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Mobile payment is going through a fundamental shift driven by the evolution in social, mobile, cloud and communications. These changes are only going to intensify in the future forcing fundamental change in business processes and in turn reshaping the industry.

In most of these cases, the change is being driven by the customer. The customer today, having experienced the always-on, always-available, contextually rich, feature sets of the mobile, wants to extend the same experience to the other facets of their life. Businesses must take cognizance of this and create highly contextual solutions that take care of the customer at the moment of their need.

Payment is one area which provides the context as well as the opportunity for mobile to make inroads. We are at the inflection point today where the various actors in the payment landscape like merchants, consumers, industry associations, regulatory bodies have finally come around to the reality of mobile payments. Technologies like BLE, NFC & QR have finally matured to the extent where they can provide the backdrop to fast and seamless transactions experience needed across industries.

The level of contextualization and customization which was not possible ten years ago has now become a reality across industries as diverse as banking, retail and hospitality. Here are some of the usage cases of how mobile is transforming customer experience across these industries.

In order to compete, banks have to provide highly personalized as well as contextual services, leveraging mobile as well as data analytics. Today, banks are competing with various third parties like OEM’s, MNO’s for a slice of the customer pie. In this context, they need to put into place a mobile-first strategy or risk losing their business to new players. Also, the size of data generated by mobile based banking transactions is too valuable to be left on the table. A mobile wallet is an essential element in banks mobile first strategy helping them to provide a seamless, omnichannel banking experience to their customers.

At the other end of the scale is personalization of offers and services leveraging technologies that provide contextuality like beacons and BLE.  Customer experience management has become an important part of the customer’s service journey right from the moment they walk in through the front door to the moment they walk out of the back door. For example, BLE technologies can detect High Net Worth (HNI) customers as they walk in through the door, fetching the customer’s data from the CRM and sending it to the relationship manager’s hand held device, and thus, creating more opportunities for providing customized services.

Mobile based technologies like BLE, NFC, QR codes are redefining payments behavior. In order to be truly effective, mobile based payment technologies must not only offer the ease and accessibility of a physical wallet, but must also offer loyalty points to facilitate higher customer acceptance rates. Combining proximity payments with a loyalty management will create the right ecosystem that will drive customer retention, repeat business and referrals. For example, BLE recognizes a customer as he walks into a retail outlet and the check-in details are recorded in the CRM at the backend. The beacon follows the customer in the store. Once it detects that the customer is standing next to the clothes section, it sends discount coupons that are redeemable at mobile checkout. As an added incentive, the customer is also given a coupon which is saved in the wallet for the next time he visits the outlet.

Retail outlets can also use NFC Mobile payments for queue busting which is especially relevant for low-value, high-volume micropayments transactions less than $1 in value.

Current cash based micro-transactions have two problems –

  • Merchants experience the “change problem” – not enough free change for processing small transactions that are generally below $1 value.
  • Customers would rather put off purchases than carry change

NFC mobile based payment digitizes the entire purchase procedure making it easier for the merchant as well as the buyer. Besides smoothening payments in micro-transactions, solutions like these have the potential to spur purchases, leading to benefits all around.

Proximity Payments using QR code digitizes the customer’s purchase journey right from billing to payment, creating a seamless in-App payments experience. For initiating the billing transaction, the merchant scans the purchased goods to get the bill amount. In the next step, the merchant enters the bill amount in the app to generate the QR code, which contains the billing as well as the merchant information. To initiate payment, the customer scans the QR code with his smart-phone and enters the pin in her wallet app after verifying the bill. The transaction is completed once the customer receives the transaction confirmation in his app.

With technologies like NFC, BLE, QR code moving towards the maturity phase, following years of scrutiny, the next few years is expected to witness higher uptake, with businesses striving to differentiate themselves in hypercompetitive markets. In the end, it is all about improving customer engagement, leveraging technologies that deliver contextually rich engagement experiences, because the more the businesses engage with their customers the more things become clearer and the more it is easy for them.

February 22, 2016 0 comment
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The many success and failures of mobile payments and related solutions witnessed so far brings home a very simple fact-one mobile-based financial solution will not cater to all markets.

After all, how can it? The mobile finance space itself is so vast: you have payments, payment-related services and commerce. Further, the stakeholders themselves; namely the consumer and the business and merchant segments. As if that wasn’t complex enough, these categories are further broken down into various strata in the form of a pyramid. Essentially, this implies one can classify a customer as belonging to the “bottom” or the “top” of the pyramid. Likewise, a merchant can be categorized as a “small”, “medium” or “large format”. So many classifications would obviously demand an equal number of solutions. And, of course, needless to say, the solutions would have to be customized to suit each market!

