japan get
out of the plight of being an "island" in mobile
payment in collaboration with mobile device
manufacturers and agents8.
Financial institution:
Bank of Tokyo-Mitsubishi UFJ (BTMU)
Bankcard organization:
Credit Saison (card issuer)
In April 2006, BTMU and KDDI, a telecom operator

in Japan, set up a joint venture - Jibun Bank. KDDI's
mobile subscribers can use their mobile phones
to pay for products and services. Fund transfer
between non-KDDI subscribers will require the
sender to use his or her mobile phone to input the
receiver's phone number and amount of money.
To make a deposit or withdraw cash, the customer
may use ATMs set up at BTMU, Seven Bank and
Japan Post Bank.
Credit Saison, a card issuer, and American Express

tested the SIM-based NFC payment on an Android
phone in SoftBank's network and they also tested
American Express' contactless payment services at
the same time.
Telecom operator: NTT DoCoMo

NTT DoCoMo introduced i-mode Felica mobile wallet solution in July 2004 and opened a new era of mobile
payment in Japan. KDDI and SoftBank, the other two major mobile operators in Japan, joined the Felica camp
in Sept. 2005 and launched 'EZ Felica' and 'S-Felica' respectively.
Technology provider: Toppan Systems

Toppan Systems developed field service/assets
management system. The data gathered by NFCenabled handsets in the field will be automatically
sent back to the CRM system. Dai Nippon and
Gemalto provided NFC technology for Credit Saison.
Equipment manufacturers:
Samsung, Mophie
Samsung released NFC-Secure Application Module
chips based on the Felica network. Mophie, an
American supplier of protective case for iPhone, is
developing a protective case solution, which will
allow the mobile device to read and write the card
information through a FeliCa application.
Source: Management Consulting, Deloitte; the official websites of the above companies, and related media reports
Korea a process jointly led by operators

and banks and with the active support of the
government
The mobile payment industry in Korea is relatively
mature and has formed a certain scale. According
to a ROA's study report, the mobile subscriber base
8
in Korea amounted to 53.10 million as of the end

of 2011, with one subscriber having more than
one device. From December 2010 to December
2011, the smartphone subscriber base increased
by 16.30 million. It is expected that smartphone
subscriber base will account for 90% of the total
mobile subscriber base by 20139. At present,
Japan does not want to

become a payment silo.
The three giants introduces
compatible mobile
payment solutions, CNII.
com.cn, January 5, 2012,
http://www.cnii.com.cn/
gj/content/2012-01/05/
content_947366.htm
Korean LTE market forecast
2012, ROA Consulting,
Jan. 2012
70% of e-payment transactions are completed via

mobile phones in Korea and the mobile payment
subscribers account for 60% of the total mobile
subscriber base10.
The fast development of mobile payment in
Korea is attributable to the strong support of the
government to this sector. The Korean government
adopted a series of policies and created a good
environment to support the development of mobile
payment in Korea.
In the meantime, it is also attributable to the active
participation of multiple players in the value chain.
1) The active participation of mobile network
operators (MNOs). SKT, KTF and LGT, the three
major operators in Korea, have a firm control over
the mobile payment ecosystem and they enjoy a
dominant position in the value chain. They all offer
mobile devices supporting credit card features and
Felica-based smart prepaid card functions. SKT
launched its mobile payment brand - MONETA;
KTF introduced K-merce and LGT released mobile
banking services. To support 3G growth in Korea,
the operators adopted handset customization
strategies. SKT was the first to take the handset
customization strategy and it had a very strong
Financial institution: Kookmin Bank
10
11
CAO Liang, Operators

Attacks Mobile Payment
and the Final Standard
Will Be Released in the
First Half of Next Year,
Communications World
Weekly, Nov. 30, 2011,
http://roll.sohu.com/2011
1130/n327394219.shtml
Advantages of Low-Cost
Mobile Banking by YV Li,
PBC, Hexun.com, Nov.
30, 2011, http://tech.
hexun.com/2011-1130/135832958.html
Kookmin Bank introduced KB Star Banking services

a couple of years ago to provide personal banking
services for customers via smartphones. In 2012,
Kookmin Bank launched the direct payment
services, which allow users enjoy the convenience
of directly paying for their purchases with their
smartphone number. The user may start to use
this service for payment only by registering a bank
account through a mobile client - UbPay.
control on the handset. SKT Teletech, a subsidiary

of SKT, produces SKT customized handsets for SKT
subscribers. Based on user habits and features of
data services, SKT will provide recommendations on
handset customization and study the requirements
of new services on handsets in the development
and planning phase to guide the production of
other handset manufacturers. The main handset
suppliers for SKT are Samsung, 3COM, and SKT
Teletech. There are three models of cooperation
between SKT and handset manufacturers: first,
subsidizing handset. A subscriber may get a new
handset with new features at a low price but he
or she has to use the handset on SKT's network;
second, pre-loading some new applications onto
the handsets produced by SKT's subsidiaries;
third, selling handsets at SKT's agents. These have
provided strong support for the development of
SKT's data services.
2) Banks paid great attention to the mobile
banking sector. Banks are all investing in mobile
payment services due to the cost of mobile
banking transaction is only 1/511 of the face-to-face
transaction. Banks expect more mobile subscribers
to use mobile banking services due to it can reduce
costs significantly for banks. At present, all the major
banking terminals can identify mobile credit cards.
Bankcard organizations: MasterCard, VISA

There are over 130,000 POS devices supporting
contactless PayPass and payWave technologies
in Korea. KT E-Wallet and Olleh tablets support
MasterCard's PayPass and VISA's payWave
technologies. Users may use BC cards, Shinhan
cards, KB cards and Lotte cards to complete the
payment process.
Telecom operators: KT, SK

In 2011, KT introduced iCarte plans for iPhone, which equipped iPhone4 and iPhone4S with NFC capabilities.
In 2011, KT subscribers conducted 30 million NFC prepaid transactions with the transaction value reaching $9.5
million. SK had issued over 1.5 million NFC SIM cards and had 4 million "Smart Wallet: users.
Technology provider: Zong

Zong, a subsidiary of eBay, introduced the carrier
billing solutions to the market in collaboration with
SK Telecom and KT.
Equipment manufacturers: Samsung,

Pantech, LG
NFC-enabled handsets are very popular in Korea.
To date, Samsung has sold over 3 million NFCenabled Galaxy handsets; Pantech has sold over
1 million Vega Racer NFC-enabled handsets and
LG has sold about 500000 Optimus NFC-enabled
handsets in Korea.
12
BetterBuyDesign, Mobile
Payments in the United
States Mapping Out the
Road Ahead, the Federal
Reserve Bank of Boston,
Atlanta Federal Reserve
Bank, March 25, 2011
13
2012 mobile future,

ComScore, Feb. 23, 2012,
http://www.comscore.com/
Press_Events/Presentations
_Whitepapers/2012/2012_
Mobile_Future_in_Focus
14
Mobile Commerce
Forecast, 2011 to 2016,
Forrester Research, June
17, 2011
15
eBay Forecasts $8B In

Mobile Commerce Volume
In 2012; PayPal Will Reach
$7B, Techcrunch, Feb. 12,
2012, http://techcrunch.
com/2012/01/12/ebayforecasts-8b-in-mobilecommerce-volume-in-2012paypal-will-reach-7b/
16
Market Trends: Mobile

Payment, Worldwide 2011,
Gartner, June 6, 2011
17
Square Annual Payment

Transaction Value Reached
$5 billion, NetEase Tech
News, April 28, 2012,
http://tech.163.com/12/
0428/16/806MVIQQ000
94L5O.html
18
Last Meter of Mobile

Payment, Entrepreneur,
July 22, 2011,
http://money.msn.com.cn/
internal/20110722/
11521272214.shtml
19
Consumers and Mobile

Financial Services, U.S.
Federal Reserve, March 2012,
http://www.federalreserve.gov/
econresdata/mobile-devices/
2012-current-use-mobilebanking-payments.htm
Source: Management Consulting, Deloitte; the official websites of the above companies, and related media reports
The United States a process with the

participation of multiple players including
financial institutions, mobile carriers, TPP
providers and other technology providers
Generally speaking, mobile payment is still in the
initial stage in the U.S. The major stakeholders in
the entire ecosystem have divergent views on the
development and execution of mobile payment
in the U.S., which constrained the rapid growth
of mobile payment in the United States12. More
specifically, the remote payment is growing fast
while the proximity payment is developing at a slow
pace and NFC payment even encountered certain
difficulties in the United States. The Square model,
which can turn a smartphone attached with an
external card reader into a POS device, grew rapidly.
The mobile penetration in the U.S. is high and
the smartphone adoption in the United States is
also higher than many parts of the world. The
comScore data shows that by the end of 2011, the
smartphone subscriber base in the United States
exceeded 98 million and accounted for 42% of
the mobile subscriber base13. Mobile e-commerce
is also booming in the United States. According to
related data, the size of mobile e-commerce retail
market in the U.S. reached $6.7 billion in 2011,
representing an annual growth rate of 91.4% from
2010. The strong growth is expected to continue
well into 2015, when the mobile retail e-commerce
market will reach $31 billion14. The high
penetration of smartphones and the development
of mobile e-commerce are driving the evolution
of the mobile payment industry, especially the
development of remote payment in the United
States. The total value of mobile payment (remote
10
payment) transactions of PayPal, a TPP provider in

the U.S., exceeded $4 billion in 2011, representing
an increase of 433% from $750 million in 2010.
In 2009, the value of PayPal's mobile payment
transactions totaled only $141 million15.
The players in the value chain are also actively
participating in proximity payment. AT&T, Verizon
Wireless and T-Mobile set up ISIS, a joint venture
between the three major U.S. mobile network
operators, Discover Networks and Barclays. They are
trying to attract more players to develop contactless
mobile payment services16. In Sept. 2011, Google,
Citigroup, and MasterCard formally launched
Google Wallet NFC mobile payment services. Credit
cards are very popular in the United States; therefore
the benefits of NFC and other proximity payment
methods cannot be fully reflected. However, the
Square model, which turns a smartphone attached
with an external card reader into a POS device, grew
rapidly, with the annual transaction value standing at
$5 billion17. The benefit of such model is that there
is no need to use cash register or pay for hardware
and connection costs for the fixed and specialized
POS devices. At present, the downloaded and
installed POS system needs to share one operating
system with other applications. As a result, the
security issue has become a main obstacle to the
large-scale deployment18.
At present, the biggest hurdle to the development
of mobile payment in the United States on the user
side is their concerns over the security of mobile
payment. According to the statistics released by
the U.S. Federal Reserve, 42% of the respondents
expressed their concerns over the security of
mobile payment19. Specifically, there are mainly
four barriers to the development of NFC payment

in the United States: high infrastructure upgrading
cost, slow uptake of contactless payment,
difficulties in changing the old payment habits of

consumers and merchants and uncertainties in
revenue generation and business models20.
Financial institution: American Express
Bankcard organization: VISA
American Express (AmEx) acquired Revolution

Money, an online payment company, at a price of
$300 million in 2009 and expanded its footprint in
Internet-based payment. In 2011, AmEx introduced
"Serve", similar to PayPal. When a user opens a
Serve account and he or she can attach a credit
card account or a debit card account to the Serve
account or use MoneyPak prepaid card to top
up his or her Serve account. Then the user could
use account management and remote payment
features via a Serve mobile client. When the user
opens a Serve account, he or she will receive a
prepaid card and the user can make purchases
at any location supporting AmEx cards and even
withdraw cash at ATMs.
VISA adopted aggressive strategies and acquired

Trusted Service Managers (TSM), Fundamo and
Monitise. Fundamo started to offer mobile financial
service platform in 2000 and was one of the early
pioneers in this field in the world. There are 55 mobile
financial projects using the technology platform
offered by Fundamo around the world. Monitise is a
leading technology and service company delivering
mobile banking, payments and commerce networks
worldwide. There are over 250 financial institutions
using Monitise services in the United States. Monitise
served over 6 million customers in the world. VISA
also developed a VISA mobile platform, which can
be accessed by equipment manufacturers, mobile
network operators (MNOs) and financial institutions.
It supports remote payment and contactless payment
via mobile devices. VISA's contactless technology,
payWave is also compatible with NFC devices and
supports proximity payment.
Telecom operator: ISIS

AT&T, Verizon Wireless and T-Mobile cooperated with Discover and Barclays to set up a joint venture, ISIS, which
is committed to the R&D of mobile payment products targeted at smartphones and NFC technology. HTC, LG,
Motorola, RIM, Samsung, and Sony have expressed their intention to support ISIS-based NFC devices. A user may
make proximity payment with the merchants supporting ISIS and use ISIS mobile app to manage his or her accounts.
20
Mobile Payments in the

United States Mapping Out
the Road Ahead, the Federal
Reserve Bank of Boston,
Atlanta Federal Reserve Bank,
BetterBuyDesign, March 25,
2011
Technology provider: Square
Equipment manufacturer: Samsung
Founded in February 2009, Square is a mobile

payment services provider, which allows merchants
to use their smartphones to accept credit card and
bankcard payment. Square's card swipe dongles
is a small square card reader, which plugs into the
mobile phone. With the Squareup app downloaded
from Android Market and iTunes App Store and
installed on the mobile phone, the dongle can
convert a mobile phone into a card swipe device
similar to a POS device. At present, the annual
payment transaction value has reached $5 billion.
Samsung introduced Galaxy NFC handsets in

the U.S. Market. HTC, LG, Motorola, RIM, and
Sony have introduced or are about to introduce
NFC handsets.
Source: Deloitte's Management Consulting; the official websites of the above companies, and related media reports
Europe - mobile payment services jointly

developed and operated by European operators
in partnership with banks
The mobile payment services in Europe are jointly
operated by European operators. Banks are
partners and they do not engage in operational
activities. The survey of comScore shows that in
March 2011, 8.5% of mobile subscribers in the
U.K., France, Spain, Germany and Italy made
mobile payments via their handsets21. From the
technology perspective, European operators and
banks are more inclined to use SIM cards as tools
for proximity payment for the sake of balancing the
interests among different stakeholders and fueling
Financial institutions:
BNP Paribas, Barclays Capital
France Telecom and BNP Paribas announced in
July 2011 that they would jointly develop mobile
banking services, which will allow users to have
remote control of their accounts and make
remote payment. Orange and Barclays Capital also
introduced mobile payment services, which utilize
NFC handsets with Quick Tap features to support
micro-payments with a value less than 15 pounds
at over 50000 shops in the United Kingdom.
the development of mobile payment in Europe.

In Europe, the biggest road-blocker for mobile
payment is the difficulties in changing consumer
habits. For instance, Barclays issued 8 million
contactless cards in the U.K. since Sept. 2007;
however, there were only 150,000 transactions in
Sept. 2010, less than 4 transactions per POS device
on average. According to the survey conducted
by Ifop in 2011, 59% consumers in France had
no interest in mobile payment22. Therefore, the
awareness of mobile payment should be further
increased among the consumers in Europe.
The players in the value chain need to provide
incentives to drive the change in consumer habits.

VISA and Groupe BPCE, the second largest bank
in France, announced in June 2011 to have the
trial operation of microSD- and NFC-based mobile
payment in Nice.
Telecom operators: Vodafore, Telefonica O2, Everything Everywhere

On June 19, 2011, Vodafore, Telefonica O2 and Everything Everywhere announced the plan to set up a joint venture
to explore mobile payment market. The joint venture will develop a mobile wallet product based on NFC technology
and create a central portal for advertisers to offer discount services.
Technology providers: Buyster, G&D
Equipment manufacturers: Samsung, Fujitsu
Buyster (a French mobile payment company jointly

set up by Atos Origin, Orange, SFR and Bouygues
Telecom) introduced online payment system
in mid-September, 2011. It was committed to
developing a payment platform suited to mobile
e-commerce, which will link the bankcard with
the mobile phone number. The user may make
payment via the mobile phone number. Telefonica
Digital and G&D reached an agreement to set up
a Europe-wide NFC service platform. G&D will
provide TSM technology for this solution.
Starting from May 2010, Orange France conducted

a pre-commercial trial on mobile payment on
Samsung's Player One Cityzi in Nice. In February
2012, Fujitsu made an announcement to introduce
NFC handsets in Europe.
Source: Deloitte Research; the official websites of the above companies, and related media reports
12
21
ComScore data, Europe:

mobile payment users
using smartphones
increased by 40%, www.
c114.net, May 28, 2011,
http://www.c114.net/
news/17/a604947.html
22
Market Trends: Mobile

Payment, Worldwide 2011,
Gartner, June 6, 2011
India - operators and banks working together

to explore mobile financial markets in rural
regions
companies will work together to deliver mobile

banking services. Such cooperation will not only
opened new revenue sources for operators, but
also bring more customers for banks23.
The mobile payment industry in India witnessed

landmark progress in recent years. In Jan. 2011, the
two telecom giants in India signed agreements with
the top 2 Indian banks to explore mobile payment
services in India. Bharti Airtel is the largest mobile
network operator (MNO) in terms of user base in
India. State Bank of India is the biggest bank in
India in terms of asset value. The two companies
co-funded 1 billion rupees (about RMB145 million
yuan) to set up a joint venture, which provides
banking and financial services via mobile handsets.
Vodafone (Essar) is the third largest MNO in India.
ICICI Bank is India's largest private bank. The two
The cooperation between operators and banks

in India is largely dependent on government
policies. India has a huge mobile subscriber
base. As of March 2012, the number of mobile
subscribers in India amounted to 919 million 24.
India has 600000 villages, among which only
50000 villages have the presence of financial
institutions. Thus, the central bank of India urged
the banking sector to expand their business to
villages and suburbs. The banking sector also
expected to accelerate the pace of expansion
through the collaboration with MNOs.
Financial institution: HDFC
HDFC, the second largest bank in India and

