Critical Success Factors of Mobile Payment

Hort, Christian

Critical Success Factors of Mobile Payment

BWL - Offline-Marketing und Online-Marketing

Zusammenfassung

Inhaltsangabe:Abstract:
Mobile payment (mPayment) can be understood as every payment where at least one participant applies mobile phone technology, thus, uses a mobile phone. But due to technological progress it seems reasonable to classify other devices like a Personal Digital Assistant (PDA) or devices with embedded Radio Frequency (RF) technology as mobile payment devices. However, mobile phones today clearly outnumber every other mobile payment device. Penetration rates are forecasted to reach almost 80% in Europe by 2005. The number of worldwide cellular subscribers is expected to pass one billion by 2003. By 2005 there will be more mobile phones worldwide than TVs, fixed line phones, and Personal Computers (PC).
Driven by the increasing penetration and resulting business opportunities, numerous mPayment solutions have been offered by payment service providers, telcos, and financial institutions. The variety of applicable technologies, the possible linkage between the financial instruments, and the mPayment device combined with different payment scenarios offer a wide landscape of mPayment solutions. Besides technology, questions dealing with consumer expectations, factors thriving or inhibiting a widespread adoption, and with it related penetration strategies for payment service providers have to be carefully researched to develop a successful mPayment.
Based on diverse motivations and influenced by recent technology development banks, telcos and start-up companies endeavour to build a successful mPayment that meets the expectations of consumers and merchants. The research question of this paper focuses on factors that can be identified as crucial to drive the success of mobile payment systems. Therefore, the first goal is to give an introduction to the mPayment landscape as a foundation for further research. The second goal is to derive key factors influencing the success of an mPayment from theoretical models and by reviewing related literature. The research concentrates on business to consumer (B2C) and consumer to consumer (C2C) payment on the European and United States (US) market. Neither cross border payments nor business to business (B2B) payments are described in this paper.

Inhaltsverzeichnis:Table of Contents:
CONTENTSI
TABLE OF EXHIBITSIII
TABLE OF CHARTSIV
ABBREVIATIONSV
1.INTRODUCTION1
1.1Motivation1
1.2Goals of the study2
1.3Structure2
2.TRADITIONAL AND FIXED-LINE ONLINE PAYMENT METHODS4
2.1History of […]

