Cell Phones and a Cashless Society

Citibank Says RFID Pilot Proves Strong Consumer Interest in Mobile Phone Payments

The company, which has completed a Near Field Communication project in India, finds that NFC-based retail applications can be successful—with the proper mix of marketing, incentives and execution.

March 8, 2010

RFID Journal - Having concluded what it deems the world's largest Near Field Communication (NFC) contactless payment pilot, Citibank indicates it believes there is strong consumer demand for mobile payment solutions. But with a scarcity of available NFC-enabled phones, alternatives such as NFC stickers or microSD cards may be necessary in order to get NFC deployments off the ground, the company reports.

The pilot included 3,141 Citibank credit card holders who, at the company's initiation, purchased Nokia NFC-enabled 6212 mobile phones from participating Nokia shops, to pay for goods at 250 merchant locations in Bangalore (Bengaluru), India. Nearly 50,000 payments were completed throughout the 26-week span, which began in July 2009, and participants made purchases more frequently, spending a greater amount with each transaction while using the mobile phones than they did using ordinary credit cards.

According to a report written to evaluate the pilot results, many consumers were willing to utilize the technology (in fact, there were more volunteers than there were available phones). The report, entitled "Citi Tap and Pay mobile NFC proximity payments pilot—Bengaluru, Results & Findings," was authored by representatives of Edgar Dunn and Co., a strategy consulting firm specializing in financial services and payments.

"We're delighted by the results," says Satish Menon, the executive VP of Citi Growth Ventures (the Citibank team that led this pilot with Citibank India). "The usage and spending story is very significant."

The study compared the purchase behaviors of a control group of non-adopters (those without the NFC-enabled phones), self-adopters (customers who had joined the pilot without having been solicited to do so) and solicited adopters. Among non-adopters, there was a 7.1 percent increase in quantity compared with purchases previously made using a credit card. Self-adopters had a 329 percent purchase increase, while solicited adopters had a 96 percent increase. The purchase value also grew, with self-adopters increasing their purchases' value by 232 percent and solicited adopters raising it by 55 percent. Each group's spending habits were compared against their credit card spending habits prior to using the NFC system.

On the other hand, the report finds that while there is a clear demand for mobile contactless payments, the lack of available NFC-enabled phones must be addressed. The Nokia 6212 phone, utilized in the Bangalore pilot, was largely perceived as outdated, compared with non-NFC mobile phones available on the market.

"Most people in markets where NFC can realistically be deployed [that is, the markets where merchants are equipped with NFC-enabled sales terminals] have gone beyond basic mobile phones," the study indicates, "and are unlikely to carry a second handset just for making payments, which defeats the primary objective of offering convenience to customers... Instead of enabling only a few handset types with NFC, there needs to be a concerted commitment from device providers to include NFC as a regular feature on all types of mobile phones."

Until that happens, the authors suggest, NFC pilots should continue, as well as permanent deployments—but those wishing to offer contactless payment systems must seek alternative solutions, such as NFC-enabled stickers to attach to cell phones, or microSD cards that can be inserted into the phones to provide them with NFC functionality ...

Participants first purchased Nokia 6212 mobile handsets, and employees at the Nokia store assisted them in downloading the ViVOtech software application they would need to enable the NFC payment system, by linking data at the point of sale over the air on the handset to the user's account. Merchants also utilized ViVOtech contactless terminals at their stores. MasterCard supported the pilot with advice and expertise gained from other NFC pilots from across the globe, and provided the PayPass certification for the payment process.

A user could take the phone to a store and, at the point of sale, tap it against a payment terminal. He or she then entered a four-digit password, and the payment was complete. During the pilot, there was a waiting list of customers requesting to participate in the program. In fact, 3,141 phones were sold, while nearly 4,000 were requested. The total value of all purchases made on the phones was 26 million rupees ($571,000).

