Cover Page

Research Brief

Musings about Mobile Payments 2009

Interviews and Observations
U.S. Market Perspective

Carol Coye Benson

Glenbrook Partners

December 2009
© Glenbrook Partners LLC, 2009. All rights reserved.

Allr company and product names mentioned herein are the trademarks or registered trademarks of
their respective owners. Information in this research brief is based on best available resources. It
is distributed on an as-is basis, without warranty. While every precaution has been taken in the
preparation of this report, Glenbrook Partners shall have no liability to any person or entity with
respect to any loss or damage caused or alleged to be caused directly or indirectly by the advice
or recommendations contained in this report. Opinions reflect judgment at the time and are
subject to change. All citations must be accurate, quoted verbatim, or duplicated without being
manipulated, adapted, paraphrased, or summarized. All citations must be sourced “Glenbrook
Partners, 2009.”

2
Preface

Preface
During the summer and fall of 2009, Glenbrook’s Carol Coye Benson conducted
a series of interviews with executives of some of the key players in the US
mobile payments market. All of her interviews were posted on Glenbrook’s
PaymentsViews.com website as they were completed.

This document brings together Carol’s interviews in a convenient book form.

You’ll find the originals at:

http://paymentsviews.com/author/carol/

About Glenbrook
Trusted relationships. Deep experience. Unusual insights. Out of the box
thinking.

Founded in 2001, Glenbrook is a payments strategy consulting firm that delivers

a unique combination of specialized skills in electronic and mobile payments,
years of hands-on operating experience in executive roles, and an extensive
network of trusted relationships to payments clients, merchant treasury,
corporate finance teams and investors in financial services and financial
technology.

Our unique expertise in mobile payments, global eCommerce payments

acceptance and fraud risk management helps our clients improve the profitability
of their payments-related businesses.

In concert with our primary strategy consulting practice, we focus on the needs
of payments professionals for knowledge and insight with Glenbrook's
Payments Education series - including our Payments Boot Camps, Private
Payments Workshops, daily Payments News blog, the Payments Jobs career
center, and our individual writings which we share on PaymentsViews.com.

1
Contents

Contents

Blinging it Home? A Look at Bling Nation .....................................................................5

The Phone is the Wallet: A Look at mFoundry .............................................................9

Decoupled Mobile? A Look at mPayy ............................................................................13

Getting the Garden Ready: FDC and Mobile Payments at the Point of Sale ......15

It’s Not Just Games Anymore - A Look at Payfone ....................................................19

A Look at Obopay: Mobile Payments Pioneer is Sticking to Its Knitting ............21

Carriers United - A Look at Zoompass ..........................................................................25

Wallets and Stickers and Phones, Oh My! - A Look at Blaze Mobile .....................27

Digital Content & Mobile Phones – a Look at Zong ..................................................29

Mobile Payment Gateway? - A Look at Billing Revolution ......................................31

Money In The Bank? A look at CashEdge’s POPmoney...........................................33

Beaucoup Bucks? - A Look at Boku.................................................................................35

About the Author.................................................................................................................37

3
 Blinging it Home? A Look at Bling Nation

Blinging it Home? A m e r c h a n t s ( m ov i e s, p i z z a , d r y
cleaners…).! The banks provide
Look at Bling Nation customers with a payment sticker (co-
by Carol Coye Benson branded with Bling and the bank’s brand)
Originally posted October 19, 2009 and instructions on how to enroll their
phone in the service.
One of the good things about having a
really odd company name is that people The merchants are given a stand-alone
do remember it.! We mostly heard device (called a “Blinger”) for payments
skeptical laughs when Bling Nation first acceptance.! At time of purchase, the
emerged from stealth.! But lately we’ve c o n s u m e r t a p s t h e B l i n g e r, t h e
been getting more questions…. I spoke transaction is processed and the
recently to co-CEO and founder Wences consumer and merchant both receive
Casares. confirmation of payment – the consumer
to their mobile phone and the merchant
Wences and co-CEO Meyer Malka have on their Blinger. ! Bling also supports a
an interesting background, having variety of merchant rewards, loyalty,
worked together in a series of successful discount, and couponing programs, all
financial services and telecom tied to mobile phone messaging.
investments in Latin America.! They’ve
taken venture financing from Lightspeed Sounds like any debit card or open loop
Venture Partners, added former Bank of network-branded prepaid card, right?!
Bling has their eyes
firmly on the prize – America Vice-Chairman Luke Helms to Wrong!! There is no network brand on
point of sale their board of directors and have pulled the sticker or the Blinger.! Transactions
transactions and the together some impressive advisors – are authorized by the consumer’s bank –
huge payments including John Reed (former CEO of Bling looks like a foreign ATM to the
industry revenues Citicorp), Carl Pascarella (former CEO of bank.! Settlement in batch is done at
associated with that. Visa USA) and Jeff Stiefler (former night, between Bling and the banks, as a
Their approach, President of American Express). private, not network, settlement.! The
however is unique. merchant doesn’t have to submit any
What They Do clearing transactions – as long as they
got the Blinger confirmation, they know
Bling has their eyes firmly on the prize – their account will be credited that day.
point of sale transactions and the huge
payments industry revenues associated Bling is finding that the operational
with that.! Their approach, however, is management of this is pretty straight
quite unique. forward – and, significantly, that the
processors which are serving many of
Bling is creating a series of community- their target banks are willing and able
based local payments networks.! The partners.
mobile phone is a piece of the puzzle, but
not the defining one – instead, think of The Pitch
the mobile form factor as an enabler of
the core payment service. The pitch to the consumer is “coolness”
and convenience – and the ability to
Bling targets a small community which access merchant rewards programs.! The
has a decent population and financial pitch to merchants is primarily cost –
asset size, and which is served primarily transactions are about 50% cheaper than
by local community banks.! They sign up traditional card acceptance.
one or more of the banks, and an
assortment of frequently-visited local

5
Blinging it Home? A Look at Bling Nation

But a secondary, and very strong, part of So just how big an opportunity is this?! It
the pitch is the ability to deliver rewards often amazes people from outside our
based on things like the frequency of industry – or outside our country – that
visits to a merchant – which the t h e U. S . b a n k i n g m a r ke t i s a s
consumers can redeem instantly as they unconcentrated as it is.
pay.! Neither the merchant nor the
consumer needs to keep track of Our estimates show that the “big three”
anything – and, says Wences, “merchants banks – Bank of America, Chase, and
love that.” We l l s Fa r g o, e v e n a f t e r r e c e n t
acquisitions, account for only about 25%
The pitch to the bank is the opportunity of bank de posits (consumer and
to get local merchant POS business – a commercial, bank and credit union) and
business that many community banks only about 35% of debit card
have given up on as much of that transactions.! There are over 8,000 credit
business has migrated to large, national unions and over 5,000 community banks
acquirers.! When compared to a out there, serving local retail customers.!
transaction where the consumer uses the Bling is betting that a lot of these
bank’s own traditional network-branded smaller institutions will be interested in a
debit card, the bank’s revenue can be new payment service that gives them a
three to five times higher. shot at playing a new role in their
community’s merchant business.
This higher revenue is made possible
because the middleman – Bling in this Common sense tells us there is a lot of
case – is taking significantly less from the volume in local purchases.! I remember
merchant discount fee than is taken, in seeing statistics years ago about what
aggregate, by the many players in the percentage of phone calls were made
traditional bank card value chain.! As the locally – I don’t remember the number, of
community network grows, a bank can course – but it was very high!! If anyone
also earn money if their consumer shops has seen an analysis of what percentage
at a merchant served by another Bling of POS transactions are done in the
partner bank, but this is not a significant cardholder’s home town, I’d love to know
piece of the economics currently. about it – I’m sure it’s very high.! Then
just factor in the percent of transactions
For both the bank and merchant, the done in small communities – certainly
“stay local” aspect of Bling is highly seems that it is a big enough number for
attractive.! In fact, Wences said they were Bling to pursue!
surprised by how strongly the “local”
aspect of the pitch resonated with local The Future
merchants.! Frankly, I’m not at all
surprised – in my small community there Bling clearly has its work cut out.! Just
is a terrific energy around several pursuing the many small banks and
community programs promoting support communities that fit its profile will take
of local merchants – but my community’s time and resources.! They are active in
banking needs are served primarily by four communities right now, and expect
local branches of national banks.! Bling is to be in ten by year-end 2009.
staying away from those communities –
for now.! I asked Wences how they were At Glenbrook, we’re always interested in
dealing with the local branches of big studying just how these new payments
banks in the communities they are propositions are likely to evolve in the
serving.!! “Right now,” he said, “we’re not future.! One development, of course,
approaching them.” might be the move to NFC-based

6
Blinging it Home? A Look at Bling Nation

contactless payments built-in to the

mobile phone – rather than the use of
contactless stickers.! Wences was pretty
philosophical about that.! “We are not,” he
said, “waiting for that to happen….I
expect non-financial applications will lead
the way for NFC”.

