Mastercard throws weight behind EU Green Paper on mobile payments

In response to the European Commission’s Green Paper on electronic payments, published today, Mastercard is the first major payment company to officially lend support to the campaign.

The goal of the paper is to expand electronic payments to help European businesses grow, and consumers to shop easily and safely online, instore and via their mobile devices.

Mastercard Europe president Javier Perez said that the company supports public dialogue on the critical role electronic payments play in commerce and society.

MasterCard is already working hard to encourage adoption of electronic payments. Greater use can help reduce the black economy, stimulate investment and improve efficiency, resulting in improved consumer and business confidence in tough times.”

MastrCard said that it thought a shift was underway as European consumers move from cash to more efficient forms of electronic payments. Payments online and via smartphones are also growing dramatically as consumers change the way they shop and pay.

The company’s own PayPass technology is being used across Europe more and more, while Visa, PayPal and Google are racing to make the biggest mark on the mobile payments space. No wonder, since technology analysis firm Yankee Group predicts the value of NFC transactions will grow from $27m in 2010 to $40bn in 2014.

Visa announced this week that its NFC payment system has now been certified for use in LG, Samsung and RIM smartphones, and back in November it confirmed that its digital wallet service will be called V.me.

Expected to be rolled out fully in early 2012, Visa is running a developer programme that brings together all of its current subsidiaries including Authorize.Net, CyberSource, Fundamo and PlaySpan. Its aim is to give retailers, merchants and start-ups better access to Visa’s payments services, since the tools provide mobile developers with easier ways to accept payments on handsets.

With PayPal’s own digital wallet service is expected to launch this year – as well as Google Wallet on the market – it’ll be interesting to see how products from the big three compare over the coming year.

On top of huge potential for growth, green and commerce benefits, Mastercard also highlighted that many of the cards already in use by European consumers help them set limits on how they spend, help them decide where they want to spend, and help them use whatever online or offline technologies they want to use to pay.

These opportunities for consumers to be in control of the way they pay were nearly unheard of when the Single Euro Payments Area (SEPA) initiative within the EU began. Europe was a pioneer in creating safe and convenient new ways to pay such as EMV chip cards.

Perez explained that these and many other innovations come from intense competition, and can only be supported with a sustainable business model.

The payments sector needs to have a sustainable business model to fund innovations that will keep Europe ahead of the rest of the world. We expect that the consultation process started today will reveal just how much the way to pay in daily life has changed for everyone.”

Who owns the paying mobile consumer: carriers or handset-makers?

Handset manufactuers, carriers and payment franchises: Who has the power?

The battle between Research In Motion and wireless carriers over mobile-payment data is a precursor to a larger war over who owns consumers making transactions using mobile devices.

United States carriers assumed continued ownership of their subscribers with the announcement of Isis, their bid to create a standard for enabling contactless payments and marketing at retailers’ point of sale via Near Field Communication. Now RIM and other handset manufacturers are exploring alternatives to that model, and the equation gets even more complicated when factoring in payment franchises such as Visa, MasterCard and American Express.

“Technically, RIM and Apple cannot preclude the SIM card solution proposed by the U.S. carriers through the Isis joint venture, and the carriers can’t preclude RIM from developing a mobile OS solution,” said David Schropfer, author of “The Smartphone Wallet,” Red Bank, NJ.

“From a consumer perspective, a smartphone connected to a mobile network will have more features—like loyalty program integration), and offer a higher degree of control for the consumer, than an application that relies on the NFC connection to the retailer during a transaction,” he said.

“The biggest question is whether or not the consumer will have access to those products in the future, or if efforts to bring these products to market will be derailed by the incumbents.”

Who will brand the mobile wallet?
The gist of the debate between BlackBerry-maker RIM and the carriers is whether data related to mobile payments will sit on wireless devices’ SIM cards, thus keeping the control with the carriers, or whether the handset-makers can build payment credentials directly into handsets, potentially doing an end-run around the carriers.

The argument boils down to who owns the customers using a mobile wallet and who gets a cut of the revenue—and how much of a cut.

RIM and other handset manufacturers would prefer to partner with financial institutions directly.

BlackBerry devices set to launch later this year will reportedly have NFC chips embedded in them, as does Google’s Nexus S Android smartphone.

Speculation has been rampant as to whether or not Apple will support NFC with the release of the iPhone 5.
The assumption was that when NFC was brought to market, carriers would control the SIM cards, a single-wire protocol with an NFC antenna directly connected to the secure elements in the device, per Yankee Group.

“That was the traditional model—the assumption was that with NFC, the final say of which credentials go onto the mobile phone would be controlled by the carriers, which is why they thought they could shut out Visa and MasterCard with Isis,” said Nick Holland, senior analyst at Yankee Group, Boston.

Inside Secure is an example of a company that sells chipsets that allow operating systems on mobile devices to access not just one secure element, but many.

Mr. Holland said that it does not have to be just the SIM now that is dictated by the wireless carrier—there can be an additional secure element on top of the SIM that companies such as Gemalto supply.

The key takeaway: Whoever owns the secure element, owns the transactions.

“Maybe six months ago the only option for Visa or MasterCard would have been an NFC sticker, but now they have the potential to completely bypass the carriers by partnering with the OEMs or creating an SD Microcard they put out themselves,” Mr. Holland said. “RIM is doing this, and I would expect others to follow suit.

“Carriers want the potential for everybody to access the secure element, but it is going to be messy, especially in the U.S., where the carriers pretty much dictate which handsets are on their networks,” he said. “Is AT&T going to say, ‘no, I’m not going to stock the new iPhone, thank you very much’?

The real value proposition for NFC is it being really simple to use, and if there are multiple secure elements on a device, that is adding additional dimensions of complexity for consumers.

This fight is over who owns the secure element, which could somewhat disrupt the usability of these handsets, per Yankee Group.

Mr. Holland believes that there will be less of a monopoly in terms of who owns the secure element going forward. That will lead to competition for carrier initiatives such as Isis.

“Isis has a real problem on its hands now,” Mr. Holldand said. “The carriers assumed that they would own the handsets and the SIM, and therefore said ‘We will own the transaction and we can shut out Visa and MasterCard.’

“However, if you are Visa, you probably don’t want to put out an SD Microcard on your own—it would be much easier to rent space on the SIM,” he said. “Isis may have to play nice and let Visa and MasterCard rent space on the SIM and process transactions.

“This is going to be really hotly fought over.”

Source: Mobile Commerce Daily http://www.mobilecommercedaily.com