Movida, a mobile payment platform provider,
formed a partnership to deliver mobile payment
service, which allows HDFC users to pay bills, buy
tickets and make other purchases via handsets.
The service does not require superb hardware
configurations and the user may use this service on
any operator's network.
VISA and Monitise set up a joint mobile payment

company - Movida, which is working with HDFC in
the field of mobile payment. PayMate, India's large
mobile e-commerce company, is collaborating with
local partners to deliver related services.
Telecom operator: Bharti Airtel

Bharti Airtel launched Airtel Money service, which allows prepaid customers to top up their accounts, buy tickets
and pay bills over the air (OTA). The service can be delivered through SMS, USSD and GPRS/3G, which indicates that
there is no particular requirement on the hardware.
23
24
The wind of mobile

payment is getting
stronger, CNII,
People's Posts and
Telecommunications News
(PPTN), Jan. 19, 2011,
http://www.cnii.com.cn/
index/content/2011-01/19/
content_833252.htm
India's mobile subscriber
base touches 951.34
million, TT Correspondent ,
May 7, 2012,
http://www.telecomtiger.
com/PolicyNRegulation_
fullstory.aspx?passfrom=to
pstory&storyid=14145&sec
tion=S174
Technology provider: Ngpay, Paypal

Ngpay, India's largest mall on mobile, supports
credit card top-up option. PayPal plans to
introduce an external card swipe device plugged
into iPhone in India.
Equipment manufacturer: Nokia

Nokia established cooperative relations with YES
Bank, a commercial bank in India, to introduce
mobile payment services in 2010. Later, Nokia
worked with Union Bank to launch bill payment,
money transfer and other services.
Africa - the operating model of mobile

payment affected by financial regulatory
environment
Despite of the economic underdevelopment in
Africa, Africa is one of the most active mobile
payment markets in the world. The severity of
financial regulation determines the choice of
business models. Some countries selected the
operator-dominant model while some countries
chose operator/bank cooperation model. Africa has
nearly 500 million mobile phone subscribers. The
mobile penetration in Africa is expected to reach
56% by 2014. Financial services are underdeveloped
in rural areas in Africa. According to related
statistics, more than 60% of the rural population is
unbanked25. Such huge market demands attracted
telecom operators and banks into the delivery of
Financial institutions:
Standard Bank, First National Bank, Absa
Standard Bank introduced MiMoney in 2009, which
allows the people with no credit cards, especially
the young consumers with no credit cards to make
online shopping. The later-introduced Instant Money
is targeted at the unbanked people. Through the
cooperation with Spar, a retailer with 850 shops,
Standard Bank supported money transfer between
mobile subscribers. First National Bank offers
e-wallet service and recently launched pay2Cell
product, which omits the need to remember long
account details and allows FNB account holders to
make payments directly into the accounts of other
FNB account holders, using only the recipient's
cellphone number. Absa allows its customers to
withdraw the money remitted onto their cellphones
from its ATMs. At the end of 2011, Absa worked
with MasterCard to embed chips in the handsets to
support mobile payment services.
14
mobile payment services. In fact, since Safaricom

launched M-Pesa in Kenya in 2007, the mobile
payment has been growing rapidly in Africa. There
are more than 40 million people using mobile
payment services in Africa26. The success of M-Pesa
in Kenya is mainly attributable to the operatorcentric model. Safaricom has 70% mobile market
shares in Kenya and the physical shops of its agents
spread across the entire country.
The development of mobile payment in Africa
shows that mobile payment has enormous
potentials in helping remote regions address
the needs for financial services. It can therefore
be concluded that delivering the basic financial
services via mobile phones may become a
technically feasible solution to address the underserved financial needs in rural areas.

VISA was also active in African mobile payment
market. In June 2011, VISA spent $110 million
cash acquiring Fundamo, a financial service
provider in South Africa. Fundamo has over 5
million registered users and provides 50 types
of mobile financial services in over 40 countries
(including 27 countries in Africa, Asia and the
Middle-East), such as person-to-person payment,
cellphone credits top-up, bill payment and interbank services. In Nov. 2011, VISA and MTN Group
(a leading telecom operator in the Middle East)
worked together to introduce VISA encrypted
mobile wallet products in Nigeria and Uganda.
25
Mobile Africa Report 2011,

Dr Madanmohan Rao,
Mobile Monday
26
Visa gets serious: Let the

Africa Mobile Payment
Wars Begin, Mbwana Alliy,
Innovation, Nov. 20, 2012,
http://afrinnovator.com/
blog/2011/11/20/visagets-serious-let-the-africamobile-payments-warsbegin/
Telecom operators: Safaricom, Vodacom

Safaricom introduced M-Pesa system in Kenya in 2007 and since then M-Pesa grew rapidly. In 2010, M-Pesa had
attracted 13.50 million users including 5 million rural users. Mobile money transfer is the most welcomed service.
M-Pesa allows mobile subscribers to quickly transfer fund with a minimum amount of 50 Kenya shillings. The value
of money transfer via M-Pesa system totaled 135.38 billion Kenya shillings, about 5% of Kenya's GDP. M-Pesa
adopts USSD technology and basically applies to all models of mobile phones. Vodacom, the largest operator in
South Africa, also launched a type of mobile payment service similar to M-Pesa in October 2010. South Africa has 13
million unbanked population, but the uptake of M-Pesa was very slow. There were only 150000 registered accounts
nine months after the launch. Because South Africa has very stringent supervision on the banking business, including
the payment business, Vodacom had to rely on its partner bank - Nedbank to complete the related transactions,
resulting in money transfer costs far higher than the operator-centric business model in Kenya.
Due to the difference in political, regulatory and

policy environments, level of development of
market-based economy, subscribers' income level
and consumer spending habits, no country's
experience in mobile payment can be simply
copied to China. China's mobile payment industry
is faced with some of the opportunities and
challenges common to the world, but it also
has its unique features, such as huge market

size, different development roadmaps and
unique business models. It therefore requires
specific analysis on the current situation of this
industry and the challenges it faces as to develop
practical and feasible development strategies
and appropriate business models for the mobile
payment industry in China.
Current situations and challenges of

mobile payment industry in China
The mobile payment market in China has huge potentials, but the
industry is still in its infancy. The adoption of mobile payment is low
and the application scenarios are limited. The players are very active,
but the majority of mobile payment services and products are still in the
pre-commercial phase. A sound mobile payment ecosystem has not been
established. In a nutshell, the business models of financial institutions,
operators, third-payment payment (TPP) providers, third-party trusted
service manager (TSM) providers may vary from one to another, but the
players in the value chain are more inclined to win-win cooperation.
The mobile payment market in China
holds tremendous potentials and
space for development and growth
Deloitte believes that the mobile payment market
in China holds tremendous potentials and space for
development and growth if measured by potential
scale, infrastructure, market demands, policy
setting and interest of the players.
China has over 1 billion mobile subscribers,

bigger than the entire mobile subscriber base
in Europe
China has the world's largest mobile subscriber
base. According to the statistics of the Ministry
of Industry and Information Technology of China
(MIIT), the number of mobile subscribers in China
reached 1019 million as of March 2012, with its
size three times as big as the mobile subscriber
base in North America and bigger than the entire
mobile subscriber base in Europe. At the same
time, 3G is also developing robustly in China and
the number of 3G users reached 152 million27.
During the "12th Five-Year Plan" period, China
aimed to bring the number of 3G users to over 450
million28. The proportion of 3G users in the mobile
subscriber base will continue to rise. The increase
in the proportion of 3G users will further propel
the growth of mobile Internet users in China.
According to the report of China Internet Network
Information Center (CNNIC), the total number of
mobile Internet users in China reached 356 million
as of the end of December 2011, a year-on-year
16
growth of 17.5%29. The size of mobile subscriber

base represents the size of potential mobile
payment users. The number of mobile Internet
users in a certain degree represents the level of
acceptance of new technologies and mobile
Internet lifestyle by mobile users. Measured from
these two aspects, the mobile payment market is
blessed with huge potentials in China and enjoys a
broad space for future growth.
The improvement of infrastructure drives the

upgrading of mobile payment industry
The fast development of 3G and WiFi has
significantly improved the wireless broadband
conditions in China while the gradual decline of
telecom tariff levels has reduced user costs. As
the 3G licenses were awarded and with the local
governments driving the "Wireless City" initiatives,
the mobile bandwidth in China is increasing
constantly. The increase of mobile bandwidth
will significantly improve the user experience in
mobile payment, especially in remote payment.
The convenience of mobile payment will be further
improved. When the 3G licenses were issued in
January 2009, the three operators started the
construction of 3G networks. According to MIIT
statistics, as of the end of November 2011, the
number of 3G base stations reached 792000; the
3G network covered all the cities and counties,
as well as part of the towns; the number of 3G
users reached 118.73 million, 71.68 million more
than that in the beginning of the year (see Figure
8 ). The proportion of 3G net adds in the mobile
27
3G enters a scale-based
development phase, MIIT,
Dec. 26, 2011,
http://www.miit.gov.cn/
n11293472/n11293832/
n11294132/n12858447/
14405125.html
28
The 12th Five-Year Plan for the

Communications Sector, MIIT,
May 4, 2012,
n11293472/n11293832/
n11293907/n11368223/14
578927.html
29
China Internet Network

Information Center
(CNNIC) - The 29th
Statistical Report on
Internet Development in
China, Jan. 16, 2012,
http://www.cnnic.net.cn/
dtygg/dtgg/201201/
t20120116_23667.html
Figure 8: Number of 3G users in China

from 2009 to 2011 (by 10,000)
20000
11873
10000
4705
1232
2009
2010
2011
Source: The official websites of the Ministry of

Industry and Information Technology (MIIT), China
30
3G enters a scale-based
development phase, MIIT,
Dec. 26, 2011,
n11293472/n11293832/
n11294132/n12858447/
14405125.html
31
Strategy Analytics: As of
the end of 2011, there
were 439 million homes
installing WiFi networks,
199IT, April 2012,
http://www.199it.com/
archives/29877.html
32
33
LI Yizhong: The opening

of basic telecom sector to
private investment now has
a timetable, Securities Times,
http://money.163.com/12/
0309/01/7S4BPE2E00253
B0H.html
The overall price level of
telecom services continues
to drop, MIIT, Dec. 26, 2011,
n11293472/n11293832/
n11294132/n12858447/
14405139.html
net adds rose from 43.7% at the beginning of the

year to 72.5%30. On the other hand, operators
began to push the deployment of WLAN. WiFi
household penetration continued to improve.
In 2011, China Telecom announced its optical
network plan to deploy 1 million WLAN hotspots
by the end of 2012. China Mobile also announced
the plan to deploy 1 million WiFi hotspots
before 2013. According to statistics released by
Strategy Analytics, a U.S. market research firm,
the WiFi household penetration in China arrived
at 21.8% in April 2012 and it is expected that
China will have 110 million WiFi home users by
201631. With the increase of wireless bandwidth
and the decline of telecom tariff level, the cost
of using telecommunications services dropped.
It is reported that the telecom tariff in China

dropped by approximately 9% each year over
the past few years32. MIIT statistics indicate that
the telecommunications service price as a whole
dropped by 5.1% from January to November
201133. The popularity of smart devices will greatly
contribute to the expansion of mobile payment.
The extensive use of smartphones is an important
driver for the wide adoption of mobile payment.
The related statistics show that the smartphone
shipments reached 72.1 million units in China in
2011. It is expected that the smartphones will grow
rapidly in 2012. The shipments of smartphones
will reach 113 million units with a growth rate of
56.0% (see Figure 9).
Figure 9: Shipments of smartphones in China from 2010 to 2015

103.1%
40000
56.0%
35.2%
32.5%
30000
28.3%
25857
20153
20000
15210
11250
10000
7210
3550
2010
2011
2012
Shipments of smartphones (by 10,000)
2013
2014
2015
Growth rate
Source: Publicly Available Data of iResearch

The booming of mobile e-commerce

stimulated the fast growth of demands for
mobile payment
E-commerce has maintained a high growth rate
over the past years in China. According to IDC
data, the Chinese Internet users spent RMB784.93
billion yuan on on-line shopping in 2011, growing
by 66% compared with 201034. The development
of e-commerce, to a large extent, has cultivated
consumer habits of using e-payment and has
fueled the rapid development of TPP providers
such as Alipay. The mobile e-commerce in China
is growing rapidly and more and more consumers
choose to buy goods via their mobile handsets.
Big domestic e-commerce websites, like Taobao,
Tmall, 360buy, Suning and Amazon, launched
their mobile clients, which have integrated mobile
payment solutions such as mobile payment
applications offered by TPP providers, banks,
China UnionPay and operators. At the merchant
level, the mobile clients of airlines, hotels and
other businesses have integrated remote payment
features and the players offered various discounts
to encourage usage. For example, in order to
encourage customers to use the client, Air China
would offer credits for the customers who buy
full price tickets via their client. An express hotel
rewards the customer who use mobile client on
their handsets to book and pay for hotel rooms
with multiplied bonus points to encourage the
usage of mobile client.
Central and local governments developed

related policies in support of the development
of mobile payment industry
In the 12th five-year plan for the development
of e-commerce in China, jointly drafted by nine
government agencies (including the National
Reform and Development Commission) with
MIIT as the lead agency, the electronic payment
industry was considered as the crucial part for
the development of e-commerce service industry.
Mobile payment was also considered an important
component of the Internet of Things (M2M) in the
plan for next-generation information Technology.
The People's Bank of China (PBC) developed
the Measures for the Management of Payment
and Settlement Organizations, which imposed a
18
licensing regime for e-payment service providers.

The Measures improved market environment and
was conducive to the long-term stability of the
market. At the same time, the development of
information and communication technology (ICT)
has become one of the indicators to measure the
performance of the local governments, which,
as a result, gave high priorities to various ICT
initiatives such as "wireless city" and "digital city"
initiatives. The framework cooperation agreements
between local governments and operators usually
contain specific agreements concerning mobile
payment. The "wireless city" initiatives will greatly
improve mobile bandwidth and enhance the user
experience of mobile payment.
The players in the mobile payment value

chain are active and the increasing cooperation
between them will boost the development of
the mobile payment industry
Financial institutions, operators, TPP providers and
other players were attracted by the tremendous
market potentials and huge expansion space
presented by mobile payment. They also
made strong presence in mobile payment and
contributed to the development of this industry
in China. According to the survey conducted by
Deloitte, 66.67% of the respondents indicate that
their companies have developed mobile payment
strategies and have provided mobile payment
services; 20.72% of the companies have developed
strategies but haven't offered any service, with the
two adding up to 87.39% (see Figure 10). Among
34
IDC released the

e-commerce white paper:
the online transaction
value in China surpassed
780 billion yuan, Alibaba
Group Research Center,
March 1, 2012, http://
www.aliresearch.com/
index.php? m=cms&q=view
&id=70886
the survey respondents, 35.14% believe that

their companies are delivering mobile payment
services on a pilot basis and 33.33% consider that
their companies are ready for deploying mobile
payment, with the two adding up to 68.47%.
Only 4.50% think that their companies have no
plan (see Figure 11). Therefore it can be concluded
that most of the players in the value chain have
developed strategies and plans for mobile payment
and have started operations. For example, China
UnionPay established strategic cooperation with

many players in the value chain; many banks and
TPP providers such as Alipay have set up mobile
payment units; ChinaPnR, a TPP provider, released
the "Asi@" mobile payment strategy to identify
its positioning. The payment industry is more
and more inclined to mobile payment. With the
common efforts of the players in the value chain,
the mobile payment industry will certainly embark
on a fast-growth track.
Figure 10: Have your company/organization

already offered mobile payment services
or already developed a mobile payment
strategy?
Figure 11: In light of the development of

