Mobile Payment Systems: Mobiiliraha (Mobile Cash) Petteri Hernelahti, Elisa

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1 Mobile Payment Systems: Mobiiliraha (Mobile Cash) Petteri Hernelahti, Elisa

2 Trends in payments and Value Added Services Payments Electronic payments developing and becoming increasingly popular e-banking highly popular Use of cash decreasing Value Added Services Non entertainment mobile value added services are growing e.g. mobile tram/metro ticket in Helsinki: 12% of all single fare tickets sold are mobile tickets Companies limit VAS usage (e.g. MMS, premium priced services) Consumer cost awareness increasing 2

3 Traditional business models for mobile payments 1/2 Premium SMS, MMS or WAP or premium rate service number Strengths Limitations Service price defined by keyword/number or by the service Service price charged on the subscribers phone bill E.g. directory service, ring tones etc. Services can be used without registration Consumers familiar with payment model Subscription owners (employers/parents) set limits on usage of value added services Max service price 20 (SMS, MMS, WAP) Credit risk, service delivered before payment Lotto/betting not allowed on operator post-paid billing 3

4 Traditional business models for mobile payments 2/2 Service specific account User registers to service and opens an account where money is deposited Service price is charged from the account E.g. Veikkaus Strengths No operator set limit for payment size Real time payment, no credit risk Limitations Must register to service Money must be deposited beforehand no ad hoc usage Consumer must have money on several service specific accounts waiting for usage 4

5 Why was a new mobile payment method created? Limitations of the traditional payment methods limit usage of mobile services Limit merchant revenue Limit operator revenue Limit the service offering that consumers could benefit from Several existing mobile payment methods with limitations Difficult to use (may require passwords etc.) Do no work with all operator subscriptions Few merchants that offer mobile payment possibility 5

6 Some issues considered when planning the service Business potential type and number of merchants type of services offered by the merchants number of transactions in a service Typical payment events Risks what alternatives does the consumer have? ease of use willingness to use the mobile phone for payments low initial number of merchants low initial customer take up previous mobile payment services not successful, what is the customer perception of a new mobile payment service? 6

7 Mobiiliraha Mobile Cash Mobile Cash was introduced to the Finnish market by the banks Nordea and Sampo in cooperation with Elisa Launch made with a dozen merchants Wide and positive media coverage A mobile payment method to co-exist with premium SMS Open payment system Any other domestic bank or broker is welcome to join Operator independent: pay with any subscription 7

8 Targets with Mobile Cash Build user experience and be commercially successful Consumers can use a mobile payment instrument in wide selection of services Facilitates also real-time small payments Requires no new customer relationships for consumer Easy to use 8

9 Mobile Cash service Service Alternative payment service to operator post-paid billing A payment instrument that is controlled by the consumer Potential consumer base Nordea and Sampo combined web banking customer base over 2 million Elisa, Sonera, DNA and Saunalahti combined subscription base more than 90 % of Finnish mobile subscriptions Functionality Real-time electronic cash User experience User experience same as with operator post-paid billing 9

10 Business model Separation of banking business from ICT business Sampo and Nordea issue wallets for consumers and transfer payments to merchants accounts Brokers provide connections to mobile operators and technical interface to banking platform Open business model makes Mobile Cash attractive for companies and consumers Extensive consumer coverage 10

11 Roles of the parties 4. Merchant Transaction broker Product/service order 2. Check balance, debit wallet 3. Information of payment made 4. Service delivery Mobile balance Customer wallet Merchant account 11

12 How does it work? Mobile Cash wallet opened and managed in Netbank Service exists as default, only the mobile number entry required for use Banks charge no service fee from consumers Consumer can browse payment information SMS and WAP based payments with MSISDN identification Easy to use, well-known user interface No need to remember passwords or IDs Pay anywhere you see the logo merchant instructs how to pay real-time payment 12

13 Service types where Mobile Cash can be used Mobile cash can be used for small and medium sized payments mobile and web information and entertainment services payments at web stores on-line betting/lotto and gaming public transport and event ticketing beneficiary collections vending parking taxi prepaid top-up lunch/fast food services Fits best to man-machine type payment events Not intended to replace credit cards or cash in events where these work better 13

14 Benefits for merchant Payments are received on the next banking day Fast cash flow compared to premium SMS (1,5-2 months) Merchandise can be delivered without risk Large clientele: 70% in the capital region, 50% nationwide Employers or tax authorities do not need to restrict payments New customer base with high potential 14

15 Benefits for consumer Wallet maintained in the same location as other banking services No unexpectedly high phone bills Make a division between communications costs and purchases Easy to use, no need for high-end handsets Company phone can be used Replaces cash 15

16 How have the targets been met so far? Build user experience and be commercially successful Too early to say, user experience being built Consumer can use a mobile payment instrument in wide selection of services Number or services accepting Mobile Cash payment increasing all the time Facilitates also real-time small payments Yes, good alternative to premium SMS Requires no new customer relationships for consumer Existing banking relationship and operator subscription are enough Easy to use No adoption of new technologies, terminals or ID s and passwords is required 16

17 Future of mobile payments? Mobile cash Possibly new brokers and banks to join Several new merchants joining Also other payment instruments can be made mobile using the existing model existing proprietary payment methods credit cards etc. Key to success is a large enough number of attractive mass services accepting mobile payments 17

18 Questions?