Mobile Payments: What is Mobile Payment?

What is Mobile Payment?

Mobile Payment is one the overly hyped phrases in the industry today. It could mean a lot of different things in different contexts. In general, Mobile Payment means that as a consumer you can use your mobile device to make payments instead of paying by Cash, Check, Credit Card, Debit Card or any other payment mechanism. It could also mean that you could use your mobile device to accept payments from others; or, it could mean that you can use your mobile to pay a friend back; or just pay a bill. You get the idea.

Let’s start a list of things we can do with mobile and payments in this post. We will keep adding to the list as we find more.

  • Mobile at the Point of Sale
    • Tap & Pay using your Mobile NFC device – Google Wallet, Isis
    • Scan a QR code using your mobile’s camera to make a payment – Paydiant
    • Show a QR code displayed on your mobile at the POS – Starbucks Wallet
    • Pay using Mobile BLE and iBeacon technology and the Cloud – Paypal
    • Simulate Magnetic Stripe signals – LoopPay
  • Mobile Point of Sale (mPOS)
    • Mobile card reader dongle to accepts payments – Square
    • Fully integrated tablet based POS system – ROAM
  • P2P payments – Person to Person
    • Pay a friend using their phone number – PayM
    • Pay a friend using their email address – PayPal
    • Pay a friend by bumping the phones together – BumpPay
    • Transfer money between different bank accounts – Bank apps
  • mCommerce
    • Pay in apps using digital wallet – Pay with Paypal
    • Pay across apps – Venmo Touch
    • Pay in mobile web sites – Regular mobile checkout
    • Pay utility bills using your mobile device
  • Old Fashioned
    • Pay using SMS – Premium SMS or MMS
    • Direct carrier billing

Mobile Payments Blog Series

Welcome to the Mobile payments FAQ and not so FAQ series and you are on FAQ #10. The idea behind this series is to share and learn as much as possible about the field of mobile payments. If you like, you can read all of the FAQs on the Mobile Payments category or by visiting the Table of contents page.

Mobile Payments: What is EMV?

What is a EMV?

EMV is defined by EMVCo as, “a global standard for credit and debit payment cards based on chip card technology”. It was named after its original developers – Europay, MasterCard and Visa. EMVCo is the organization that manages, maintains and enhances the EMV specifications.  Today, EMVCo is owned by American Express, Discover, JCB, MasterCard, UnionPay, and Visa. Other organizations from the payments industry also participate as technical and business associates from time to time.

EMV chip cards contain embedded microprocessors that provide strong authentication, security and cryptography features not possible with traditional magnetic stripe cards. In addition to storing payment information in a secure chip rather than a magnetic stripe, using EMV improves the security of a payment transaction by adding 3 important features:

Card Authentication:

Card authentication protects the payment system against counterfeit cards. Card authentication methods are defined in the EMV specifications and the associated payment network chip specifications. Card authentication can take place online, offline or both.

Cardholder Verification:

Cardholder verification authenticates the cardholder. Use of a PIN is a common cardholder verification method (CVM) that authenticates the cardholder and protects against the use of lost or stolen card. EMV supports Online PIN, Offline PIN, Signature and No CVM as part of its specifications. As mobile payments grow new CVMs, in the form of finger-print, voice and device PIN may also get added to the list

Transaction Authorization:

For an online transaction authorization, EMV supports the notion of a dynamic transaction cryptogram. The presence of the dynamic component completely eliminates replay style attacks. EMV supports both online authorization and offline authorization based on rules and risk-parameters set by the Issuer

The Contact chip cards and Contactless chip cards that we discussed in earlier posts can comply to the EMV specification and reap its security advantages. In fact, all of the contact and contactless chip cards in Europe are created using the EMV specification. At present, contact chip cards are in very limited use in US, but the good news is that they are migrating towards it and they are using EMV as the underlying specification.

In contrast, many US banks did offer contactless chip cards over the last few years. These cards did not follow the EMV specification. They instead used a complementary Contactless MSD specification which is an equivalent to regular magenetic stripe data, but a bit more secure. They chose to use MSD because US does not have the EMV infrastructure setup yet. As and when the migration towards EMV matures, these existing contactless MSD cards will also be migrated to Contactless EMV cards or that is what I think.

Mobile Payments Blog Series

Welcome to the Mobile payments FAQ and not so FAQ series and you are on FAQ #9. The idea behind this series is to share and learn as much as possible about the field of mobile payments. If you like, you can read all of the FAQs on the Mobile Payments category or by visiting the Table of contents page.