China's mobile payment industry as a whole,
how do you view the current situation of the
mobile payment business of your company/
organization?
6.31%
4.50%
6.31%
8.11%
18.92%
20.72%
33.33%
66.67%
35.14%
Have a strategy and have already offered mobile

payment services
Have a strategy but haven't offered mobile
payment services
No services and no plan to offer services in the
coming three years
Not clear
Mature
Ready for deployment
Trial phase
Planning phase
No plan
There is ever-increasing cooperation among

financial institutions, operators, TPP providers,
device vendors, and technology providers. Starting
from the 2nd half of 2009, the cooperation in
mobile payment at the industry level has been
increasing. There were over 70 cooperation
cases publicly reported by the media, such as the
cooperation between financial institutions and
operators, the cooperation between payment
companies and financial institutions, cooperation
among financial institutions, device vendors and
technology providers. The most widely-covered
story was the cooperation between China Mobile

and Shanghai Pudong Development Bank (SPD
Bank). China Mobile acquired some stake in
SPD Bank and the two companies established a
strategic partnership. On one hand, the increasing
cooperation at the industry level indicates the no
single player can do it alone due to the range of
the value chain is extremely diverse; on the other
hand, as the industry grows, it is likely to generate
the co-competition model and open ecosystem
based on collaborative partnership in China's
mobile payment industry.
Mobile payment is still in its infancy

in China
The potentials and prospects of the mobile
payment market in China presented a thrilling
picture, however this industry is still in the initial
stage of development in China. The adoption as a
whole is still low, most mobile payment products
and services are still in the pre-commercial
stage, and the players in the value chain haven't
developed mature business models. In general, the
players are still exploring various options.
Mobile payment is a quite young industry in China.
It existed for only a decade starting from 2002
when China Mobile rolled out the micro-payment
based on carrier bills. The user base is small and
the mobile payment value is small. According to
the People's Bank of China, the mobile payment
value in China totaled RMB570 billion yuan in
201035. The influence of mobile payment in the
entire payment system is still weak.
Judging from the development of mobile payment
industry, remote payment is relatively mature in
China. There are mature remote payment products
available for the mass market, such as mobile
Alipay. The mobile e-commerce volume and the
mobile payment value are both rising. In contrast,
the development of proximity payment is relatively
slow, with financial institutions, operators, and
TPP providers conducting commercial pilots in
cities. China Unicom and China Telecom tested
NFC mobile payment in many provinces, but the
service was not commercialized. China Mobile
also conducted pilots in some provinces. A typical
success case is Mobile Shenzhen Tong Project.
Innovative payment companies such as Qfpay
and iBoxPay also released the quasi-Square POS
products, but these companies are still young.
There are three major types of players participating
in China's mobile payment market: financial
institutions represented by China UnionPay (CUP),
telecom operators, and TPP providers represented
by Alipay. They all wanted to develop a business
model where they could play a leading role. These
players have their own respective strengths. China
20
UnionPay has a sound and mature payment and

clearing system. Operators and TPP providers
have huge customer base and sales channels. The
cooperation and competition among them will coexist, but the key problem is how to develop a winwin mechanism and business model in line with
the interests of all the players in the value chain36.
Multiple business models co-exist and

the players in the value chain face
many challenges
Financial institutions: transforming to the
providers of full-range mobile financial services
Fast and easy-to-use mobile financial services may
increase customer loyalty to banks and provide
the conditions to further tap customer value.
Banks pay close attention to mobile payment
and consider it an important component of
mobile financial services. Banks have two big
advantages to develop mobile payment: 1) banks
are the centers where customers conduct their
financial activities. They manage a huge capital
chain and enjoy great advantages in payment and
settlement management; 2) banks have established
a relationship of trust with the customers and
have an enormous amount of user data and data
security centers. Mobile banking is regarded as
an important vehicle for the development of
mobile financial services. Banks have integrated
e-commerce and remote payment into the basic
mobile banking functions. The remote payment, as
an important part of the mobile financial services
strategies, achieved rapid development based on
banks' mobile banking platforms.
A customer may access a bank's financial services
via SMS, WAP and APP client. Application and
solution providers worked with banks to deliver
technology and security solutions. At present,
most banks in China have rolled out WAP-based
mobile banking and client-based mobile banking.
Banks have all integrated traditional online banking
functions and added remote payment functions
such as transfer and remittance. In addition to some
traditional features, banks also developed innovative
services customized for mobile handsets, such as
35
PBC, China Payment

System Development
Report 2010, July 20,
2011,
http://www.pbc.gov.cn/
publish/zhifujiesuansi/
1071/2011/20110720171
556680476432/201107201
71556680476432_.html
36
UnionPay casts a net

to top nationwide
mobile payment market
- revenues still coming
from commission charges,
Southern Metropolis Daily,
Nov. 28, 2011,
http://www.afinance.cn/
bank/yhxw/201111/400
551.html
"roaming remittance" of the Agricultural Bank of

China (ABC), "mobile number money transfer" of
China Merchants Bank (CMB), and "card-less life" of
the Bank of Communications (BoComm).
Mobile banking services can be divided into
financial and non-financial services. Financial
services include account inquiries, remittance and
transfer, wealth management services (bonds,
funds, insurance), foreign exchange management,
financial information inquiry, etc. Non-financial

services include payment services (utilities bill
payment, i.e., water, electricity and gas, fine
payment, and mobile payment), account topup, game cards, business travel services, payment
collection on all-in-one cards, payment for lottery
tickets, payment for hospital registration, etc.
Non-financial services are delivered by banks in
partnership with third parties (online shopping
malls) on the banks' platforms.
Figure 12: Business model of banks for remote mobile financial services
Means of access
Main players
SMS
CUP
WAP
Banks
APP
Third-parties
Services
Financial services:
Account inquiry
Money transfer
Credit card management
Wealth management services
Financial information services
Authorization of corporate
transactions

Non-financial services:
Utilities bill payment
Fine payment
Business travel service
Phone account top-up
All-in-one card payment collection
Hospital registration
Game
Lottery

Other players: Software and solution providers, Handset manufacturers, Operators, etc.
Banks' remote payment can leverage their

financial advantage to create, integrate, and
develop online financial products and services.
The online banking platform is also a strong
supplement to their physical network of outlets.
Small and medium-sized banks, city commercial
banks, and rural commercial banks may break
geographical limitations and expand business
coverage by offering mobile payment and mobile
banking services. Moreover, the country strongly
supports the development of rural financial
services. Mobile banking has great opportunities
in rural and remote regions. The poor wired
network infrastructure and the low penetration
of PCs in the countryside coupled with the wide
coverage of mobile networks and the high
penetration of mobile phones in the countryside
have made mobile payments more suitable to
develop in the countryside.
China UnionPay played a dominant role in the
development of proximity payment in China.
UnionPay built up the inter-bank payment and
clear system. As a result, it has a powerful
advantage in fund clearance and settlement and
bankcard payment services. UnionPay has a strong
control over POS devices and it is much easier for
UnionPay to upgrade the POS devices in a more
cost-effective manner. The 13.56MHz standard
led by UnionPay has been basically finalized.
The key lies in how to create a well-organized
IC card application environment. An open and
sound IC card application environment is critical
for the development of NFC mobile payment. In
accordance with PBC's arrangements in 2011,
UnionPay partnered with commercial banks and
other stakeholders in 2011 and they made the
financial IC cards widely supported by most POS
devices of domestic merchants. They even planned
to upgrade ATMs to support financial IC cards.
PBC planned to stop issuing magnetic stripe cards
completely in 201537. The issuance of financial IC
cards is accelerating. In 2011, about 14 million
new IC cards were issued, up 150% over the
same period of 2010. Many national commercial
banks, including the Industrial and Commercial
22
Bank of China (ICBC), Agricultural Bank of China

(ABC), Bank of China (BoC), China Construction
Bank (CCB), Bank of Communications (BoComm),
China Merchants Bank (CMB), China Everbright
Bank and Shanghai Pudong Development Bank,
have introduced various financial IC cards with
special features in over 30 provinces in China38.
UnionPay is pushing the cooperation with public
service departments such as social security, public
transportation, health, and education to embed
more functions in the IC cards.
At present the proximity payment can be divided
into two models, NFC mobile model and quasiSquare mobile payment model. There are different
NFC models: NFC-SD, SIMpass and NFC SWP.
These three technologies all support proximity
payment and could participate in the NFC fulldevice solution in the future. Different technologies
require different partners. With respect to the
source of fund, users may top up their accounts
with debit cards, credit cards, by cash or by other
means. (See Figure 13)
In the NFC mobile model, the smart financial SD
card model is led and pushed by UnionPay as a
primary model. UnionPay has established positive
cooperation with the players in the value chain,
including banks, device vendors, technology
providers and hardware providers. For example,
UnionPay, Chongqing Rural Commercial Bank and
HTC jointly released the first NFC-SD UnionPaystandard mobile financial product in 2011, which
integrated remote payment, proximity payment,
self-service banking, e-wallet and other features. It
supports over-the-air credit loading and gets rid of
the need for the user to find a top-up location. The
user may transfer the fund in his banking account
to his electronic wallet via the mobile handsets.
The SIM-based model requires the cooperation
among UnionPay, banks and operators. Users need
to bundle their bankcard data so as to as realize
proximity payment function. A very small number
of third-party organizations also participated in the
remote payment services. For instance, the Bank
37
Timetable for IC bankcards

is released, the issuance of
magnetic stripe bankcards
will be terminated before
2015, Nov. 8, 2010,
http://finance.people.com.
cn/bank/GB/13151437.
html
38
CUP accelerates the

application of financial IC
cards, Financial News, Feb.
8, 2012, http://finance.
people.com.cn/bank/
h/2012/0208/c2279253402923325.html#
Figure 13: Four proximity payment models of UnionPay

Source of funds
Technical means
Debit cards
NFC-SD
Credit cards
SIMpass
Application scenarios
Physical merchants
Buses/Subways
Gas Stations
Expressways
Cash
Others
NFC-SWP
Schools
Hospitals
Card Reader
Other players: Banks, CUP, Hardware manufacturers,

Application/Technology providers, etc.
of Communications joined hands with UnionPay

and China Unicom to introduce SIM-SWP solution
in June 2010 in Shanghai - the Pacific-Unicom cobranded debit card with SIM cards having bank
payment functions. The IC and SIM cards are
integrated into one card, which can be used on
POS devices with UnionPay log and supporting
contactless chips. On Sept. 2, 2010, ICBC and
China Unicom launched joint mobile payment
services and introduced the first SIM-card+PBOC2.0
contactless card in Shenzhen to meet customers'
needs for on-site micro-payment. At present, this
card can be used on the POS devices supporting
contactless chips and the supporting merchants
include chain supermarkets, fast food restaurants,
grocery shops, cinemas, and Guangzhou-Shenzhen
high-speed trains.
Although banks and UnionPay actively engage in

proximity payment, their initiatives are primarily
regional with limited application scenarios and
geographical area. The main challenges for financial
institutions are banks and operators are separately
regulated and the policy and legal environment
for the fast development and expansion of mobile
financial services are not in place. Other challenges
are as follows: business models are uncertain; the
policy direction is unclear; the boundaries between
operators and banks are not well defined; there is a
lack of standardization; and uncertainty also exists
for the development of mobile devices. Due to
these uncertainties, most banks are still watching
and testing mobile payment and are reluctant to
make large-scale deployments.
The Square payment model is an innovative model

where the smartphones, with an external card
reader and an app, can be turned into a POS
device. Similarly, UnionPay and iBox introduced
iBox payment, which supports all UnionPay
bankcards and credit cards. Users may check the
balance, repay credit cards, top up their mobile
phone accounts, pay for public utilities and use
other payment features.
Case:
Bank of Communications (BoComm) - leverage the advantage of mobile devices to create a
card-less lifestyle
24
BoComm has been a leader in mobile banking/mobile

payment in China. In 2009, BoComm Shanghai Branch
and China Telecom Shanghai Branch signed a strategic
cooperation agreement. In 2010, BoComm joined hands
with China UnionPay and China Unicom to launch a
SWP-SIM mobile payment solution, which integrates the
features of IC card and SIM card into one card and supports
proximity and contactless micro-payment. Users may
load credits into the card over the counter, via ATMs and
multimedia terminals. In 2011, BoComm introduced the
card-less withdrawal function and established the concept
of accessing remote financial services anytime anywhere.
In 2012, BoComm introduced the first mobile banking app
for BlackBerry devices. BoComm's new-generation mobile
banking services are available for iOS, Android, BlackBerry,
Symbian and other mobile operating systems.
A wide range of different devices from low-end to high-end

can all support BoComm's mobile banking services. Therefore,
BoComm has an advantage in offering rural mobile financial
services. Based on the practices of BoComm, it was found
that migrant workers are frequent users of mobile banking
services, particularly remittance service. At present, BoComm
offers money transfer between mobile handsets at no charge.
The Cardless ATM withdrawal via the mobile phone is offered
free of charge, with the goal of fostering the habit of midand low-end users. BoComm believes that the demands of
rural market are huge, but the farmers haven't developed a
habit of using mobile devices for payment purposes. It takes
time for users to get to know and accept this product. Mr.
Wang pinpointed two problems facing rural mobile financial
services: 1) unaddressed security issues; only micro-payment is
supported; 2) inconvenience of SMS code.
Mr. Bing WANG, a senior manager at the electronic banking

unit of the BoComm, indicated that BoComm was an early
adopter of mobile finance and had introduced mobile banking
products as early as 2009. BoComm took the following
measures to develop mobile financial services: 1) migrate
the Internet services on fixed devices to mobile devices;
2) leverage the advantages of mobile devices to deliver
innovative services. BoComm was the first to launch Cardless
ATM withdrawal and Cardless consumption services, which
greatly facilitate people's lives and ensure security through
dual validation of mobile handsets and password. The best
feature of Cardless ATM withdrawal is that there is no need
for customers to change their habits of using ATM for cash
withdrawal. This product was well accepted by customers
after being introduced. "Cardless consumption" services
include financial service applications and daily life applications
(including plane tickets, film tickets, lottery, bill payment,
etc.) These services are delivered in collaboration with
device vendors through mobile clients. In addition, BoComm
introduced some corporate services suitable for mobile
devices, such as multi-level delegation in capital management
and Cardless ATM withdrawal from corporate accounts.
Around 10% of the 70 million BoComm's customers opened
mobile banking services.
Looking into the future, BoComm indicated their intention to

continue its cooperation with Internet players, TPP providers,
and application providers. Cardless lifestyle will drive the
trend. At present, BoComm's Cardless financial and electronic
account (bundled with handset and no physical bankcard) is a
type of Cardless service. In one or two years, remote payment
or proximity payment will both be on a fast track. At the time
when proximity payment experiencing hard time, the players
may try to find other approaches and get over the disputed
areas. In addition, BoComm is testing a LBS-based mobile
payment model.
Case:
Hua Xia Bank - deliver a full range of mobile financial services
Mobile payment becomes one of the important areas of

technology and business innovation for banks. Developing
mobile payment is a strategic initiative that could help banks
lead the innovation of payment services. Based on mobile
payment, Hua Xia Bank developed a full range of mobile
financial services. In the areas of investment and wealth
management services, Hua Xia Bank offers personal and family
capital management, investment and wealth management,
consulting on market conditions and other services. Due to
the portability of mobile phones, investment banking services
can be delivered via online banking channels and can offer
more choices for mid- and high-end customers.
Since the signing of a framework cooperation agreement with
China UnionPay in June 2011, Hua Xia Bank has introduced a
series of mobile payment and mobile banking services. Hua Xia
Bank launched mobile remote payment service in partnership
with China UnionPay in December 2011. The smart financial
SD card was used as the payment vehicle and the security of
mobile banking was greatly enhanced. The mobile remote
payment supports the bundling of one mobile phone with 10
UnionPay cards and customers can use mobile phones to pay
for utilities bills and credit card loans, top up mobile phone
accounts, buy lottery tickets, shop at mobile shops, book airline
and train tickets, make hotel reservations, and buy tickets of
tourist attractions. Hua Xia's mobile banking services broke the
boundaries between banks and allowed customers to access
their account details at different banks anytime, have complete
control of their own accounts and make better arrangements
for their funds. Customers can also use bankcards of other
banks or Hua Xia Bank to repay his credit card at Hua Xia Bank,
which is a great facilitation for customers.
Based on its market positioning and strategic development,
Hua Xia Bank believes that the future of the bank lies in not
only offering sound, complete and secure financial services,
but also expanding, enriching and integrating non-financial
value-added services. At present, Hua Xia is doing well in
the integration of financial and non-financial services. The
feature services offered by Hua Xia include: 1) making hospital
registration reservations via mobile phone in some cities
including Chengdu and paying the registration fee remotely;
2) booking movie tickets in some cities including Chengdu.

Movie-goers may buy the tickets and select their seats via
their mobile phones; 3) booking electronic tickets of some
tourist attractions; 4) delivering over 40 mobile payment
features in Chengdu. According to Hua Xia, security, ease of
use and functional completeness are the priority issues they
consider when they are developing mobile financial services.
In the area of proximity payment, Hua Xia is running some
pilot projects in Chongqing and partnering with UnionPay
to test proximity payment in Shanghai, Shenyang and some
other cities. Hua Xia used the smart SD card of UnionPay as
the mobile wallet. It supports micro-payment requiring no
physical card or password and high-value payment requiring
no cards but magnetic stripe data. Hua Xia is actively
developing financial and non-financial proximity payment
scenarios. The possible applications include attendance card,
campus card, city all-in-one card, fuel card, expressway ETC,
social security card, and medical card. In addition, the SD
card is capable of delivering public and community services.
Therefore, it can be used for social and public undertakings,
medical insurance and health care, transportation services and
corporate management applications.
In additional to personal mobile banking, Hua Xia is actively
preparing for the launch of corporate mobile banking services,
especially those targeted at small and micro-businesses. For
example, 1) applying for credit services via mobile phone.
The customer may submit their application documents by
way of taking photos and scanning, which can streamline
the processes for credit application; 2) mobile banking binds
the user and allows pledge loans; 3) for instance, in a small
commodity wholesale market, the market management
board can have its members to provide guarantee for each
other with their accounts as collateral and their products as
mortgage. The bank may provide mortgage loans for the
whole value chain. By creating an isolated environment, the
bank may connect products, logistics and financing together.
Mobile banking also allows cash withdrawal and eliminates
the constraints of time and space. In addition, Hua Xia also
believes that the development of agriculture-related finance
could be accelerated by offering agriculture-related loans and
money transfer services via mobile banking or home banking.
Case:
Rural Credit Banks Funds Clearing Center - enable rural financial
innovations and develop rural mobile finance
From a global perspective, mobile payment
has tremendous opportunities in rural
and underdeveloped regions. Rural Credit
Banks Funds Clearing Center (RCBFCC)
has worked productively in this regard.
RCBFCC was established on May 29, 2006
with the approval of the People's Bank of
China. The Center was initiated by over 30
provincial rural credit cooperative unions,
rural cooperative banks, rural commercial
banks and Shenzhen Rural Commercial Bank
(hereafter referred to as rural cooperative
financial institutions or RCFI) with the
registered capital of RMB100 million and
with the goal of resolving the cross-province
payment and clearing between RCFIs. The
Center established a nationwide payment and
clearing system between RCFIs and resolved
the problems of cross-province payment and
clearing. Due to the unbalanced development
of RCFIs, some newly founded RCFIs need to
improve their IT facilities to face competition
from commercial banks. The Center then
developed various systems in support of the
upgrading of RCFIs.
In such a context, the RCBFCC mobile
banking sharing platform was developed
with the aim of improving the development
of mobile banking system for RCFIs. The
Center expects this platform to attract more
RCFIs to develop mobile banking and form an
exemplary effect so as to boost the mobile
financial services of these institutions.
RCBFCC (the Center) now offers two types of
mobile banking services: installing a client on
the mobile handset or placing a film on the
SIM card to deliver mobile banking features
over the mobile phone. For the first type,
26
banks may develop the client software based