Leseprobe

Inhaltsverzeichnis

ID 6643

Hort, Christian: Critical Success Factors of Mobile Payment

Hamburg: Diplomica GmbH, 2003

Zugl.: St. Gallen, Universität, Thesis, 2002

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Contents

Contents

CONTENTS ...I

TABLE OF EXHIBITS...III

TABLE OF CHARTS ... IV

ABBREVIATIONS...V

INTRODUCTION ... 1

1.1 Motivation... 1

1.2 Goals of the study ... 2

1.3 Structure... 2

TRADITIONAL AND FIXED-LINE ONLINE PAYMENT METHODS ... 4

2.1 History of payments... 4

2.2 Traditional payment methods ... 5

2.3 Fixed-line online payment methods... 7

2.4 Summary... 8

MOBILE PAYMENT... 9

3.1 Market and players... 9

3.2 Mobile hardware ... 13

3.3 Connection technologies... 14

3.3.1 Cellular network technologies ... 15

3.3.1.1 GSM ... 15

3.3.1.2 HSCSD ... 16

3.3.1.3 GPRS... 16

3.3.1.4 EDGE ... 17

3.3.1.5 UMTS... 17

3.3.1.6 SMS... 18

3.3.2. Proximity technologies ... 19

3.3.2.1 Bluetooth ... 19

3.3.2.2 IR... 20

3.3.2.3 RFID... 21

3.3.3 Wireless Internet technologies... 22

3.3.3.1 WAP ... 22

3.3.3.2 I-Mode ... 23

3.4 Types of mPayment ... 24

3.4.1 mPayments applying cellular network technology... 25

3.4.1.1 mPayment linked to phone bill... 25

3.4.1.2 mPayment linked to bank or credit card account ... 26

3.4.2 mPayments applying mobile Internet technology ... 26

3.4.2.1 Personal online payments ... 26

3.4.2.2 Micropayments... 27

3.4.3 mPayments applying proximity technology ... 28

3.4.3.1 Single chip... 29

3.4.3.2 Dual chip ... 29

3.4.3.3 Dual slot ... 31

3.5 Describing criteria... 32

3.6 Summary... 35

CRITICAL SUCCESS FACTORS ... 37

4.1 Contingency factors ... 37

4.2 User specific factors... 38

4.3 Value creating factors ... 40

Contents

4.3.1 Diffusion of innovations theory... 41

4.3.2 Technology acceptance model... 42

4.3.3 Network externalities theory... 43

4.3.4 Customer perceived value... 45

4.3.5 Critical value creating success factors ... 46

4.3.5.1 Cost... 47

4.3.5.2 Complexity ... 48

4.3.5.3 Trialability ... 48

4.3.5.4 Acceptance ... 49

4.3.5.5 Observability ... 49

4.3.5.6 Convenience ... 49

4.3.5.7 Security... 50

4.3.5.8 Anonymity... 50

4.3.5.9 Standard... 51

4.4 Summary... 52

APPLICATION CASES ... 53

5.1 Paybox ... 53

5.2 Speedpass... 55

5.3 PayPal ... 57

5.4 Firstgate ... 59

5.5 Summary... 60

SUMMARY AND OUTLOOK... 62

REFERENCES ... IX

APPENDIX ... XXI

A 1 Traditional payment methods ... XXI

A 1.1 Basic payment procedures ... XXI

A 1.1.1 Payment by cash ... XXI

A 1.1.2 Payment by cheque... XXIII

A 1.1.3 Payment by giro or credit transfer ...XXV

A 1.1.4 Debit charge procedure... XXVI

A 1.2 Card based products...XXVII

A 1.2.1 Payment by cash card ...XXVII

A 1.2.2 Payment by debit card ...XXVIII

A 1.2.3 Payment by credit card ... XXXI

A 1.3 Payment related terms... XXXIV

A 1.3.1 Cash on Delivery ... XXXIV

A 1.3.2 Payment by bill...XXXV

A 1.3.3 Electronic Bill Presentment and Payment ...XXXV

A 2 Fixed-line online payment methods...XXXV

A 2.1 Electronic counterparts of basic payment procedures...XXXV

A 2.2 Encryption channels... XXXVI

A 3 Mobile device related technologies...XXXVIII

A 3.1 SIM ...XXXVIII

A 3.2 SAT...XXXVIII

A 3.3 WIM... XXXIX

A 4 Relations between critical success factors ...XL

Table of Exhibits

III

Table of Exhibits

Exhibit 1: Development of Payment methods German local POS 1995-2001... 6

Exhibit 2: Traditional and fixed-line online payment methods... 8

Exhibit 3: mPayment device connection overview ... 15

Exhibit 4: Radio frequency identification architecture... 21

Exhibit 5: Wireless application protocol network model ... 23

Exhibit 6: Personal online payment process... 27

Exhibit 7: Implementation alternatives of security element... 28

Exhibit 8: Describing criteria ... 33

Exhibit 9: Technology acceptance contingency model ... 37

Exhibit 10: Elements of diffusion... 41

Exhibit 11: Technology acceptance model... 42

Exhibit 12: Impact of positive feedback over time on market share ... 44

Exhibit 13: Customer perceived value... 45

Exhibit 14: Paybox - describing criteria... 54

Exhibit 15: Speedpass - describing criteria ... 56

Exhibit 16: PayPal - describing criteria... 58

Exhibit 17: Firstgate - describing criteria ... 59

Exhibit 18: Cheque clearing ... XXIV

Exhibit 19: Giro transfer clearing... XXVI

Exhibit 20: Credit card clearing...XXXIII

Table of Charts

Table of Charts

Table 1: Cost by participant... 47

Table 2: Comparison of application cases by critical success factors... 61

Table 3: ATM, EFTPOS value and volume of transaction ... XXII

Table 4: Credit transfer - relative importance in cashless transactions ...XXV

Table 5: Direct debit - relative importance in cashless transactions ... XXVII

Table 6: Cash card - volume and value of transaction 1996 2001, Germany...XXVIII

Table 7: EC transactions 1996 - 2001 (retail and gas purchases) Germany...XXX

Table 8: Debit card - volume and value of transaction...XXX

Table 9: Credit card market - volume and relative importance, Germany ... XXXII

Table 10: Credit card - volume and value of transaction, penetration ...XXXIII

Table 11: Relations between critical success factors... XL

Abbreviations

Abbreviations

Second

Generation

Three Domain

Third

Generation

,,Aktiengesellschaft"

ATM

Automated Teller Machine

B2B

Business

B2C Business

Consumer

BCG

The

Boston

Consulting

Group

BdB Bundesverband

deutscher

Banken

BIS

Bank for International Settlement

C2C

Consumer to Consumer

CAGR

Compounded Annual Growth Rate

Card

Bancaire

Clearing

Department

CDMA

Code

Division

Multiple

Access

Clearing

House

COD

Cash on Delivery

cp.

