Though mobile phones hold the promise of
becoming a major payments channel in the US the challenge is to
ensure interoperability between all participants. No easy task
given the proliferation of technology models but one the Financial
Services Technology Consortium is tackling. Charles Davis
reports.
becoming a major payments channel in the US the challenge is to
ensure interoperability between all participants. No easy task
given the proliferation of technology models but one the Financial
Services Technology Consortium is tackling. Charles Davis
reports.
Giving mobile payments a long-needed boost, the
Financial Services Technology Consortium (FSTC), an association of
US financial services and technology companies and academic
institutions, and the US Clearing House Payments Company (CHPC)
have launched an initiative to work through the dizzying array of
technology models supporting mobile payments in an effort to make
recommendations on how to construct an interoperable mobile
payments infrastructure.
Financial Services Technology Consortium (FSTC), an association of
US financial services and technology companies and academic
institutions, and the US Clearing House Payments Company (CHPC)
have launched an initiative to work through the dizzying array of
technology models supporting mobile payments in an effort to make
recommendations on how to construct an interoperable mobile
payments infrastructure.
The FSTC has gathered more than 25 leading
banks, wireless carriers and technology vendors in a conversation
about best practices that could lead to a set of working standards
for mobile payments interoperability. The initiative is sponsored
by The Federal Reserve Bank of Boston and CHPC as well as industry
bodies the American Bankers Association, BITS Financial Services
Roundtable, National Automated Clearing House Association and
PaymentsNation.
banks, wireless carriers and technology vendors in a conversation
about best practices that could lead to a set of working standards
for mobile payments interoperability. The initiative is sponsored
by The Federal Reserve Bank of Boston and CHPC as well as industry
bodies the American Bankers Association, BITS Financial Services
Roundtable, National Automated Clearing House Association and
PaymentsNation.
Thirteen banking companies have agreed to
participate – ABN Amro Holding, NV’s LaSalle Bank Corp, Bank of
America, BB&T Corp, Citigroup, Comerica, HSBC, KeyCorp,
JPMorgan Chase, National City Corp., PNC Financial Services Group,
US Bancorp, Wachovia and Wells Fargo.
participate – ABN Amro Holding, NV’s LaSalle Bank Corp, Bank of
America, BB&T Corp, Citigroup, Comerica, HSBC, KeyCorp,
JPMorgan Chase, National City Corp., PNC Financial Services Group,
US Bancorp, Wachovia and Wells Fargo.
The initiative will focus specifically on two
areas: mobile proximity payments, which are payments made at
attended or unattended POS terminals using near field
communications (NFC) or other contactless technologies, and mobile
person-to-person (P2P) payments, involving movement of funds from
one individual or account to another.
areas: mobile proximity payments, which are payments made at
attended or unattended POS terminals using near field
communications (NFC) or other contactless technologies, and mobile
person-to-person (P2P) payments, involving movement of funds from
one individual or account to another.
Testing mobile devices
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Numerous issuers, card companies and vendors are testing mobile
devices for banking and payment-related functions. The contenders
offer a wide variety of alternatives – some based on text
messaging, others using mobile internet Web browsers and others
employing downloaded applications or embedded radio-frequency
identification chips.
“We are evaluating what is out there today to
see where there are common practices and differences,” FSTC
managing executive of payments Jim Pitts told EPI. “We will use our
findings to develop an interoperable model for all mobile payments
participants.”
see where there are common practices and differences,” FSTC
managing executive of payments Jim Pitts told EPI. “We will use our
findings to develop an interoperable model for all mobile payments
participants.”
The promise of mobile payments in the US has
been hampered by the patchwork of technologies and payments
protocols developed by dozens of different payments processors and
wireless carriers in piecemeal fashion. Interoperability is
essential to realise the promise of mobile payments, which is the
ability to make a payment from any bank, on any mobile phone, using
any carrier.
been hampered by the patchwork of technologies and payments
protocols developed by dozens of different payments processors and
wireless carriers in piecemeal fashion. Interoperability is
essential to realise the promise of mobile payments, which is the
ability to make a payment from any bank, on any mobile phone, using
any carrier.
The group expects to recommend a preferred
technology standard for interoperability by the end of 2008.
technology standard for interoperability by the end of 2008.
“Many banks, wireless networks and handset
manufacturers are involved in pilots or early roll-outs, which
provides a rich source of information,” said Pitts. “However, at
some point, the systems will have to work well together for mobile
payments to succeed as a major payments channel.”
manufacturers are involved in pilots or early roll-outs, which
provides a rich source of information,” said Pitts. “However, at
some point, the systems will have to work well together for mobile
payments to succeed as a major payments channel.”
