Innopay @ IQPC: The role of banks in mobile payments

tomorrow’s transactions today

Role of banks in m-payments Understanding the various options

Jeroen de Bel – January 31st 2012

2 The role of banks in m-payments. Jeroen de Bel – January 31th 2012. © Innopay BV.

Jeroen de Bel – Innopay

• Studied Business Economics & Finance in NL and USA, graduated Cum Laude in 2009

• Held multiple positions at various departments of major banks

• Joined Innopay in 2010

• Advising major financial institutions and large corporates

• Focus on strategy and innovation in retail banking (e.g. e-banking, mobile payments)

• Author of ‘Mobile payments 2012 - My mobile, my wallet?’


innopay. tomorrow’s transactions today

• Innopay is an independent full service consultancy firm, specialised in payments and related transaction services

• E-payment, e-invoicing, e-identity, m-payment, cards, rules

• From ‘Powerpoint to Production’

• Reputed player with active contribution to development of the industry. Member of a.o. EPCA, EBA en ECP/EPN

• Truly independent from IT vendors & financial institutions

• Founded in 2000, employs 15 consultants, from Amsterdam − Founded by Chiel Liezenberg (1968) and Douwe Lycklama (1965)

− Extensive experience in consulting in complex organisations

Online payment

E-invoicing

E-identity

Cards

Mobile payment

Rules


Innopay reference customers


Understanding the various options

Role of banks in m-payments


Contents

• Banks and the mobile opportunity

• Role of banks in mobile NFC payments

• Summary and conclusions


The role of banks in payments: Issuing, Acquiring and Clearing & Settlement

ISSUING ACQUIRING

CLEARING & SETTLEMENT

Consumer Corporate


Banks already handling payments … mobile payments seems a logical next step

BANK MOBILE OPPORTUNITY


Banks are uniquely positioned

1. Experience in handling payments:

• Issuing, Acquiring , Clearing & Settlement

2. Direct access to funding:

• Direct access to bank account and funds

3. Capabilities to deal with regulation & compliance:

• License to perform transactions and hold funds

4. Banks are trusted as mobile payments provider

• …


Banks and card schemes enjoy highest trust

Source: Lexus Agency - Wallet Wars 2011

BANK

CARD SCHEME

MOBILE NETWORK

RETAIL IT


Gap between FI’s and others

Source: Ogilvy & Mather - The New Mobile Shopper: From Armed to Charmed

Percentage of respondents expressing trust in brand


However, mobile payments is a complex ecosystem


Many stakeholders Where are you? Where is the bank?

Payee

Payer

OEM

PoS

Issuing Bank

Acquiring Bank

Card network

E-Payment platform Mobile Wallet

Mobile Network Operator


Multiple mobile payment categories Which context do you want to address?

Source: Innopay Mobile payment s 2012


Multiple technologies Which technology best fits your needs?

INTERACTIVE VOICE RESPONSETEXT MESSAGING

(SMS, USSD)

2D BARCODEHIGH FREQUENCY RADIO

(mobile speaker & microphone)

MOBILE INTERNET

NEAR FIELD COMMUNICATION(chip based electronic)


Source: Innopay analysis

Scope of today: Banks’ role in mobile NFC payments


Analysis per category

Role of banks in mobile NFC payments


2a. C2B NFC payments

ISSUING ACQUIRING


ACCOUNT DETAILS

ACQUIRING NETWORK


2a. Role of banks in C2B NFC payments

Issuing:

• Get debtor bank account details on secure element

• Cooperate with TSM

Acquiring:

• Arrange PoS terminals to have NFC capabilities for mobile NFC transactions

• Invest in new infrastructure

• Changes in business rules, e.g. security, liabilities, guarantees, interchange fees, user experience

Clearing & Settlement:

• Via regular bank and card networks


2a. Position of banks in C2B NFC payments

Banks hold a unique position

• Banks already have large acquiring networks for cards

• Card networks can create their own wallets, but also must first agree with banks on technical standards and business rules

Competitors cannot go without banks and cards

• E-wallets still have to secure their position in the terminal

• E-wallets better positioned to provide value added services as couponing

Multiple parties cooperating and/or competing

• Combination of banks, e-wallets and card networks operating in this area

• If banks already have issued contactless cards, mobile NFC seems small step

• The ‘winner’ may differ per market


2b. Mobile PoS NFC payments

ISSUING ACQUIRING


ACCOUNT DETAILS

ACQUIRING NETWORK


2b. Role of banks in Mobile PoS payments

Issuing:

• Issuance of contactless card by bank

• Secure element is in card

Acquiring:

• The terminal enables a mobile phone to receive contactless data

• The terminal acts as a PSP for card transactions; online acquiring with a contactless card

• The banks’ role of acquirer remains the same as online card transactions




2b. Position of banks in Mobile PoS

Banks can leverage on existing merchant services

• Online card PSP is related to current PSP services of offline PoS

• However, banks also missed the opportunity for online PSP services

• Risk of fraud making banks reluctant

Startups also have ample possibilities

• Only a nice application and an add-on card reader are needed to become a PSP for online card transactions

• Add-ons must be distributed to merchants

Innovations expected from startups:

• E-wallets may also issue their own add-ons (making it similar to P2P)

• Banks may lack behind in innovative solutions but can leverage on current business


1. P2P NFC payments

ISSUING ACQUIRING


ACCOUNT DETAILS

ACQUIRING NETWORK


1. Role of banks in P2P NFC payments

Issuing:

• Get debtor bank account details on secure element

• Cooperate with TSM

Acquiring:

• Enable communication with networks

• Banks must cooperate and trust each others systems (4-party model), e.g. allowing RBS on iPhone to communicate with Barclays on Blackberry




1. Position of banks in P2P NFC payments

Banks may take some time:

• Issue account details on secure element and allow banks to communicate with each other (4-party), e.g. different security and business rules

• Advantage bank is that users already have an account

E-wallets seem to be in a better position:

• E-wallets are platforms that serve both the debtor and creditor (3-party)

• E-wallets product development more agile

• E-wallets sign up enables quicker user adoption

E-wallets are likely to take the spot…

• …but when banks have secured their place on the secure element, P2P is only a small step


Banks’ roles and positions dependent on various factors

Summary and conclusions


Banks will have a role in m-payments

Issuing: get account details on secure element

• Banks can issue account details on secure element

• Alternatives are e-wallets and card networks

Acquiring: unique role through existing acquiring networks

• Banks have a very important role in the acquiring through PoS

• Alternatives must have their own acquiring network

Clearing & Settlement: nothing new

• Banks have exclusive access to clearing & settlement systems

• Alternatives may settle within their own system when they have both the debtor and creditor (3-party)


Banks hold a unique position … but its position may differ per category 2a. C2B payments: the winner may differ per market

• Unique position for banks and card networks in the PoS acquiring network

• E-wallets need to cooperate with banks and card networks to participate

2b. Mobile PoS payments: startups likely to take the spot

• Banks can leverage on existing merchant acquiring services

• Startups seem better positioned to innovate

1. P2P payments: e-wallets seem better positioned

• Possibilities for alternatives as traditional acquiring network is not necessary

• In near future e-wallets seem to be best positioned


Mobile payments 2012 – My mobile, my wallet?

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Thank you For your attention

Jeroen de Bel e: [email protected] t: @jeroendebel

Innopay @ IQPC: The role of banks in mobile payments

Economy & Finance

Transcript of Innopay @ IQPC: The role of banks in mobile payments