Longer term, it is extremely interesting

to note that while Bling is taking a
community-by-community approach in
its initial market development, they are
also building a larger infrastructure.! If
my community bank issues me a Bling
sticker and I travel to your community….
that sticker works when presented to the
Blinger of your local merchant!! A new
network is born?

7
 The Phone is the Wallet: A Look at mFoundry

The Phone is the Wallet: Looking Back: Mobile Banking

A Look at mFoundry We started with a retrospect on mobile
by Carol Coye Benson banking. ! A lot has happened in three
Originally posted September 28, 2009 years!! If you recall, three years ago most
banks were worried about deciding
Last week, Starbucks announced a raft of among competitive delivery technologies
new mobile capabilities, with iPhone apps – the phone browser (pretty awful at the
to enable consumers to use their phone as time), SMS, or an application on the
their card in a variety of ways, including phone. ! The application required carrier
seeing a balance and reloading.! For the p a r t i c i p at i o n . S o m e l a r g e b a n k s
payments industr y, however, the (including Citi, working with mFoundry)
announced test of a usable-for-purchase went forward with an application in order
prepaid card on the phone, using 2d bar to ensure an attractive user experience.!
code technology, is big – very big. This Other companies (including Firethorn,
piece is enabled by mFoundry, an early later acquired by Qualcomm) moved even
leader in mobile banking; who, it appears, more aggressively to provide pre-
is again moving to the forefront, this time installed applications with deep carrier
Some people assumed in a new category of mobile payments. involvement.! Sievers thinks the financial
that mobile payments services industry collectively had a bad
would simply be a I spoke recently with CEO Drew Sievers.! experience with these applications, and
logical next step after I w a s p a r t i c u l a r ly i n t e r e s t e d i n par ticularly with the carriers: it
mobile banking.! That understanding his new initiative, and also “established an adversarial relationship
was naive – in the to understand his thoughts on the between carriers and banks… if we fast
U.S. in particular, connections – real and potential – forward, it became very clear that mobile
many people make between mobile banking and mobile operators had no real role in mobile
payments through payments. banking.”
cards that are not
provided by their Background The obvious game changer was the
banks.! iPhone, and the whole concept of an open
When the whole topic of “mobile” came environment for apps on the phone.!
to boil for the financial services industry Regardless of who wins and loses on the
about three years ago, there was a lot of question of app stores, Sievers thinks it is
confusion about the difference between clear that open ecosystems are how
mobile banking and mobile payments. consumers are going to get apps for their
Some people assumed that mobile phone through open ecosystems! –
payments would simply be a logical next i n c l u d i n g m o b i l e b a n k i n g a p p s.
step after mobile banking.! That was mFoundry and other providers are now
naive – in the U.S. in particular, many merrily creating iPhone, Android, and
people make payments through cards that other lightweight apps for banks to offer
are not provided by their banks.! And consumers, as well as solutions via WAP
we’ve seen the various person-to-person, and SMS.
digital content, and NFC/POS mobile
payments plays emerge and evolve The marketing challenge for mFoundry
separately from the evolution of the and other mobile banking companies is
mobile banking environment. (We’ll reaching the many banks in the United
discount, for the moment, bill payment – States; that’s why mFoundry’s strategic
which is included in most mobile banking partnership with bank processor Fidelity
offerings.) National is so important to them. I
questioned this, pointing out that the
cross sell between bank core processors

9
The Phone is the Wallet: A Look at mFoundry

and online banking is pretty low (e.g. a which he is a veteran, having been a “Mad
bank using Fidelity for core processing Man” at Ogilvy-Mather and other
may well use another provider for online agencies in the 1980s) has “been talking
banking and bill payment.) ! Sievers about this promised land for decades… in
acknowledged this but thinks that the reality”, he says, “we are not really
cross sell between core processing and drastically closer to that than we were 30
mobile will be much stronger – partly years ago.” He thinks that even if the
because the real time alerts that mobile marketing applications of NFC become
solutions support (and demand!) require real, they won’t necessary be tightly
deeper integration with the core than is coupled with payments.
the case for online banking. And there is a
need to serve all of a banks customers, Despite what sounds like some pessimism
not just the ones who use online banking, about mobile payments, Sievers is actually
quite optimistic about consumer use of
Looking Forward: Mobile phones for payments and identity
Payments management. In the short-term, the killer
app for mFoundry will be frequent-use,
The mFoundry team has been thinking closed-loop stored value cards – delivered
hard about what this new app not by NFC but by the use of 2D bar
environment means for payments, and codes. The Starbucks test announced last
most importantly, the question of how week is the first of what Sievers claims
purchases at the point of sale – will be multiple announcements coming
presumably using NFC technology – will from mFoundry in the near future.! With
roll out. The common wisdom is that this approach, consumers will be able to
doing these kinds of transactions check their balances and reload using
requires a level of security beyond that light weight apps on their phone, and
supported in the open apps environment. then simply display a bar code to the
This leads banks and other payments store clerk for payment. This solution
providers to rely on phone SIM card typically does not require new software
security, and thereby drops them back in for the merchant – since most merchant
the laps of the carriers, who control the optical readers come with this capability
SIM card. ! Payments providers are (reading a 2D bar code and generating
fighting hard against the notion of card payment data) “baked in.”
sharing their payments revenue with
carriers. (One of my partners here at mFoundry’s role is writing the client
Glenbrook, Bryan Derman, is fond of software for the phone and generating
pointing out that when you aren’t the barcodes based on the consumer’s
creating new revenue, but rather trying profile and account balances. ! They also
to re-allocate existing pools of revenue, manage the security of the system. The
the water gets bloody pretty quickly.) back end prepaid functions are not
provided by mFoundry but by a prepaid
Sievers sees no quick resolution to this processor. mFoundry’s business model is
battle, and is generally skeptical about the as a managed service provider – not a
short-term promise of NFC payments. transaction processor.
The convenience argument isn’t enough
for him: “it’s not materially faster or We closed by talking about the future for
easier than swiping a card.” And he is payments innovation – a topic that we at
particularly doubtful about the whole set Glenbrook are always interested in
of marketing arguments, which revolve discussing! ! Sievers thinks that the most
around ideas such as providing real-time exciting element of the open app
couponing. The marketing industry (of environment is that it enables innovation

10
The Phone is the Wallet: A Look at mFoundry

from a broader ecosystem, rather than

relying on one or a small number of
companies that control a technology to
provide it. He is optimistic that over time
“external innovators” will figure out how
to use the NFC chip for payments, and
more importantly for identity and access
management, without forcing payments
providers to share revenue with the
carriers.

We talked a bit about the ongoing

industry discussion on mobile wallets –
what are they, who provides them, etc. !Of
course, everyone agrees that “the wallet”
will hold multiple payments instruments
and identity documents. Interestingly,
Sievers said “how it actually happens is
less relevant than the content”. “The
phone”, he said, “is the wallet”. This
would mean that a consumer might have
multiple payments related apps on their
phone – with no particular integration or
organization of them.

Before dismissing this (”of course

consumers would want to go to one place
to see their mobile payments”), keep in
mind that many products that have as
their premise the organization of
consumer finances find very limited
markets – think of the personal financial
management systems and bank
aggregation offerings.! Consumers tend
to value convenience, and discount
organization, when it comes to their
finances – so this is one prediction that
merits careful thought.

In the meantime, I’m waiting for the

Starbucks test program to expand in the
Northwest from Seattle – one of their
test cities – to my (small) home town of
Ashland, OR.! I’ll be the first in line for
my latte!