Compare

CPV Customer

Perceived

Value

DoCoMo

Communication

Over the Mobile Network

DTMF

Dual Tone Multi-frequency

DVP Delivery

versus

Payment

EBPP

Electronic Bill Presentment and Payment

Electronic cash

Engl.: public company.

Abbreviations

ECIN

Electronic Commerce Info Net

eCommerce Electronic

Commerce

ed.

Edition

EDGE

Enhanced Data Rate for GSM Evolution

EESSI

European Electronic Signature Standard Initiative

EFTPOS

Electronic Funds Transfer at the Point of Sale

EHI EuroHandelsinstitut

ELV ,,Elektronisches

Lastschriftverfahren"

e-mail

Electronic

mail

EMI European

Monetary

Institute

EMPS

Electronic

Mobile

Payment

System

EMV

Europay

Mastercard

Visa

ePSO

Electronic

Payment

Systems

Observatory

ERP Enterprise

Resource

Planning

European

Union

Fin. Financial

FRSFS

Federal Reserve System Financial Services

FTP File

Transfer

Protocol

General

Electric

Germ.

German

GHz

Giga

Hertz

GPRS

General Packet Radio Service

GSM

Global System for Mobile Communication

HRFWG

Home Radio Frequency Working Group

HSCSD

High Speed Circuit Switched Data

HTTP

Hypertext Transfer Protocol

IBM International

Business

Machines

Engl.: electronic debit charge procedure.

Abbreviations

VII

IDSP

Interoperability Domain Security Protocol

IDTechEx

Identification

Technical

Exchange

IEEE

Institute of Electrical and Electronics Engineers

IMT-2000

International

Mobile Telecommunication 2000

incl. Including

Infrared

IrDA

Infrared Data Association

IrFM

Infrared

Financial

Messaging

ISM Industrial

Scientific Medical Spectrum

Information

Technology

ITAS

Institute for Technology and Systems Analysis

ITU International

Telecommunications

Union

IWW

Institut für Wirtschaftspolitik und

Wirtschaftsforschung

Kbps

Kilo

bits

per

second

mCommerce Mobile

Commerce

MeT Mobile

electronic

Transactions

MHz

Mega

Hertz

MoTo

Mail order / Telephone order

mPayment

Mobile Payment

n.a.

Not applicable / not available

NTT

Nippon Telephone and Telegraph

OLV

Online

,,Lastschriftverfahren"

Personal

Computer

PDA

Personal Digital Assistant

Personal

Identification

Number

POS

Point of Sale

POZ

POS without ,,Zahlungsgarantie"

Abbreviations

VIII

PPA Preferred

Payment

Architecture

PSP Payment

Service

Provider

PTD Personal

Trusted

Device

Radio

Frequency

RFID

Radio

Frequency

Identification

Imp.

Relative

Importance

Recommended

Standard

SAT SIM

Application

Toolkit

Security

Element

SET Secure

Electronic

Transaction

SFR Swiss

Franc

SIG Special

Interest

Group

SIM Subscriber

Identity

Module

SMS

Short Message Service

SSL Secure

Socket

Layer

TAM

Technology

Acceptance

Model

TDD

Time Division Duplexing

TDMA

Time Division Multiple Access

Telco

Telecommunication Company

TRA

Theory of Reasoned Action

United

Kingdom

UMTS

Universal

Mobile

Telecommunications

System

United

States

USD US

Dollar

WAP

Wireless Application Protocol

W-CDMA

Wideband

CDMA

WIM

Wireless Identification Module / WAP Identity

Engl.: debit charge procedure.

Engl.: guaranty of payment.

Abbreviations

Module

WLAN

Wireless Local Area Network

WML

Wireless

Markup

Language

WPKI

WAP

Public

Key

Infrastructure

WTLSP

Wireless Transport Layer Security Protocol

Introduction

1 Introduction

1.1 Motivation

In the context of this research, payment is understood as the exchange of monetary

value between participants either directly or using an intermediary.

Mobile payment

(mPayment) can be understood as every payment where at least one participant applies

mobile phone technology, thus, uses a mobile phone.

But due to technological progress

it seems reasonable to classify other devices like a Personal Digital Assistant (PDA) or

devices with embedded Radio Frequency (RF) technology as mobile payment devices.

However, mobile phones today clearly outnumber every other mobile payment device.

Penetration rates

are forecasted to reach almost 80% in Europe by 2005.

The number

of worldwide cellular subscribers is expected to pass one billion by 2003.

