Mobile Payments

Mode of Mobile Payments

1.

SMS/USSD-based transactional payments

2.

Direct mobile billing

3.

Mobile web payments (WAP)

4.

QR Code Payments

5.

Contactless Near Field Communication

6.

Cloud-based mobile payments

7.

Audio signal-based payments

SMS/USSD-based transactional payments

In the predominant model for SMS payments, the consumer sends a payment
request via an SMS text message or an USSD to a short code

The merchant is informed of the payment success and can then release the paid
for goods

A Multimedia Messaging Service can also deliver barcodes which can then be
scanned for confirmation of payment by a merchant

Since a trusted physical delivery address has typically not been given because
of purchasing of goods become very quick

A premium charge is applied to their phone bill or their online wallet

SMS are attractive for micro payments and are fast, easy and anonymous

SMS/USSD-based transactional payments

Pros

Cons

Easy and quick to make payment using SMS

Poor reliability - transactional premium SMS

payments can easily fail as messages get lost

No internet required because it work on

GSM/CDMA service provider

Slow speed - sending messages can be slow and

it can take hours for a merchant to get receipt of
payment

Nice mode of payment for micro payment

Security - The SMS/USSD encryption ends in the

radio interface, then the message is a plaintext

SMS based payment is possible to all the types of

phone basic and smart phones

High cost - The cost of setting up short codes and

paying for the delivery of media via a Multimedia
Messaging Service and the resulting customer
support costs to account for the number of
messages that get lost or are delayed

Quick delivery of goods like ring tones, music ,

wallpaper etc

Low payout rates - operators also see high costs

in running and supporting transactional payments
which results in payout rates to the merchant
being as low as 30%. Usually around 50%

SMS/USSD based payment globally used

Low follow-on sales its very difficult to

remember where something was purchased or
how to buy it again
4

SMS/USSD-based transactional payments

SMS
Gatew
ay

SBS/USSD
GPRS
Gatew
ay

Digital goods
return
Customer

Mobile
Networ
k

Mobile Service Processing

Direct mobile billing

Addressing to security hole in the premium SMS model, the direct mobile billing adds an
additional authentication step in the purchasing process

It requires two factor authentication which shows to significantly reduce the potential
for fraudulent purchases , protecting both consumer and merchant

Direct mobile billing, also known as mobile content billing, and carrier billing, requires
integration with the operator

Directmobilebilling is one of the preferred micro-payment methods for gaming tokens, inapp items, or social network credits.

It is becoming popular in both emerging and developing markets, since it offers the safest
and fastest way for completing a digital purchase.

It allows people tobuy digital contentby adding the cost of a purchase directly to their
mobile bill, regardless of the type of device they own. The concept is comparable to
buying on-demand television shows by adding it to your cable bill.

Companies: AT&T, Sprint, T-Mobile, U.S. Cellula

Direct mobile billing

Pros

Cons

The operators already have a billing relationship

with the consumers, the payment will be added
to their bill

Only good for digital goods and micro payment

Provides instantaneous payment

Operator Spending Caps

Protect payment details and consumer identity

Late charges applied if missed to make payment

before due date

Reduced customer support costsfor merchants

This is a logical alternative to credit card and
Premium SMS billing.

If bill is disputed, the money is still deducted

from account or put on credit card whether
customer is ready or no

Accurate reporting and notifications to

consumers e.g. paid, not billed, etc.

the payout rate will be much lower than with

other payment providers.

Direct mobile billing

Mobile web payments (WAP)

The consumer uses web pages displayed or additional applications downloaded and
installed on the mobile phone to make a payment. It usesWAP(Wireless Application
Protocol) as underlying technology and thus inherits all the advantages and
disadvantages ofWAP

Mobile online payments are simply typical eCommerce payments using a credit card
over a mobile phone via a website or application. Mobile online payment s require user to
enter all the mandatory details for payment like name, card info etc..

There could be multiple mechanism behind web based mobile payment

Direct Operator Billing This involves a direct connection between the customer
and billing operator

Credit Card This involves the usual based credit card transaction, in which
users are directed to a credit card payment page where they are required to fill
credit card details

Online billing through third party players like Paypal, Google Checkout, Amazon etc..