11
Decoupled Mobile? A Look at mPayy

Decoupled Mobile? A All of this, of course, requires some

sophisticated risk management on
Look at mPayy mPayy’s part – to ensure that the
by Carol Coye Benson consumer is properly authenticated; that
Originally posted September 21, 2009 the bank account information they have
provided is valid, and that there are
At Glenbrook, we’re fascinated by the sufficient funds in the account to pay for
topics of mobile payments (in general); the purchase.! The mPayy platform
the potential for new ACH applications; handles this through a complex set of
and the continued growth of eCommerce.! back-end processes.
So it was great to talk to Conrad
Sheehan, CEO of mobile payment startup You can think of mPayy as a PayPal-like
mPayy – who has moved his company platform, but Sheehan is quick to point
right into the center of all three topics. out that there are some important
differences.! First is that credit card
To start with, Conrad is no slouch – he is funding is accepted only as a back up (if
an industry insider, having built his the DDA funding fails), not as an up-
payments skills as a consultant to banks front option for the consumer.! That
and Viewpointe during those early check m e a n s t h at v i r t u a l ly a l l m Pay y
image days, and then later as head of transactions run on the more profitable
Chase’s consumer payments group during half of PayPal’s business model.! This
the early growth days of POS debit. also enables mPayy to pass some of the
savings (from avoiding card funding
mPayy, which was started in 2007, is expense) on to merchants. Secondly, the
interesting today because of the platform consumer identifier is the mobile number,
it has built to support eCommerce and rather than the email address, as in
P2P (person to person) payments.! It PayPal’s case (making PayPal sound “so
might be even more interesting in the 1990’s” in this respect!).
future – at the point of sale – more on
that later. Merchants & Consumers
The Platform Like many payments startups, mPayy
faces a “chicken and egg” problem of
The mPayy platform is a “secure debit signing up both merchants and
platform”.! mPayy, says Sheehan, is a consumers.
“decoupled debit provider” using mobile
as a key channel. A consumer sets up an Sheehan’s starting point is merchants,
mPayy account and authorizes a where he feels he has a “very compelling
transaction on the merchant’s or biller’s proposition”.! The elements of the
website or mobile site.! For billers or any merchant appeal?
invoicing merchant, mPayy can send a
mobile invoice and collect payment from • Acceptance costs “materially below
the consumer’s cell phone. ! P2P that of cards”.
transactions can be done on the mPayy
• The management of ACH risks. Once
website, by mobile, or on the major social
a payment is authorized, mPayy
networks. mPayy then manages the guarantees settlement and absorbs
process of drawing funds out of the
any fraud-based charge-backs and
consumer’s account, by an ACH debit
NSF’s.
transaction, and sending money on to the
recipient. • Rapid set-up process – mPayy can
open up a consumer account and

13
Decoupled Mobile? A Look at mPayy

execute a transaction all in one a shot at this because they control the
session SIM chip that (in the base case scenario)
needs to be provisioned with card data for
• Checkout support – the merchant can
security.! But a debit platform such as
opt to have mPayy populate the
mPayy’s could work directly with carriers
address page, etc.
on an NFC solution.! Rather than being
mPayy is signing merchants up by the c o n c e r n e d ab o u t l o s i n g e x i s t i n g
now-established route for payments start- interchange, mPayy (or any other similar
ups, of making deals with acquirers – debit platform) would see it simply as an
“the usual suspects”. opportunity for new revenue – which
(and this is my speculation) they would
What about the consumer half of the presumably be more than ready to share
chicken and egg problem?! The best route with a carrier.
to getting consumers, Sheehan feels, is
through merchants: “anything else just What do you think the chances are that a
isn’t cost-effective for a startup”.! He scenario like this could interest a carrier
recognizes the challenge here, but thinks in getting started with NFC?
mPayy can benefit from lessons learned
by other start-ups that have had a hard
time taking this path. ! ! Of course, he
says, the consumer proposition is “easy,
secure, and free”.

Easy sign-up and the mobile interface, he

hopes, will help drive consumer use of
mPayy once they are signed up.! A basic
WAP capability for the consumer is of
course already in place: iPhone and
Android applications are coming soon.

Looking Forward
Sheehan is also enthusiastic about
mPayy’s ability to support social
networking and payments; they already
have secure widgets available for
installation on Facebook – but he admits
“there’s been very little usage”.! He thinks
the work they have done there will find
better applications in supporting digital
content purchases – in particular for
newspapers.

We closed with a very interesting

discussion about how mPayy might play
in an NFC world.! Sheehan, like the rest
of the industry, is watching the carriers
and the card issuers battle out the
question of how payments revenue – now
in the issuer’s pocket – might get shared
with carriers in the future.! Carriers have

14
Getting the Garden Ready: First Data and Mobile Payments at the Point of Sale

Getting the Garden but the good news is that the same
terminals that support contactless
Ready: FDC and Mobile cards (MasterCard PayPass, Visa
Payments at the Point of payWave, etc.) work for NFC phones
as well.! (Contactless cards and NFC-
Sale enabled phones both use RFID
by Carol Coye Benson technology to communicate with
Originally posted September 2 2009 terminals.)

While the list of start-ups focused on • Contactless cards in the U.S. are
either (pick one point of view):
mobile payments for digital content,
eCommerce physical goods and/or • On a roll – initially implemented at
person-to-person transfers continues to f a s t - b u y l o c a t i o n s, r a p i d l y
grow, another part of the industry is spreading to other merchant
biding its time, with an eye on what may categories, consumers love the
be a much larger prize. convenience

What’s at stake are point-of-sale, in- • Stalled out – have found their
market at fast-buy locations; won’t
person payments – what Glenbrook
go much further, consumers find
estimates to be roughly $4 trillion and
little incremental value in waving
107 billion payments each year in the U.S.
vs. swiping with no signature
market.! Some of these today are done by
card; some by cash and check.! All are • The key issue about the “when” of
targets for the companies looking at NFC (and even the “if ”) is the
using the phone to make those payments. carrier’s place in the economic model.!
Provisioning card data onto a phone
Background: Conventional requires security, and the most likely
Wisdom on Mobile @ the POS candidate is the carrier-controlled
(Glenbrook’s Perspective) SIM chip.! Carriers will undoubtedly
charge issuers for provisioning and
• NFC (Near Field Communications) maintenance – but will they also get a
technology is seen as the key enabler.! share of transactional revenue?
Think of this as a “modem chip” on • Stickers containing a contactless chip
your phone (actually, an antenna) – may help bridge consumer adoption
that can communicate with issues; consumers who do not yet
appropriately enabled terminals. have an NFC-enabled phone will put
• NFC-equipped phones aren’t in the these stickers on their phone.! These
U.S. market yet – but may become are either (pick one point of view):
prevalent in new phones in the • A key transitional offering –
2010-2012 time period (estimates consumers will get used to “paying
vary); someone is going to have to by phone” and make an easy
pay the incremental cost of putting transition to NFC when their
the NFC chips in phones.! (This could phone is enabled
be the carrier, a payments provider, or
a marketing company – NFC chips • A market-confusing distraction,
are also going to enable a slew of which may slow the rollout to full
POS couponing kinds of NFC capability
applications.)
• Merchant terminals need to be
capable of interacting with chips –