By 2005

there will be more mobile phones worldwide than TVs, fixed line phones, and Personal

Computers (PC).

Driven by the increasing penetration and resulting business opportunities, numerous

mPayment solutions have been offered by payment service providers, telcos, and

See Dahlberg/Mallat (2002) p. 651.

See Krueger (2001) p. 1; see IWW (2002a) p. 5; see Kreyer/Pousttchi/Turowski (2002) p. 1 f.

See Thing/Rouse (2001); cp. chapter 3.2.

Users as a percentage of the population.

See Barnett/Hodges/Wilshire (2000) p. 164.

See Barnett/Hodges/Wilshire (2000) p. 164; see Krueger (2001) p. 3; see GSM Association (2002b).

See Datta/Pasa/Schnitker (2001) p. 72.

"Convenient access [...] to relevant information with the ability to easily take

action on it when and where you need to."

IBM's definition of Pervasive Computing

"M-Payment systems will continue to gain momentum in 2002 [...]. In the

United States and Europe, the greatest challenge will be for vendors to create

sufficiently compelling reasons for users to adopt a new payment system."

Gartner Research

Introduction

financial institutions. The variety of applicable technologies, the possible linkage

between the financial instruments, and the mPayment device combined with different

payment scenarios offer a wide landscape of mPayment solutions. Besides technology,

questions dealing with consumer expectations, factors thriving or inhibiting a

widespread adoption, and with it related penetration strategies for payment service

providers have to be carefully researched to develop a successful mPayment.

1.2 Goals of the study

Based on diverse motivations and influenced by recent technology development banks,

telcos and start-up companies endeavour to build a successful mPayment that meets the

expectations of consumers and merchants. The research question of this paper focuses

on factors that can be identified as crucial to drive the success of mobile payment

systems. Therefore, the first goal is to give an introduction to the mPayment landscape

as a foundation for further research. The second goal is to derive key factors influencing

the success of an mPayment from theoretical models and by reviewing related literature.

The research concentrates on business to consumer (B2C) and consumer to consumer

(C2C) payment on the European and United States (US) market. Neither cross border

payments nor business to business (B2B) payments are described in this paper.

1.3 Structure

The second chapter "Traditional and fixed-line online payment methods" includes a

short historical part, and presents established payment methods in the real world and the

fixed-line Internet world. Additionally, it explains the correlation to mPayments.

The third chapter "Mobile payment" addresses the first goal, the introduction to the

mPayment landscape. After the discussion of the mPayment market and its players, the

mobile device is specified. A detailed discussion of connection technologies provides

the foundation to examine different types of mPayment. Finally, criteria to describe

mPayments are developed.

See Dahlberg/Mallat (2002) p. 650.

Introduction

The fourth chapter "Critical success factors" is designed to achieve the second aim,

the development of critical success factors. Critical success factors are divided into

contingency factors, user specific factors, and value creating factors.

To underline findings of the third chapter in practice, the fifth chapter "Application

cases" examines mPayment solutions by applying describing criteria and critical

success factors.

Finally the sixth chapter "Conclusion and outlook" summarizes the approaches taken

in this paper, presents the major findings, provides a short outlook, and proposes issues

which could be subjects for further research.

Traditional and fixed-line online payment systems

2 Traditional and fixed-line online payment

methods

Chapter 2 is designed to briefly present traditional payment methods and fixed-line

online payment methods. Moreover, it explains their link to mPayments.

To achieve this goal, chapter 2 starts with a short history of payments (chapter 2.1).

Then traditional payment methods (chapter 2.2) and fixed-line online payment

methods (chapter 2.3) are presented. Chapter 2.4 summarizes the most important

aspects.

2.1 History of payments

An important piece of the foundation that supports every leading economy, is the

possibility to exchange goods, services and money. The major part of trading is finally

settled through payments.

Predecessors of today's payments are barter and commodity money. Bartering is limited

by different individual interests in the exchanged goods

, also known as double

coincidence of wants

. In a barter economy, the sum of exchange relations between n

goods and the number of resulting relative prices is n(n-1)/2. The introduction of

money, considered as a standard good, reduces the number of relative prices to n-1

absolute prices, and in overcoming the double coincidence of wants, simplifies the

trading of goods.

Commodity money, such as corn, salt, or gold, was the earliest

money. The value of these physical commodities were well known and used to effect

payment. The next phase in the development of money were paper and coins backed by

deposits of gold and silver held by the note issuer.

The next step in the progress of

money is called fiat money. Fiat money is not backed by commodities, it is only backed

See Arnold/Martin (2000) p. 575.