on different mobile operating systems. A user
may check his or her account and transfer
fund via the mobile client, which currently
supports iOS, Android and J2EE (Symbian in
particular). The Center also indicated that
other mobile operating systems will also be
supported in the future such as Windows
Mobile. In addition to basic financial services
such as account check and money transfer,
the Center also developed value-added
services such as mobile phone account topup. The user may top up his or her mobile
phone account via the mobile banking client.
For the second type, banks may place a film
on the SIM card. The user may put the filmed
SIM card into the phone and select services
through a menu. The service instructions will
be sent to the back end as encrypted SMS.
The back end then sends back the required
information in the form of SMS to fulfill
account inquiry, money transfer and other
payment functions. The second method is
device independent and can be supported by
95% mobile devices. The user is not required
to access the Internet or download and install
the client software. The user may use the
financial services after he/she asks the counter
of the bank to place a special sticker film on
his SIM card. This option is more suitable for
the customers of credit cooperatives. In these
two types of methods, customer account
and other related information is stored at
the provincial rural cooperative unions. The
instructions for account inquiries, money
transfers and other operations are sent
through the RCBFCC mobile banking system
to the provincial rural cooperative unions,
which then send the required information
back to complete the payment process.
At present, the client-based mobile banking

system is developing well. As of April 2011,
there were three provincial rural credit
cooperative unions that adopted the sharing
mobile banking system of the Center: rural
credit cooperative unions of Hainan, Guizhou
and Hubei. Hainan Rural Credit Cooperative
Union has commercialized the mobile
banking services. The other two unions are
conducting internal test run. About 10 other
credit cooperative unions are planning to
join the sharing mobile banking platform,
including the unions in Xinjiang, Shanxi,
Shaanxi, Inner Mongolia, Jiangxi, Sichuan
and Jilin. The filmed-SIM-card-based mobile
banking has been growing rapidly in recent
years. The Rural Credit Cooperatives of
Shandong developed 620000 customers
in less than one year. The cost of placing
the sticker film on the SIM card is borne
by RCFIs. These financial institutions are
very active for this model really can help
them attract effective customers with such
demands and with a relatively high degree
of security awareness. The cost is not a road
blocker for the development of the filmedSIM-based mobile banking. As more and
more cooperative financial institutions join
this camp, the cost will be further reduced.
The payment services most required by
rural residents are money transfer and
mobile phone account top-up. There is also
a huge demand to purchase game point
card via mobile handset at the county level.
Concerning the security related to SMSbased payment, the Center indicated that up
to now there wasn't any single case of SMS
interception. In client-based mobile banking,
the generated transaction information will
be sent to the customer in SMS and the
customer needs to input the validation code

in the SMS to complete the transaction. It
has been proved highly security. In filmedSIM-based mobile banking, the transaction
instruction is completed through encrypted
SMS text. The key used each time is different
and it is therefore highly secure.
With respect to the thinking on the future
development of mobile banking, the Center
indicated that first, they would focus on
market development, keep a close eye on the
development of emerging payment means,
and select the payment methods suited to
rural needs; once the time comes, they will
put such system in production quickly for the
RCFIs have nearly 80000 outlets across China
and if there is a need, expansion can be
achieved easily; second, they would focus on
new type of services, such as the cooperation
with Alipay; third, they would consider
increasing the operating systems supporting
the client on the mobile handset and make
partial customization on their products.
Case:
Chongqing Rural Commercial Bank (CRCB) - develop mobile payment services to
boost financial inclusion
Founded in June 2008, Chongqing Rural Commercial
Bank (CRCB) is the largest bank in Chongqing in terms
of total assets, total deposits and outlet coverage. It was
listed on Hong Kong h-share main board in Dec. 2010,
making it the first public rural commercial bank, the first
local bank listed in overseas market, and the first listed
bank in western China. Since its listing, CRCB, depending
on its advantages brought by institutional reform and the
strong capital capability, is committed to helping farmers,
agriculture and rural areas, supporting mid-sized, small and
micro businesses, driving the development of county-level
economy and enhancing innovation on financial products.
Developing mobile payment services is an important
part of CRCB's mission of promoting financial inclusion.
CRCB took a two-step strategy. Step 1: promoting the
filmed-SIM-based mobile banking. In July, 2011, CRCB
introduced the first such mobile banking product in
western China. The product allows the user to access his
account information, transfer and remit funds, manage
his account, and access wealth management services
and credit card services. The product has other powerful
features. The customer may enjoy account services on
the STK menu. The data is transmitted in encrypted SMS
and almost all the mobile phones can support the filmed
SIM card. Low cost of use, high level of security and wide
audience coverage enable the public, especially rural
residents, to benefit from the latest development in mobile
payment and help to achieve service equalization in urban
and rural areas. As of end of May 2012, the effective
customers reached 290000, the number of transactions
reached 8.71 million and the transaction value amounted
to RMB 51.8 billion yuan. This product was well accepted
by the customers. Step 2: CRCB was the first to launch
the NFC-SD mobile financial product based on UnionPay
standard. In Sept. 2011, CRCB, together with China
UnionPay, Chongqing City Smartlink Card Co. LTD, High
Tech Computer Corporation (HTC), and Shanghai F-ROAD,
launched this product in Chongqing. It is supported by
the NFC handsets developed by HTC with the SWP-SD
(single wire protocol) chip based on UnionPay standard. It
complies with the security standard developed by UnionPay
28
for NFC payment. It integrates self-service banking, remote

payment, proximity payment, e-wallet and other features.
It also combines basic financial services, multi-area mobile
payment applications and cross-industry mobile payment
applications together. It supports the mobile networks of
China Mobile, China Unicom, and China Telecom. In terms
of technology, functionality, security and other aspects,
this product is a leading product in China and around the
world. It is a new financial platform, which can change the
way of life of the people.
For the next step, CRCB will further improve "Jiangyu"
mobile financial product so that it will be better adapted
to mid- and low-tier customers. CRCB will work with
Chongqing Rail Transportation Group to accelerate the
upgrading of the POS devices in the stations of light
rails and subways. The cost of the SD cards and other
transaction fees will be exempted for customers. CRCB
hoped to attract over 50000 customers for this product
in 2012. China UnionPay Chongqing Branch is working
actively on upgrading the existing POS devices to support
NFC payment. It is expected that they will upgrade over
20000 POS devices in 2012.
"Financial innovation is an inexhaustible force for
sustainable development of a rural commercial bank and
an inherent requirement of the development of inclusive
finance. For the next step, we will, based on the related
mobile payment policies and standards, further strengthen
product development so as to support a broader customer
base and truly deliver differentiated, easy-to-use and
personalized products and services. This year, our bank will
further strengthen cooperation with Chongqing Electric
Power Company. The tests of installing NFC chips into the
meters have been completed. In the future, customers may
tap their NFC-enabled phones over the NFC sticker on the
meter to read the meter and make the payment. Our bank
is also considering developing mobile financial services and
products for corporate customers. I firmly believe that the
mobile payment business has a bright prospect," said the
head of electronic banking division at CRCB.
Operators - open cooperation to achieve a winwin outcome

Operators are important participants in mobile
payment industry. The three major telecom
operators in China: China Mobile, China Unicom
and China Telecom all established wholly-owned
subsidiaries specialized in mobile payment: China
Mobile E-Commerce, Unicom Payment Ltd., and
Tianyi e-Commerce Limited (hereinafter referred to
as operators' payment companies or OPCs). They
were all awarded the licenses by the People's Bank
of China to operate non-financial (non-banking)
payment business at the end of 2011.
OPCs were late comers in the payment over the
PC and lagged behind TPP providers and banks.
But they have mobile network resources and huge
customer base and may gain momentum in mobile
payment more easily. Providing customer-centric
and quality services and increasing customer
stickiness are the important drivers for operators to
develop mobile payment services.
OPCs have developed both remote and proximity
payments. The remote payment services are also
managed by OPCs in a centralized manner. This is
significantly different from the proximity payment
model. The proximity payment services are
managed by the provincial operating subsidiaries
of operators. OPCs provide provincial operating
subsidiaries with technology and management
support. In the remote payment model, customers
need to register online to use the payment
services. What is worth mentioning is that the
three operators' payment companies are providing
services not only for their customers, but also for
the customers of other operators.
The operators followed the market trends closely

when they developed mobile payment services and
products. They can now support different popular
payment options, including payment wallet model,
gateway model and quick payment model (shown
in Figure 14).
1) Mobile wallet model. Mobile wallets are
independent from the users' mobile phone
accounts. Customers may top up the mobile
wallet with cash, online banking account, mobile
phone credit, reward points, prepaid card and
other methods.
2) Gateway model. Operators act only as an
interface for webpage redirection. OPCs started at
different time; as a result, the number of on-line
banking options they support varies. The funding in
the model derives from debit cards and credit cards.
3) Quick payment model. Quick payment is a type
of payment first delivered by Alipay in 2011. The
quick payment model adopted by operators is
basically the same as the one adopted by Alipay.
Because this product was released recently, there
were a small number of cooperative banks.
Operators also made some innovations. For
instance, the quick payment product introduced
by China Unicom allows the user to pay the phone
bills via replying SMS.
Figure 14: Operator's remote payment business model

Top-up channels
Payment means
Application Scenarios
Payment wallet
Internal merchants
Online outlets
Self-run services such as business
travel, game, video, and music
Self-run shops
Cash at the outlets

Online banking top-up
with debit/credit cards
Phone credits
Prepaid cards
External merchants
E-commerce websites
Credit card repayment
Mobile internet service fees such as
game and video
Reward points
TPP
Gateway
Bundling with online

banking of debit/credit cards
Quick payment
Partners: banks, CUP, TTP providers, software and solution providers

Due to the positive cooperation between operators

and merchants, operators' remote payment can
be used under many application scenarios. The
merchants can be divided into internal and external
merchants. The internal merchants may deliver
some of operators' services or may help operators
expand their services. Operators can control
these merchants in the payment field. Therefore,
operators gave high priority to internal merchants
for it was a good starting point for operators to
enter payment business. To stimulate the usage,
operators launched marketing and promotion
campaigns to attract users. For instance, operators
would offer the user discount and subsidy if the
user paid phone bills through operator's payment
applications. However, operators' payment
companies (OPCs) are facing strong competition in
the field of remote payment. There is no obvious
barrier in the field of remote payment and the TPP
providers and some banks may also deliver such
products. In the Spring Festival in 2012, there
30
were nearly 200000 person-times each day using

Mobile Alipay to top up their phone accounts. The
external merchants come from e-commerce, bill
payment and virtual currency purchase areas. This
is a traditional market for TPP providers. However,
the competition intensified as more and more
players entered this business such as UnionPay
and banks. Alipay, Tenpay and China UnionPay
have established close partnerships with a large
number of e-commerce players such as Taobao,
Tmall, 360Buy, Vancl, Suning.com and Amazon.
Operators will have to invest tremendous efforts if
they enter this market. In the field of bill payment,
operators enjoy certain advantages due to their
broader subsidiaries networks and better social
resources and stronger government relations which
compared to the UnionPay and the TPP providers.
At the current stage, the three operators selected
different proximity payment standards. While
developing 2.4GHz-based standard, China Mobile
is not giving up 13.56MHz standard. China

Telecom focused its efforts on 13.56MHz standard.
China Unicom implemented the NFC and SIMpass
solution based on13.56MHz standard and the
RF-SIM solution based on 2.4GHz standard in
Shanghai and some other cities, with SIMpass as
the main solution. As their business grows, China
Unicom and China Telecom are gradually shifting
toward 13.56MHz standard led by UnionPay.
In proximity payment, operators don't have a
nationwide business case. They pre-commercialized
proximity payment products only in some cities
and regions. In this area, all the operators selected
the partnership model and cooperated with banks,
UnionPay and all-in-one card companies. In such a
model, operators don't own the accounts, but they
provide support in card making, card issuance and

top-up channels. Users may go to the counter to
top up their wallets with cash, via bankcards overthe-air, by their phone credits and through other
channels. Users may use their wallets for public
transportation, in supermarkets and at restaurants.
Based on operators' strong footprint in major
accounts (governments, companies and schools),
they introduce proximity payment to governments,
companies and schools. The upgrading of POS
devices is a pain point for proximity payment. The
adoption of POS devices supporting proximity
payment is a crucial element determining
customers' choice. If operators collaborate with
UnionPay to upgrade POS devices, the adoption of
proximity payment will accelerate.
Figure 15: Operator's proximity payment business model

Top-up channels
Payment means
Application Scenarios
Cash at the outlets

Public transports: subways, buses,
OTA loading with

debit/credit cards
railways, etc.
Payment wallet
Phone credits
Partners' channels
Technical solutions: RF-SIM,

SD-PASS, SIM-PASS, NFC
total terminal solutions, etc.
Offline merchants: shopping malls,

department stores, chain restaurants, etc.
Schools, government agencies, companies
Partners: CUP, banks, public transport companies, chip makers, software providers,
device vendors, schools, government agencies and companies
Case:
China Mobile E-Commerce - create a payment platform to achieve win-win cooperation
China Mobile is the largest telecom operator in the

world. The value of mobile payment for China Mobile
is not to generate profit but to optimize customers'
experience, meet growing customer needs, increase
customer stickiness and reduce the churn. Driven by such
a motivation, China Mobile has established e-commerce
base in Changsha in 2006, which is responsible for
platform construction, product development and business
operation of mobile payment and mobile wallet services
of China Mobile across the nation. In the initial stage, the
e-commerce base focused on developing its proprietary
proximity payment standards and the applications of
proximity payment in such scenarios as access control and
public transport all-in-one card. The base conducted trials
in Hunan province and formed a certain market scale.
In June 2011, China Mobile's Hunan Branch (Hunan
Mobile) established a wholly-owned subsidiary - China
Mobile E-Commerce Co. LTD, which aims to deliver
mobile payment and mobile wallet services and providing
consumers with integrated mobile payment services.
China Mobile selected remote payment to deliver mobile
payment. Customers may do on-line shopping, pay
phone and utilities bills, and buy insurance and lottery
online via WAP, mobile client, IVR and SMS. China
Mobile E-Commerce offers mobile payment services on a
nationwide basis. As of November 30, 2011, China Mobile
E-Commerce had captured over 50 million mobile payment
users, with the transaction value over RMB10 billion yuan,
2000+ cooperative merchants, 400+ payment items and
80+ cities being covered. China Mobile's mobile wallet is a
type of key-enabled proximity payment service developed
by China Mobile E-Commerce. The provincial branches of
China Mobile helped to promote mobile wallet services
according to the features of local users, their technological
profile and their public resources while China Mobile
E-Commerce provided technical and managerial support
for the provincial branches. The standards of proximity
payment were not harmonized. China Mobile E-Commerce
delivered two types of proximity payment solutions
respectively based on its proprietary standard and the
standard of the financial industry.
32
In 2011, China Mobile's Shenzhen Branch worked with