15
Getting the Garden Ready: First Data and Mobile Payments at the Point of Sale

First Data and Contactless introducing integrated peripherals (which

Payments handle contactless, PIN and mag stripe
cards), as First Data recently did.
First Data Corporation is a pivotal player
in POS payments – a key provider of In terms of phones, McCarthy thinks
processing solutions to both the that 2011 will see large-scale
merchant and the issuing sides of the introductions, with essentially all new
business.! So it was particularly phones in the U.S. market being NFC-
interesting to speak last week with Barry enabled by 2012.! “All it will take is one”,
McCarthy, President, Mobile Commerce he said, “if RIM or Apple or Palm
Solutions for First Data introduce an NFC phone, the rest will
follow”.
McCarthy sees mobile payments at the
POS as an eco-system that is being built, Card issuers, he believes, will be heavily
piece by piece – and that a giant tipping influenced by the “top of wallet” factor.!
point will occur once all of the pieces are This is particularly true with contactless
in place.! The four key pieces are the stickers, which by definition have only
terminal base, the NFC-enabled phones, one card: true NFC phones can easily
issuer participation, and consumer support wallet software giving
education. consumers a choice of cards to pay with.!
A n i s s u e r a l r e a dy s u p p o r t i n g a
He’s very optimistic about the terminal contactless card program will (assuming
base.! (He should know, as this is First satisfaction with the carrier-negotiation
Data’s core business!)! In other words, issue discussed below) have no problem in
he’s squarely with the “on a roll” point of supporting an NFC program.! I asked
view on contactless readers.! He thinks McCarthy about his views on the relative
most analysts looking at terminal interest of banks in provisioning their
deployment have missed a central point.! signature debit cards vs. credit cards on
If you look at the absolute number of contactless stickers and NFC phones, but
terminals in the U.S. market, about 300k he (diplomatically) declined to comment.!
to 400k out of maybe 7 million are (Personally, I can imagine some pretty
contactless enabled – that’s still pretty heated debates around the old payments-
low.! But if you look by categories, the council table at a bank!)
penetration is impressive.! Almost all
QSRs (quick service restaurants), almost The $64 million question (actually, that’s
every drug store and convenience store probably pretty low – given POS card
chain have installed contactless readers.! interchange of maybe $30 billion a year
Fur ther more, contactless-enabled in the U.S.!) is consumer adoption.! “It’s
locations in those categories represent no secret”, according to Barry, that
over 40% of card transactions in that overall consumer adoption of contactless
category – a very impressive number. cards – in terms of actual use – is in
“very low percentages”.! There is a
What’s more important, McCarthy says, “fundamental consumer education issue”
is how quickly contactless is moving to – although there are 50 to 60 million
other classes of trade.! He’s seeing “some contactless cards in distribution in the
name brand mall merchants” and big U.S., many consumers aren’t even aware
discounters moving “pretty aggressively”.! that they have the capability.
Smaller merchants, he thinks, will still
lag, but will end up adopting as terminal The contactless sticker is, he believes, the
providers start incorporating contactless key to solving this problem.! Consumers
capabilities into standard terminals, or will want to use their phone for payment,!

16
Getting the Garden Ready: First Data and Mobile Payments at the Point of Sale

and a sticker will let them do that.! For ability to operate in scale with integrity.!
many consumers, he thinks, a phone they I asked about who their competitors
often have in their hand will be much would be in the TSM world.! Other
more convenient than digging out a card processors, he thinks, and maybe software
and using it for a fast purchase. First platforms.! Banks, card networks, and
Data’s “Go Tag” sticker is getting carriers are all considering it, but may be
enthusiastic response.! Right now, the too neutrality-compromised to be
sticker is available just in prepaid form.! successful.
This will continue – in fact, he sees
contactless prepaid stickers as being a hot Of course, phones are going to be able to
“J Hook” item – but First Data will also do a lot more than make payments.! In
be providing Go Tag’s to support issuer’s fact, one way to look at the emerging
credit and debit card programs. world of phone applications is to see a
battle of sorts between applications
On the key question of economics downloaded by consumers onto phones
between carriers and issuers for NFC from “app stores”, and applications
payments, McCarthy was quick to say provisioned by TSMs onto secure chips
“we’ re not involved in those on the phone.! Common wisdom, again,
negotiations”.! His opinion is that carriers says that card purchases will have to be
will end up content with revenue for supported through the latter model.! But
provisioning and maintenance, and will this could all play out in a number of
leave the transaction revenue for the ways.! One view might find that there
issuers.! This is particularly true if would be a lighter-weight way of
carriers want to avoid taking transaction securing card purchases – potentially
liability.! But, as he says, “it’s early days eliminating or invalidating the whole
yet”. TSM concept.! Another view is that the
TSM role would be of value for a wide
So what’s First Data’s play in all of this?! r ange of applications outside of
Terminals and stickers, of course – but a payments – creating a much larger world
much bigger piece is their planned role as of opportunity for First Data.
a TSM – or Trusted Service Manager –
for NFC payments.! This concept is just
beginning to be fleshed out within the
universe of concerned carriers and
financial institutions.! Basically, the idea is
an intermediary, who would separately
contract with MNO (mobile network
operators, or carriers) and card-issuing
financial institutions.! The intermediary
would manage the secure provisioning of
the card data onto the phone, and
conceivably perform a wide range of
value-added suppor t i n g s e r v i c e s,
including billing, customer service,
reporting, etc.! According to Barry, the
role is “exactly analogous” to the role
First Data plays today in creating and
personalizing cards on behalf of issuers.!
The key attribute for a TSM, he believes,
are neutrality, security, connectivity,
database management savvy and the

17
It’s Not Just Games Anymore - A Look at Payfone

It’s Not Just Games says that Payfone’s intense focus on user
experience and merchant needs has led it
Anymore - A Look at to build features like variable pricing,
Payfone single-click/zero-SMS, guaranteed
settlement, rapid payout and robust fraud
by Carol Coye Benson
prevention that will drive merchant
Originally posted September 1, 2009
choice.! In fact, rather than sharing a
hefty percentage of the gross revenue
Among other recent interviews on mobile
with the carrier, Payfone will enable
payments, we took a look last month at
something that will look “more like a card
two companies (Boku and Zong) that are
economic structure than a ringtone
focusing on bill-to-carrier models for
structure”, Rodger says.
digital content purchases in the online
gaming arena.! Fascinating, but surely
Desai is betting that merchants and
(for my demographic, at any rate) a niche
developers are going to love Payfone.
market – after all, how many times have
Unlike SMS-based mobile payment
you spent $1.25 for a super-sword to
m e t h o d s, w h e r e “ u p t o 2 0 % o f
vanquish a foe in an online game?
transactions fail” according to Desai,
Payfone has built a “zero-failure
So it was particularly interesting to
architecture for mobile transactions that
interview Rodger Desai, CEO of startup
rivals credit card networks and offers
Payfone.! (Disclaimer: my fir m,
rapid payout and guaranteed settlement
Glenbrook Partners, although not this
f o r m e r c h a n t s a n d d e v e l o p e r s ” .!
writer, has an advisory relationship with
According to Desai “the SMS billing
Payfone.) Payfone is also focused on
infrastructure was not built to support
digital content and a bill-to-carrier
merchants and developers, rather is an
model, but with some big differences.
architecture established to support the
Instead of using SMSs and short codes delivery of ringtones” and thus relies
entirely on the delivery of low-priority
like ringtone merchants and existing bill-
to-carrier payment providers, Payfone messages to effect billing. In addition,
Rodger says, “the system is plagued with
operates within the carrier signaling
network, a global network that allows fraud related problems – carriers,
carriers to communicate and exchange merchants and developers pay the price
for this through high customer service
information between each other.
costs and charge-backs.”! Which Rodger
What’s important here is the implication says is unacceptable for a scalable
for the mobile carriers, merchants and payment system. “When we think about
developers hooked into Payfone’s hub.! online payments, we think of the
Today, merchants and developers wishing seamless experience of a credit or debit
to implement mobile payment as a card.! Merchants like Amazon and Apple
checkout option, face a number of have mastered the checkout UI to the
challenges, according to Rodger: fixed point where you can complete a
price points, high transaction failure transaction with a single click. Why can’t
rates, 90-120 day settlement periods, users with value locked in their mobile
oppressive carrier fees and significant account have the same experience?! We
exposure to charge-backs and fraud. think they should and we are going to
Mobile carriers accepting bill-to-carrier show the world how.”
mobile payment have been wary of the
practice given the high customer care Payfone’s strategy is to “bank the rest”.!
According to the GSMA, an international
costs it has historically generated. Rodger
association of mobile carriers, only about

19
It’s Not Just Games Anymore - A Look at Payfone

1 billion of the 4 billion mobile

subscribers across the globe have credit
cards.! Merchants attempt to reach “the
rest” through clumsy techniques like
scratch cards. One “major global music
merchant”, says Rodger, “makes about a
quarter of their revenue from scratch
cards, but just can’t get these distributed
widely enough”. What these merchants
need, he says, is a ubiquitous payment
system and “luckily, mobile carriers have
already built the infrastructure to support
this globally, which is exactly what
Payfone is bringing to the payments
world”.

Payfone is getting close to launching

their product, and the purposely
clandestine company promises you’ll be
hearing much more from them in the
coming months as they prepare to enter
the market.

I’m already beleaguered by my teenager,

who demands that I put some extra cash
he has dug up into iTunes, so he can buy
that movie he wants.! Maybe with
Payfone he’ll be able to do that himself !

