Mobile Payment Forums Set Deliberate Pace

With m-commerce stymied by point-to-point, proprietary payment solutions, six European organizations are clearing a path toward a single, open mobile payment standard.

“We’ve already witnessed anywhere from 15 to 20 proprietary approaches,” says Stefan Schneiders, chief operating officer at PayCircle. “All these solutions left the market because proprietary approaches do not work.”

On this point, the groups have consensus, but they are divided regarding the appropriate architectural framework for mobile payments.

Each organization—Mobey Forum, Mobile Electronic Transaction Initiative (MeT), Mobile Payment Forum, Mobile Payment Services Association (MPSA), PayCircle and Radicchio—approaches the mobile payment problem from a unique vantage point. Behind the organizations stand coalitions of handset makers, mobile operators, financial institutions, payment providers and application developers promoting their discrete viewpoints.

Not a single group expects a mobile payment solution any time soon. As Bo Harald, executive vice president of Nordea and spokesperson for Mobey Forum says, “It’s all a big mess, and there’s lots of conflict between players.”

The conflict exists among the stakeholders, the mobile operators, financial institutions, billing developers and handset manufacturers, not the mobile payment groups. The individual associations know little about other groups’ activities and are unaware of any overlap or parallel efforts.

Examining the different groups and their recent activity, though, does expose a few redundancies, and more importantly it exposes the critical first efforts now underway that could make mobile payments a reality.

Mobey Forum: The Financial Services Coalition

Led by members of the financial industry, Mobey Forum’s mission is to encourage the use of mobile technology in financial services. Major European banks, including ABN-Amro, Nordea, BNP Paribas, HSBC and UBS, are joined by Siemens and Nokia as the groups founding—and most active—members.

Mobey Forum’s vision is that consumers will have one ubiquitous payment device—their mobile handset—over which they can conveniently access a wide range of financial services. The underlying mission is to promote user-friendly and convenient services and maintain consumers’ freedom of choice.

“Customers should be able to conduct mobile payments regardless of their bank, operator or handset,” says Harald. “And, any change to a bank, operator or handset should not affect the consumer’s ability to make a mobile transaction.”

Established in May 2000, the 25-member group published a Preferred Payment Architecture in June 2001 and a Preferred Payment Architecture for Local Payments in September 2002. The documents outline proposed steps to reach mobile EMV (Europay/MasterCard/Visa) payments. EMV is a standard defined by Europay, MasterCard and Visa that defines interoperability specification between a handset’s chip cards and terminals.

Mobey Forum’s bank and handset maker members support an architecture where handsets are waved in front of a point-of-sale terminal or ATM to elicit the payment transaction. The group addresses solutions for the application, transport and media layers, with a concentration on the application layer.

For Mobey Forum’s vision to become a reality, handset makers will need to add a dual-chip to the handset, and terminals will need to adopt RF, infrared or Bluetooth technology. Mobey Forum is encouraging the industry to adopt a global standard within a dual-chip architecture and WIM-capable multi-application card. And, it has also outlined a server wallet architecture with a secure customer authentication method.

If Mobey Forum’s vision dominates the industry, mobile operators will not share a portion of those payments. Mobile operators will continue to support their internal, proprietary mobile payment systems, and the financial institutions will handle payments initiated at terminals.

“Mobile payment processing is the natural role for the finance industry,” says Harald. “If you’re not a bank, you must stick to your own business or become a bank. There is a natural role for each party.”

Harald adds that operators are aware of the benefits of the Mobey Forum model, which will increase activity in mobile channels and drive additional air time.

Much of Mobey Forum’s activity is dependent on global acceptance of the EMV standard. EMV is trudging toward broader acceptance, but migrating the widespread credit card and terminal markets happens in small increments.

If Mobey Forum continues to wait for EMV, the group could fall to the wayside. Every mobile payment stakeholder is eager to introduce mobile transactions into the market as quickly as possible. In many cases, technology is not preventing transactions from occurring, rather business processes and partner agreements are stalling progress.

Harald notes, “The key point is that there is no headlong rush into mobile banking transactions. It’s going to take some time.”

Mobile Electronic Transaction Initiative (MeT): League of Handset Manufacturers

One of the more productive organizations, MeT, has published a number of specifications for enabling mobile transactions via the handset during its three years of existence. Sponsor members NEC, Nokia, Panasonic, Siemens, Ericsson, as well as MeT’s 50 associate members want to add functionality into the handset that will encourage consumers to view the phone as an “essential personal accessory.”

MeT envisions consumers using their phones as the ultimate digital wallet, making purchases in three environments: remote, local and personal. The remote environment includes purchases of games, video, images, logos or ring tones over digital public mobile networks. Local transactions include services that are accessed via a local communications link, such as concert or event tickets, public transport or point-of-sale purchases. The personal environment consists of communication between multiple devices controlled by the same user, such as a mobile phone and PC.

To enable this interoperable environment, MeT is defining four interfaces. The service execution interface helps to perform a secure transaction with a content server. The service registration interface exists between the service certificate issuer and the handheld and is used for loading service certificates onto the handheld. The user interface represents the interactions with the user that are necessary to perform the transactions, such as presenting information to the user on the handheld, prompting for an input, and accepting the input and forwarding it to the appropriate calling routines. The security element interface exists between the security element and transport and application layers in the handheld.

Rather than reinventing the wheel, MeT is adopting industry standards and technologies. MeT draws upon WAP for WTLS (Wireless Transport Layer Security) and TLS (WAP TLS Profile and Tunneling), WIM (Wireless Identity Module) and WPKI (Wireless Public Key Infrastructure). The organization also supports Bluetooth and RFID (Radio Frequency Identification) as communication technology solutions, and endorses the transition toward XHTML browsers.

MeT and Mobey Forum work more closely together than other organizations, as Mobey Forum is an associate member of MeT. Like Mobey Forum, MeT expects that mobile operators will benefit from increased air time, but not be primarily responsible for payments. Operators could also add revenue with authentication services. The business model must include user authentication, and MeT sees the mobile operator as a logical provider due to the SIM or

WIM card.

MeT expects that it will take a few more years to alleviate the industry’s current chaos. Having already survived a shift from server-based applications to Java midlets stored on the handset, MeT must stay nimble to respond quickly to the immature market.