Shenzhen Tong to develop the Mobile Shenzhen Tong
(MST) product. As of April 2012, a total of over 500000
cards were issued. This product became the most-widelyused proximity payment product with the most cards
issued in one single city. The MST user may use his or her
mobile handset to make purchases at over 750 outlets
of shopping malls, supermarkets, cinemas and over 200
vending machines at subway stations, exhibition centers,
transport hubs and office buildings. They will continue to
increase the card reading devices supporting MST cards.
On October 19, 2011, SPD Bank's Changsha Branch and
Hunan Mobile launched China Mobile - SPD Bank CoBranded Mobile Wallet Card. This is the first innovative
bankcard that has integrated electronic cash micropayment function, debit card wealth management function
and the credit card consumption function in China. If the
card holder is a user of China Mobile, he or she may make
quick micro-payment at the UnionPay QuickPass devices
through the external mobile phone card attached to the
mobile devices. At present, the user may make quick
payment for his or her purchases at nearly 6000 shopping
malls, supermarkets, hotels, restaurants, drugstores, photo
studios, beauty shops and the establishments closely
linked with people's daily life in Changsha, Zhuzhou and
Bingzhou. They planned to introduce value-added services
based on this co-branded card and expand their business
scope and user base.
China Mobile E-Commerce, with a vision of serving and
facilitating people's lives, will continue to cooperate with
the players in the value chain in an open manner so as to
create the most widely-used payment tool and the most
convenient mobile e-commerce application platform. It
will open three areas for cooperation: payment, clearing &
settlement, and marketing application. The payment and
clearing & settlement capabilities include order payment,
bulk payment and settlement of individual accounts.
Case:
Unicom Payment Ltd. - tap internal resources and offer differentiated mobile
payment services
With the growing adoption of smartphones
and the rise of mobile e-commerce, mobile
payment has become a payment model
with the greatest potentials in the payment
industry. In the coming years, the size of
the market and the adoption rate will grow
substantially. China Unicom, as an important
player in mobile payment ecosystem,
is vigorously expanding the scope of
payment business. Unicom Payment Ltd.
was established on April 11, 2011 and was
awarded the license by PBC to operate nonfinancial payment services on December 31.
2011. Unicom Payment Ltd. is responsible
for the payment business of China Unicom.
Based on the existing payment business
of China Unicom, Unicom Payment Ltd.
builds on the strength of China Unicom and
develops new types of payment services in
an innovative manner. Unicom Payment Ltd.
provides consumers and corporate customers
with the payment solutions across the
Internet, mobile network and POS network.
The payment business of Unicom Payment
Ltd. covers quick payment, online banking
payment, WO account payment, mobile
handset payment, fixed phone payment,
POS acquiring business, mobile wallet,
mobile public transport card, and integrated
corporate payment solutions.
Unicom Payment Ltd. has a clear positioning:
providing payment services closely related
to Unicom's services, devices and existing
communication resources and offering
differentiated payment services. The top
priority of Unicom Payment Ltd. is to
strengthen cooperation with e-commerce
and e-channel units of China Unicom and
provide the 200 million Unicom's customers
with a diversity of bill payment tools so that
customers may complete the payment of
Unicom's bills faster, more easily and more

smoothly. This may also reduce the pressure
of Unicom's outlets.
In the area of mobile remote payment,
Unicom Payment Ltd. has introduced a
wide range of service models including
online banking gateway redirection service,
"WO" payment account service, and mobile
payment plus, which basically covered all
remote payment models in the market.
The user may select suitable payment
services according to their own needs and
application scenarios. The mobile remote
payment services of China Unicom are
managed by Unicom Payment Ltd. in a
centralized manner. To facilitate the bill
payment process, China Unicom released
quick payment service. The user needs to
make some settings on his or her cellphone,
such as the date and ways for the reminder
of account payable/balance and at the same
time activate the quick payment functions
for the bankcards to be used for payment.
After the setting, China Unicom will send a
reminder message to the user's handset on
the date set by the user informing him or
her of the amount payable/balance. The user
may complete the payment of telephone
bills by sending back the reply message
or confirming the payment at the mobile
payment client.
China Unicom also set clear directions for its
proximity payment: 1) paying attention to
public transport card and all-in-one card for
schools and companies and hoping to grow
the business to a certain scale; 2) paying
attention to capital settlement business.
China Unicom has hundreds of thousands
corporate customers. Unicom needs to
deliver innovative acquiring business and
strengthen cooperation to provide fast

and easy-to-use payment solutions for
corporate customers. The markets of public
transport card and all-in-one card for schools
and companies vary greatly from region
to region. Unicom Payment Ltd. has not
adopted a centralized management model
for proximity payment and it only provides
technical support and shares experience
with provincial operating branches. China
Unicom has conducted mobile payment
trials in Beijing, Shanghai, Guangzhou
and Chongqing as early as 2011. They
issued a small amount of SIM cards with
public transport card functions. The mobile
handsets with such SIM cards can be read at
the card readers of buses and subways.
On April 26, 2012, China Unicom held a
ceremony to celebrate the establishment
of Unicom Payment Ltd., which marked
the official operation of Unicom's payment
company. DAI Renfei, General Manager
of Unicom Payment Ltd. said, "Unicom
Payment Ltd. will give priority to remote
payment and proximity payment services.
For the remote payment, we will focus
on mobile quick payment and micropayment services. We will deploy micropayment products and upgrade mobile
quick payment products in the latter half of
2012." Unicom Payment Ltd. indicated that
they would introduce proximity payment
products based on electronic cash and
conduct trials and they would continue to
promote mobile public transport cards and
all-in-one cards for schools and companies.
For the development and improvement of
payment environment in rural areas, Unicom
Payment Ltd. will introduce low-cost and
34
efficient mobile payment products for rural

residents based on its huge communication
network and service outlets and offer easyto-use, secure and fast payment services for
farmers. They will deploy and market such
products and services in some regions first.
In terms of industry application, Unicom
Payment Ltd. is integrating financial access
capabilities and building a centralized
collection platform, which will go online in
the latter half of the year. The centralized
collection platform will expand to other
industries so that the collection enterprises
could provide convenient withholding and
collection services. This platform can also be
used for sectors having frequent payment
transactions such as telecom, broadcasting &
TV, insurance, funds and public utilities.
Case:
China Telecom - reduce customer cost and deliver convenient payment services
China Telecom was the last operator in China to enter

mobile communications market. However, based on its
advantages in brand and corporate customer base it
accumulated from fixed-line and broadband business, its
mobile business has been growing rapidly. The number of
mobile users exceeded 140 million. Based on CDMA2000
technology, China Telecom was ahead of the other
two operators in terms of 3G customer penetration. It
paid particular attention to the application of emerging
technologies and stepped up its presence in mobile
payment in order to meet the 3G customer needs and adapt
to the development of the mobile Internet. On March 10,
2011, China Telecom set up a wholly-owned subsidiary Tianyi e-Commerce Limited. On December 31, 2011, it was
awarded a license by PBC for the operation of non-financial
payment services. Its business covers mobile payment, fixedline payment, e-point payment, and other fields. The value
proposition of Tianyi e-Commerce Limited in the value chain
is to provide customers with more convenient payment
applications by using the resources given by banks and
financial institutions as well as the technical support from
card providers, device vendors and system providers.
Before Tianyi e-Commerce Limited was established,
China Telecom had conducted trials in different provinces
on mobile payment service primarily based on NFC
technology. For instance, China Telecom Beijing Branch
(Beijing Telecom) introduced mobile Shangtong card
service. The Shangtong card account of Zihexin was preset
in the UIM card of 2.4G FRID handset. Tianyi user may use
the handset to pay for the purchase in over 50 merchants
cooperating with Zihexin. Beijing Telecom partnered with
China UnionPay (CUP) to deliver mobile bankcard services.
The smart financial UIM card in the handset carries the
personal bankcard payment account information of the
user and the handset becomes the payment information
processing device. As an emerging payment means, it
supports both remote and on-site payment. China Telecom
has a strong base of government, corporate and school
customers. Its mobile payment handsets have been used in
different scenarios on campuses, including access control,

attendance record, book borrowing, payment within the
campus, payment for boiled water and shower, etc. The
applications for corporate customers include attendance
management, restaurant consumption, and parking
management. China Telecom, as the card issuer, has issued
about 7 million mobile payment cards. However, due to
the absence of complete interoperability with UnionPay,
the economy of scale was not achieved, but China Telecom
and CUP have put it as a priority direction to expand.
Before 2011, China Telecom put its focus primarily on
proximity payment. After Tianyi eCommerce Limited was
founded, it considered remote payment based on mobile
client as another priority area. China Telecom introduced
the YiPay account, through which customers may complete
the payment. The YiPay account supports different types
of merchants including external merchants such as utilities
(gas, water, electricity, etc.), cinema tickets, train tickets
and traffic ticket fines, and big e-commerce websites
such as 360buy and Vancl and internal merchants, such
as China Telecom online outlets, TravelSky, TV189.COM,
189store.com, iMusic, etc.
Having obtained the payment license, Tianyi eCommerce
Limited became a full-service payment company delivering
both proximity and remote payment. Proximity payment
can be realized on FRID handsets, mobile phone POSs,
IPTV, multimedia self-service terminals and POS devices.
Remote payment can be delivered via mobile client, web,
WAP, SMS and IVR. In addition to remote and proximity
payment, Tianyi eCommerce Limited focused its efforts
on establishing the YiPay platform, on which China
Telecom may have centralized management of merchants,
customers and clearing & settlement. The YiPay platform
delivers five features: product configuration, transactional
orders, risk control, data analysis, and customer care
service. The establishment of YiPay Platform indicates that
Tianyi eCommerce Limited is able to provide corporate
customers with complete mobile payment solutions.
Third Party Payment providers - make

constant efforts to develop remote payment
and explore innovative services
payment account via mobile phone top-up cards,

virtual currency or the top-up cards offered by
payment companies.
Since Alipay became the first Third-Party Payment

(TTP) provider in China in 2004, the TPP industry
has been growing rapidly. The number of TPP
providers exceeded 300. In 2011, PBC awarded
101 non-financial payment licenses in three steps,
which indicated that the TPP industry entered a
stage of standardization.
2) Gateway model. Merchants may embed an

interface for the TPP gateway on the handset and
the user may select a payment bank on the TPP
interface and he or she will be redirected to the
mobile banking interface to make online payment
via credit card or debit card. In the gateway
model, the payment company only provides a
webpage redirection and the source of fund
comes from the bankcard.
The TPP providers focus primarily on remote payment

and there were very few attempts in proximity
payment. The rise of TPP providers came from webbased payment on the PC in the Internet era. The webbased payment was transplanted to the mobile handset
and remote payment can be delivered via WAP and
mobile clients. There are mainly three models:
1) Wallet mode. The customer needs to first
transfer fund to the payment account via multiple
channels, such as saving account or credit card
account. The customer may also top up their
3) Quick payment model. The user needs to bundle

the bankcard account with the TPP account at
the first use. In the following transactions, the
user only needs to input the password of the TPP
account to complete the payment. There is no
need for the user to enter bankcard number and
password. The security of customer data can be
better guaranteed. Quick payment was widely
accepted by customers due to it strokes a good
balance between security and quickness.
Figure 16: Remote payment business model of TPP providers

Top-up channels
Payment means
Application scenarios

E-commerce
Merchants
Phone credits
Prepaid cards
Credit card repayment
Payment wallet
Money transfer
Hotels
Virtual Currency
Transports

Gateway
Bundling with online

banking of debit/credit cards
Quick payment

Film ticketing
Wealth management
Guarantee
Partners: banks, CUP, TTP providers, software and solution providers

Remote payment of TPP providers supports various

application scenarios. In addition to the applications
offered by traditional e-commerce companies
such as Taobao, 360buy, Suning.com, and Vancl,
the TPP providers deliver a diversity of other
payment features and functions, such as credit card
36
repayment, payment for travel and tourism, public

payment, wealth management and guarantee.
E-commerce occupies a very important position
among the merchants using remote payment. With
the entry of UnionPay and banks, the competition
become more intense. Another area worth noticing
is the payment of financial wealth management

products. Compared with e-commerce, financial
wealth management product usually involves a
huge transactional amount and therefore generates
more profit. But the central bank has more stringent
regulation on the payment of non-financial
institutions for financial wealth management
products. In 2011, only China PnR, Allinpay,
ChinaPay, and YeePay were awarded the TPP
licenses for funds. In May 2012, Alipay, Tenpay and
99bill also acquired such licenses. As more payment
companies enter this market, the competition in the
mobile payment for financial wealth management
products will increase.
The TPP providers are conservative in proximity
payment. They haven't introduced payment
products based on RFID or NFC technologies.
But they are not waiting and they made active
attempts in proximity payment depending on their
advantage in remote payment. Through 2D barcode technology, they may also fulfill the proximity
payment functions. The 2D bar-code payment
launched by Alipay is very typical. The 2D bar-code
payment requires the user to download the Alipay
App. When the user pays for the purchase, he or
she may use the Alipay App to display the 2D barcode representing his or her account. The payment
collection side will scan the bar-code and then
enter the collection amount. The system will return
the information to the App and the use clicks the
confirmation button to complete the payment. The
collection side may be an individual or a merchant.

The Alipay App also offers bar-code scanning
and payment collection functions. The bar-code
payment is realized via the network. Although the
consumer and the merchant face each other, the
payment is completed remotely. Such innovative
model requires no change to the handset hardware
and shortens the length of the value chain. The
scanning is completed via handset or other smart
devices. There is no need to upgrade POS devices.
The coverage of the product was still very limited
and the market responded weakly. This model has
not been deployed in a large scale. Among the
respondents of our mobile payment survey in China,
a manager from e-banking unit of a bank indicated
that the 2D bar-code model is all about the reverse
ID authentication. The payment environment is not
closed and there are too many steps in the payment
process. The customer experience and perception
are not as good as cash and credit card payment.
Moreover, some TPP providers also introduced
card reader mobile payment products. Such
as the Smartphone Card Reader introduced by
99bill. Different from the Square mobile payment
model, which focuses on providing micro-payment
services for consumers, the 99bill targets corporate
customers with its Smartphone Card Reader.
According to the head of market unit of 99bill,
99bill has signed commercial agreements with
many insurance companies and have introduced
payment products for industry customers39.
Figure 17: 2D bar-code mobile payment business model

Virtual currency
Customer presents
2D bar-code
Debit/credit card top-up
Merchant scans the code

and push the message
Phone credit top-up
Customer receives and

confirms the message
2D bar-code scanner (mobile

phone or other devices)
39
Square batter in the

Chinese version: concerns
remain with mobile
payment security, Invest in
China, www.china.com.cn,
April 9, 2012,
http://invest.china.com.cn/
wwwroot/c_0000000
20001/d_49972.html
Top-up cards
Account
Quick payment
Payment
successful
Debit/credit cards
Partners: banks, CUP,, software and solution providers, merchants

Device vendors
Software providers
Chip makers
Solution providers
Case:
Alipay - explore innovative models to drive the rapid expansion of the
third-party payment industry
Founded by Alibaba Group in December
2004, Alipay (China) Network Technology
Co. Ltd. is a leading TPP provider in China.
It is committed to providing "simple, secure
and fast" online payment solutions for
e-commerce in China. Alipay was originally
established to safeguard the rights and
interests of the e-commerce consumers.
Traditionally, the electronic payment requires
the consumer to transfer funds directly
to the merchant's capital account via the
Internet. There was much fraudulence and
other drawbacks. Alipay, as a third party,
established a payment platform, which
serves as an intermediate platform between
consumers and merchants. The security level
of payment was improved substantially. This
model has not only boosted the fast growth
of other e-commerce websites, but also
made Alipay China's largest TPP provider.
Besides the traditional online payment
business on the PC end, Alipay is also an
active player in mobile payment industry.
As early as 2010, Alipay set up a wireless
business unit to develop SMS payment,
WAP payment and embedded payment for
non-smart devices. The market of mobile
Internet was still underdeveloped and the
mobile payment developed by Alipay failed
to achieve the economy of scale. But Alipay
accumulated rich experience through these
attempts. With the rapid development of
mobile Internet and the quick adoption of
smart devices, the wireless business unit
38
started to migrate the traditional online

payment functions to the mobile handsets.
Alipay was a forerunner in mobile payment
in China.
At the end of 2010, Alipay and more than 60
vendors including the handset chip vendors,
system solution providers, handset hardware
providers, and mobile application providers,
jointly established the Secure Payment
Industry Alliance (SPIA) and introduced
wireless payment product for mobile Internet
- "mobile secure payment", an open platform
for mobile application developers. This
marked that Alipay completed its deployment
in the wireless payment market and officially
launched the open strategy for mobile
Internet payment. On April 20, 2011, UC
and Alipay signed a strategic joint venture
agreement, announcing the launch of the
first mobile payment solution in China.
The payment can be completed with only
one click by the user on the mobile phone
equipped with a UC Browser. It is four or five
payment steps less than the WAP payment.
For the micro-payment less than RMB200
yuan, the user does not even need to enter
password. It also saves the associated
development efforts of e-commerce
websites, who only need to write a line of
secure payment code identifiable to the UC
Browser on the page. Alipay also launched
a quick payment product, which allows
the user to complete the payment by only
entering the card number of cooperative
banks and payment password without the

need to log on the on-line banking pages.
After two years' efforts, Alipay has achieved
the scale in the field of mobile payment. In
H2 of 2011, the daily transaction volume of
Alipay wireless payment exceeded 500000
transactions. On the Singles Day alone, the
payment transaction volume reached a record
high of 33.69 million transactions, including
1.71 million wireless payment transactions.
Alipay cooperated with merchants to deliver
mobile payment services. Besides Taobao
and Tmall.com, Alipay also offers mobile
payment functions for MeiTuan.com, Lashou.
com, Vancl, Dianping.com, Letao.com,
NewEgg.com.cn, Qunar.com and other big
merchants. The Alipay mobile client supports
all the mainstream mobile operating system,
including iOS, Android, Symbian, Windows
Mobile, BlackBerry, and Java. As of the end
of 2011, the installation base exceeded 10
million. The Alipay mobile client provides a
wide range of services including payments,
collection, mobile phone account top-up,
lottery purchase, bar-code payment, utilities
bill payment and so on. As online payment
got more and more mature, Alipay also set
its eyes on proximity payment. In October
2011, Alipay launched the bar-code payment
function to facilitate customers to consume
in shops, convenience stores, and restaurants.
Consumers can use Alipay mobile client to
display the bar-code or 2D bar-code of their
accounts. The collection side scans the code
and enters the payment amount. The system

returns related information to the client.
Consumers click the confirmation button and
the payment is completed. The collection
side can also be an individual. The Alipay
client also provides corresponding bar code
scanning and payment collection functions,
which can convert the smart mobile devices
into the scanner of the cash register.
Alipay made its presence in mobile payment
very early and has reached a certain scale. On
one hand Alipay has a huge active customer
base. The smartphone adoption increases
and the acceptance of non-cash payment is
increasing. On the other hand, Alipay made
innovative attempts in mobile payment and
provided customer with supreme experiences
based on its rich experience in the field of
payment on PCs. Alipay has been making
constant innovations on its mobile payment
services and products.
Case:
China PnR - develop Asi@ strategy to enter the mobile payment market
Established in July 2006, China Payment and Remittance