Bring Your Own Wallet

Today, the mobile wallet is an overused buzzword discussed and debated by a variety of industries. Payment companies, financial institutions and merchants of all sizes are all vying for consumer attention. Technology companies, mobile network operators (MNOs), start-ups and even marketing companies are joining forces to innovate in this space. Though many are talking about it, asking a simple question like what is a mobile-wallet? brings surprisingly different answers depending who you ask.

The competition heats up

A question often asked is who could win the ‘wallet wars’ in the years to come? Isis Wallet was launched just a few weeks ago and is heavily backed by three of the top MNOs (Verizon, AT&T and T-Mobile). Google Wallet has finally escaped the clutches of MNOs by introducing Host-Card emulation in Android Kit-Kat. Are they in a position to reverse their wallet downfall? PayPal has started piloting their in-store beacon payment experience. With over 100 million credit-cards on file, is PayPal going to be the winner again? Will MCX wallet, with its support from all major retailers, be the Holy Grail for merchants? Can Square re-create their m-POS success in the wallet world? Apple’s passbook shows huge potential by itself. With the subsequent introduction of finger-print biometric and iBeacon in iOS7, is Apple in a better position than others?

Generic vs. merchant

These questions, however, are based on an assumption that a multi-purpose generic wallet will emerge as the winner. Considering that the mobile payments revolution is still in its nascent stages, it’s too early to assume that a single generic wallet will triumph over a merchant-specific wallet such as a Starbucks wallet. Starbucks claims that more than 10% of store sales are driven by its mobile wallet app and is the only success story in this space. The generic wallet fails to provide any credible proof to challenge this. So, the real question is: who will win the generic wallet vs. merchant-specific wallet war?

As far as merchants are concerned, this question need not be fully answered before they dive into their mobile wallet initiative. Here’s why: most of the wallets mentioned above try to solve the mobile payment challenge. But payment is just one part of the larger wallet ecosystem. Until other ambitious players solve the mobile payment challenge, merchants can use stop-gap payment solutions while focusing on the rest of the wallet ecosystem.

Bring Your Own Wallet

The most practical approach then would be for a merchant to follow the mantra, ‘your app is your mobile wallet.’ By building your own-brand mobile wallet, you can access customer profile information (demographics, purchase behavior, spending patterns) and track transactions which would otherwise be sold to competitors. Combining such valuable information with unique capabilities that smartphones offer, new and innovative solutions can be created to boost your sales, up-sell, cross-sell and elevate customer experience to a whole new level in several different ways:

  1. Improve the in-store shopping experience and customer engagement: staff can be equipped with mobile POS devices; in-store navigation can assist customers to the exact location of a particular product; access to store inventory can identify if a particular product is in stock; product comparison and user reviews can strengthen customer confidence; mobile ordering, smart-checkout and in-store pickup can reduce queue wait times.
  2. Increase customer loyalty and invite repeat-visits: access to digital loyalty/reward cards from the wallet; real-time rewards information access; creating badges and rewards gamification to increase customer spend; geo-fencing, to check-in customers and offer a personalized experience.
  3. Increase customer base using innovative offers: offering location based offers when the customer is in vicinity of the store; iBeacon technology to identify if a customer is checked into the store and leveraging that for targeted sales to motivate in-store purchases. This can also be used to bring your mobile wallet to the forefront without getting hidden in the fourth home screen.
  4. Support a payment solution that works today: use a stored-value digital card that the customers can refill with their linked bank accounts; or use a white-label mobile payment provider like Paydiant if you prefer to support all card networks from your mobile wallet. Regardless of payment option chosen, integrate it with your rewards program; offer additional incentives for consumers who use your mobile-wallet; ensure tight integration between the mobile payment system and the rest of the mobile-wallet ecosystem.
  5. Support generic mobile payment providers when they finally figure it out: eventually, the generic wallet providers will figure out a standardized way to make a payment at the physical or virtual POS. Design your mobile strategy to be flexible to support them so you don’t lose generic wallet customers. Your own loyal customers can be appropriately incentivized to continue using your mobile wallet.

Remember, the existing magnetic-stripe based card payment experience is not broken. It works, customers understand it and more importantly, they are happy with it. So, payment is not the problem you need to solve. Neither should you wait for generic wallet providers to solve the m-Commerce challenge for you. By placing your bet on your own unique mobile wallet today, you can focus on creating what adds value – a new and improved relationship with your customer and rewarding them with a pleasurable shopping experience.