See Huschke (1998) p. 179.

See O'Mahony/Peirce/Tewari (1997) p. 5.

See Crameri (2000) p. 94.

See O'Mahony/Peirce/Tewari (1997) p. 5.

Traditional and fixed-line online payment systems

by the issuing government's decree that it is acceptable as legal tender currency. Its

value derives from the confidence in stable governments and the trust in central banks.

Digital money is not new: bank historians found out about transferring bank account

balances to conduct payments from Italian merchants 1200 AD.

Today paper and

coin, card based products, systems developed or tailored for the Internet use and more

recently mPayments are brought into play to conduct payments. Paper and coin

improved standardization, lowered the risk of trade and transaction cost. Card based

systems mainly improved creditworthiness and the ease of pay.

MPayments are

designed to enable further improvements, such as the possibility to pay any time and

anywhere.

2.2 Traditional payment methods

Traditional payments have been around for decades and are widely accepted. They can

be grouped into basic payment procedures and card based products.

Basic payment procedures encompass payment by cash, payment by cheque, direct

transfer, and debit charge procedure.

They are called basic payment procedures

because other payment systems are based on one of these payments and their settlement.

For example, card issuing companies finally use a debit charge procedure to debit their

customers' accounts with accumulated purchases; also some micropayment systems and

mPayment systems in Europe use the debit charge procedure to debit their customers'

accounts.

Additionally, they are considered to be a key asset of the financial industry:

depending on the offered form of payment, a European Monetary Institute (EMI)

licence or a banking licence is required.

Depending on the time of payment, card based products can be differentiated into pay

before, pay now and pay later cards. Cash cards belong to pay before cards and debit

See Fitch (2000) p. 183.

See White (1997) p. 15.

See Mantel (2000) p. 33.

Basic payment procedures are explained in chapter A 1.1.

See FRSFS (2001) p. 10; see IWW (2002b).

See Lelieveldt (2000) p. 8 f.

Traditional and fixed-line online payment systems

cards or EC-cards to pay now cards. Credit cards are typical pay later cards.

The development of applied traditional payment instruments at the local Point of

Sales (POS) in Germany provides an idea in terms of relevancy and future trends in the

field of B2C retail transactions (cp. Exhibit 1).

Cash

EC-card +

signature

(ELV&POZ)

EC-card +

PIN

Credit card

Bill

Retail card

Cheque

Stored

value card

Other

(incl.

mPayment)

1995

2001

Cash

EC-card +

signature

(ELV&POZ)

EC-card +

PIN

Credit card

Bill

Retail card

Cheque

Stored

value card

Other

(incl.

mPayment)

1995

2001

value

(

rce

)

Exhibit 1: Development of Payment methods German local POS 1995-2001

The development indicates that there is fierce competition between already existing

payment methods. Cash is losing its importance. Cheques are becoming more and more

insignificant. In general, all existing payment methods lost their importance to card

based products. However, the German "Geldkarte", a card based stored value system

designed to substitute cash, completely failed. Exhibit 1 clearly indicates that

mPayments are so far insignificant at German local POSs. Contrary to the German local

POS situation, mPayments in form of Radio Frequency Identification (RFID)

payments

are gaining traction on the North American retail market.

There, RFID

payments are mainly challenging cash payments because RFID payments are in a strict

sense another way to initiate card based payments.

Card based products are explained in chapter A 1.2.

See Rüter (2002) pp. 4-6.

Cp. chapter A 1.2.1.

Cp. chapters 3.3.2.3 and 5.4.

See Kountz (2002) p. 1.

Traditional and fixed-line online payment systems

2.3 Fixed-line online payment methods

This chapter briefly explains payment instruments derived from the rise of the Internet,

and the resulting changes in the commercial environment

. Coherent with the logical

transfer of traditional payment methods to the online environment, the two groups

electronic counterparts of basic payment procedures and card based products

combined with Internet technology were built. The last group within online payments,

having obviously no predecessor, are payments evolved from the Internet revolution.

Electronic counterparts of basic payment procedures consist of electronic money,

electronic cheques, paperless direct debit, and paperless direct transfer. Apart from the

paperless direct debit and paperless direct transfer, all electronic counterparts failed.

Applicable card based products in the Internet environment are cash cards which are

either stored value cards or scratch cards, debit cards, and credit cards. The difference to

traditional card based products is the transmission of payment information residing on

the cards to the POS. The card information can be sent without any security precautions

via Secure Socket Layer (SSL), via Three Domain (3D) Secure Electronic Transaction

(SET) or via 3D Secure.