20
A Look at Obopay: Mobile Payments Pioneer is Sticking to Its Knitting

A Look at Obopay: Obopay charges the sender of funds – the

current price is 25 cents – and it is free to
Mobile Payments receive or withdraw money.! Funding the
Pioneer is Sticking to Its account – or an individual transaction – is
another story.! Not surprisingly, Obopay
Knitting has been able to refine the details of how
by Carol Coye Benson the funding works – and what the
Originally posted August 6, 2009 economic model is – after having been in
the market for several years.! Credit or
Mobile payments company Obopay is in debit card funding is more expensive, as
the interesting position of being the Obopay incurs a merchant discount fee to
‘grand old man’ of U.S. mobile payments tap those accounts – they pass this on to
– they’ve been around the longest – and their customer as a 1.5% fee.! ACH
with the same basic product offering, for funding is free, but, since it presents NSF
person-to-person payments. and fraud risk for Obopay, takes longer to
be credited to the consumer’s account.!
I spoke last week with Michael Diamond, The current lag on ACH funding is 5
Senior Vice President of Business days when a customer first signs up.! As
Development at Obopay, about their Obopay gets more experience with that
current status and future plans. customer, they will shorten the lag.

Obopay’s solution allows consumers to Similarly, Obopay has been able to refine
make payments to other consumers, by their risk management practices, and has
sending an SMS message with their established different procedures for
mobile phones.! Obopay operates on customers sending instructions by text
either a prepaid basis (you fund an message, for example, than for customers
Obopay account, and then send funds out using a thick client application.! “We’re
of that account) or on a transactional pretty settled”, Michael said, “in that we
basis – each outbound payment is do multi-factor authentication for
separately funded.! In the prepaid case, transactions – we just vary what and how
funding can be either by credit or debit we do this depending on the situation”.
card, or by an ACH transaction “pulled”
f r o m yo u r b a n k a c c o u n t .! The Obopay entered into an alliance with
transactional basis requires credit or Citibank a few years ago, and has done
debit card funding. extensive work to establish a “deeply
integrated” variation of their product for
Obopay has always positioned itself as Citibank customers.! The alliance allows
“technology neutral”, and there are Citibank customers to either fund an
multiple ways to use the phone for a Obopay account from their Citibank
transaction – using either a browser, an checking account (without the time
Obopay application on the phone, or by delay), or (and this is the most interesting
sending an SMS message.! Obopay part) use Obopay to directly send money
introduced a Blackberry app last year.! out of their Citibank checking account.!
Obopay was also ahead of the pack in The wiring of this is as follows:! a
recognizing the connection between consumer sends a payment instruction to
prepaid and mobile P2P: their original Obopay; Obopay sends it directly to
product offering gave customers the Citibank – coming in looking very much
option of getting a prepaid card linked to like a non-Citibank ATM.! Customers
the Obopay balance, and today, a new enroll in the Obopay service through a
customer is offered the option of a stand-alone portal, using the bank’s
MasterCard prepaid card. authentication: this establishes the key

21
A Look at Obopay: Mobile Payments Pioneer is Sticking to Its Knitting

account-to-phone number link to secure Michael and I talked a bit about the
the relationship.! Citibank’s financial typical use cases.! He makes the
difficulties don’t seem to be impacting the distinction between emergency use and
rollout of the service: “they are still fully routine use.! The emergency users, by
engaged”, according to Michael. definition, don’t often use the service and
are therefore apt to fund a specific
Obopay recently established a partnership transaction by card rather than ACH.!
with Fidelity Information Services, which Currently, card loads are roughly twice
supplies online banking software to the volume of ACH loads, according to
banks; this is particularly interesting Mike, so this could be taken to imply that
given Fidelity’s pending acquisition of most users are doing emergency
Metavante.! The deal, according to transactions.! Of course, it’s hard to build
Michael, is a “distribution deal” – which a business case on occasional
allows Fidelity to provide a branded transactions, so presumably Obopay is
service to their bank clients. Fidelity hoping to establish a base of customers
would enable the customer Obopay who are using the service for routine
account setup through the bank online transactions – but it is hard to tell, absent
channel – but after that, transactions numbers, where they stand on this.
would be “normal” Obopay transactions,
and not, at least in the early stages, the What’s Next
“deeply integrated” version that is now in
place with Citibank.!!! They aren’t yet in a Obopay has a similar offering in India,
position to announce any banks that are and given the importance of the U.S.-to-
adopting the service. I n d i a c o r r i d o r fo r i n t e r n at i o n a l
remittances, it certainly seems logical
Perhaps most significantly, Obopay and that Obopay expand their offering to
MasterCard recently announced that a enable this.! ! Michael agreed that it is a
partnership formed last year was ready to “clear opportunity” but said that Obopay
go – to enable P2P transfers between is deliberately going slow – “there are a
MasterCard accounts, using Obopay as lot of different ways we could do this –
the front-end connectivity to mobile we want to make the right choices”.! In
networks.! At first, customers will be able particular, they want to make sure that
to get a MasterCard prepaid card and use the risk management model is right.! He
this to send money – but the home run mentioned that the active involvement of
s c e n a r i o i s c l e a r ly w h e n ( o r i f ) the Reserve Bank of India in mobile
MasterCard issuers in the U.S. sign up, payment regulation is one good reason to
and enable cardholders to send money proceed cautiously.
from and to existing MasterCard
accounts. It was particularly interesting to me to
talk about the directions that Obopay is
So where does Obopay stand now?! They not taking.! They are not, for example,
don’t disclose numbers – of customers or looking actively at expanding into the
transactions.! But it was interesting to point of sale domain – a direction that
note that they recently closed on a many mobile payments companies are
venture funding round from investors taking, especially given the sudden
including Nokia – for an undisclosed blossoming of NFC stickers.! They see,
amount rumored to be in the range of rather, their immediate expansion
$70 million – which certainly can be read opportunities in the U.S. as being deeper
as providing at least some evidence of into the P2P domain – particularly to tap
traction. into cash based merchants – the “pay your
nanny” scenarios.! “We certainly expect

22
A Look at Obopay: Mobile Payments Pioneer is Sticking to Its Knitting

to go there”, Michael said.! They are also

very interested in opportunities enabled
by social networking and the new classes
of transactions around digital content
purchases.! Michael thinks this will be
huge:! “Pay me on my Facebook page.”

Obopay is also not talking much about

wallets.! Michael was skeptical, in fact,
about the concept of a single mobile
wallet for a consumer – especially if that
wallet is directly or indirectly under the
control of a carrier.

Obopay also had “no comment” on a

recently circulating rumor about a
payment product by their new investor
Nokia.! One blog described “Nokia
Money” as an “attempt to establish a ‘new
platform’ (for) making purchases through
the mobile Internet”.! Certainly is
interesting to speculate on what an
Obopay behind-the-scenes role in this
could be!

23
Carriers United - A Look at Zoompass

Carriers United - A Look The consumer is charged for sending

money – a business model which we have
at Zoompass previously noted has proven problematic,
by Carol Coye Benson in the U.S., at any rate, for P2P payments.!
Originally posted October 19, 2009 But simplicity and ubiquity (Zoompass
covers 95% of Canadian cell phone
Zoompass is a carrier-centric service subscribers) may create enough value to
recently announced in Canada.! The three overcome this obstacle.! Robin expects
major carriers there together formed a the model to continue, but the actual
company (EnStream) to offer the service prices to change as they learn more about
to their customers.! At launch, this is the market.
positioned as a cash substitute in the
person-to-person domain – a way to send Robin thinks the opportunity is huge,
money to someone else, knowing only simply because “people are mobile”.! He
their cell phone number. As a nice touch, sees the phone as a virtual appendage for
Zoompass also includes a “request for many.! All of their research also indicates
money” feature. (I can only assume they that people want to do a lot more with
have some kind of velocity monitoring to their phone, including eliminating the
avoid cash harassment!)! I interviewed need to carry cash.! And, he notes, it is
Robin Dua, President at EnStream. important to realize that many people are
phone-centric rather than computer-
Funding is pure simplicity.! You can link a centric -! something that developers still
credit card to the account, and use it to working on online payments may be
send money to any mobile subscriber on a tempted to overlook.
participating network.! The mechanics
are similar to PayPal in the United States. I’m fascinated, of course, by the banking
Zoompass does a credit card transaction angle on this.! When I recently lived in
(where they are the merchant), and then a Canada, I was a big fan of the banks’
separate transaction, using the Canadian shared Interac debit network, and
ACH, to credit the receiving customer’s particularly the email money transfer
bank account.! Alternatively, a customer service that let me effortlessly transfer
can fund a Zoompass stored value money to someone else (I paid my son’s
account from their bank account, using piano teacher this way), knowing only
either a preauthorized ACH-type debit, or their email address.! So why weren’t the
by using their online banking bill pay banks able to convert this model to
service:! Zoompass is set up as a payee on mobile?! If any country can summon the
all the major banks services.! There is collective energy of bankers to work
also an optional prepaid MasterCard together, it’s Canada – so what happened?
available.! Interestingly, the balance of
this account is linked to your Zoompass According to Robin, the most !important
balance, so if you have $100 in your issue is the phone software itself.! To
Zoompass account, and then sign up for begin with, “it’s not easy” to develop
the prepaid MasterCard account, that software that works on a large set of
prepaid card automatically has $100 on it. target handsets – you need phone-savvy
developers.! The carrier relationship that
If a consumer is sent money, and does EnStream has gives them access to
not yet have a Zoompass account, they handset technology, even before the
receive a text message and are asked to introduction of the phone in the market.!
set up an account.! Viral marketing at its Furthermore, “we’ve done things that are
purest! proprietary – that only a carrier or
someone owned by a carrier can do”.! For