Promotion was an important element in the pilot, and was intended to gain consumers' attention before the pilot even started. A teasing phase was launched first, in which marketing material (such as the simple word "tap") was posted in stores, as well as on billboards. This was followed by an education phase, providing live demonstrations to customers in order to explain how the system worked. Well-known grocery outlets participated, as did fast-food chains, accessory stores and bookshops. What's more, smart posters were placed at locations in which pilot participants could use the Nokia phones to pick up mobile coupons that could then be spent elsewhere ...

"The valuable insights and learning provided by the pilot should be utilized to roll out the pilot in other cities in India or indeed in other global markets as well," the study found.

The report's authors also found that combining NFC technology use with loyalty campaigns could contribute to the program's success ...

According to the report, users were most commonly young men between ages 26 and 35, with an annual income of 720,000 rupees ($15,720). These customers typically used credit cards for making purchases, but paid cash for groceries and fuel.

The pilot broke new ground, the study found, because of its size—the largest NFC contactless payment pilot in the world to date, according to Citibank. It was also noteworthy for the aggressive marketing campaign, and for the customer service provided from workers at the Nokia stores.

"We're seeing a very healthy trend," Menon says, which shows a strong interest in NFC technology, though he adds that in order to make contactless payment ubiquitous in India—or worldwide—the mobile phone vendors will need to meet the demand for NFC-enabled phones. "We would like to see it tomorrow morning, of course," he says. In the meantime, however, Citi would consider alternative solutions, such as NFC stickers or microSD cards. According to Menon, the company intends to embark on further pilots, though he declines to say where or when. "The whole world is our canvas in that sense."

The pilot in Bangalore, Zafar says, "shows that NFC technology can influence customer behavior positively and significantly with the right mix of smart marketing, attractive incentives and good execution." He adds that:

"NFC is the next wave—it's a matter of choice. One can get into the game early, learn and develop a strong position as the market develops, or sit on the sidelines and have a lot of catching up to do later."

Mobile Money Summit in Rio de Janeiro, May 24 - 27, 2010

Conference Agenda Preview

Unleash the Power of Mobile Money at the 2010 GSMA Mobile Money Summit. The event is planned for 24-27 May 2010, in Rio de Janeiro, Brazil. This exciting event will help to stimulate a greater understanding, collaboration and progress for all Mobile Money stakeholders globally, regionally and locally.

The GSMA Mobile Money Team is currently developing an outstanding lineup of speakers for MMS. Topics covered at the event will include:

Mobile enabled-G2P
Security
Mobile Money Applications
Regulation
Financial Agents
New Business Models
Mobile Money Technology Enablers
Customer Behaviour Analytics
Visions for 2020
Mobile Money for Roamers
Fraud and Risk Management

Brief descriptions of some of these topics include:

Mobile Enabled-G2P: Some 158 million people are getting payments from governments today. Imagine if that flow were to be channelled through m-banking. What’s the true potential of government-to-person payments and transfers in fuelling new m-banking services?

Regulation: Regulatory limitations on what operators are allowed to do are having a big impact in the development of innovative mobile money services. In fact, mobile and finance are two of the most heavily regulated industries and bringing them together represents a regulatory challenge for all stakeholders.

Business Models: Everyone wants to know what the next M-PESA will be. Here we will be discussing more complex arrangements developing across the ecosystem. What’s the role of financial agents in spreading the reach of m-banking services? Some mobile operators are getting banking licenses in order to provide a wider range of services. How does this competition impact traditional banks?

Visions for 2020: Within 10 years, a younger world, the internet, emerging economies, activist governments and even crime will shape the future of mobile banking.

Event Overview

• A spectacular conference agenda focusing on new topics and issues never before presented in the Mobile Money market
• A cutting edge exhibition showcasing the most innovative Mobile Money products and services
• The industry's premier forum for Mobile Money networking and deal making with the C- Level leaders of financial services institutions, mobile network operators, development organizations and solutions providers, as well as regulators and policy makers

Paying by Phone Slowly Coming to the U.S.