The WAP protocol is designed with the network, device and user interface limitations in
mind. This means that WAP is optimized for mobile networks with narrow bandwidths,

Mobile web payments (WAP)

Pros

Cons

Transaction is reliable, which add to customer

satisfaction

Limitations of WAP today are related to the

devices used and the mobile networks

Bookmark the pages to make the payment next

time

Time consuming because of network issues on

mobile

Access your bank accounts and related services

Not everyone aware with web based payment

Transfer funds between various bank accounts of

the same as well as different banks

It requires internet on device to make the

payment

The Mobile Banking application emulates a

majority of banking services provided by the bank

Security point of view its possible for hackers to

grab the detail enter of customer and make the
use of it

10

Mobile web payments (WAP)

WAP Gateway

Client/Custome
r

WML
Encoder

WML

WML
Script

Web Server

WAP

WML
Script
Encoder

HTTP

WML
Decode
with WML
Script

HTTP

Ban
k

Protocol
Adapter
11

QR Code Payments

Quick Response Codes (short: QR codes) are two-dimensional machine-readable codes

usually consisting of a matrix of black and white squares. They contain data (e.g. a link to
a website or a short text) that can be read and displayed by a Smart phone

QR code is another way of delivering payments that display on a Smartphone screen and
are scanned at point of sale.

Originally used to track products in warehouses, QR codes were designed to replace

traditional (1D bar codes)

QR code contains all the business details you need to get paid, including your mobile
number or Short Code.

We can put a QR code on business cards, bills, website, point of sale or product labeling for
interactive and easy payment

Generating a QR code is very easy

Companies:Walmart, CVS and Rite Aid, CurrentC

12

QR Code Payments
Pros

Cons

Ease of implementation Its relatively quick

and inexpensive for a merchant to implement a
mobile wallet solution based on this technology

Availability - Not everyone on has a smart

phone. People also have to download an app to
scan the QR codes

Simplicity This type of solution relatively easy

to use, although it is important to properly align
the QR code with the scanner or camera

Security Malicious QR codes can contain

malware or Trojans

Addressable market Since no NFC chip is

required on the phone, the addressable market for
this technology interface is quite large

Inconsistency There currently exists no

standardization for payments via QR codes,
resulting in unpredictable technical specifications
and an inconsistent user experience
Usability Using QR codes at the point of sale is
not as easy as tap and pay: consumers and
merchants are both required to perform more
work in order to complete a transaction

13

QR Code Payments

Merchant

Merchant
Server

Payment
Gateway

Customer
14

Contactless Near Field Communication (NFC)

NFC is a short range wireless technology , enabling communication between devices

over a distance of < 10 cm

It has three main mode of communication

Card Emulation

Enables devices to act like contactless cards

NFC enabled mobile phones used for payment

Reader/Writer

Enables devices to interact with RF tags

E.g. NFC-enabled phone used to read smart poster

Peer-to-peer

Two NFC devices communicate to exchange information

Companies:Apple Pay, Google Wallet, Softcard, LoopPay

15

Apple Pay

Apple Pay is a mobile payment service that lets certain Apple mobile devices make
payments at retail and online checkout

It lets Apple devices wirelessly communicate with point of sale systems using a near field
communication (NFC) antenna, a "dedicated chip that stores encrypted payment
information" (known as the Secure Element), and Apple's Touch ID and Passbook

Passbook is use to store credit or debit cards while registering it for payment

It keeps customer payment information private from the retailer, and creates a "dynamic
security code generated for each transaction

iPhone users authenticate by holding their fingerprint to the phone's Touch ID sensor

To keep transactions secure, Apple uses a method known as "tokenization," preventing

actualcredit card numbers from being sent over the air. Card numbers are not stored on
the device, instead, a unique Device Account Number is created, encrypted and stored in
the Secure Element (SE) of the device

User's payment information, and credit card numbers and data are never uploaded to
iCloud or Apple's servers

Apple utilizes Device Account Numbers, a user's credit card number isnever shared with
merchantsor transmitted with payments

16

Apple Pay

17

Contactless Near Field Communication (NFC)

Pros

Cons

Easy-to-use : Anyone can use it with a single

touch.