Service (China PnR) is headquartered in Shanghai, with
offices in Beijing, Shenzhen, Chengdu and other cities
and with a registered capital of RMB100 million. The core
team is made up of senior managers of China's financial
industry. On May 28, 2011, China PnR became one of
the earliest TPP providers to obtain payment licenses.
China PnR, as an expert in electronic payment, focused
on financial payment and value chain payment. Its core
competitiveness is to provide industrial customers with
quick, accurate and customized payment solutions,
develop innovative electronic payment services and
products and boost the development of e-commerce in
various industries. Based on this positioning, China PnR
casts its eyes on the aviation payment at the early stage
of growth and rapidly establishes cooperation with Air
China, China Southern Airlines, China Eastern Airlines, and
other major international airlines. Subsequently, China
PnR enters the funds payment and launches TTYFund and
other wealth management products. To date, China PnR is
serving tens of thousands of industry customers spanning
across different industries, such as funds, airline ticketing,
commercial circulation and digital entertainment.
China PnR is also a leading payment company in China
just like Alipay. However, the models are different. China
PnR is committed to finance-grade electronic payment
expert, targeted at industry customers, bulk payment and
B2B. Alipay, depending on its power Taobao platform,
is targeted at consumers. With the booming of mobile
Internet, China PnR expects its mobile payment business
will reach the level of RMB100 billion in 2012. E-commerce,
aviation payment, and financial payment are key growth
points in mobile payment. In such a context, China PnR
announced Asi@ mobile payment strategy, which consists
of four pillars: All, Security, Independence and @anywhere.
Mr. ZHOU Ye, Chairman and President of China PnR said,
"Mobile payment is a historical opportunity to change the
payment landscape. China PnR, with capital, technology
and professional team, is committed to mobile payment.
We look forward to growing together with other players in
40
the value chain." China PnR plans to invest RMB100 million

in mobile payment in the initial stage to deliver complete
payment settlement and capital chain management
solutions based on mobile Internet for the players in both
downstream and upstream of the value chain.
China PnR has released various payment products based on
mobile phone, such as card number payment, quick mobile
phone payment, image recognition technology, and wealth
management mobile terminal. For other terminals, China
PnR launched PAD+EPOS payment solution, which allows
the insurance brokers to complete the collection of premium
once the client confirms the amount of the premium and
swipe the card. The capital will be managed at the backend management system. Take mobile e-commerce as
an example, 360buy, Suning.com and other e-commerce
companies deliver services through the client on the
mobile phone while China PnR integrates mobile payment
technology in the clients of e-commerce companies. The
user may use the e-commerce client installed on the mobile
phone to place orders and make purchases directly via the
mobile payment. The payment is also completed on the
mobile phone. It really allows the user to shop anytime
anywhere. In the financial area, China PnR also moved its
core product - TTYFund to the mobile phone and introduced
TTYFund client to allow user to purchase funds products via
mobile phone. CHENG Shanbao, a senior manager at the
strategic development unit of China PnR said, "the winning
mobile payment strategy is fostering demands, developing
user habit, diversifying application scenarios and making
technologies ready." With the interactions of multiple
factors, mobile payment will enter a fast track.
China PnR has given a strategic priority to mobile payment
and has clearly identified its positioning of mobile payment.
The mobile payment solutions offered by other payment
companies are more inclined to micro-payment of consumers
while China PnR is expected to make breakthroughs in the
field of mobile bulk payment due to its strong presence in
aviation and financial sectors and become another strong
competitor in mobile payment.
Case:
Easylink - seek innovative IVR payment model and focus on the blue sea of
mobile payment market
Easylink (Guangzhou) Payment Network Co.
Ltd (Easylink) was founded in 2005, with the
registered capital of RMB100 million. In 2011,
it has obtained the payment business license
issued by the People's Bank of China, which
allows it to operate mobile phone payment
services and prepaid card issuance and
acceptance business. Easylink is working with
China UnionPay to provide mobile remote
payment services based on IVR technology.
Easylink focuses on IVR payment and it's
not competing with other TPP providers in
Internet payment. Therefore, it also maintains
a good cooperative relationship with the TPP
providers. Some TPP providers uses Easylink's
IVR solution and risk control. The user
payment will be cleared by Easylink to the
accounts of the TPP providers, which then
clear the payments to the merchants.
Easylink's IVR remote payment is a type
of card-less certified payment with the
asynchronous transmission of transaction
data and password through the dual
channels of data and voice. In a transaction,
the user needs to provide the merchant
with the bankcard number, his or her name,
mobile phone number, ID number and other
identity authentication information, which
will be transmitted to the back-end via the
Internet data channel. When the data is
validated by the system and platform of the
card issuer, the UnionPay IVR voice payment
platform will call the mobile phone of the
card holder to confirm the payment. The
card holder answers the call and inputs the
payment authentication element (payment
password for debit card; expiration date for
credit card, CVN2). The back-end, after data
matching, will initiate the password-based

(requiring no magnetic stripe information)
transaction payment request, which will be
sent to the relevant bank via UnionPay's
platform to complete the payment. For some
business which requires regular payment,
such as payment of premiums, the user only
needs to input the password one time (no
magnetic stripe information is required),
and for the remain payments, Easylink may
provide regular payment collection functions
without the need for the user to input
password again. When the user completes
payment, the capital will be cleared by
UnionPay to Easylink account, which will
clear the capital to the merchant's account.
According to DENG Yun, COO of Easylink,
Easylink currently supports next-day arrival
of capital. For some special services, such
as insurance, Easylink will make advance
payment to the accounts of insurance
companies and have regular settlement and
rebate with insurance companies.
IVR-based payment is less dependent on the
hardware of mobile devices. The user simply
needs to transmit password information
by the IVR channel. In theory, any phone
supporting voice functionality can work.
However, due to the fact that this payment
method requires only password without the
need to swipe bankcards and the IVR was
little known to the user community, there
was little understanding of such a payment
method and a lot of concerns over its security
in the early days of promotion. To address
these concerns, Easylink worked closely
with banks to increase the number of banks
supporting such methods. Furthermore,
Easylink took all the risk of bankcard fraud.

When the user completes the transaction, the
fund will be cleared from the bank account
to the Easylink account, which will then clear
the fund to merchants' account. If there
is a bankcard fraud, Easylink will make the
compensation. Such model reduces the risks
associated with bankcard fraud and theft
for the user, but this requires a high level
of risk control at Easylink. Easylink controls
risks from two aspects: on one hand, they
selected big and quality merchants for the
cash-out possibility of these merchants is
low and they have better protection of user
information; on the other hand, Easylink built
up a proactive risk control system. When a
user initiates a transaction, the system will
first judge whether this is the authorized user.
If the system fails to confirm the user ID,
the customer care operator will make a call
to the user to confirm the user ID by asking
some authentication questions. The risk
control system sets up different amount limits
for different users and different businesses.
As the transactions of the user increase, the
system will make dynamic adjustment to
the limit. In addition, each time when the
transaction is completed, Easylink will send
the transaction information in SMS format
to the mobile phone of the user to further
ensure the security of user funds.
42
The IVR remote payment of Easylink is

gaining momentum. Talking of the expansion
of merchant base, Mr. Deng said that the
major call centers in China have all adopted
Easylink's IVT payment solution including
10086, 12580, 112114, and call centers of
ticketing agencies and insurance companies.
Though it requires significant system upgrade,
the IVR payment is irreplaceable in the call
center payment solutions and it is growing
well. On the mobile Internet side, there are
more and more companies using Easylink's
IVR solution. At present, mobile lottery
payment has adopted Easylink IVR payment.
The iTunes account top-up also starts to
support Easylink's IVR payment. The user base
is less than 10 million, but the trend is picking
up, especially when iTunes also selected this
solution as one of their payment options. The
number of users is increasing by thousands
each day and the pace is accelerating.
Case:
Innovation Works: Buding.cn - an innovative model for online payment and offline
consumption (O2O)
With the rapid growth of mobile Internet in China, an
innovative payment model, O2O (Online to Offline), is
emerging in mobile payment market. Buding.cn (Beijing
Buding Fangzhou Sci &Tech Co., Ltd) was founded just for
this purpose in Nov. 2010. Buding.cn is the first batch of
incubation projects of Innovation Works (an investment
company and founded by Dr. Kai-Fu Lee in September
2009) and is committed to the O2O area in mobile
Internet. It has obtained the A-round financing of nearly
$10 million from Zero2IPO Capital, a domestic venture
capital management company. Buding.cn has introduced
a number of applications, including Buding Life,
Buding Movies, Buding Food, Buding Coupons, Buding
Takeaways, and Buding Film Tickets. It supports both iOS
and Android platforms. In 2011, Buding.cn started to
shift from providing applications for everyday life at the
beginning to mainly offering coupon-centric products. As
of March 2012, Buding.cn had over 10 million active users.
Buding.cn is studying the market demands and developing
new products in the hope to bring the most practical
application tools to facilitate the daily life of the users.
The business model of Buding Film Ticket is that the
customer may purchase the coupon and complete the
payment remotely through the client on the handset.
When the user walks into the cinema, he or she could
change the coupon into the ticket. The client-based
remote payment currently only supports UnionPay and
Alipay. 100% of the Buding Film Ticket users are mobile
payment users, proving that the adoption rate of mobile
payment in some business models of mobile Internet can
reach 100%. The user ordering the tickets may differ
from the user paying for the tickets. According to the
data of Buding.cn, the success rate from product ordering
to payment completion was 25%, a leading indicator in
the industry. But there were still 75% of the users who
ordered the film tickets but gave up purchase due to the
unacceptance of remote payment over the client. The

online payment experience became a critical factor in the
payment process. According to Mr. XU Lei, founder and
CEO of Buding.cn, the order conversion rate will rise to
30% to 40% if the payment process is further improved
and optimized. However, the room for improving
customer experience is very limited for delivering supreme
customer experience may lead to security issues. The O2O
mode faces great challenges but still have big room for
improvement and optimization. The key is to find a good
balance between user experience and security.
Based on the studies of Buding.cn on remote payment,
customers wish to have a buffer zone in the payment
process. For instance, customers may have concerns
to make online payment with UnionPay bankcards for
UnionPay is directly linked with their debit and credit cards.
Judging from the online payment statistics, Alipay is the
most active product, followed by credit cards and debit
cards. Customers have concerns to directly associate their
debit cards with an online account. For credit cards, they
still got opportunities to appeal and get back their money.
But for debit cards, if something goes wrong, they cannot
get back the money once the payment is completed. It is
much easier for customers to accept Alipay for the amount
is usually small and the user would not suffer a huge loss
even if the account is lost or stolen.
Trusted Service Manager (TSM) Platform:

promote open cooperation to lead innovation
in mobile payment
Figure 18: Open and collaborative third-party

TSM platform
There are various players involved in mobile

payment, especially in proximity payment value
chain. Great difficulties exist in balancing their
interests and harmonizing the standards. Mobile
payment is still in its infancy in China and a
stable industry landscape has not been formed.
The security issue is the biggest challenge for
the industry. To protect user data security and
effectively manage the participants in proximity
payment, the third-party TSM platform appeared.
The most representative case is the TSM solution
of FirstData. FirstData plays a very important role
in managing the participants of Google Wallet. It
offers interfaces for various bankcards based on its
technology and platform infrastructure and allows
users to use Google Wallet to complete payment
easily and quickly. The TSM platform offered by
FirstData is highly scalable. The user may set up
multiple loyalty accounts in this virtual wallet to
enjoy merchant discount and control costs40.
MNOs
There are also third-party TSM entities in China's

mobile payment industry. As an emerging third-party
entity, TSM is independent from operators, financial
institutions and TPP providers. By developing card
and POS device specifications, TSM worked with all
the players to provide users with mobile payment
services (see Figure 18). For instance, Mobile
Shenzhen Tong project, as a TSM platform jointly
initiated by Angel Shine in Shenzhen in collaboration
with China Mobile and Shenzhen Tong, have
achieved good commercial results. About 550000
Mobile Shenzhen Tong cards have been issued, with
270000 transactions per day and 51% of active
users per day41.
The TSM model is a feasible solution from the
technical perspective, which could coordinate
the interests of different players for the common
development of the industry. The third-party
TSM model is a business model featuring open
collaboration (see Figure 18). It plays a key role in
three aspects42.
44
Virtual card
providers
Third-party
TSM platform
Financial
institutions/
non-financial
payment
providers
POS providers
and equipment
manufacturers
Physical card
providers
Merchants
Source: Mobile Payment in China Survey, Deloitte

China, 2012
Firstly, TSM increases the mutual trust between

the players in the ecosystem. The third-party TSM
platform, as a neutral party, provides a place for
the players to coordinate their interests. TSM
is the center of mobile payment value chain. It
maintains and enhances the relationship with
service providers (including financial institutions)
and operators and provides check, test and
support for new applications, customer support
and some supporting management services such
as data storage.
Secondly, it serves as a bridge between mobile
users and application providers. TSM connects
application providers such as banks with operators
and is a bridge between them. TSM allows any
participant to access the customers of other
participants easily. It provides the participants with
NFC payment services and relieved them from the
need to manage complex relationships. TSM may
also offer a set of specifications accepted by the
participants to allow every participant to access
applications easily.
40
Mobile Commerce, Google

Wallet, First Data,
http://www.firstdata.com/
en_us/products/merchants/
mobile-commerce/googlewallet.html
41
Deloitte's survey on mobile

payment in China, Feb. May 2012
42
Edward Kountz, 2010: A

Crossroads For NFC Mobile
Payments, Forrester, , Feb.
21, 2010,
Lastly, the independent TSM may provide virtual

card/application management. As the center for
multiple service providers and mobile network
operators, TSM supports over-the-air download
and activation of payment applications and other
more personalized mobile applications such as
loyalty programs. When the user device is lost,
TSM may lock and terminate related applications
to guarantee the security of personal data.
basic functions as well as virtual card/application

issuance functions. The payment features are
expanded to support multiple functions of security
documents (ticket, coupon, certificate, and card).
On the physical card side, the independent TSM
develops related specifications and delivers
them to physical card providers (chip providers
and encapsulation vendors). The physical cards,
examined by the TSM, will be provided for mobile
network operators (MNOs), which will then
distribute the physical cards to the users. Physical
cards do not integrate application or virtual card.
The TSM will write the virtual card and application
into the physical cards to fulfill payment functions.
When the cards are issued to the users, TSM may
also add virtual card/application via OTA download
to expand the features of physical cards.
Generally speaking, proximity payment involves

three key elements: physical cards, POS devices
and management systems. The key role of TSM
is to build and operate the system, coordinate
the interests of different participants, and provide
viable industry specifications for physical card
providers and POS device providers to allow
them to access TSM platform (see Figure 19). The
physical card for TSM is a CPU card, which supports
Figure 19: TSM business model

Source of funds
Business models
Customers
POS
network
MNOs
n
Banks
Non-Financial
b
Payment
Institutions
Top-up
channels
No. a. OTA loading
b. Fund transfer
c. Top-up
d. Swipe card
e. Delivery
f. Transaction settlement
g. Fund transfer
Physical cards d
POS devices
e Merchants
Users
Physical card
providers
Virtual card/
application
providers
p
j
i
h
POS
providers
Third-party TSM platform
h. Virtual card/application issuance

i. Account management
j. Confirm remote payment
k. Send account information
l. Provide card-making specifications
m. Provider POS device specifications
n. Supply card
o. Issue card
p. Provide application/virtual cards
q. Supply POS devices
r. Supply POS network
s. Upgrade POS devices
Source: Mobile Payment in China Survey, Deloitte China; Angel Shine, 2012
On the POS device side, the TSM also needs to

provide the POS specifications for POS suppliers,
which will then manufacture POS devices
and contactless card readers according to the
specifications. POS suppliers may provide the
compliant POS devices for users through POS
network (UnionPay, All-in-one card networks) and
upgrade existing POS devices with contactless card
readers with the authorization of POS networks.
With respect to the source of funds, users may
store money into the "wallet" through banks, nonfinancial institutions, or cash top-up channels and
make payment at the POS devices. The user may top
up his or her wallet over the air on a menu when
there is insufficient balance if the user bundles his
bankcard with his or her account. Mobile Shenzhen
Tong of Angel Shine has established cooperation
with ICBC, ABC, Bank o China (BoC), CCB, China
Everbright Bank, SPD Bank, Bank of Beijing, and
Bank of Communications. If the user bundles his
debit card with his wallet account, he may top up
his wallet through STK menu43.
In terms of business operation, TSM's main
responsibilities include: to coordinate, develop,
provide and maintain specifications, manage
user accounts and capitals and expand merchant
resources and application scenarios. Another
important task of TSM is to align industry
specifications. This involves the coordination,
development, provision and maintenance of
the specifications. First, TSM needs to know the
technical and business standards of different
participants, including financial institutions, nonfinancial institutions, mobile operators, and virtual
card/application providers and then design and
develop a set of mobile payment specifications,
which can accommodate these standards so
that different players may accept and recognize
these specifications. TSM needs to provide the
specifications for physical card providers and POS
device providers. The vendors involved in the
production of physical cards and POS devices need
to follow these specifications in the production
process. These cards and devices shall be examined
by the TSM and the qualified products will be
supplied to the (physical) card issuers such as
MNOs. With the expansion of application scope,
46
the applications of different industries need to be

incorporated into the specifications. As a result, TSM
needs to maintain and update its specifications so as
to meet the needs of an open collaboration model.
TSM's main roles concerning the management
of user accounts and capital include storage and
transferring of user data, capital management, and
customer relationship management (CRM). Firstly,
the user data is stored on the TSM platform. The
user may inquire account, top-up and transaction
records through STK menu or by other means.
Secondly, the top-up credits from various channels
will be transferred to the accounts on the TSM
platform. Before fund settlement with merchants,
the money will stay at the TSM account. TSM
needs to manage the fund and ensure its security
for the purposes of capital settlement with
merchants and meeting user needs to unload
credits. Lastly, another task of TSM is customer
relationship management. When the user
encounters a problem in mobile payment, TSM
needs to respond in a timely manner to help the
user resolve the problems and maintain customer
relationship through customer care services.
TSM is also responsible for expanding merchant
resources and application scenarios. In a certain
degree, the diversity of application scenarios will
determine the popularity of mobile payment. TSM,
as an open platform, may interface to different
application scenarios and merchant resources.
This concerns the payment processes of different
application scenarios and the coordination
and harmonization of the service and technical
specifications of different merchants. Compliant
virtual cards/applications examined by the TSM
may be integrated into the physical cards to
expand features and applications.
We believe that in a chaotic mobile payment
market, it is necessary to have a third-party
platform, which can coordinate the interests and
technical and service standards of different players.
The emergence of TSM advanced the mobile
payment industry in China. Financial institutions,
operators, and TPP providers all want to take
the leading role. The fights among them have
resulted in the development of third-party TSMs.
43
Mobile payment in China