At this point, without running the risk of tooting my own (or my company’s) horn, let me elaborate on that last bit. Simply put; keeping in mind that every global marketplace vastly differs in every possible way, the need of the hour is a “no white space” strategy. (The term is my own coinage). This implies more than dotting the “i”s and crossing the “t”s. It means being able to provide an appropriate solution to the appropriate target audience.

Now, coming back to the markets. For the sake of simplicity, I will divide them into two categories; developing and developed. Without going into details (and thus running the risk of losing my audience), I think that it suffices to say that the mobile payments market got its first real push from the developing markets. Why? Well, because this customer group had very fundamental financial requirements. Using a mobile payments system essentially provided them easy and fast access to their personal accounts. Without such a system in place, they’d still be conducting all financial transactions in cash. However, that was then. Things have come a long way since and permit me to cite Africa as an example. Today, the mobile money services space in Africa is steadily maturing. Of 196 mobile operators, 99 have already launched mobile money services. More importantly, the scope of the service itself has increased tremendously. For instance, in Zimbabwe, one such player, EcoCash made its debut in the mobile money space with the launch of the P2P Transfer service. Today, it offers customers a wide range of solutions. Briefly, these include the Merchant Payment system solution (for the retail payment business) and the EcoCash $ave and the EcoCash Credit services (aimed at bringing micro-savings into the formal financial system). Other interesting initiatives are the salary payments and mobile savings services and the SVA-linked debit card. These launches are aimed at extending the company’s reach to businesses and beyond Africa’s borders as well as driving merchant payments. Enough said?

Of course, these companies haven’t stopped there. Not by a long shot. The next step was launching interoperable mobile services. So, not surprisingly, in June this year, Tanzania’s three mobile money heavyweights; Airtel, Tigo and Zantel – signed an interoperability agreement, as per which, users of their respective Airtel Money, Tigo M-Pesa and Zantel’s EzyPesa services will be able to send money to each other from their handsets. An interesting aside-the hopes of over 16 million mobile money customers in Tanzania were pinned on this service!

Now, while it is indeed tempting to focus on Africa for the remainder of this piece, (since I am quite partial to this region myself and also because, let’s face it, when it comes to mobile money, Africa remains the biggest success story), let’s move on to the developed markets.

When it comes to mobile money, the clearest differentiator between developing and developed markets can be summed up as follows. In a space where consumers already have a plethora of choices, such as cards, electronic payments, digital payments, access to digital channels, such as the internet, why would they use a mobile for financial transactions? To answer this question, I would like to touch upon what I refer to as, “re-imagining the consumer’s purchase behaviour” in the context of mobility.

Let me kick-off this discussion with a simple statement; customers have changed. Companies should too. In the good old days, a customer used to walk into a store, select a product, purchase it and walk out. Today, the rules of the game have changed, because the game itself has become so complex. Before walking into a store, the modern customer researches a product they are interested in, they view videos pertaining to the same, compare prices, download coupons, the list is endless. In this context, therefore, a company can “re-imagine” a potential customer’s purchase journey with the help of mobile-based tools that are context-aware, socially driven, powered by technology, personalized and, most importantly, secure.

In this context (pardon the pun), the mobile is the king, commerce is the queen and context is God. Simply put, a retailer can tap into a customer’s purchase behaviour and interests based on the trends highlighted in previous transactions. The retailer would then be able to push customized offerings on the customer’s mobile phone. Another way is location-based offers. This entails detecting a customer’s presence at a location, in order to push various offers via technologies such as Bluetooth Low Energy (BLE) beacons. Essentially, on the basis of a customer’s location, I would be able to tell what this person is doing currently and provide them with specific information that can aid them in their buying or purchasing behaviour.

Next, let’s talk about the most powerful tool (arguably) of our age; social networking. Social networks are “the” way customers are obtaining information from companies and using it to decide what product to purchase. If we were to transpose that into a mobile handset, a retailer can analyze and understand consumers through their consumption of social media to make changes in brand and marketing. Less prosaically, integrating social media with one’s purchase journey can help increase visibility, interaction and engagement, not to mention, add a “fun” element to the entire process! The bottomline is; the whole experience becomes that much better and different.

