Mobile payment gaining momentum with real services

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Services for travel ticketing, parking permits, vending machines and other services are going into operation, writes Reinhard Zuba

Reinhard Zuba: by 2014 three billion people will be able to
transact electronically by mobile technology

A driver pays for parking at Vienna’s Schönbrunn Palace 

With a single touch, an NFC phone becomes a train ticket 
The telecoms industry has a history of hype overtaking the reality when it comes to new services, a trap that m-payment has been in danger of falling into.
A recent study by Juniper Research predicted that the total value of mobile payments for digital and physical goods, money transfers and near field communications transactions will reach $670 billion by 2015, up from $240 billion this year. This growth will be driven by the rapid adoption of mobile ticketing, NFC contactless payments, physical goods purchases and money transfers as people in both developed and developing countries use their devices for everyday transactions.
In contrast to other global markets, mobile payments and m-commerce services are already well established and very popular in Austria, which has gained a reputation as the most advanced m-payment market in the world.
Telekom Austria launched the first m-commerce application worldwide in 1999, allowing the purchase of train tickets via text message. Later on, the service was expanded to municipal transportation in six of the largest Austrian cities, resulting in more than half a million mobile tickets sold in 2010.
Despite claims to the contrary, m-payment services have so far failed to reach a breakthrough at the global level due to diverging interests across industries, especially between financial institutions and mobile providers.
We’ve seen recently that credit card giant Visa has been making waves with its acquisition of Fundamo and the extension of its agreement with Monetise, yet this is simply the latest in a number of strategic moves within this market. Where Austria succeeded was in understanding early on that the adoption of m-payment services was dependent on building close relationships between operators and mobile payment providers.
In fact, it’s 10 years ago this year since Mobilkom Austria — now integrated into the main business, called A1 — acquired a stake in Paybox Solutions and began initiating partnerships and merchant agreements.
In Austria, mobile payment started with the Paybox service, which was automatically available for Mobilkom Austria customers. Customers of other operators could also use the services but had to register with Paybox.
All postpaid subscribers could pay for parking and public transport, pay at several thousand vending machines and in cabs, shop online, top-up any prepaid phone and play the lottery.
The popularity was such that, by 2008, Austria’s four leading Austrian mobile operators — Mobilkom Austria, T-Mobile, One, now integrated into Orange, and Tele.ring — had signed a cooperation agreement to open the Paybox standard to all of their combined subscriber base, reaching a customer base of more than four million.
The greatest challenge faced by mobile operators and their payment partners was to develop a payment scheme that is on the one hand easy to handle and safe for the customers and on the other hand technically possible, high performing and secure for the business partners.
Another key challenge is how to involve financial institutions in m-payment initiatives, an issue that Telekom Austria sidestepped by becoming the first mobile network provider worldwide to be awarded a bank licence in 2002. Subsequently the A1 bank was established, guaranteeing secure mobile payment, supporting both pre-paid and post-paid transactions.
Both the interoperable Paybox platform and the A1 bank supported the wide range of m-commerce applications available in Austria and have contributed to driving the market. Since the launch of the interoperable m-payment platform, the number of m-payment users has doubled to roughly 400,000 and the number of transactions has increased even more significantly.
One of the most successful m-payment solutions of recent years in Austria is m-parking, a service known as Handy Parken. Launched in 2003, it sold more than 14 million parking permits in 2010. This figure is set to rise to over 16.5 million in 2011.
In Vienna, where the original pilot scheme began, about 40% of all permits are bought via Handy Parken, and the scheme has been extended to nine other cities. Handy Parken transactions account for 60% of transaction volume for A1’s m-commerce portfolio, which also includes transport tickets, road toll charges, lottery tickets, vending machines and event tickets.
This success is based on the simplicity and customer convenience of the service, which is delivered in partnership with Siemens. Customers send a text message to the service number, stating the length of the desired parking time. A receipt is sent via SMS.
Ten minutes before the ticket expires, the driver is reminded by SMS. The parking voucher can then be extended, once again by SMS. Payment can be made securely through Paybox or credit card top-up. A Handy Parken smartphone app has been downloaded more than 100,000 times.
In April this year, Handy Parken expanded to include the Apcoa car parks at Schönbrunn Palace and Graz airport, also working via Paybox. The customer presses the button for a ticket when entering the car park. Payment is then made by texting a code printed on the ticket to a telephone number. Just a few seconds later a text message confirms the payment process and enables the car to exit the garage.
The Juniper report also found that some 20 countries are expected to launch NFC services in the next 18 months, resulting in transactions approaching $50 billion worldwide by 2014. This increasing adoption of NFC looks set to give fresh momentum to m-commerce applications as it offers a wide range of possible applications from transport ticketing, loyalty cards, access cards and micro m-payment solutions.
Austria has tested a wide range of NFC-based applications, including peer-to-peer information terminals, vending machines, cafeterias and access to buildings such as lecture halls, labs and garages.
As part of the trial, A1 monitored user acceptance of the services in everyday life. A user experience study will provide the basis for application developments, product improvements and strategies.
In September 2007, A1 launched a package of NFC services in Austria in co-operation with NXP Semiconductors, Nokia, rail company ÖBB and Vienna’s public transport service Wiener Linien. With a single touch, a mobile phone can be transformed into a railway ticket, tram ticket, electronic parking ticket, lottery ticket and much more.
This led to the development of the world’s first mobile chip-based end-to-end NFC solution for mobile ticketing, which was piloted by A1 and ÖBB, with support from Nokia, in January 2009.
Tickets are no longer delivered via SMS, but directly loaded onto the NFC element of the mobile phone. From there, the ticket details can be validated directly by the conductor’s NFC phone; again with a single touch.
For the customers, this has the advantage that tickets can be checked by the conductor even while the customer is making a call or when the mobile phone is switched off. Nearly 2,000 NFC mobile phone tickets were ordered from the pilot customers from January to March 2009.
In March 2008, the marketing council of the Austrian city of Wels, together with local merchants, began a customer retention programme, whereby merchants can buy parking fees for their customers. All shops participating in this retention programme were equipped with a NFC-capable mobile phone, the Nokia 6131, and NFC tags. Merchants can buy a 30-minute parking permit, enabling their customers to enjoy their shopping without interruption. This project demonstrates how this innovative technology can be deployed for concrete, customer-oriented solutions with a high added-value.
For mobile payment, the reality may have finally caught up with the hype. More and more operators are gaining experience and competitive advantage due to the increasing numbers of m-commerce and m-payment initiatives being developed and deployed across most market sectors.
By 2013, Gartner predicts that mobile phones will overtake PCs as the most common web access device worldwide; and by 2014 over three billion of the world’s adult population will be able to transact electronically via mobile or internet technology. Mobile is here to stay, and growing ever more pervasive in today’s society, and mobile payment has ceased to be the skeleton in the industry’s closet. GTB
Reinhard Zuba is CMO of Telekom Austria Group