Survey, Deloitte China, Feb.
- May 2012
In the future, with the further adoption of mobile

payment, particularly proximity payment, TSM will
enjoy tremendous potentials for further expansion.
Players in the value chain: geared to win-win

cooperation as a whole
From a cost/benefit perspective, financial
institutions may get transaction fees, attract
and retain customer resources through mobile
payment services. The main cost factors are
transaction processing, client development,
construction and maintenance of settlement
systems. Mobile network operators wish to
increase customer loyalty through mobile payment
and obtain revenues from mobile wallet leasing
fee, transaction fee and advertising fee. The TPP
providers need to establish transaction platforms
and obtain transaction fee from each transaction.
The equipment vendors and technology providers
may provide technical and equipment support for
financial institutions, operators and TPP providers
and generate new growth points. The support
from merchants is also an important factor for the

development of mobile payment. Mobile payment
should bring added value to them and help them
reduce transaction costs (see Table 1).
Financial institutions, operators, and TPP providers
are the major participants in mobile payment
industry and they have formed different business
models. The business model led by financial
institutions focuses on offering specialized financial
services. They may integrate the existing financial
networks, clearing systems, customer base and
merchants resources, but they have weak control
over the device -manufacturers. In the business
model dominated by operators, operators have
stronger control over end users and device
manufacturers, but they lack merchant resources.
TPP providers have advantages in user base and
online merchant resources, but they lack offline
merchant resources and their influence on device
manufacturers is limited. These business models also
face challenges, but the participants, as a whole,
hold a positive attitude of win-win cooperation.
Table 1: Costs, benefits and tendency of cooperation among different participants

Players
Costs
Benefits
Tendency of cooperation
Financial
institutions
Transaction processing,
Transaction fee, customer Leveraging operators' channels; sharing bigger
client development, CRM value
Internet e-commerce market; active customers
Mobile
network
operators
(MNOs)
Handset subsidies, POS

devices, CRM
TPP providers Platform construction

Third-party
TSM
Platform construction,
coordination cost, backend costs
Device
Design, production, and
manufacturers support
Mobile wallet leasing

fee, transaction fee,
advertising fee
Leveraging capital accounts and clearing

and settlement systems; reducing repetitive
construction; expanding payment merchants
base and enriching the handling environment
Platform/ transaction fee, Saving time and cost of building physical

user data
channels; avoiding being marginalized
Obtaining greater support; sharing platform
Platform/ transaction fee,
construction costs; entering nationwide markets
user data
quickly
Marginal profit,
differentiation
Cost savings generated by scale-based

production and greater market
New source of growth
Technology
providers
Platform construction
and maintenance costs
Service fee, user data
Merchants
Transaction fee, POS

device upgrade, loyalty
reward
Cost saving, efficiency

Leveraging cooperative platforms, channels,
increase, customer loyalty brands, expanding consumer base and improving
improvement
self-branding
Lack of policy support and lack of standard

alignment are the biggest challenges facing
the value chain
There are many different participants involved in
the mobile payment industry including financial
institutions and operators. From a regulatory point
of view, it is a very complex issue. A number of
government agencies including the Ministry of
Industry and Information Technology (MIIT), the
People's Bank of China (PBC), and China Banking
Regulatory Commission (CRBT) are involved
in the development of polices, standards and
industry specifications. Based on the survey results
of Deloitte, lack of policy support and lack of

standard alignment are the biggest challenges
for the industry. Due to uncertainties at the policy
level, the companies were relatively conservative
in technical, human resources and capital
inputs, which in a certain degree hindered the
development of the industry. The third biggest
challenge is security issue. Many customers are
reluctant to use mobile payment due to security
concerns. How to guarantee payment security to
the maximum extent is a subject for the players.
Other challenges include "weak user demands"
and "difficulties in reaching an agreement on
revenue sharing". (See Figure 20)
Figure 20: Please rank the challenges facing your company when developing mobile payment
strategies in order of severity according to your knowledge
Lack of policy support
13.73%
Lack of standard alignment
12.32%
Security issue
10.92%
Weak user demands
10.92%
9.51%
Difficult to agree on revenue-sharing
8.80%
Industry segmented
8.45%
High cost
7.75%
Lack of user understanding
6.69%
Lack of NFC-enabled devices
5.99%
Technical barriers
4.58%
No support from merchants

Others
0.35%
48
For financial institutions, the biggest challenge in

remote payment is how to develop user habits,
improve the utilization of mobile payment, and
convert the bank users not using mobile financial
services and the users getting used to mobile
payment of TPP providers to the mobile financial
service platforms of financial institutions. In
the area of proximity payment, the challenges
for financial institutions are: limited application
scenarios, difficulties in changing user habits, and
unstable user experiences.
Operator payment companies (OPCs) are new
entrants in mobile payment. They face big
challenges in cooperation and operational
experiences. The number of banks and online
merchants collaborating with OPCs are far smaller
than those working with big TPP providers. The
payment resources of operators are not fully
integrated and lack of partners is one of the barriers
to the development of OPCs. In terms of operating
experiences, OPCs have some disadvantages in
the ease of use of the product, internal resources
integration, technical development and execution.
In the proximity payment, the biggest challenge
lies in uncertainty in standards.
The biggest challenge for TPP providers is

how to satisfy and lead the fast-changing user
demands through constant innovation. The
third-party companies are in a weaker position
than financial institutions and operators in terms
of scale, policy support and profitability. Only
through innovation can they win their places in a
fiercely competitive landscape.
The main challenge for the third-party TSMs
comes from the development of specifications
and technical development. The participants
have already established relevant specifications
based on their own standards. They face great
difficulties in aligning different specifications. The
technical development concerning specification
development is also very complex. The complex
specifications may bring risks to system operation.
In the real operation, there might be security risks
and the user experience might be affected.
Prospects of mobile payment ecosystem

in China
Mobile payment will become a hot spot in China in the coming three years and it
will attract sustained attention. In 2015, mobile payment in China will become
a mainstream means of payment. The adoption rate of proximity payment and
remote payment will further increase and there will be more players to join
the mobile payment value chain. The competition in mobile payment market
will get more intense. Co-competition will be the main theme for the mobile
payment value chain. Deloitte believes that due to the fierce competition and
the participation of multiple players, they will actively build an open business
model. The TSM platforms will spring up. The participants will jointly establish
the mobile payment industry promotion organization, which will play an
important role in integrating the third-party TSM platforms, building an open
innovative ecosystem, promoting the development of this industry and driving
the win-win cooperation among the players.
Mobile payment will become a
mainstream means of payment in 2015
Mobile payment will receive constant attention
in the coming three years. Proximity payment
and remote payment will be the hot spots of the
industry. Among the respondents of Deloitte's
survey, 93% believe that proximity payment
will receive high and medium attention in the
coming three years and 95% believe that remote
payment will receive high and medium attention.
There will be more and more participants
joining the value chain to drive the innovation,
promotion and adoption of mobile payment
tools. Specifically, micro-payment and electronic
coupons will receive more attention from the
industry. 88.28% respondents believe that micropayment will receive high and medium attention in
the coming three years and 81.08% respondents
believe electronic coupons will receive high and
medium attention in the coming three years. It
indicates that mobile payment will be primarily
micro-payment in the coming three years. Mobile
payment will start to integrate electronic coupon
features. The advantages of mobile payment tools
will be further manifested. For P2P/P2C payment,
27.03% respondents believe that it will receive
50
sustained attention in the coming three years.

Therefore it can be concluded that it's hard for
P2P/P2C payment to become mainstream mobile
payment method. (See Table 2)
Table 2: Level of attention paid to P2P/P2C
payment, micro-payment and electronic
coupon in the coming three years
Level of
attention
P2P/P2C
payment
Micropayment
Electronic
coupon
High
27.03%
54.05%
46.85%
Medium
49.55%
34.23%
34.23%
Low
22.52%
10.81%
17.12%
Zero
0.90%
0.90%
1.80%
Source: Mobile Payment in China Survey, Deloitte

China, 2012
By 2015, proximity payment will become the

mainstream means of mobile payment. Although
mobile payment is still in its infancy in China, the
industry as a whole has full confidence in the
prospects of the industry in the coming three
years. 32.71% respondents believe that proximity
payment will become the mainstream means of
mobile payment in one or two years; 50.45%
believe that remote payment will become the
mainstream means of mobile payment in one or
two years. Therefore, it can be seen that remote
payment will still be the mainstream means of
mobile payment in China. Looking at the coming
three and four years, 51.41% respondents
believe that proximity payment will become the
mainstream means of mobile payment (see Figure
21). This also reflects that most participants
considered proximity payment a hot spot area, but
they were still cautious to enter this area.
The players will continue to compete

with each other and the co-competition
will remain the main theme of the
mobile payment industry in 2015
The main players in mobile payment industry in
China are financial institutions, MNOs and TPP
providers. They all have made active attempts in
mobile payment. The situation will continue in
2015. In the Deloitte survey, 21.37% respondents
believe that banks will dominate the mobile
payment industry in 2015 while 20.48% believe
that MNOs will lead the mobile payment in 2015,
16.96% believe that it will be China UnionPay and
15.86% believe that it will be TPP providers (see
Figure 22). It can be concluded that the players
will continue to compete with each other and the
co-competition will remain the main theme of the
mobile payment industry in 2015.
Figure 21: When mobile payment will become the mainstream means of payment in China?
Proximity
Remote
0%
10%
20%
Currently
30%
In 1-2 years
40%
50%
60%
In 3-4 years
70%
80%
In 5-10 years
90%
100%
In 10+ years
Figure 22: What types of players will affect the development of mobile payment in China in
the future (2015)?
21.37%
Banks
20.48%
MNOs
16.96%
CUP (China UnionPay)
15.86%
TPP providers
8.37%
Application providers
Merchants
6.61%
SIM card or chip makers
5.29%
Device vendors
5.07%
In 2015, the players that will have the strongest

control over mobile payment device users are
MNOs, followed by banks. In Deloitte's survey,
33% respondents believe that MNOs will have
the strongest over mobile payment device users
by 2015 while 30% believe that banks will have
the strongest control over mobile payment
device users. Meantime MNOs' control over
mobile payment device users will decrease. 46%
respondents believe that MNOs now have the
strongest over mobile payment device users,
however only 33% respondents believe that it will
remain so by 2015. (See Figure 23)
Banks have the strongest control over mobile

payment applications and security. In Deloitte's
survey, 39% respondents believe that banks
have the strongest control over mobile payment
applications and security, followed by MNOs.
17% respondents believe that MNOs have the
strongest control over mobile payment applications
and security. It will remain so by 2015 for 35%
respondents believe that banks will have the
strongest control over mobile payment applications
and security. MNOs' control over mobile payment
applications and security will further decrease (see
Figure 24).
Figure 23: What types of players have or will have the strongest control over mobile payment
device users?
50%
46%
45%
2012
40%
35%
30%
2015
33%
30%
26%
25%
15%
15%
15%
12%
8%
8%
5%
3% 2%
ve Dev
nd ic
or e
s
s
id
pr
ov
TP
P
CU
Un P (C
io hi
nP na
ay
)
er
s
NO
M
Ba
nk
s
0%
1% 0%
0%
Ap
p
pr lica
ov ti
id on
er
s
M
er
ch
an
ts
10%
0% 1%
S
ch IM
ip ca
m rd
ak o
er r
s
20%
Figure 24: What types of players have or will have the strong control over mobile payment
applications and security?
45%
40%
35%
39%
35%
2012
2015
30%
25%
20%
17%
15%
13%
12%
15% 14%
11%
8%
10%
7% 6%
5%
5%
6%
7%
3% 2%
52
S
ch IM
ip ca
m rd
ak o
er r
s
Ap
p
pr lica
ov ti
id on
er
s
M
er
ch
an
ts
ve Dev
nd ic
or e
s
CU
Un P (C
io hi
nP na
ay
)
TP
pr
ov
id
er
s
NO
M
Ba
nk
0%
area and 43.81% respondents believe that the

cooperative model between financial institutions
and operators is more likely to win in the remote
payment area. In addition, establishing open
mobile payment platforms is also highly recognized
by the respondents. 34.86% respondents believe
that this model will win in the proximity payment
area and 32.38% respondents believe that this
model will win in the remote payment area. (See
Figure 25 and Figure 26)
Open and cooperative business models

are more likely to win by 2015
The open and cooperative business models
are more likely to win in the coming three
years. According to the survey results, the
model featuring cooperation between financial
institutions and operators is more likely to succeed.
47.71% respondents believe that the cooperative
model between financial institutions and operators
is more likely to win in the proximity payment
Figure 25: Please score the likelihood of success of the following mobile payment business
models in proximity payment
Establishing an open mobile
payment platform
Partnership between financial
institutions and operators
Reliable third-party
intermediaries
Operators only
Financial institutions only
0%
20%
1 (Most likely to succeed)
40%
2
60%
3
80%
100%
5 (Least likely to succeed)
Figure 26: Please score the likelihood of success of the following mobile payment business
models in remote payment
Establishing an open mobile
payment platform
Partnership between financial
institutions and operators
Reliable third-party
intermediaries
Operators only
Financial institutions only
0%
20%
1 (Most likely to succeed)
40%
2
60%
3
80%
100%
5 (Least likely to succeed)
Building a mobile payment ecosystem

will be the main goal of industry
development in the coming three years
It will be a natural choice for the players in the
mobile payment value chain to seek for win-win
cooperation. The main goal of the mobile payment
industry in the coming years is to build up an open
and innovative ecosystem. It is unrealistic for any
single player to dominate the whole industry. Only
through cooperation can the players push forward
the development of mobile payment in China.
Moreover, an open and cooperative business model
is essential for the large-scale commercialization of
mobile payment in China.
The mobile payment industry also faces great
challenges in China. From regulatory and policy
perspective, there are no clearly-set market
access rules and the technical standards are not
harmonized. From the technical perspective, a
more flexible platform is required to enhance
security and anti-fraud activities. In the coming
three years, the third-party TSM platform will grow
rapidly and steadily.
At present, MNOs have started to build up the TSM
platforms they could control. China Telecom, China
Mobile, and China Unicom have all completed
the construction of TSM platforms. China Telecom
and China Unicom have opened the card space to
allow the release and management of third-party
applications. MIIT also indicated the intention to
develop the standards concerning TSM platforms
and push forward its development. However,
the TSM platforms dominated by one part of
the players may lead to isolated ecosystems and
contradict with the interests and strategies of
other players in the value chain. If it turns out to
be a lasting fight for mobile payment standards,
merchant resources and user resources, it will
seriously impede the development of mobile
payment in China.
Deloitte believes that the third-party TSM providers
independent from financial institutions, MNOs and
the TPP providers, will usher in big development
opportunities. Deloitte also foresees that due
to the facts that the value chain is diverse and
complex, there are a vast number of participants
and the competition for interests and resources
is intense, simply relying on the introduction of
a single standard and the establishment of thirdparty TSM platform are not enough to change the
54
current situation or boost the rapid development

of the industry as a whole. For example, Google
Wallet model, with American FirstData as the
third-party TSM provider, recently encountered
some difficulties, which can be attributed to
the complex chain of interests and the failure
in coordinating the interests of the players. The
value chain consists of Google, operators, handset
manufacturers, credit card companies, banks, and
merchants and there are giants in every link of the
chain. The complex chain of interests eventually led
to the failure of Google Wallet44.
Compared with the precarious Google Wallet model,
the launch of the proximity payment ecosystem
led by the Infocomm Development Authority (IDA)
of Singapore in collaboration with the third-party
TSM provider is worth expecting. In October 2011,
IDA joined hands with Gemalto to deploy mobile
NFC contactless services across Singapore. Gemalto
will develop and operate the TSM solution so as to
securely deploy and manage mobile NFC services
such as payment, ticketing, bonus points, smart
poster (which allows consumers to interact with the
ad) and other wireless services. Singapore's three
mobile operators all established connections with
this interoperable NFC infrastructure. Banks, payment
providers and service providers will be able to deploy
innovative mobile NFC services for all the mobile
subscribers of different operators. This open and
secure platform will also encourage more companies
and service providers from various industries to
join the ecosystem and provide more services for
consumers. The TSM infrastructure is able to support
the potential service providers to extend their services
to all mobile subscribers in Singapore. The project
is expected to be commercialized and start offering
services in mid-201245.
It is in Deloitte's belief that the mobile payment
industry in China needs an open and orderly
ecosystem where the boundaries of the
stakeholders are well defined. It is a progressive
process to build up such an ecosystem. The players
need to explore cooperation opportunities with
an open mind. The construction of the ecosystem
should move forward smoothly and orderly
on the basis of integrating different business
models, updating specifications and consolidating
platforms. Based on the innovation theory and
the practice of mobile payment in China, we
divided the development of the ecosystem into
three phases: transformation, standardization, and
stabilization. (See Figure 27)
44
Google Wallet failed:

it's hard to balance
the interests of
different players, China
Entrepreneur,
http://tech.hexun.com/201206-04/142089277.html
45
Gemalto started to deploy

mobile NFC contactless
services across Singapore,
Business Wire,
http://news.yktworld.com/
201110/2011102611242
93582.html
Figure 27: Evolution of China's mobile payment ecosystem
Trusted
third-party
platform 6
Solution
providers
Chip
makers
Norming phase
Financial
institutions
MNOs
Trusted
third-party
platform 1
Trusted
third-party
Mobile
payment platform 2
TPP
industry
providers
promotion
organization
Trusted
Trusted
third-party
platform 5
Device
vendors
third-party
Trusted platform 3
Application
third-party
providers
platform 4
Merchants
POS device
vendors
Equipment
manufacturers
Technology
Trusted providers
third-party
platform
Transitional phase
Merchants
Equipment
manufacturers
Technology
providers
Technology
providers
TPP
providers
Merchants
Equipment
manufacturers
Mobile payment
industry promotion
organization
Financial
institutions
Merchants
MNOs
Financial
institutions
MNOs
Third-party TSM
platform
TPP
providers
Equipment
manufacturers
Technology
providers
MNOs
Merchants
Financial
institutions
TPP
providers
Financial
institutions
Stable phase
MNOs
TPP
providers
Strategy
Application
providers
Risk
control
Solution
providers
Information
Mobile payment
industry promotion
organization
Trusted third-party
platform
Merchant
resources
Merchants
Device
vendors
Device
vendors
User
resources
Chip
makers
POS device
vendors