25
Carriers United - A Look at Zoompass

example, Zoompass allows you to build something and get ubiquitous.! The
synchronize your contacts within the wallet application, from a payment
phone address book with the application.! instrument standpoint, will have to be
The application also detects if a phone open – that is, support multiple payments
number you are trying to send money to types and brands.! But it looks like the
is a cell phone or not, because it has Canadian carriers are clearly banking on
access to carrier databases.! This allows the wallet itself being under their
them to create a more friendly user control, and being branded Zoompass.
experience.

Although banks have been relegated to a

behind-the-scenes role (as the passive
recipient of ACH transactions), Robin is
anxious to work with them, and
partnering discussions have already
begun.! One possibility, of course, is that
banks could offer this service to their
customers, and integrate the transactions
more smoothly into the mobile online
banking experience.

Another potential next step would be to

take the Zoompass wallet to the point of
sale, again possibly with the cooperation
of banks.! This would be “the first step in
a convergence of wallet and phone”.!
Dua notes that the carriers expect a few
handsets to be NFC capable by the end of
this year, with more following in 2010.!
He thinks the tipping point won’t occur
until 2011.! They are actively looking at
bridging technologies, such as contactless
card stickers and micro SD (which can
enable the full NFC experience) to enable
POS functionality before NFC chips are
broadly available in phones.

Other potential expansion plans involve

enabling digital content purchases, other
sources of funding, and international
licensing.! They are in discussions with
some carriers, including in the U.S., on
this possibility.

At the end of our interview, Robin

returned to the question of phone
software.! He thinks we are moving
towards an environment where there will
be fewer device platforms – probably four
dominant platforms.! Application
developers will therefore find it easier to

26
Wallets and Stickers and Phones, Oh My! - A Look at Blaze Mobile

Wallets and Stickers and There is a specific focus on buying movie

tickets – a key purchase category for
Phones, Oh My! - A Look Blaze’s target demographics.! Blaze will
at Blaze Mobile compete with Fandango et. al. in allowing
consumers to browse, purchase, and use
by Carol Coye Benson
movie tickets. ! Consumers can register
Originally posted July 15, 2009
various cards and bank accounts with
their wallet, and choose the instrument to
Blaze Mobile is a wallet-centric offering
use for buying the movie ticket.
in the U.S. market.! CEO Michelle Fisher
spoke with me last week.
Blaze also incorporates a “PFM Lite” –
the ability to see bank and other account
Rather than focusing on payments per se,
balances (such as rewards programs)
Michelle’s focus is on enabling the
from the phone.! She thinks the wallet
consumer’s mobile life.! In her earlier
approach to PFM will be more attractive
career at Microsoft and Telco SBC, she
than going to each account’s site
always took “the approach of the
individually – the average person, by her
consumer” – focusing on segmentation
reckoning, has about 8 active accounts
schemes around the needs of sets of
that they might want to access by mobile
consumers.
phone.! Earlier users are enthusiastic
about this – 63% are using the feature.
Given this, Blaze Mobile is not
concentrating on a single payment
Blaze has three target segments at this
domain, but r ather suppor ting
time.! The first is 18 to 25 year olds –
transactions across a number of domains.!
their research shows that these people
The early use cases are P2P payments
particularly like contactless technology
and point of sale payments.! She wants
for POS purchases.! (It is fun to watch
the consumer to be “completely mobile”.!
their video demonstration, done at a
Her approach is to narrow in on
variety of stores – often, the clerk hasn’t
segments and deliver what they need in
seen a sticker-on-a-phone used for a
the way of mobile financial transactions.
contactless purchase.! It is abundantly
clear that everyone in the video thinks of
I downloaded the iPhone Blaze Mobile
wallet and set up an account.! I ordered it as “paying by phone” – even though it
my Blaze Mobile contactless sticker, but is just a sticker – which could just as
easily be stuck to your paperback novel!)!
don’t have it yet.! On the phone, the top
level menu lists (in order) “Movies”, The second target segment is college
students – who are heavily into social
“Money”, “Rewards”, and “What’s
Nearby”.! So what can I do? networks and need P2P transfer
capabilities.! This segment also buys a lot
Once a consumer sets up a Blaze Mobile of movie tickets.! The third segment is
account, they can do P2P transactions parents with kids at home, who need
(Michelle !wants people to say, “Blaze me digital allowance management and P2P
the money”), and, if they opt for a transfer capabilities.
contactless sticker, ! POS transactions at
locations that accept contactless cards.! The P2P capabilities currently allow
transfers from one Blaze account to
The mechanics of setting up the account,
funding it, etc. are the basics of any another, or from a Blaze account to a
specific bank account.! Blaze has a
prepaid stored value transaction.! Today,
the sticker is limited to a single funding banking partner who does this piece for
source (a prepaid MasterCard). them: it is a simple ACH credit
transaction.! They are planning to

27
Wallets and Stickers and Phones, Oh My! - A Look at Blaze Mobile

enhance this by the 4th quarter, to enable In some ways, Blaze is more confusing, to
bank to bank transfers. an industry insider, than some of the
“pure play” products in the market.! But
In the future, Blaze will enable consumers that’s because they are starting with the
to choose payments instruments for point consumer, and following that lead.! The
of sale purchases – this will be made gamble, of course, is that they have that
available for NFC enabled phones. right – and that the consumer isn’t too
distracted by the myriad other offers and
The Blaze team is also anxious to products that are out there.! But in the
alleviate consumer security fears.! No meantime, my iPhone app is pretty cool,
financial data is stored on the phone.! and I look forward to getting my sticker!
There is a “wallet PIN” that provides
permission to access! the wallet, and
which is enabled by default (although a
consumer can opt-out of this feature). If
the phone is lost or stolen, the consumer
c a n r e m o t e l y c h a n g e t h e P I N .!
Consumers can also establish a “payment
limit PIN” for purchases.! Finally, Blaze is
enabling a “transaction PIN”.! This is a
bank-provided PIN that may or may not
be demanded by a merchant at the POS.
Finally, consumers are able to remotely
lock their phone at any time – this also
resets the Wallet PIN.

Blaze’s business model is still evolving.!

Some pieces are clear: there is a
transaction fee taken when a movie ticket
purchase is made, and for P2P
transactions. !Presumably, Blaze will also
benefit from the interchange on POS
transactions, although that part of the
business model is not disclosed. The
wallet itself, and the PFM capabilities, are
free to the consumer.

I asked Michelle about her view of the

competitive environment going forward.!
She thinks the most important piece of
the puzzle – and the hardest – is getting
the wallet software right.! This “isn’t
trivial”, she says, given the number of
handsets, platforms, etc.! Delivering an
integrated, open (to multiple payments
types), consumer friendly wallet demands
“intense software”, and companies that
win in this space will concentrate on
supporting a mix of “rich client software
development and hosted services”.