August 26, 2009

Wired - You can talk, play, surf the web — and now you can pay for stuff with your cellphone. Nokia announced a new mobile payment service Wednesday, called Nokia Money, that will allow consumers to send money, pay bills and recharge pre-paid phone cards — all using their cell phones.

The Nokia Money service is likely to debut in Asia and Africa in early 2010. The company hasn’t commented whether it will offer the service in the U.S.

Mobile payments are a big business in emerging markets where there are more cellphones than a PC, and where many users still don’t have a bank account. But paying by phone hasn’t caught on in the U.S.

“With more than four billion mobile phone users (worldwide) and only 1.6 billion bank accounts, global demand for access to financial services presents a strong opportunity,” says Mary McDowell, an executive vice president for Nokia.

The widespread use of credit and debit cards and easy access to banking services has meant few American customers are clamoring for mobile payments. That’s changing, says Bruce Cundliff, director of payments research and consulting for research firm Javelin Strategy.

“Mobile payments in the U.S. market are still very nascent,” says Cundiff. “But there are a lot of pilot projects that are currently being developed.”

Smartphones are the key to the growth of mobile payments here. The devices are a fast growing segment in the cellphones business, with U.S. sales growing nearly 47 percent in the second quarter. The increased capabilities of these phones mean that they are potential new platforms for commerce. And as handset makers battle for consumer attention through app stores, developers have greater incentives than ever to create services that customers can pay for through their phones.

Though American consumers may have to wait a long time to try Nokia Money, there are a few other projects that users can try out. Mobile payment services currently in trials in the U.S. include a project from social networking giant Facebook, banks, and credit card service provider MasterCard.

Here’s a quick rundown on some of the mobile payment options available currently to American consumers.

• Banking apps: For the last few years, banks have been trying to offer mobile payments as part of their online banking solutions. But now these financial institutions are using smartphone apps as a way to popularize the service. For instance, Bank of America has an iPhone app that lets its customers check their banking accounts, pay bills or transfer funds using their mobile phones. Users can download the app for free through Apple’s app store. Other banks such as Well Fargo and USAA also have iPhone apps available that lets users schedule payments and tranfer money using their accounts. About 26 million users in the U.S. are likely candidates to use mobile payment services, estimates Javelin Strategy. “Mobile payment may finally be ready for prime time,” says Cundiff.



• Facebook mobile payments: With more than 200 million users worldwide, Facebook is the most powerful social networking platform today. Facebook users are willing to spend real money to shower their friends and family with virtual gifts. Earlier this month, Facebook started testing the use of mobile payments for its virtual currency, Facebook Credits. Facebook has partnered with mobile payments service provider, Zong, to let users buy Facebook credits using their mobile phone. Users are then billed to their account with the mobile carrier. The service is still in its very early stages and it is more expensive to pay using the mobile phone compared to a credit card. But as more users buy into the idea, Facebook and Zong hope mobile payments will become more competitive.



• MasterCard MoneySend: Who doesn’t have a MasterCard in their wallet? MasterCard is now hoping it can achieve that kind of iconic status on the mobile phone. In June, the company launched a mobile payment platform enabling customers to transfer money to another person, and all they need to know is the recipient’s mobile phone number. Currently, customers use the service through a prepaid card issued by The Bancorp Bank and then link it to their mobile phone number to send or receive money. But as more issuers enroll into the program, says MasterCard, mobile phone users will be able to take just about any account and link it to MoneySend. MasterCard is working with Obopay, a Redwood City, California-based startup, that is also powering the Nokia Money service.



• Special-purpose smartphone apps: One of the significant announcements from Apple this year was that it would allow developers to charge users for goods and services purchased through their apps. The move could turn out to be an important boost for mobile payments, because it will get people used to the idea of paying for things within special-purpose apps. For instance, the Taxi Magic iPhone app allows users to call a taxi through the app and then pay for the ride using their phone.

Flashback to 11/25/02: Shopping by Cell Phone? No Thanks