Mobile payment is expected to achieve a breakthrough before the end of this year. An important indication of this forecast is the fact that major retailers are upgrading their payment terminals accordingly. Once there are enough frequent opportunities to pay for purchases quickly and easily with a cell phone, m-payment will become commonplace. And this will open up important new opportunities for marketing to promote sales, which can also be incorporated into advertising campaigns.
However, the future shape of the MPayment landscape in Switzerland is still being fought over in the background, and it seems uncertain how the various old and new players will be able to come to terms. But from a marketing perspective, the market order that emerges here is crucial for the future use of MCommerce. Once again, it is the three letters of an abbreviation for a technical term that is making the rounds like a buzzword: NFC. This refers to Near Field Communication (NFC), a technology that enables suitably equipped devices to exchange data over a short distance of a few centimeters.
NFC chips have been used in credit cards for a few years now, and they are now also appearing in the first cell phone models. They can be used, for example, to quickly and conveniently pair appropriately equipped speakers with the cell phone. Or the NFC-enabled cell phone can be used as a car key, as Hyundai recently presented in a concept model. When it comes to mobile payment, it is important to distinguish between the following three types:
NFC plus card: With the intention of increasing security compared to the conventional magnetic stripe, Eurocard, Mastercard and Visa have begun to equip credit cards with an NFC chip. When such a card encounters an appropriately equipped payment terminal (which has rarely been the case so far), no PIN or signature is required for payment, and the card does not even need to be taken out of the wallet. Just hold it out - and because it's so easy, only amounts up to a maximum of 40 francs can be paid in this way. In Switzerland, the credit card specialist Aduno alone has around 750,000 credit cards in circulation that are equipped with an NFC chip for so-called contactless payment. NFC chips do not need credit cards per se: they are thin enough to be stuck as a sticker on a cell phone, for example - a procedure that is widely used in the Far East, for example, to promote contactless payment.
NFC plus cell phone: The first cell phone models equipped with an NFC chip are currently appearing in our country - but it is not possible to use it to make payments (although it could be used to start a car, for example). This is because the NFC chip must first be connected to a means of payment (a debit or credit card). This requires an app with an electronic wallet. It is becoming apparent that various such wallet solutions with different features will be entering the market in the near future. Although not necessarily so technically compelling, in Europe there will primarily be wallets that are connected to an NFC-enabled SIM card in the cell phone. In this way, additional security elements can be achieved, as only the network operator can access the corresponding contents of such SIM cards. This creates the conditions for being able to pay larger amounts via cell phone, although this requires confirmation with a PIN code, for example. And this only works if the respective mobile network provider has been able to negotiate corresponding contracts with the companies that are traditionally active in the transaction business.
Mobile plus cloud: It would be astonishing if, in view of the great revenue potential around MPayment, the rest of the world were simply to leave this opportunity to the mobile network operators. So the argument is that NFC is outdated, especially since the standard dates back to a time twenty years ago when hardly anyone had thought of the data networks that are now available almost everywhere. For example, the security elements associated with the NFC SIM card could now be handled simply and, thanks to encryption, securely over the network. Such arguments are particularly effective in the USA, where m-payment lags behind the Far East and Europe.
And so there are numerous providers and start-ups that want to gain a foothold here. The best known is PayPal, which is widely used as a payment service provider, especially in the e-commerce sector. And Google Wallet also belongs in this category. Such solutions work without consumers or merchants having to invest in expensive new equipment. However, the payment process is not as "cool" as with NFC-based solutions, because instead of just waving the NFC chip at the cash register, numerical codes have to be entered.
But this means that the consumer's cell phone actually becomes a POS, which in turn opens up new possibilities when payment can be made anywhere there is a data connection, but not necessarily a cash register. But the vendor's cell phone also mutates into a payment terminal, for example with additional devices that allow credit cards to be scanned and processed. These three variants are currently the main focus of m-payment. There are also others, such as charging the purchase amount to the user's current cell phone bill. This Vor - probably because of the risks involved - does not want to act as a collection agency.