Next: technology itself. Of course, in the entire purchase journey, the technology is merely incidental. Having said that, however, technologies like Near Field Communications (NFC), BLE, Biometrics, QR Codes, and wearables ARE (and will continue to) disrupting the payments space in a big way. So, retailers would do well to remember to use these mediums to create “wow” moments for their customers. For example, deploying NFC to ease payments, like what Apple Pay is doing today, or get information through QR codes, or get the right discount voucher through a Bluetooth Low Energy beacon-all this will enhance the customer’s experience! What’s more, the entire experience is put into context! Suddenly, one is able to visualize a pattern by which one is able to aid the consumer again and help them not only in the purchase journey itself but beyond as well. This would, in all likelihood, encourage the customer to share their experience with their peers.

While the aforementioned trends hold a lot of potential and promise, the issue of security is bound to raise its head up sooner than later. Even today, despite the plethora of applications (security-related included) available in the market, customers perceive mobile payments as unsecure, owing to the lack of familiarity with the system. Of course, grappling with complex security mechanisms don’t help the cause at all. So, naturally, every organization offering mobile-based payments is focusing on this aspect. To sum up, I am of the firm opinion that if an appropriate solution can be developed to allay a customer’s fears about security, mobile-based payments would certainly obtain increased momentum.

In conclusion, though this piece focuses primarily on payments, it goes beyond that, of course. The wide gamut of mobile payments includes applications, content, and, most importantly, knowing what a customer wants. The bottom line is simple; all these elements are important parts of the payments game.

Having said that, I feel it is important to mention that the discussion so far centred on what WAS in 2014. Shall we take a look at what WILL (or, at least likely to) be in 2015?

First and foremost, and let’s get this out of the way once and for all-mobile payments aren’t going anywhere. They are and will continue to be a priority for every stakeholder in the mobile financial services space. Mobile money has moved beyond hype and is establishing itself as a lasting trend.

Sample this; according to a recent report published by The Society for Worldwide Interbank Financial Telecommunication, consumers are using their mobile phones to make payments in over 130 deployments with a 100 more planned and several new initiatives are being announced each week. If that doesn’t indicate growth, nothing does! Moreover, this is a growing market. The mobile, as a payment technology, will register significant growth over the next five years. As per industry estimates, the growth rate for mobile payments is expected to vary between 350 and 900 million users, generating anywhere between $430 billion and 1 trillion in transaction value by 2015. The retail segment, in particular, is expected to take up this cause enthusiastically. How? By adopting a “mobile-first” strategy-i.e. ensuring that a customer’s experience on any mobile device (tablets, handsets, phablets, you name it!) is nothing short of perfect!

Now let’s talk about the services themselves. As I mentioned earlier in this piece, mobile payments have risen far above and beyond P2P transfers. This is just the tip of the iceberg; numerous non-financial players have entered the mobile payments market, often with innovative solutions. In fact, mobile network operators like Vodafone, MTN, Orange and airtel have deployed mobile payments services in several countries or have set up joint ventures between them. If that wasn’t enough, money transfer operators like Western Union and MoneyGram, as well as card companies like Visa, MasterCard and Amex all have multiple mobile payments initiatives. To add to the mix (or shall I say confusion?) payment service providers like PayPal are throwing their hat into the ring too and putting their entire might into the mobile.

The big bucks matter, of course. So does the technology used for such payments, by the way. For example, Near Field Communications is (and will continue) creating a lot of buzz in the mobile payments space.  It is being used in Japan on close to 65 million handsets by 15 million customers initiating 30-50 million transactions per month with 750,000 merchants. If that wasn’t enough, several projects have been launched in some 35 countries in Europe, the US and China, but many have a long way to go before reaching critical mass (in terms of market penetration). Google Wallet is one example.

Now, let’s add another element to this mix; namely: Host Card Emulation. It is here to stay. Very simply put-traditional NFC using SE for contactless proximity payments had too many challenges which HCE has resolved. The tokenization service offered by card schemes would enable financial institutions to launch NFC Wallets by simply working with a mobile wallet platform provider. In fact, I believe that the movement of NFC-based payments towards HCE, which started in 2014, will become more prominent in 2015.

Moreover, user experience, context awareness and universality will be the benchmarks by which every mobile money deployment will be judged. The user experience has to be compelling, convenient and cost-effective and the context awareness, intelligent and customized. Too much of wishful thinking? Well, let’s put it this way; the solution that addresses these best within the time, cost and quality constraints shall succeed.

