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M - Commerce

Payment Systems and Issues 

SCENARIOS
  • Wireless payment by handheld devices like Palm - beam Palm to a credit card terminal using infra red now and Bluetooth in future. The Point Of sale credit card terminal has an infra red device attached to it.
  • Cashless payment without using conventional credit cards
  • Mobile wallet initiatives 

The Requirement ...
To provide a comprehensive infrastructure (consumer software and hardware enhancement, if required for handheld device,
software in retailer's server for processing a wireless transaction, backend payment and account reconciliation application infrastructure at a centralized processing center - akin to credit card processing by Visa or Master Card, the security mechanism, etc) so that an end-to-end transaction can take place between a consumer and card or wallet holding organization.

Micro-payment Examples
This term defines payment for small value transactions by using new m-commerce systems. Paying by credit cards is not economical because of high processing costs for such transactions. 

  • Mount Sinai hospital allows employees to charge their purchases by using their ID cards that have a micro chip embedded into these cards.
  • Boeing, DaimlerChrysler and Walt Disney  allow their employees to do the same.

Factors & Issues in Web-based Mobile Payment Application 

  • Lack of standards for m-commerce between different financial institutions
  • End-to-end security issue
  • Retailer-processing center integration problems - too many variables in OSes.
  • High transaction processing capacity at the backend application processors - see Visa's initiative to use Sun Solaris that is claimed to handle 10,000 transactions per second
  • Lack of payment infrastructure 

Smart Card and M-Commerce Payment Systems

In Europe, smart card is being integrated into payment systems. Go here about a press release on Oberthur's pilot with smart card as a vehicle for m-commerce payment.

Major Vendors Initiatives 

  • Palm and Visa Partnership - Palm Inc. has started an initiative with Visa to allow consumers to use Palm devices to beam credit card information to POS terminals through an Infra Red (IR) connection.  While this is an early stage trial and pilot, it is significant to see two major players involved in getting users to modify their individual payment methods.
  • Visa International has rolled out a high-transaction payment infrastructure (consisting of Cisco networking gear and Sun Solaris J2EE processors) for online transactions. This is expected to be enhanced to allow mobile commerce. For more info, see Information week story. Visa and Master are feeling the heat from micropayment vendors. www.informationweek.com/796/payments
  • City Group made a deal with AOL- this will allow AOL subscribers to transfer funds and make payments for web purchases
  • Cybercash is an online payment processor - charges 15 cents/transaction , plus set up fee of $99 for existing and $499 for new customers (mid 2000 pricing)
  • SNAZ Mobile Wallet is related but not exactly a payment system.  It facilitates payment for buying online multiple items from different merchants. "Please note that SNAZ declared bankruptcy in August 2001. Hopefully, some other vendor will pick up the intellectual property developed by SNAZ." - MobileInfo Editor
  • Person to person payment systems - see www.propay.com - This allows any two people exchange money anywhere and at anytime.  Since this is a paradigm shift to replace hard cash with electronic cash without the Federal Banking system of each country or a credit card institution like Visa or master card, it may find consumer resistance.
  • For three months, Macdonald Hamburger chain has been testing a new wireless payment technology in nine restaurants in Chicago and four in California. Working with Exxon Mobil, McDonald’s is enabling its customers to use their Mobil Speedpass transponders to swipe pass special cash registers to pay for their meals. For more, go here.
  • VeriSign has agreed to supply new trust engines to be embedded in wireless communication devices of DoCoMo’s i-mode 3G services. For more, go to the news page.
  • FreedomPay.Com (a micro-payment vendor) is working with Nokia to allow consumers to buy stuff from vending machines by using their cellular phones. Nokia is planning to embed RF devices in smart phones to allow this capability FreedomPay.Com is going after the lunch crowd.
  • wMode - wireless micro-payment vendor

Vendors and Products 

Business Case Justification - Pretty good as compared to a transaction where the retail clerk swipes the credit card.

Additional Resources

MobileInfo Advisory and Comments: This is a complex area of software application integration between payment processing centers, retailers. and consumers. Wireless must be treated as an add-on to the existing application infrastructure. In our view, stand-alone payment solutions being floated today will not survive for long. However, micro-payment issue is complicated because of the cost of processing for low-dollar value transactions. It is also not clear whether the carriers are willing to address all the requirements of micro-payment.  It is one thing to bill consumers for per minute or per second cellular calls by batch or electronic processing of well-defined billing records collected from your partners or your own call handling/switching processors. It is entirely a different and complex task to deal with hundreds of thousands of retailers and other organizations that may generate m-commerce transactions where product and services have entirely different units of measure and settlement requirements.  We need to merge the expertise of established players like Visa/Master Card and new breed of more efficient micro-payment software vendors.


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