Janey Place, CEO of consultancy
Digital-Thinking, added. “This initiative will play an important
role in identifying and documenting the technology that will enable
banks to meet growing customer demand for mobile payments.
Digital-Thinking, added. “This initiative will play an important
role in identifying and documenting the technology that will enable
banks to meet growing customer demand for mobile payments.
“Open and efficient communications networks
have created significant benefits for consumers, commerce and the
national economy.”
have created significant benefits for consumers, commerce and the
national economy.”
Getting the major banks, wireless carriers and
vendors in the same room at the same time is a major step forward,
and an important first step toward perhaps finding some consensus
on the issue. The goal, FSTC says, is to establish common ground
and standards that would allow the emergence of the long-awaited
mobile wallet.
vendors in the same room at the same time is a major step forward,
and an important first step toward perhaps finding some consensus
on the issue. The goal, FSTC says, is to establish common ground
and standards that would allow the emergence of the long-awaited
mobile wallet.
The struggle is for turf as much as anything.
Banks, not surprisingly, want to process payments without the
intervention of the wireless carrier. Carriers, on the other hand,
have a keen interest in maintaining control of the screen interface
and user billing. Issuers see the whole process as a means to
interchange revenue necessary to defend the investment in
contactless investments.
Banks, not surprisingly, want to process payments without the
intervention of the wireless carrier. Carriers, on the other hand,
have a keen interest in maintaining control of the screen interface
and user billing. Issuers see the whole process as a means to
interchange revenue necessary to defend the investment in
contactless investments.
The first step will be a survey of the
landscape of the current models in the US and abroad, with emphasis
on far more advanced models in Europe and Asia.
landscape of the current models in the US and abroad, with emphasis
on far more advanced models in Europe and Asia.
In the US, almost all contactless and
near-field communications activity is still at the pilot test
stage. The highest-profile to date is the 2006 pilot in Atlanta by
Visa, Cingular and JPMorgan Chase, which used NFC technology to
allow sports fans to pay for food and souvenirs at sporting events
through their cell phones.
near-field communications activity is still at the pilot test
stage. The highest-profile to date is the 2006 pilot in Atlanta by
Visa, Cingular and JPMorgan Chase, which used NFC technology to
allow sports fans to pay for food and souvenirs at sporting events
through their cell phones.
HSBC’s credit card division is currently
running an in-house pilot using phone-based contactless payments at
merchant locations equipped with MasterCard PayPass
terminals.
running an in-house pilot using phone-based contactless payments at
merchant locations equipped with MasterCard PayPass
terminals.
Bringing carriers on board
The FSTC’s leadership on the issue could bring many more
institutions out of the wait-and-see mode, and more importantly,
bring the carriers on board for a mobile P2P application long
needed for banks to counter the growing importance of alternative
payments providers.
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By GlobalDataOne of the key questions – an assumption,
really, underlining the FSTC’s efforts – is whether the financial
industry would be better served moving as a block rather than as a
mix of entrepreneurial efforts.
really, underlining the FSTC’s efforts – is whether the financial
industry would be better served moving as a block rather than as a
mix of entrepreneurial efforts.
Some observers have wondered whether the moment
for a unified standard for mobile payments has passed the industry
by, but FSTC believes that the opposite is true – that the industry
is only now arriving at a moment where standards can help move the
mobile wallet one step closer to reality.
for a unified standard for mobile payments has passed the industry
by, but FSTC believes that the opposite is true – that the industry
is only now arriving at a moment where standards can help move the
mobile wallet one step closer to reality.
The proper analogy, they say, is to the
development of debit networks, which began as closed proprietary
ATM systems within individual banking companies but grew in
popularity only after the networks were connected.
development of debit networks, which began as closed proprietary
ATM systems within individual banking companies but grew in
popularity only after the networks were connected.
The creation of standards could also ease the
legal vagary currently plaguing the payments industry, such as the
series of lawsuits filed by DataTreasury Corp, a small Texas
processor, over copyright claims. DataTreasury claims broad
intellectual property rights over the process of creating and
storing digital cheque images, but those patents are being
challenged.
legal vagary currently plaguing the payments industry, such as the
series of lawsuits filed by DataTreasury Corp, a small Texas
processor, over copyright claims. DataTreasury claims broad
intellectual property rights over the process of creating and
storing digital cheque images, but those patents are being
challenged.