But, as the saying goes, “there is no such thing as a free lunch”. So, while mobile money offers significant business opportunities, it also comes with very specific challenges. It’s quite straightforward, really. The metaphorical elephant in the mobile payments room is interoperability. All the mobile money faithful agree that it can boost volumes to dizzying heights. But, naturally, one’s own company’s business goals become priority and so no player wants to give another even the slightest bit of elbow room, whilst expanding market share. Things are expected to, well, improve somewhat in 2015. Stakeholders are expected to relax their competitive stance and adopt a collaborative approach. And, it’s already happening (in small doses, of course). Citing the Tanzania example mentioned before, in November 2014, Airtel Money and Tigo Pesa joined hands to enable the very first domestic interoperable mobile financial service in Tanzania. Powered by our very own mobiquity® Money (still not tooting my company’s horn), the service allows customers to send and receive money directly between the mobile money accounts of these two service providers. The service simplifies off-net money transfers and enables recipients to transact through the convenience of their own mobile phone without cashing out. Small steps, no doubt, but at least it’s a start. A word of caution, though; before the full potential of interoperability can be leveraged, the various faces of this concept need to be clearly understood, prioritized and then introduced. Tanzania is just the tip of the iceberg, though.  In 2015, we are likely to see a number of markets jumping onto the interoperability bandwagon!

To sum up, 2014 witnessed several changes and innovations in the mobile payment space. Honestly, we can continue to gaze into a crystal ball with regard to what’s going to happen in 2015. We may or may not be right. Nevertheless, it’ll be worthwhile seeing how the next year shapes up for this space.

February 26, 2015 0 comment
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Has the concept of mobile-based payments had its moment in the sun? It isn’t the latest kid on the technology block or (arguably) the most impressive. Its potential in making cards a thing of the past has been discussed to death. Indeed, it has been at the forefront of thousands of industry-wide debates and forums.

So, can it be written off as just a flash-in-the-pan? Well, yes and no. No, because in theory, the concept of a mobile handset coupled with a digital wallet is sound. It has the potential to transform the overall payments experience by introducing contextual awareness into the mix, resulting in happy customers and merchants (the former with personalized offers and the latter with better customer outreach).

The not-so-great news is that despite the potential, a mere handful of pilots have been conducted across multiple geographies. The grand idea of mobile payments seems to have turned out to be a paper tiger. All teeth but no bite.

Is the failure to identify the right kind of technology its downfall?  Again, yes and no. There have been several hits and misses. To illustrate, in the initial years, Near Field Communications (NFC) was touted as “the” technology for mobile payments. Over the years, though, industry experts steadily started dismissing NFC on multiple grounds. To begin with, the business model entailed was complex and also added several more players in the ecosystem. This meant more contenders for the already wafer-thin margins.  Each solution suggested to salvage the situation, though put forward with honourable intentions, was deemed badly planned. Invariably, all the players involved wanted to have first dibs on the customer.

In the end, while NFC never made it to the mainstream, the idea of mobile payments didn’t die. As a result, many other technologies-in particular QR Codes and Biometrics-have been given a fair trial but these are not really expected to become mainstream unless there are standards defined, followed by an industry-wide push for adoption. Also, security concerns for these alternate payments have to be thought through and a robust mechanism built before these find their feet in this space.

In this scenario, Host Card Emulation (HCE) has arisen as a potential solution to the “which technology ought to be used for mobile payments” conundrum. It seems to have hit the bulls-eye, with bigwigs like MasterCard and VISA announcing their specs and EMV following suit and developing their own guidelines for tokenization. HCE has taken off very rapidly and, in fact, has helped sort out a few kinks in the traditional NFC model. I think it’s appropriate to mention Google at this point, for the HCE specs it introduced in the KitKat version of Android.

Of course, what’s well begun is often half-done. The next step is extending the magic of HCE-based NFC payments outside the Android universe.

To be fair, there has been a fair amount of activity on this front. Several banks have enthusiastically signed up for the same and have been rolled out HCE-based wallet pilot projects. Let’s not get ahead of ourselves, though, it is still a bit premature to measure the success of such projects. Every player worth mentioning operating in this space is attempting to have a “eureka” moment in this context and are certainly pulling out all the stops. Take, for instance, the enabling of tokens for disconnected modes or the solution that ensures the customer carries out the transaction in record time.

Meanwhile, the next big question is: which platform would provide a more secure environment to support HCE-based wallets-the Trusted Execution Environment (TEE) or the secure element (SE on the cloud)? The former is widely regarded as the winner , but it is not without flaws. To begin with, it is dependent on the mobile handset’s processor (always a red flag) and introduces an additional player in the value chain-not always a welcome development.