Not the first attempt
Just as with mobile advertising, the imminent breakthrough of mobile payment has been predicted again and again for years. Ten years ago, Swisscom was already running a mobile payment project focusing on mobile payment with debit and credit cards. At the end of 2003, the project was stopped because the financial institutions did not want to make their debit cards (Maestro, Postcard) available for this purpose. The next Swiss mobile payment initiative followed in the fall of 2008 under the name "Hermes," when Credit Suisse, PostFinance, Swisscard, Swisscom, SIX Multipay (formerly Telekurs Multipay) and Visa Europe conducted a joint test trial that provided initial insights into customer needs and technical feasibility. As a result, the credit card companies MasterCard and Visa began to launch credit cards that enabled contactless payment thanks to an embedded radio chip. Although more than 750,000 such cards have been sold throughout Switzerland to date, the whole thing turned out to be a complete flop: retailers were not prepared to convert their checkout systems for this purpose, and only a few places (e.g., the fast-food chain McDonalds) have been able to make payments in this way so far.
This is now changing: The two major distributors Coop and Migros are in the process of modernizing their payment terminals across the board. The reason for this, however, lies in a contractual obligation to periodically update these devices to the latest technical standards, as Bernhard Wenger, media spokesman for SIX Management, explained to Werbewoche. According to Urs Peter Naef, media spokesman for Migros-Genossenschafts- Bund, enthusiasm for m-payment is limited, at least at Migros: "This does not mean, however, that contactless payment will be possible in Migros stores from this point on, as it still requires additional components and, apart from individual pilot installations, NFC is still very little used as a technology."
Urs Meier, media spokesman for Coop, also points out that technical difficulties were still encountered in a pilot test for m-payment last year; for example, positioning the cell phone at the terminal was tricky. But, he adds, "Both customers and staff were enthusiastic, mainly due to the speed of the payment process and the fact that you don't necessarily need a wallet." Thus, if NFC-enabled payment terminals appear in retail stores across the board by the end of the year, the NFC chips in cards or cell phones will no longer be virtually useless, but can now be used widely. Meanwhile, the three mobile communications providers Swisscom, Sunrise and Orange formed an NFC working group last year to ensure that standards prevail in the Swiss market so that all customers can benefit from new services.
New opportunity for sales promotion
Anyone who designs a campaign comprehensively has hardly ever dealt with the payment process for the advertised product. If mobile payment now gets into the swing of things, this opens up interesting new possibilities from a marketing point of view, whereby it is no longer just about m-payment but about the overriding concept of m-commerce. Take vouchers, for example: Up to now, these have been widely distributed via mass media, but the lead times do not allow for a quick response to current events, and it has also been difficult to implement an individualized approach. Experiments with m-couponing could change this, but the processes are not very attractive for the customer: In addition to the payment process, the coupon code must be displayed on the cell phone at the checkout and processed separately.
Only with wallets does this work out nicely: The voucher is immediately transferred to the digital wallet and can be automatically taken into account during payment. This opens up new possibilities: vouchers are no longer distributed by watering can, but individually on the basis of the customer's history or other profile characteristics. And they can also be distributed at lightning speed, depending on the market situation: If the competition launches a special promotion, the incentive to buy the company's own product can be quickly increased. Particularly attractive scenarios arise when localization services come into play: Anyone who is in the vicinity of the sales location receives vouchers in their cell phone wallet that are intended to encourage customers to visit the respective store.
Who will win the Wallet War?
Anyone who wants to pursue such m-couponing strategies in the future will be well advised to consider today how the MPayment landscape in Switzerland should be structured in the future. This involves questions such as these: Should (possibly antitrust-sensitive) agreements be promoted so that there is a "Swiss Wallet," i.e., a one-size-fits-all solution in which all market participants can participate? Or should the free market be given free rein, which will probably result in a myriad of wallet apps for consumers, and the virtual wallets in smartphones will resemble the conventional ones crammed with credit and customer cards? Where can a sensible middle ground lie between (possibly state) interventionism and market liberalism? Whose task (if any) should it be to bring about an efficient m-payment market order? The authorities? Politics? The industry organizations? How marketing-friendly will mobile operators' wallet solutions be? What conditions will apply to send mobile coupons? Will all cell phone users be reachable via all mobile network operators, or will everyone cultivate their own little garden? And above all, what tariffs will apply to store data about loyalty programs in a wallet and process it automatically during payment transactions? What conditions (e.g., regarding opt-in) will consumer and data protection authorities enforce? Is it appropriate to voluntarily regulate the use of mobile couponing within the communications industry, so that this instrument does not fall into disrepute with the public through unbridled use? Who will organize (and pay for) communication efforts to demonstrate the fundamental advantages of m-payment to the public?