The first two options are classified as Mail order / Telephone

order (MoTo). MoTos are considered as "card not present" transactions which do not

result in liability shift in favour of the merchant towards the banks, as it is the case with

3D SET or 3D Secure transactions.

Typical payments evolved from the Internet revolution are micropayments, personal

online payments, and encashment via accounts maintained by third parties.

As in the field of traditional payments, there are several payment options at the virtual

POS. Due to existing differences in the underlying international traditional payment

infrastructures, applied payment instruments in the online environment vary from

country to country: in Germany for instance, direct debit procedures are very common

for Internet purchases. In the US, however, direct debit procedures play an inferior

role.

Cp. chapter 4.1.

Cp. chapter A 2.1.

Cp. chapter A 2.2; for more information on 3D SET or 3D Secure: see Visa (2002).

See Kanniainen (2001b) p. 30.

Cp. chapter A 1.1.4.

Traditional and fixed-line online payment systems

Generally, credit cards are the most preferred payment method in the US and Europe at

the virtual POS.

2.4 Summary

Chapter 2 gave a brief introduction to B2C and C2C payment with a focus on the

European and US market. Exhibit 2 depicts the main groups, traditional payments, and

fixed-line online payments that have been identified.

pay

trad

nal

pay

xed-

line

ne pa

xed-

ne pa

basic payments + internet

· stored value card

· debit card / ec-card

· credit card

· electr. money softw. based

· electronic cheques

· paperless direct transfer

· paperless direct debit

prepaid card

stored value / scratch card

(unsec./SSL/C-SET)

debit card

(unsec./SSL/virt. numbers)

credit card

(unsec./SSL/SET/virt. numbers)

card based + internet

basic payment procedures

card based

· cash

· cheque

· direct transfer

· debit charge procedure

ELV, OLV

evolved from Internet revolution

· micro payments

· personal online payments

· encashment via 3rd party

pay

trad

nal

pay

xed-

line

ne pa

xed-

ne pa

basic payments + internet

· stored value card

· debit card / ec-card

· credit card

· electr. money softw. based

· electronic cheques

· paperless direct transfer

· paperless direct debit

prepaid card

stored value / scratch card

(unsec./SSL/C-SET)

debit card

(unsec./SSL/virt. numbers)

credit card

(unsec./SSL/SET/virt. numbers)

card based + internet

basic payment procedures

card based

· cash

· cheque

· direct transfer

· debit charge procedure

ELV, OLV

evolved from Internet revolution

· micro payments

· personal online payments

· encashment via 3rd party

Exhibit 2: Traditional and fixed-line online payment methods

A crucial outcome is that basic payment procedures which are built on the proprietary

network of the financial institutions, are the foundation of all other payment instrument

methods. Next to this, card based products are still gaining importance among

traditional payment methods and are the most successful payment methods in the online

environment. The strong position of card based products in the fixed-line online

environment might be propelled by the increasing use of Interoperability Domain

Security Protocols (IDSP), such as 3D SET and 3D Secure. However, MoTo will

remain in use, which is applied considerably in today's online purchases.

Another outcome is that until today mPayments at local POSs are insignificant.

virtual POSs, recent research is revealing an increasing use of mobile phones to pay for

online purchases.

Reliable information about the situation in the C2C scenario are not

available.

See Kerr (2001).

See Kanniainen (2001b) p. 30.

Cp. Exhibit 1.

See IWW (2002c) p. 8.

Mobile payment

3 Mobile

payment

Chapter 3 is designed to introduce mPayment. Therefore, it outlines the potential

mPayment market, the motivation as well as the unique value proposition of the main

players (chapter 3.1). Then the introduction is lead by a technological approach. It

describes the mobile hardware (chapter 3.2) and the technical foundation for a wireless

connection (chapter 3.3). Based on the technological approach, three main mPayment

groups are built and examined: mPayments based on cellular network technology

(chapter 3.4.1); mPayments based on mobile Internet technology (chapter 3.4.2) and

mPayments based on proximity technology (chapter 3.4.3). To classify emerging

mPayments chapter 3.5 develops describing criteria. Finally, chapter 3.6 draws a

summary.

3.1 Market and players

The growth of the mPayment market relies on the ongoing spread of mobile telephony

and the related expansion of mobile commerce (mCommerce). At this early stage,

mCommerce market forecasts and related mPayment market forecasts are rather

imprecise and therefore have to be interpreted carefully

: the mCommerce market is

expected to reach 13 billion US Dollar (USD) in 2003, 50 billion USD in 2006 and

approximately 270 billion USD in 2010.

