International Conference on Techniques and Applications in Mobile Commerce Glasgow, 15 Jan 2008

The Mobile Payment Paradox Current Research Issues on Yesterday’s Future Payment Instrument

Key Pousttchi Mobile Commerce Working Group (wi-mobile) University of Augsburg

Research area: Mobile Payment  Technical and economical standardization issues  Business models and market entry strategies  Prototypes  Projects > National Level: Roundtable M-Payment > European Level: SEMOPS Project > Worldwide Level: PAYCIRCLE organization

Example: Customer Acceptance Study Series  Framework on acceptance criteria (2001/02)

General

 Empirical Study MP1 (2002) > General importance of payment scenarios, MPSP, general acceptance criteria

 Empirical Study MP2 (2003/04) > Specific Examination of 40 use cases, security > Basis: > 30 000 scenario assessments

 Empirical Study MP3 (2006/2007) > Design of MP procedures, Comparison of payment instruments, bank issue

 Usability Study MP4 (2007/2008) > Scenario-dependant usability of m-payment procedures Specific

Contents  Why is m-payment a research issue?  The Research Landscape and its issues  Some exemplary insights on… > Scenarios > Acceptance > Markets

and their interrelations

> Technology > Usability

 (At the end it all comes down to) Business Models  Excursus: MP in developing countries

Why is M-Payment a Major Research Issue?  Answers from science > MP is important » Two sides of the coin: MP as an MC enabler and MP as an MC service

> MP is still unresolved » Although it seems both natural and easy for users and providers

> MP is very complex » A lot of different areas involved and inter-related/inter-dependant

 Answers from industry > MP potential is assessed as extremely high > MP complexity is underestimated > MP is tried to be exploited to the maximum » Do it alone – keep prices high – don’t work too hard for the solution – …

The Research Landscape

Technology

Usability

Scenarios

Acceptance

M-Payment Research Security obj subj

Markets

Business Models

Scenarios MP Basic task

Payment scenario

Characteristics

Mobile Payment inside Mobile Commerce

Mobile Commerce (MC)

System-inherent billing of mobile offers which are typically combined with a data transport over the mobile network

Electronic Commerce (EC) Mobile Payment outside Mobile Commerce

Stationary Merchant Automat (SMA) Stationary Merchant Person (SMP)

M-payment as m-commerce application to provide payment functionality, in competition to existing means of payment such as credit/debit card or cash

Customer-to-Customer (C2C) [MP1]

Acceptance* Parking ticket

Safe deposit box Cigarette-seller

Railway ticket

[MP2] * MP-affine target group on the German market, n=8295

Comparison of payment instruments* < 1 EUR

1–12 EUR

SMP

Kreditkarte 2,5% EC-Karte 3,3%

Kreditkarte 3,5%

12–25 EUR

Mobiltelef on 42,8%

bar 21,9%

bar 4,5%

EC-Karte 51,4%

bar 41,7%

Kreditkarte EC-Karte 2,2% 4,6%

Kreditkarte 3,1% EC-Karte 8,1%

Kreditkarte 31,4%

Mobiltelef on 26,3%

bar 8,5%

bar Mobiltelef on 20,1% 48,2%

bar 42,2%

Mobiltelef on 68,6%

bar 3,6%

bar 5,1% Kreditkarte 11,9%

Mobiltelefon 51,1%

Mobiltelef on 12,7%

Kreditkarte 18,2%

EC-Karte 46,6%

EC-Karte 24,8%

SMA

> 50 EUR

bar 8,9%

Kreditkarte 10,5%

EC-Karte 6,2%

Mobiltelefon Mobiltelef on 48,6% 36,3%

bar 57,9%

25–50 EUR

Kreditkarte 20,7% EC-Karte 46,8%

EC-Karte 47,5%

EC-Karte 31,4%

Mobiltelef on 15,8%

Mobiltelef on 26,8%

Kreditkarte 33,8%

[MP3] * MP-affine target group on the German market, n=1682

Market  MNO/MVNO

GSMA: new initiatives on NFC and M-Payment

> Focus: MC scenario, micropayments (acquirer competency) > Operates on existing infrastructure and customer basis

 Bank/Financial Service Provider

MVNO option for banks

> Focus: Stationary merchant and EC scenarios, macropayments (acquirer comp.) > Operates on existing infrastructure and customer basis

 Specialized intermediary > MP is core competency » Typically innovative procedures, trademark directly related to mobile payment

> Revenues have to be drawn completely out of MP » Problems: Revenue model, acquisition of merchants/network effects, customer trust

> Opportunity: Co-operation with other players

(Scenarios Market) Business Models Use Case Type B

Use Case Type D Use Case Type C

Use Case Type A

MC

EC MPRM

SMA

C2C

Use Case Type E

Use Case Type G

SMP Use Case Type F

Mobile Payment Reference Model (MPRM)