Companies are faced with the question of whether it would be better to launch their own wallet solution for their own customers in order to better present their own offers and customer loyalty measures. This is the question facing mobility providers who want to use m-payment for ticket sales, for example: Here, not only must the payment process be as simple and secure as possible for customers. It must also be ensured that the tickets purchased in this way are delivered in such a way that they can be checked. Because NFC technology is advantageously used for automated control (at a barrier, for example), the purchased ticket will have to be transferred to the NFC chip. It is now understandable why SBB has recently communicated its own m-payment ideas: The aim here is to extract the best possible conditions (technical and commercial) from the wallet providers that will dominate in the future. Otherwise, the threatening gesture should mean: We'll create a wallet solution ourselves. It is clear that mobile payment has not yet taken off, but the landscape is already confusing and many questions remain unanswered. Many want to play along and are pushing their own ideas onto the market. It is quite possible that consumers will lose track of the situation and lose interest, which means that a protracted war of attrition for market supremacy is inevitable. Once the heavyweights (from Amazon, Apple, Google, Visa, Mastercard and the like to - in Switzerland - Swisscom and the SIX Group) have squeezed out (bought up or ruined) the competitors, there will be another chance.
Christoph J. Walther
Mobile payment is standard in Africa
Since very few people in many emerging and developing countries have a bank account, payments are often made by cell phone. The best-known example is M-Pesa from Kenya, which has over 17 million registered accounts and is thus considered the most successful mobile financial service provider in the developing world. Initially, call credits were simply moved between cell phone connections via service SMS, but today regular accounts are linked to the normal prepay credit account.
The m-payment players
Consumers: In addition to cash, they have debit, credit, prepaid and/or customer cards and know how to use them. Are they convinced of the advantages of mobile payment solutions and are they prepared to take the necessary technical steps? To what extent are they put off by any number of different wallet solutions or by security and data protection concerns?
Dealers: You operate a point of sale or money reference point. For example, a store, online store, gas station, or an automated teller machine (ATM). How quickly are they willing to invest in which technical innovations to support which mobile payment solutions? How well loyalty programs (e.g., customer cards such as Cumulus or Supercard) can be integrated is important.
Card Organizations: International card organizations such as Visa, MasterCard, American Express, Diners, JCB and UnionPay are licensors for issuers and acquirers (see below). They also determine (in the Rules & Regulations) exactly how their payment methods may be used. To what extent will they support which mobile payment solutions or, at best, want to give their own m-payment solutions an advantage by imposing restrictive conditions? At the Mobile World Congress in Barcelona at the end of February, MasterCard launched its own m-payment solution both for consumers (with a wallet app) and for merchants (for example, with QR codes that can be scanned by customers themselves for payment).
Card Issuer (Issuer): For example, financial institutions such as banks (or institutions contracted by banks) that issue cards and are responsible for billing and account debiting.
Card acceptance (acquirer): Contractual partner of the merchant for the acceptance of card-based payments. Among other things, they are responsible for transaction processing and for remunerating the merchant.
Processors: Companies such as Switzerland's SIX Group (formerly Telekurs) provide products and services to merchants, banks and other financial institutions related to the issuance, acceptance or processing of debit and credit cards or other cashless payment options.
NEW: Telcos: Telecommunications companies see new business areas in mobile payment and are therefore driving this development. They have a direct customer relationship with cell phone users and are trying to establish themselves as gatekeepers for data traffic to m-payment. At the center are NFC-enabled SIM cards, on which all security-relevant information such as credit card data, customer cards, and coupons are securely stored.
NEW: Mobile Phone Manufacturer: They are trying to make their devices additionally attractive and profitable with their own pre-installed payment solutions. At the Mobile World Congress in Barcelona at the end of February, Visa and Samsung were the first credit card companies and cell phone manufacturers to announce an agreement to jointly offer an NFC solution in the future. For the Swiss market with its high proportion of iPhones, it will be significant in which direction Apple will go here in the future, because up to now there have been no NFC chips in iPhones.
NEW: Wallet provider: Wallets promise lucrative business if the payment flows processed via them are linked to a commission business. That's why new players are trying to establish themselves in payment processing alongside the established companies, such as Google with Google Wallet. This also involves the data on purchasing behavior obtained in this way, which is important and valuable for targeted advertising.