Forrester is predicting the mPayment market

in Europe to be 23,4 billion USD in 2005.

According to Frost & Sullivan, the

mPayment market in Europe is predicted to reach 25 billion USD in 2006.

Players of the mPayment market have to regard consumers and merchants with

partially opposite demands: consumers' payment behaviour has changed dramatically.

In a nutshell, the consumer wants to pay any time and anywhere with a convenient

payment method. Merchants on the other side are always looking for a payment option

See Schneidereit/Padurch/Rueda (2001) p. 876.

See Barnett/Hodges/Wilshire (2000) p. 163; see Reuters (2001); see Krueger (2001) p. 4.

See Forrester (2001); (cross rate USD/EUR 0,9).

See Mobile CommerceNet (2002).

Mobile payment

cutting down their costs and at the same time guaranteeing payment. The following

parties can be identified as likely candidates to provide mPayment services:

· Telecommunication companies (telcos),

· Start-ups,

· Financial service industry,

· Alliances of the parties above.

Telcos are pressured to charge off their investments for licenses to operate the so-called

Third Generation (3G) of mobile networks.

The cost for the 3G infrastructure is

estimated to total 250 billion USD in Europe alone, of which 110 billion USD is in

licences.

However, 3G technology is considered an unproven technology: it stays

unclear whether the consumer will adopt the offered products and services, generates

the planned volume and value, or whether the technology might be substituted by, until

today, unknown products.

In order to pay the high amount of interest and considering

the fact that simple data transport over mobile networks is becoming a commodity

telcos endeavour to expand their business to so far untouched segments.

Additionally,

the failure of mPayment might lead to decreasing traffic in the operator's network and

could hinder new value-creating opportunities.

A solid mPayment is also expected to

foster customer loyalty.

Thus, the development of mPayment is substantial for telcos.

Main advantages of telcos are their technical experience in wireless technology, their

control over mobile networks, their existing billing systems and their large customer

base.

The challenges depend on the technical realization of mPayment: a solution based on

See Krueger (2001) p. 4; see Schneidereit/Padurch/Rueda (2001) p. 877; a detailed description of the

mCommerce value chain can be found at: Barnett/Hodges/Wilshire (2000) p. 166 f.;

Durlacher (1999) pp. 15 18.

See Henkel (2001) p. 15.

See Trintech (2002) p. 10.

See Clifford (2002) p. 46; see Schneidereit/Padurch/Rueda (2001) p. 878.

See Barnett/Hodges/Wilshire (2000) p. 163; see Barnett/Hodges/Wilshire (2000) p. 166;

see Henkel (2001) p. 15.

See Schneidereit/Padurch/Rueda (2001) p. 877.

See Krueger (2001) p. 5.

See Henkel (2001) p. 15.

See Barnett/Hodges/Wilshire (2000) p. 167.

Mobile payment

standard phone call technology would give the telcos a rather low influence, in that they

could only charge for the resulting traffic.

However, a severe challenge is a solution

requiring a regulatory permission. The management of multi purpose prepaid accounts

make a banking licence or an EMI licence mandatory if the accounts are not only

accepted by the company hosting the accounts, but also applicable to purchase services

and goods at other companies.

Moreover, the ability to grant a payment guaranty to

merchants requires a banking licence. Telcos can obtain a licence via direct application

or in cooperation with a bank.

The next challenge is identified as the increasing

exposure to financial risk. Fraud and unpaid bills involving just air time result in little

additional cost. However, unpaid bills consisting of accumulated purchases at

merchants, who are given a payment guaranty, would severely impact the operator's

cost.

For start-ups the unclear development of the mPayment market seems to bear two

opportunities: they can act as intermediaries between consumers, merchants, banks and

credit card issuing companies, e.g. as Payment Service Provider (PSP). Secondly, due to

the need of completely new payment systems, derived from the development of new

market places like private auction sites, start-ups can enter the market as first movers

with new sophisticated payment solutions.

The main advantages of start-ups are seen in their flexibility to explore emerging

technologies faster, compared to cumbersome competitors, such as banks or telcos.

Additionally, they are embracing the risk to fail easier than other parties, especially

banks, which are afraid to lose their reputation.

In terms of challenges, they might face similar problems to telcos depending on the

solution. A recent example is PayPal, a US start-up in the field of personal online

payment. In order to operate in Europe, PayPal is in need of an EMI licence, because its

prepaid accounts are designed to buy services and goods from other parties.

Another

Corresponding mPayment solutions are explained in chapter 3.4.1.