Expensive: It may prove to be much too

expensive for companies to adopt NFC-enabled
technology

Versatile: NFC is very versatile, in that it covers a

range of different industries and services.

Not Advantageous Enough: Not all the phones

are NFC enabled

Better User Experience: This system is

beneficial for enterprises too companies that
readily adopt the latest technology are viewed by
customers as being dynamic and progressive

Lack of Security: While NFC transactions are

undoubtedly more secure than regular credit card
payments, this technology is not completely free
from risk. It gives hackers more incentive to
access peoples smart phones because more
valuable data is stored there.

More Secure: Using mobile wallets is, to an

extent, safer than using physical credit cards .

Fraud risk : debit cards clear money immediately.

NFC, however, requires an overnight update to
actually clear the funds.

Mobile as Wallet: Customers have all their

important information on their phone for payment

18

NFC Mechanism

19

Cloud Based Mobile Payment

The cloud based payments enable the industry to efficiently deploy innovative payment
solutions. It gives the industry more flexibility in offering the consumer convenient and
secure ways to pay with mobile devices.

When secure element (SE) is placed in cloud then payment made by such process is
called could based payment

Cloud based mobile payments can be deployed by Host Card Emulation (HCE),
tokenization

Cloud-based payments enables to perform NFC card emulation without using a hardware
Secure Element (SE) in mobile handsets , this SE get placed in cloud space where all the
information of credit card store to make the payment secure

Major players involved in cloud based mobile payment are:

PayPal

GlobalPay

GoPago

Google

20

Cloud Based Mobile Payment

Pros

Cons

Easier to integration with third parties which

includes mobile network operators, NFC device
manufacturers and trusted service managers
(MSMs)

One of the major concerns with cloud computing is

the security of data. Often mobile users will
provide sensitive information through the network,
and if not protected, can lead to major damages in
the case of a security breach.

Cardholders as well as financial institutions might

find it easier to get their cards into this wallet as
Secure Element (SE) is deployed in cloud which
leads to lower cost as well

A wireless connection (via WiFi or 3G/4G) is

required to deliver credentials from the cloud to
the phone

The computing power of an SE in the cloud is

higher than that on a mobile device

Storing information in the cloud could make your

company vulnerable to external hack attacks and
threats.

Storage capacity on a physical SE is limited. In the

cloud, storage is scalable and can be expanded to
meet individual requirements and to support any
card, application and payment scheme
Credentials stored in the cloud can be available to
any device, assuming the user is properly
authenticated on the device. And the credentials
stored in the cloud can be delivered from the
phone to the POS via a variety of mechanisms,
including NFC

21

Cloud Based Mobile Payment

HCE

22

Audio Signal Based Payment

The audio channel of the mobile phone is another wireless interface that is used to
make payments. Several companies have created technology to use the acoustic
features of cell phones to support mobile payments and other applications that are
not chip-based

It uses different technologies likeNear sound data transfer (NSDT), Data Over Voice
and NFC 2.0 produce audio signatures that the microphone of the cell phone can pick
up to enable electronic transactions

Each time a client make a transaction, encrypted information is embedded in an

audio one-time password (OTP) that is sent to the payment server through the
phones audio channel

Today, NSDT is primarily used formobile bankingtransactions through the mobile

money platformTagpay. It is also used to securely open doors and enable
authentication on websites etc

By using TagPay as an integrated solution, banks, microfinance organizations and

other financial actors can benefit from secure, convenient, and affordable mobile
transactions

23

Audio Signal Based Payment

Pros
It uses the mobile phones audiochannel to
transmit secure information used to
electronicallysign transactions its more secured

Cons
More noisy environment can create the problem
in data transfer

It provide an excellent level of efficiency and

reliability even in noisy environment
Payment is performed regardless of network
operator
No extra hardware require in mobile device like
NFC so it becomes less expensive

24

Audio Signal Based Payment

Merchant
Gateway

Merchant

Audio Channel

Internet

Custome
r
25