28
Digital Content & Mobile Phones – a Look at Zong

Digital Content & carriers for over nine years.! Rather than
using an aggregator model (aggregators,
Mobile Phones – a Look who evolved to enable the ring tone
at Zong market, are intermediaries standing
between digital content or service
by Carol Coye Benson
providers and the carriers), Zong is
Originally posted July 15, 2009
directly connected to the carriers.! There
are a number of important advantages to
Zong is a mobile payments product from
this, according to David.
Echovox which enables digital content
purchases on mobile phones.! A few
One advantage is that the payment from
weeks ago, I profiled competitor Boku,
the carrier to Zong happens more quickly
and commented on some of the benefits
with these direct connections than with
they offer digital goods merchants.! Last
the aggregator model.! This enables Zong
week, I spoke with Zong’s CEO David
to pay the end merchant more quickly.!
Marcus.! Like Boku, Zong offers
Secondly, simply having one fewer layer
consumer ease of use (leading to higher
in the value chain means fewer parties to
purchase completion rates – a key
compensate, enabling Zong to charge
problem solver for merchants), simplicity
lower rates to the merchant. Finally,
of merchant implementation, broad
digital content merchants working with
global carrier coverage, and a strong
aggregators are exposed to a number of
four-letter consumer brand.
financial and operational risks –
aggregator failure is one.! Payments to
From a payments system standpoint,
merchants may also be delayed for
Zong shares with Boku and others in this
sometimes staggering periods of times
category the defining characteristic of
(many months).
using the carrier’s bill to the consumer as
the means of payment.! Zong gets paid,
Finally – and this is pretty intriguing –
and pays the merchant, only once the
David believes that by avoiding the
consumer has paid their mobile bill: there
aggregator model, Zong may be on track
are different patterns depending on
to establish a different type of economic
whether the underlying consumer phone
model with the carriers in the future.!
account is prepaid or postpaid.! The
Today, no carrier is going to tinker with
carrier is an economic participant in the
the highly profitable ring tone model that
value chain, driving the total cost to the
the aggregators enable.! But some
merchant, including Zong’s “slice”, to
carriers, David says, are open to
30% to 50% of the gross purchase price.
establishing a new business model to
enable payments transactions – as long as
David discussed some of the additional
it doesn’t threaten that ring tone model.!
aspects of Zong’s service that he believes
The long term payoff ?! A separate
give Zong a competitive advantage.! In
transaction type, with much lower carrier
the key area of consumer convenience,
“cuts”, could enable this model to greatly
Zong’s “pin code based flow” is, he
extend the market for mobile payment
believes, superior to a “reply to text
platforms.! Think of it this way.! Today,
message” based flow, and drives a claimed
The New York Times (which has played
15% higher payment conversion rate.
with any number of digital content
models) is not going to try a model where
But the critical differentiating element of
their product, they believe, is the nature a subscription – or an article purchased –
of Echovox’s! relationship with global nets a carrier (or a payments service
working with carriers) half of the
carriers.! Echovox has been working with
consumer revenue.! But – who knows? –

29
Digital Content & Mobile Phones – a Look at Zong

maybe they would if that cut were, for

example, 10%.! More than a merchant
discount rate, less than a digital content
rate.

David summarized his comments on the

aggregator model by saying that “it
simply doesn’t scale” to match the market
potential.! Aggregators, in his view, are a
bottleneck limiting the growth of the
market.

I asked David about the likelihood of

Zong expanding into non-digital goods
purchases, P2P payments, or funding
sources other than carrier bills.! He
thinks Zong has a “sweet spot in social
networking and gaming”, but says “we do
have broader ambitions”.

In my view, although it is interesting to

look at the competition between Zong
and its closest peers, such as Boku, the far
larger question is how these types of
services will compete with other types of
payments, including cards and ACH type
bank network payments.! Three years
from now, will most mobile, low-value,
digital content purchases be made
through carrier billing arrangements, or
through mobile-enabled card and bank
account payments?! I’m not sure I know
which side of that bet I’d take!

30
Mobile Payment Gateway? - A Look at Billing Revolution

Mobile Payment In contrast to many of the mobile

payments products for online purchasing
Gateway? - A Look at (usually of digital goods) , the operator is
Billing Revolution not a direct participant in the service and
gets no revenue other than whatever
by Carol Coye Benson
consumer revenue comes from web
Originally posted October 19, 2009
access.
Billing Revolution is an interesting
BR has two pricing/service models – the
emerging back-end player in mobile
first is for mobile merchants who do not
payments. I spoke last week with co-
already have a merchant account.! For
founder Mike Dulong.
these customers, BR handles the full
payments process! The pricing in this
Billing Revolution’s helps eCommerce
model is 3.5% plus 50 cents per
merchants establish a mobile presence:
transaction, with no other charges. For
“like web checkout optimized for the
mobile merchants who already have a
phone”.! Once a merchant chooses to use
card acquiring account, there is a second
Billing Revolution, BR then supports,
service model priced at 50 cents per
behind the scenes, the process of
transaction.
capturing credit card information.!
Another way to think of this is as a
BR has a “mobile single click” process.! If
payments gateway for mobile online
a customer clicks “remember me”, BR can
purchasing.
identify them the next time they visit that
site, saving them from having to re-enter
BR prides themselves on having created a
their card data. Technically, they can
very simple product/process for the
enable this for a consumer visiting
merchant – their goal is to enable the
another site, as well – but Mike
merchant to easily conduct mobile
appreciates that there will be a need to
transactions.
support consumer options here (change
card number, block certain sites, support
The approach is entirely based on
browser access to purchasing sites.! multiple cards, etc) – exactly how will
best be done is still evolving.
When the consumer wants to buy
something, they are presented with a
BR is investing heavily in security &
screen asking for credit card data.! BR
fraud management capabilities.! They can
manages the process of collecting the
identify risky transactions, and apply
data (it is encrypted and reportedly fully
additional control measures to limit risk.
secure; BR is also “PCI Compliant”) and
passing it on to gateways or acquirers.!
Their current customers are all selling
(Most typically, they are not the
digital goods. BR’s immediate value
merchant of record, although apparently
proposition is a very different pricing
there are some situations where they are.)
model than the current operator-centric
pricing (40% to 70% of gross), as well
After the consumer enters the credit card
offering merchants a fully secure, PCI
data, they are taken to a screen giving
compliant mobile payments platform.! Of
them what Mike referred to as “CRM
course, they can’t compete with the
Options” – canceling the order, getting a
operator-centric payments products in
receipt, etc.! BR is invisible to the
terms of marketing or consumer
consumer; there is no consumer
coverage.! As an interesting data point,
registration process or visible account
their average purchase price is $11.
with BR.

31
Mobile Payment Gateway? - A Look at Billing Revolution

The current product can support physical

goods as well, and Mike thinks they have
a big opportunity with physical goods
e C o m m e r c e m e r c h a n t s.! Many
eCommerce merchants, according to
Mike, “have not yet thought through the
issues around mobile credit card
payments”.! They are in discussions
currently with several of the eCommerce
platform providers, as well as some of the
big physical goods eCommerce
merchants.

At Glenbrook, we’ve been fascinated by

the gateway model for some time.! The
word is used to mean different functions
within different parts of the payments
industry.! At an abstract level, you can
say a gateway is a “front end to a front
end” in the payments process – a highly
specialized piece of value-added
processing tailored to the needs of a
particular merchant vertical, or, in this
case, to a particular form of commerce.!!
What is generally true is that this is a
profitable business model – which will
make it particularly interesting to watch
BR’s progress.