See Lelieveldt (2000) p. 8 f.

See Henkel (2001) p. 15.

See Krueger (2001) p. 9.

See Schneidereit/Padurch/Rueda (2001) p. 876.

Cp. chapter 5.2; cp. chapter 3.4.2.1.

See Krueger/de Geest (2001) p. 10.

Mobile payment

challenge is to gain trust and a good repudiation: merchants are not preferring start-ups

as mobile payment provider.

In the financial industry, payment is a core business. According to the Boston

Consulting Group, payment fuels about 40% of costs and constitutes up to 35% of

revenues. Therefore, payment is clearly a core business within a bank. To exploit its

enormous value a clear strategy is necessary.

There are statements about payment

services being a loss producing activity, but crucial to establish customer relations.

Payments are seen as an access to the consumer market to sell financial services. Private

and corporate customers are expecting banks to deliver financial services at acceptable

prices.

Their main advantages are the control of the existing payment infrastructure, the

profound knowledge about security issues, established risk management and consumer

trust.

Internationally operating financial institutions are very suitable to cope with

cross-border problems.

The challenge for banks is related to the fact that mPayments might well be offered by

other industries, e.g. telcos. Banks are endangered to become disintermediated. The

outcome would be profit loss to competitors offering new or better services based on

emerging technologies, and the loss of close customer contact. To avoid

disintermediation they have to focus on their customers expectations when providing

convenient payment services.

It is important to understand that the three parties discussed above do not necessarily

have to compete. Banks could establish fruitful alliances with telcos

to better fulfil

the expectations of the consumers in combining the advantages of both sides: banks are

experienced in financial products, have risk management in place, are trusted by

See De Lussanet (2001).

BCG (2002).

See Prast (1995) p. 431.

See Maude/Raghunath/Sahay/Sands (2000) p. 92; see Prast (1995) p. 431; see Krueger (2001) p. 17;

see Raina/Harsh (2002) p. 272.

See Henkel (2001) p. 16.

See Krueger (2001) p. 1.

See Datta/Pasa/Schnitker (2001) p. 78.

Mobile payment

customers and are in the possession of a banking licence. Telcos also have a large

customer base and are experienced in mobile technology. A cooperation could finally

lead to a win-win-situation.

Both parties can also build up alliances with start-ups

adopting the new technology and offering experience in their field of competence.

3.2 Mobile hardware

Some mPayment definitions have in common that they posit the mobile phone as the

device to conduct payment. But there are payment solutions which can also be

considered as mobile although not involving a mobile phone, but e.g. RFID key fobs.

Additionally, PDAs are increasingly equipped with mobile phone technology and vice

versa.

Therefore, it might be suggested to expand the circle of mPayment devices.

Next to mobile phones, smartphones, PDAs, and RFID fobs can be considered as

mPayment devices according to the following criteria:

· Physical criteria: a mobile device should be highly portable.

· Connection criteria: a mobile device has to establish a wireless connection. The

payment information can be exchanged by a local short range connection, as in the

case of RFID, or by a cellular network connection or both.

· Acceptance criteria: a mobile device should qualify for any time and anywhere

usage. Points of acceptance should be widespread and not bound to a single

location, e.g. an RFID technology based bridge toll payment system, which can

only be used at one single bridge cannot be considered as an mPayment system.

However, if this toll collecting system could also be applied for another purpose,

e.g. to purchase gas, it could be considered as an mPayment system.

However, mobile phones are equipped with a combination of features and functionality

which gives them an outstanding position among other mPayment devices. Among the

features is the ability to send and receive text and speech. Other key technologies, such

as the Subscriber Identity Module (SIM), the SIM Application Toolkit (SAT) or the

See Schneidereit/Padurch/Rueda (2001) p. 878.

See Thing/Rouse (2001); see Trintech (2002) p. 8.

See Noble (2002).

Details

Seiten
Erscheinungsform: Originalausgabe
Jahr: 2002
ISBN (eBook): 9783832466435
ISBN (Paperback): 9783838666433
DOI: 10.3239/9783832466435
Dateigröße: 890 KB
Sprache: Englisch
Institution / Hochschule: Universität St. Gallen – unbekannt
Erscheinungsdatum: 2003 (April)
Note: 1,0
Schlagworte: zahlungsverfahren mobilfunk internet-technologie short-range-technologie faktoren erfolgsfaktoren

Autor

Christian Hort (Autor:in)

Critical Success Factors of Mobile Payment

Zusammenfassung

Leseprobe

Inhaltsverzeichnis

Details

Autor

Christian Hort (Autor:in)