Of course, the wheels of technology keep turning and so, it is unsurprising that an alternative mechanism – the latest buzzword – white box cryptography (WBC) is already squarely in place. In fact, it has already been implemented to enable token management securely within the phone memory without a secure element in place. While HCE started with the SE being present on the cloud which helps in processing transactions being in the connected mode, the WBC mode is to enable disconnected transactions where required.

I believe that this isn’t mere hype-it could very well be a genuine possibility of enabling over-the-counter payments through NFC. We have already engaged with various players who have evinced interest in deploying HCE solutions. Again a disclaimer-technology can never be perfect. In this context, the jury is still out on the question of who would manage the tokenization systems – would banks have their own system or would the network scheme players like MasterCard and VISA lead the way? While the former seemed to be a logical solution, the process of managing the flow of payments could become complex and while the latter could help in deploying the token systems faster, another question arose-would everyone subscribe to the model?

If history has taught us anything, no-one would have been taken by surprise by Apple’s grand announcements in early September. While I am still unclear of how the overall market will pan out, the launch of the Apple Pay solution on the iPhone 6 and Apple Watch (users of iPhone 5s can use Apple Pay through this) signals the beginning of the US market’s journey towards NFC adoption.

Apple’s heavyweight status became even clearer at the event-as it has already roped in every major player including banks, networks and merchants to be an integral part of the launch. Keeping in with time-honoured tradition, the solution makes it clear that Apple has thought the overall process through to develop an offering which is not only frictionless but also secure. The tokenization thought process which began with HCE has clearly been adopted and I am sure this is destined to become pretty much part of any payment flow.

In fact, the biometric authentication feature    they introduced in the last version of the iPhone is now being given space to play-the perception to consumers would clearly be that their payment credentials are secure, which will hopefully translate into a healthier adoption rate. While not stated clearly, the context aware services would have their moment as well. Of course, Apple will continue to mix things up and will most likely steadily throw in the passbook and the ibeacons facilities. Add the payments feature to that and you’re likely to end up with a product that offers more value to consumers and gives the world a solid reason to subscribe to the mobile payments thought process.

But is the world ready? I believe so, especially with the US retail industry going through the EMV migration. In this case, contactless and NFC terminals can be part of the same migration process. This will make the acquiring side ready for the mobile payments revolution while the nuts and bolts have started falling into place on the issuing side-well at least for consumers who will pocket the latest iPhone.

While all the hype surrounding Apple’s latest offering is exciting and full of promise, let’s take a moment. The company has already stated that 83 per cent of card holders in the US can already access this service. But wait what about the other mobile platforms (including Android) which need to enable NFC so that the market will become broader? While this may not give the good people at Apple sleepless nights, it is important to remember that Android rules the roost outside the US.

Speaking of teething issues, personally, I am curious to see how Apple will tackle the issue of a “disconnected” environment and who will introduce payments and authentication to, let’s say, the transit industry-traditionally considered a killer app for NFC. Further, how will wallet providers including large format retailers club their wallet offering with the Apple payment systems? How will Apple build in context awareness in this product, keeping in mind their recent proclamation that they do not hold customer info? While I never claimed to have a crystal ball, I am clear about the fact that Apple will slowly but surely be the ID and access mechanism for various applications and this is where they may open their platform to the developer community.

But that’s Apple. What about the larger Android universe I had mentioned earlier? Well, for one, the right solution is required. Further, banks and payment providers will need to offer their payments products to consumers irrespective of which OS platform they are on. Now the tricky part-dealing with HCE on Android is very different from what Apple Pay is offering. Banks will have to do their homework to figure out how to replicate the process across platforms.

It doesn’t end there. Players like MasterCard and VISA have increased their relevance with tokenization at the network level. It will, therefore, be mildly-I joke-VERY difficult to change the existing system to support NFC payments for other platforms. Also, wallet providers exercised more control on the Android platform and the overall consumer buying behaviour including payments could be more tightly integrated. So, where does all this stand? Are we to believe that the payments piece will  now become a platform play? The big question is will Google follow suit? Is there room for it to do so? Interesting times are coming and it won’t be an exaggeration to say that Apple’s recent announcements have led to the makings of a storm in the NFC space. From the viewpoint of someone who has been eagerly waiting for this (me), looks like wishes do come true!!

September 18, 2014 0 comment
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