32
Money In The Bank? A look at CashEdge’s POPmoney

Money In The Bank? A Understanding how POPmoney works

means under standing their basic
look at CashEdge’s platform. ! CashEdge effects the P2P
POPmoney transfers by “doubling up” – doing two
payments transactions: one an ACH debit
to the sending consumer’s account, and
by Carol Coye Benson
Originally posted June 25, 2009 one an ACH credit to the receiving bank
account. ! (This doubling up is common
There are a lot of mobile payments with new payments products – for
example, PayPal or Decoupled Debit).!As
companies – and a lot of prepaid/mobile
combo products – that are focusing on we all know, the ACH debit half is the
person to person, or P2P payments. !It’s tricky piece of this transaction. ! An
not surprising – this is a payment domain originator of an ACH “ad hoc” consumer
still dominated by cash and check. debit is exposed to both fraud risk and
NSF (insufficient funds) risk. ! There are
Introducing a new P2P product also
avoids all the messy complexities of several components to the fraud risk.!
terminals and the point of sale. ! Of CashEdge is nicely covered from the first
course, the challenge in this domain has major source of fraud: a consumer giving
always been the business case – another consumer’s bank account
information. ! Since the CashEdge
particularly for domestic P2P transfers.!
There hasn’t been a lot of evidence of transaction starts at the consumer’s bank,
consumer interest in paying to pay – or that bank in effect can vouch that an
receive – payments from friends and account belongs to the consumer in
family. question. ! ! There are more complicated
fraud schemes which can still be
So it was particularly interesting to see perpetuated, and the management of this
an important incumbent in the P2P is part of what CashEdge does for the
arena, CashEdge, step into the mobile banks.
P2P arena with their new product,
POPmoney. ! CashEdge is a behind-the- Interestingly, the consumer sending bank
does not vouch to CashEdge for good
scenes player that supplies banks with
services to allow their customers to move funds in the consumer account (you’d
m o n e y! e l e c t r o n i c a l l y. ! T h e think they could, but maybe it is too
Company! ! started by enabling transfers comple x to hook into the debit
from a customer’s account at one bank to authorization infrastructure of the bank).!
CashEdge offers options on its product to
the same customer’s account at another
bank – so called “me-to-me”! transfers.! deal with this: one is a transfer which is
They have since expanded!the offering!to not good-funds-guaranteed (in other
handle third party transactions (“me-to- words, CashEdge can reverse it) and one
you”). Several hundred banks are which is guaranteed, but where the
second leg of the transaction (the ACH
currently their clients, including!seven!of
the largest! ten! banks. ! CashEdge credit to the receiving bank) is delayed
transferred over $50 billion for banks in for a few days in order to manage that
2008. risk.

The POPmoney product, which again So, back to mobile. How will banks offer
this to consumers? ! Platt believes that
will be offered to banks, is, from their
viewpoint, simply a logical extension of most will make it a function of their
their platform. ! I spoke with Neil Platt, mobile banking offerings. ! Some may
SVP & General Manager, US Banking, create a stand-alone product. ! The very
about the launch. attractive feature is that the only thing

33
Money In The Bank? A look at CashEdge’s POPmoney

the sending consumer needs to know is

the email address or the! mobile! phone
number of the recipient. ! The recipient
will get! an email or text! message along
the lines of! “you’ve received funds from
(name),” and will direct them to go to
their financial institution or the
POPmoney.com hub to collect the
payment. ! (There will be options for
consumers who have accounts at banks
who participate in the service, and also
for consumers who don’t.)

Consumer pricing, of course, will be left

up to the bank. !Experience tells us that it
is unlikely that most consumers will pay
for this – but there are people that think
that “mobile changes everything”, and in
a mode of spontaneous, small-dollar
purchases (can you say ring tone,
anyone?) agreeing to pay some small
transaction fee to send money might yet
work.

I think it’s likely that banks won’t be able

to charge explicitly for this service, and
will end up incorporating it into their
basic account package. ! (That’s what
happened to me, when I lived recently in
Canada. ! The Interact P2P transfer
ser vice was bundled – up to X
transactions per month – into my overall
Bank of Montreal account package.) ! So
why would a smart bank provide
consumers with yet another service with
no incremental revenue? It could be that
those smart bankers are getting very
nervous about the non-bank mobile
payments offerings - and think letting
consumers send money out of the bank
as a good way of keeping money in the
bank over the long run!

34
Beaucoup Bucks? - A Look at Boku

Beaucoup Bucks? - that previously didn’t exist. The failure of

most micropayments schemes to date can
A Look at Boku most simply be attributed to the basic
by Carol Coye Benson “information wants to be free” concept,
Originally posted October 19, 2009 which proved to be the case with
computer-centric consumers of
Boku announced a new mobile payments information.
product yesterday, along with a set of
acquisitions, new funding, and a new But this isn’t about computers, and it’s
management team. The offering is not about information – right now, at
ambitious, and dead-set against the least. It’s about phones, and
emerging global market for spontaneous entertainment. If “information just wants
purchases related to online gaming. to be free”, remember that “kids just want
to have fun”. The model here is ring tones
Niche, you say? I’m not so sure. There’s a – a market that is very much still alive (as
lot to be interested in here. Of course, I evidenced in my life by a trip to the mall
may be biased – as a Francophile (at times yesterday with three thirteen year olds –
openly, at times secretly), I like the all playing their ring tones to each other
wordplay. And strong, four letter in my much-too-small car).
payments brands seem to work…
What else has Boku got right? Matching
Here’s what caught my eye: the drop-dead easy pitch to consumers is
a pitch to sellers (“publishers”) that makes
Boku is drop-dead easy for the consumer. it simple to access a global market of
The online demo is stunning in its c o n s u m e r s. T h e m i n d - b o g g l i n g
simplicity. Never, ever, underestimate the complexity of cross border commerce
importance of ease of use for a consumer. and payments has already provided
Especially for spontaneous purchases. In lucrative opportunities for companies and
my opinion, this is right up there with 1- networks willing to step in front of the
Click. complexity and offer simple products.
That is what the global card networks did
It enables “new money”. While many new so successfully for tourists, and what
payments offerings are structured to PayPal has done so successfully for online
provide consumers with alternative ways eCommerce. In an interview with VP of
of paying for things they are buying now, Product & Marketing Ron Hirson, he
Boku is primarily about enabling the sale referred to this as “iceberg-ing”. A
of stuff that hasn’t been sold before – all publisher will be shown exactly the fees
those “extras” (costumes, awards, points, for a given country and carrier, and
etc.) that the new class of on-line “free” (equally key) be given easy-to-use tools to
games will allow users to buy. set pricing and therefore control their
available revenue. Boku will handle all the
Those of us with long histories in the c o m p l i c at e d d e t a i l s b e h i n d t h at .
payments industry may well say “hmmm, Transparency plus simplicity – nice!
sounds like micropayments to me”. Now,
the term may cause you to twitch – there So, you say – it still sounds like a niche?
is a long and painful histor y of How big can online gaming be, after all?
micropayments failures. But the lure of Even if I agreed with that, here’s why I’ll
micropayments – what has brought be watching Boku as it moves forward:
investors and developers back to the
concept time and again – was this very It’s defining itself as a payment platform.
notion of enabling a class of commerce Today, the platform has limited funding

35
Beaucoup Bucks? - A Look at Boku

options (the purchase is billed to your

phone bill) and a risk management
approach that is obviously optimized for
digital goods. There are inherent limits to
these models. Larger dollar purchases
will run into well-known problems with
carriers extending and managing credit;
non-digital goods have entirely different
f r a u d m a n ag e m e n t a n d l og i s t i c s
requirements.

But platforms, once established, can

support growth both horizontally and
vertically. A Boku “wallet” of the future
could easily offer consumers choices of
funding, and make its way into other
classes of goods. Perhaps not the
purchase of plasma televisions (at least
not right away), but certainly other forms
of digital content – music, video and
ebooks.

This will take them straight into the

Apple orchard – so it will be fascinating
to see how Boku evolves and works (or
doesn’t work) with the iPhone App store
and its emerging competitors. As an avid
ebook/Kindle user (making way too
many spontaneous purchases of digital
content!) I’m keeping my eye on Amazon
in this market as well.

Finally, there is the confusing, but

intriguing, world of social networking,
with hundreds of unanswered questions
about how payments will be made and
received among participants in a network.
Boku has some of the pieces necessary to
play. Let’s stay tuned!

36
About the Author

Carol Coye Benson

Carol offers clients over 25 years of experience in product, marketing, and
strategy development with leading financial services providers in both wholesale
and retail banking. She has offered management direction to companies
providing corporate cash management, security and authentication, and payment
systems processing.

Before founding Glenbrook Partners, Carol served as a managing director of the

Global Institutional Services division of Deutsche Bank (previously Bankers
Trust), where she oversaw marketing, client online services, and Internet
development. At Visa International, she
led a group conducting early work on
the use of credit cards online, and a
project that pioneered database
marketing and related consumer-
privacy issues. Carol also founded and
managed Visa's European product-
development office, where she led a
series of electronic-commerce and chip-
card projects designed to bring European banks online. Prior to her career with
Visa International, Carol spent twelve years with Citibank, where she managed
the development and market introduction of new payments products. Carol
began her career as a corporate lending officer for large multinationals at both
Bank of America and Citibank.

In addition to her work as a consultant,

Carol is the Partner in Charge of
Glenbrook's Payments Boot Camp
program. This unique program
provides executive training for
professionals in the payments industry.
Glenbrook Payments Boot Camps are
held throughout the year both as public
events and as customized, private
sessions for clients.