Example: Use case Type B

Example: Use case Type B / strong MNO

MNO

Content Owner, e.g. Media Company

Example: Use case Type B / strong bank

Bank

MNO

Content Owner, e.g. Media Company

Introspective Analysis of the MPSP

Usability  Confer: Success of mobile services in general > “Special set of needs and expectations of the mobile customer”

Adaptation

> Adaptation exponentially to the fulfillment

Fulfillment of customers‘ needs

Usability: Some design issues  Number of clicks

Customer acceptance for # of clicks 70%

61,6%

63,8%

60% 50% 40%

28,6%

30%

Supermarkt supermarket, 33 clicks Klicks

Parkautomat parking lot ticket 5machine, Klicks 5 clicks

20% 10%

20,2%

18,2% 7,6%

0% Weniger als im Less than dargestellten Beispiel presented

Höchstens This is so theviele w maximum ie im Beispiel

Ich w ürde auch mehr Would accept Ausw ahlschritte in more clicks Kauf nehmen.

[MP3]

Usability: Some design issues  PIN usage 30%

20% parking lot ticket machine Parkautomat

Supermarkt supermarket

10%

0% keine no 0 € PIN

1€

5 € 10 € 15 € 20 € 25 € 30 € 50 € 100 €200 €

(Only amounts over > 1% considered.)

Market -> Subjective Security  Customers trust banks

[MP1, MP2]

> But: “What is a bank” for this issue? [MP3] Ich bezahle mit dem

new or unknown Handy, wenn es eine neue bzw.brand unbekannte banking

25,80%

21,55%

52,54%

Bank anbietet.

Ich bezahle mit dem Handy, wenn es eine a well-known renommierte Bank (nicht banking brand meine Hausbank) anbietet.

Ich bezahle mit dem Handy, wenn es meine my house bank Hausbank anbietet.

trifft zu

58,45%

19,79%

21,66%

unentschlossen trifft nicht zu

73,99%

13,06% 12,95%

Technology  MP-Technologies > IVR > SMS > NFC > Java/SIM AT > WAP > USSD > CLIP only

MC

EC

SMA

SMP

IVR SMS NFC Java USSD WAP CLIP

 Problem > Restricitions often require compromises in realization » Non-optimal use of the technology

C2C

Technology Usability  Example: Errors per payment transaction MC

EC

SMA

SMP

C2C

IVR

+

o

+

o

SMS

o

-

o

o

o

-

o

NFC Java

+

+

+

+

USSD

+

+

o

o

+

-

o

o

WAP CLIP

work in progress (data verification phase)

[MP4]

Acceptance Market Is there room for a variety of MP procedures? Ich w ürde auch akzeptieren, jedem Would accept to register with mich everybei single Händler einzeln anzumelden. merchant

Would be willing to register with…

1,5%

bei mehr als6 6 more than

0,5%

4-6 4-6bei MPP

1,1%

2-3 2-3bei MPP

23,5%

beiMPP einem one bei keinem no MPP 0%

65,2%

8,2% 10%

20%

30%

40%

50%

60%

70%

Want a variety of m-payment options trif f t nicht zu 6,5%

Don’t know

unentschlossen 5,7%

Want to pay everywhere with just one m-payment procedure

[MP3] trif f t zu 87,8%

(All other elements) ->> Business Models  M-commerce is about three things: “Business models, business models, business models”

[John Strand, MCTA 2006]  Idea: Aggregate the issues and their interrelations to business decisions

Mobile Payment Business Model Framework (work in progress)

Mobile Payment Business Model Framework

Market Model Capital Model

Distribution and Communication Model

Threat perspective

Offer perspective

Market perspective

Mobile Payment Service Provider/Enabler

Offer Model

Threat Model

Source: wi-mobile

Implementation Model

Application of the MP-BMF  Description of an MP business model  Structured comparison of different business models  Assessment of business models with regard to completeness and consistency > E.g. for venture capital companies

 Formulation of requirements / assessment of business models with regards to these  Formulation of restrictions  M-payment business model engineering

Is that everything about the MP issue?  Excursus: MP in developing markets > Virtually no cashless B2C or C2C payments » Lack of banking infratructure, especially in rural areas » Penetration of the population with bank accounts extremely low — Cellphone penetration high

» Efficiency, development and security issues as major drivers to “bank the unbanked”

> Major current players » Mobile Network Operators » Mobile Network Equipment Vendors » Specialized intermediaries

The Research Landscape

Technology

Usability

Scenarios

Acceptance

M-Payment Research Security obj subj

Markets

Business Models

Research and industry meet at…

8th Conference Mobile Commerce Technologies und Applications University of Augsburg, 28–29 Jan 2008

www.wi-mobile.org

German Conference on Mobile and Ubiquitous IS Co-located with

Multiconference on Business Informatics (MKWI 2008) Technical University of Munich, 26–28 Feb 2008

GERMAN SOCIETY OF INFORMATICS

www.gi-mms.de/mms2008 Mobile Commerce Working Group, WI-SE, University of Augsburg

28