The article was originally published on bobsguide on May 8, 2014 and is re-posted here by permission.

Mobile Payments: What is Tap & Pay?

What is Tap & Pay?


When we use a Contactless Card to tap on the Contactless reader to make a payment, instead of swiping a magstripe card, we are essentially using Tap & Pay technology. The same goes for any NFC enabled mobile device that support Card Emulation Mode – like Android and Blackberry. Tap & Pay is just a marketing terminology. You may also see it referred to as Tap-n-Pay, Tap to Pay, Tap & Go, Wave & Pay and so on.

Mobile Payments Blog Series

Welcome to the Mobile payments FAQ and not so FAQ series and you are on FAQ #8. The idea behind this series is to share and learn as much as possible about the field of mobile payments. If you like, you can read all of the FAQs on the Mobile Payments category or by visiting the Table of contents page.

Mobile Payments: What is a Contactless Chip Card?

What is a Contactless Chip Card?

Contactless chip cards are standard credit cards with an embedded contactless chip. Optionally, a MagStripe is also provided for backwards compatibility. These cards require no physical contact with the point-of-sale (POS) terminal. To make a payment, the consumer holds the contactless card in close proximity (less than 2-4 inches) to the merchant POS terminal and the payment account information is communicated wirelessly via Radio Frequency (RF).

Radio frequency waves are the frequencies within the electromagnetic spectrum associated with radio wave propagation. Many wireless communications technologies are based on RF, including radio, television, mobile phones, wireless networks and now, contactless payment cards and devices. Don’t confuse this RF with RFID technologies used in manufacturing, shipping and object tracking. Those are designed to operate over long ranges (in the order of 25 feet) and typically don’t have built in security and privacy. On the other hand, the contactless cards that are used for payments are desgined to operate at a short range and come built-in with security and cryptography capabilities.

In the image above, the logo marked on the right hand side represents the universal contactless symbol. If you see this logo on your credit card, you can be sure that it supports contactless payments. Similarly, POS devices that support contactless payments prominently display the same logo to advertise their capability for the same.

Typically, when you make a payment with contactless cards, you are not required to enter a PIN or autograph your signature. This is intentional because, one of the most touted value-add features provided by a contactless card is fast checkout times. Consequently, they are sometimes also referred to as Tap & Go cards.

In the context of mobile payments, when you use a NFC mobile device (like Android or Blackberry) to Tap & Pay at the point of sale, you are actually using the same underlying technology as the Contactless Chip Card. The NFC controller chip inside the mobile device is put into card-emulation mode. In this mode, the NFC chip behaves like a Contactless chip card thereby transforming your mobile phone into a contactless credit card.

Since mobile phones are way more powerful than a plastic card, they can hold as many cards as you want and the NFC chip will be able to simulate any or all of them. This essentially turns your mobile phone into a virtual mobile wallet. Now you know where the concept of Mobile wallets origintated from.

Mobile Payments Blog Series

Welcome to the Mobile payments FAQ and not so FAQ series and you are on FAQ #7. The idea behind this series is to share and learn as much as possible about the field of mobile payments. If you like, you can read all of the FAQs on the Mobile Payments category or by visiting the Table of contents page.

Mobile Payments: FAQ and not so FAQ

I have been working in the field of payments, specifically mobile payments for quite sometime now. If you haven’t noticed, a lot is happening in that area. The players in this field keep coming up with new stuff all the time; the field keeps coming up with new players all the time. Some of them just make sense, but some just don’t regardless of how hard we think. It is not their mistake. They are trying out new and innovative ideas hoping that one of them will click.

Mobile payments come with a lot of variables and not everyone has the knowledge or patience to understand all of them equally well. For instance, a credit card expert may not understand how HCE (Host Card Emulation) is affecting the SE (Secure Element); while an NFC expert may not understand how a Card network gets involved in tokenized transactions.  Apparently, it is not a surprise that many questions come to our mind that needs an answer – a short and simple answer.

My goal here is to try and answer these FAQs and not so FAQs for my benefit and reference. I plan to use a question/answer format where each question is answered in one short and simple blog post. As a general rule, I will prefer simplicity to absolute accuracy, because i don’t like my learning to be limited by some fine-print details. In many cases, I will restrict the details to the context of mobile payments to avoid information over-bloat.

I am confident that this will benefit me and hopefully it will benefit others too. I am also hoping that any expert stumbling across these blogs will offer their valuable thoughts thereby helping the rest of us.

Welcome to Mobile Payments FAQ and not so FAQ series. View all posts from the Table of Contents page