Transformation - establish an industry

promotion organization and open the channels
for interactions and communications
Institutional innovation is critical for the
development of mobile payment industry in
China. Financial institutions, operators, thirdparty payment (TPP) providers, merchants, device
vendors, chip makers, POS device manufacturers,
application and solution providers, as the
participants in the value chain, are expected to
create a harmonious ecosystem and establish
stable business models. The business activities and
the communication among the participants require
proper institutional arrangements, guidance,
coordination and sustained incentives.
It is in Deloitte's belief that the ecosystem needs a
mobile payment industry promotion organization.
This organization should take into account China's
reality, seek various routes to promote win-win
cooperation among the participants, advance
the development of mobile payment industry in
China, and properly coordinate the interests of
different participants. This organization should
coordinate marketing strategtes, make rational
arrangements, promote fair competition, and
make rational allocation of related resources.
The organization should be initiated by the
government in collaboration with the trusted thirdparty responsible for organizing, planning and
establishing such an organization.
The mobile payment industry promotion
organization needs to consult with the players
involved as well as the third-party TSM providers
on common market positioning and strategies and
help the players eventually reaching an agreement
on the sharing of profits and resources. During
the transformation period, the top priority for the
organization is to identify the participants in the
mobile payment. For example, the third-party TSM
provider needs to first approach operators, banks,
CUP, and TPP providers to consult on technical
standards and application specifications. Then, the
TSM provider also needs to work with equipment
manufacturers and technology providers to
56
advance product agreement and technical

integration. Moreover, the TSM provider also
needs to collaborate with merchants to promote
the application and adoption of mobile payment.
In the whole process, the TSM provider needs to
identify the participants and the leading players
through market surveys and in-depth interviews
and based on the characteristics of their business
models and commercial activities.
The promotion organization may assist the thirdparty TSM provider in negotiating with the
participants on standards and specifications and
building and expanding the TSM platform. This
is an interactive process. The organization may
set up project groups to discuss the agenda for
the joint creation of the organization. The project
groups may also develop new plans, strategies
and structures and finally reach agreements on
the charter of the organization. The promotion
organization is responsible for coordinating and
integrating resources and establishing rational
distribution mechanisms and internal management
and reporting mechanisms concerning information
and technology, user resources, merchant resources
and risk control.
Standardization - promote mutual learning

and develop common standards and
specifications
During the standardization phase, the industry
promotion organization should integrate multiple
third-party TSM platforms and align different
specifications and standards. It should establish
a coordination and communication mechanism
interacting with different industries and
participants and integrate them into the unified
platform, develop corresponding rules binding
to all the players. In this process, the promotion
organization needs to have active consultations
with the platform provider and other players in
the value chain. Based on the coordination of the
promotion organization, the players concerned
should study and develop unified standards
according to the development needs and establish
databases, organizational structure, management
mechanisms, reporting mechanisms, talent pool

and market access rules. The players concerned
should strengthen the security of the mobile
payment system, establish and improve the security
management system, and enhance the security
management of the third-party TSM platforms
so as to create a secure network environment
for the development of mobile payment and
address the security concerns of mobile payment
transactions. The players should, based on the
integrated platform, with the organization's
charter as the guideline, carry out internal and
external commercial and technical exchanges and
cooperation and coordinate and share various
resources through the platform.
Stabilization - share risks and resources

and achieve win-win results under the cocompetition mechanism
With the coordination of the mobile payment
industry promotion organization, the players
concerned may share strategies, information,
technologies, users, merchants, risks and other
resources based on the integrated third-party
trusted platform. They may cooperate and
compete in an orderly manner and achieve the goal
of profitability. In accordance with the guideline
of win-win cooperation, the players concerned
may jointly conduct business cooperation and
develop new products and explore new markets.
The promotion organization should consolidate
the cohesiveness of the members, deepen mutual
trust between the members, and enhance the
competitiveness of the overall industry. Based
on the platform effect, the organization should
continue to accept and identify new members,
update the norms and guidelines of the
organization on an ongoing basis, and ultimately
achieve the sustainable development of the mobile
payment ecosystem.
This ecosystem applies not only to proximity
payment but also to remote payment. We
recommend the construction of mobile payment
ecosystem in China may start from pilot programs
at regional or provincial level. In this way, we may
largely reduce the risks involved through testing
the feasibility of such an ecosystem in reality.
When the ecosystem reaches the stable phase, the
experience gained can be expanded throughout
the entire country.
Conclusions
Mobile payment, as an emerging industry, faces many uncertainties in its

development process. Reviewing its development in the past several years, the
players grew rapidly and made some progress in mobile payment despite of the
uncertainties existing in the environment. Different mobile payment products
are emerging in the market and these products have delivered fast, efficient,
and secure mobile payment experiences for users.
Mobile payment went through a critical path in
China in 2012. On one hand, the country issued
various policies, developed clear mobile payment
standards, and helped to form a unified service
management platform. The country made positive
efforts to create a good environment for competition
and cooperation and ensure the healthy growth
of mobile payment industry. On the other hand,
the participants gradually increased their inputs in
technology, capital, human resources and other
fields and tried to gain an upper hand in the market.
Mobile payment was trialed in different application
scenarios, including remote and proximity payment.
User awareness of mobile payment increased and
the adoption rate went up. With the chemistry
among governments, the industry and users, we
believe that the mobile payment industry in China
will see breakthroughs in the coming three years.
The number of customers, transaction value and
product varieties will reach new high peak and the
economy of scale will be achieved.
The business model will become clearer in the
coming three years. The growth of mobile
payment ecosystem will speed up. Competition
and cooperation will be the main themes of the
industry. There will be more and more internal
integration among financial institutions, operators
and TPP providers. They will leverage their own
advantages and make pioneering and innovative
efforts to deliver fast and easy-to-use mobile
payment services.
58
Deloitte, as an independent third-party consulting

firm, has rich experience in mobile finance and
mobile payment. We have a global team for
mobile financial services and payment. They may
provide all the players in the value chain including
banks, operators, bankcard organizations, TPP
providers, merchants, device vendors, POS device
manufacturers and related government agencies
and regulatory bodies with strategic consulting
and technical support services in many areas
including mobile financial services, planning and
development of market strategies, venture capital
and M&A, design of operational models and
organizational structures, design of products and
customer experience, infrastructure upgrading
and technology integration, anti-fraud strategy
and development of risk model, expansion and
innovation of marketing channels. We assist
companies around the world pushing frontier
payment technologies into the market and guided
the execution of payment strategies, product
design and systems. We participate in M&A,
conduct market evaluation and due diligence
investigation and help companies increase revenue
and improve operating performance.
This is an exciting era full of opportunities and
challenges. We believe that with the efforts of all the
players in the value chain, the mobile payment industry
will enter the maturity phase faster. We hope that
every player will grow rapidly and harvest the fruits of
mobile payment growth in China. Finally, we wish that
you and your colleagues could benefit from this report.
We always welcome your valuable feedbacks.
Methodologies
In this study, we conducted a thorough analysis of the current situation

of China's mobile payment industry, mobile payment strategies, business
models and the major challenges faced by various players within China mobile
payment industrial chain; and investigated the construction of open innovative
mobile payment ecosystem and predicted the future development of the
mobile payment industry. Our methodologies include in-depth interviews,
questionnaires, qualitative and quantitative analysis, literature reviews, media
reports, case studies, etc.
We interviewed 16 influential Chinese enterprises
within the mobile payment industrial chain,
including financial institutions, mobile carriers,
third-party payments providers, Trust Services
Managers (TSMs), device manufacturers, and
mobile payment technology companies. We also
interviewed related regulators. In preparing for
the interviews, we conducted necessary research,
designed interview questions and maintained
good relationships with the organizations to be
interviewed. We encouraged the interviewees
to offer their own views and opinions. In-depth
interviews enabled us to obtain rich, detailed
information.
We also conducted online surveys. Questionnaires
were designed to ensure that respondents fully
expressed their views on China mobile payment
trends and prospects. We sent out a total of 200

questionnaires to the related mobile payment
players from February to May 2012, and received
111 validated questionnaires of them back.
Responding organizations were from China mobile
payment industrial chain, including financial
institutions, mobile carriers, third party payments
providers, application providers, SIM card or chip
manufacturers, mobile device manufacturers, etc.
The respondents came mostly from corporate
decision-makers and senior management, i.e., senior
executives or managers with extensive experience in
the field of mobile payment. All respondents were
informed of the purpose of the survey, that their
participation was voluntary, and that their responses
would remain anonymous. All the data obtained
were organized with professional statistics software,
and were tabulated using MS Excel.
By industries:
By roles:
Merchants
2%
Device Manufacturers
5%
CEO
5%
Mobile Carriers
7%
Financial
Institutions
27%
Application
Providers
19%
Others
10%
SIM Card or Chip
Manufacturers
11%
Third Party
Payments
Providers
19%
Others
28%
Partners / General
Managers
9%
Senior Vice
General Managers
/ Senior Managers
16%
Vice General Managers

/ Managers
42%
Authors
Pengcheng Wang
Managing Partner, Deloitte China Financial
Services Industry Leader
Tel: +86 10 8520 7123
Email: wangpc@deloitte.com.cn
William Chou
Managing Partner, Deloitte China Technology,
Media & Telecommunications Industry Leader
Tel: +86 10 8520 7102
Email: wilchou@deloitte.com.cn
Richard Li
Senior Manager, Deloitte China FSI Center of
Excellence
Tel: +86 10 8520 7031
Email: ricli@deloitte.com.cn
Jessica Hu
Director, Deloitte China Technology, Media &
Telecommunications
Tel: +86 10 8512 5314
Email: jesshu@deloitte.com.cn
Research Team
Vivienne Huang
Assistant Manager, Deloitte China Research
and Insights Center
Yingwei Wang
Senior Consultant, Deloitte China Technology,
Media & Telecommunications
Miao Yang
Deloitte China Financial Services Industry
Center of Excellence
Huidong Li
Deloitte China Financial Services Industry Center of
Excellence
Sharon Song
Center of Excellence
60
Acknowledgements
The strong support and full cooperation from our colleagues were obtained in the process of data collection,
writing and publishing this report, and we hereby specially express our thanks to the following personnel:
Alfred Yeung
Partner, Deloitte China Financial Services Industry
Market Leader
Dora Liu
Mike Shi
Lorraine Gu
Jeff Tao
Juliet Li
Jason Guo
Calvin Zeng
David Yau
Partner, Deloitte China Enterprise Risk Services
Jessica Ling
Adrian Lee
Jennifer Xie
Partner, Deloitte China Clients and Markets
Zhigang Xu
Partner,Deloitte China Clients and Markets
Benny Cheung
Yao Zhao
Wendy Yang
Leon Fan
Christine Hu
Jennifer Qin
Tonny Xue
Ye Fang
Jason Li
Norman Sze
Managing Partner, Deloitte China Consulting
Alvin Ng
Consulting Leader
Jungle Wong
Partner, Deloitte China Consulting
Alan Wang
Peter Pang
Po Hou
James Wang
Weldon Lu
Albert Liu
Stanley Dai
Partner, Information Technology Lead, Deloitte
China Consulting
Brian Shniderman
Principal, Payments Practice Lead, Deloitte
Consulting
Ramnik Bajaj
Principal, Deloitte Consulting LLP
Rakesh Kumar
Principal, Deloitte Consulting LLP
Divakar Goswami
Manager, Strategy & Operations, Deloitte Consulting
Alda Lee
Senior Manager, Deloitte Consulting LLP
Sheila Celata
Senior Manager, National Audit Practice, Deloitte &
Touche LLP
Cynthia O'Brien
Manager, National Audit Practice, Deloitte &
Touche LLP
Jerry Ma
Senior Manager, Deloitte China Financial Services
Industry
Lianyong Song
Senior Manager, Deloitte China Technology, Media
& Telecommunications
Li Guo
Associate Director, Deloitte China Consulting
Nina Luo
Jensen Zhao
Director, Deloitte China Technology, Media &
Telecommunications
Eva Sun
Senior Manager, Deloitte China Financial Services
Industry
Zhaoli Meng
Senior Manager, Deloitte China Technology, Media
& Telecommunications
Jian Feng
Associate Director, Deloitte China Financial Services
Industry and Information Technology
Yating Liu
Susan Yang
Associate Director, Deloitte China Consulting and
Information Technology
Hans Deng
Manager, Deloitte China Financial Services Industry
Keat Lee
Xian Wu
Manager, Deloitte China Technology, Media &
Telecommunications
Michael Wang
Manager, Deloitte China Financial Services Industry
62
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this area. Deloitte TMT provides professional services for 80% of the Fortune 1000 technology, media and
telecommunications companies. We have dedicated service team of TMT in 45 countries. In China, Deloitte
has more than 300 partners, directors and senior managers dedicated in services in TMT industry, where
we provide 5 professional services: audit, tax, consulting, risk management and financial advisory. Deloitte
is the industry leader in assisting Chinese companies in getting listed overseas. From 2005 to July 2010,
Deloitte gained 48 percent of China's market share of US listed companies, ranking number 1 worldwide.
We also provide audit services for one-third of companies listed in Hong Kong. Deloitte China TMT covers
three sub-sectors, and 13 sub-sub-sectors. Deloitte TMT specialists dedicated in different industries are all
leaders in relevant field of study. At the same time, the dedicated teams provide excellent industry solutions
to help Deloitte clients keep outstanding among the growing number of competitors.
Deloitte China Financial Services Industry Center of Excellence

Deloitte China Financial Services Industry Center of Excellence (FSICoE) is dedicated to helping financial
institutions understand the major issues and trends within the financial service industry of China, and at the
same time, helps enterprises get hold of new opportunities in areas such as financial reform, development
strategy, financial management, performance evaluation, risk management and technological innovation.
Deloitte China Financial Services Industry Center of Excellence engages in constructive dialogues with
administrators, decision-makers and organizers on innovative solutions, and provides prospective frontline
insight and in-depth views with strategic significance, to assist financial institutions such as those engaged
in banking, securities, insurance and asset management in enhancing enterprise performance.
64
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Contacts
If you have any questions about the content of this report or wish to have further communication
with Deloitte, please contact:
Dr. Richard Li
Senior Manager, Deloitte China FSI Center of Excellence
Tel: +86 10 8520 7031
Mobile: +86 186 1112 1022
Email: ricli@deloitte.com.cn
Dr. Jessica Hu
Director, Deloitte China Technology, Media & Telecommunications
Tel: +86 10 8512 5314
Mobile: +86 186 0100 1009
Email: jesshu@deloitte.com.cn
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2012 Deloitte Touche Tohmatsu CPA Ltd.

Mobile Payment Industry in China

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Mobile Payment Industry in China

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Trends and Prospects of Mobile

Payment Industry in China 2012-2015

Financial Services Industry Center of Excellence, Deloitte China

What is mobile payment?

Development of mobile payment in other parts of the world

Current situations and challenges of mobile payment industry in China

Prospects of mobile payment ecosystem in China

Dr. Pengcheng Wang

Mr. William Chou

Mobile payment is attracting more and

As an emerging means of payment, mobile payment is attracting more and

million by 2015, which indicates that the average

Figure 1: Global mobile payment user base

Figure 2: Value of global mobile payment

The rapid rise of mobile payment and the growing

Source: Gartner, Forecast: Mobile Payments, Worldwide, 2009-2016, May 2012

Forecast: Mobile Payments,

convenience and security of mobile payment can

The Chinese government is also increasing

Mobile payment is facing unprecedented

In order to gain a deep and comprehensive

Figure 3: Mobile payment transactions

PBC's data on mobile

1 What is mobile payment?

parts of the world?

payment and what are the challenges?

4 What are the characteristics of the existing

business models and what are the prospects

5 How to build a mobile payment ecosystem

Source: China Payment System Development Report

with Chinese characteristics?

mobile payment industry in the coming

What is mobile payment?

In this report, based on our understanding on

Figure 4: Classification of mobile payment

Remote money transfer

Remote online payment (mobile

Source: Deloitte Consulting, 2012

Forecast: Mobile Payments,

Mobile Payments Enter A

Remote payment, also known as online payment,

technology. The United States, Europe, Japan

Mobile payment technology

Source: Forecast: Mobile Payments, Worldwide, 2009-2016, Gartner, May 2012

In addition to those four mainstream technologies,

According to the survey of Deloitte, WAP-based

NFC proximity payment

Embedded credit card

NFC proximity payment

Source: Mobile Payment in China Survey, Deloitte China, 2012

Among different technologies, SMS-based

is relatively mature and 64.15% respondents

Source: Mobile Payment in China Survey, Deloitte China, 2012

Ready for deployment

Development of mobile payment

The development of mobile payment varies from country to country in terms

Gary Kim, 10% of Japanese

The mobile payment adoption rate is high in Japan,

10 billion yen to UC Card, a company associated

card market in Japan was small, which presented

However, the FeliCa technology is incompatible

In April 2006, BTMU and KDDI, a telecom operator

Credit Saison, a card issuer, and American Express

Telecom operator: NTT DoCoMo