Mercantile Bank of Michigan is riding the wave of free publicity from being first to market (probably) with iPhone-based P2P payments powered by PayPal. That's a triple play in both alliteration and PR value. See the teaser ad on the bank's website below (first screenshot).

The new service, a joint effort from PayPal and S1, is expected to go live in early 2010. It will allow customers to send money directly from their iPhone to any other individual on the worldwide PayPal network. All the sender must know is the recipient's mobile phone number or email address. According to the five-question FAQ on the landing page (see second screenshot), the service will be available to all MercMobile customers and will be free of charge.

Mercantile Bank has become one of the most innovative banks we follow. Congratulations to CIO John Schulte and his team for leading the industry on several fronts and providing great material for Netbanker (previous posts here; note 1).

------------

For more on the P2P payments market, see our latest Online Banking Report, published earlier this week, Making the Case for Person-to-Person Payments. 

Mercantile Bank's powered-by-PayPal mobile P2P app (7 Dec. 2009):

Mercantile Bank of Michigan homepage (8 Dec. 2009):
Note: MercMobile P2P Payment teaser in lower left and home-based remote-deposit capture on the top banner.

P2P payments landing page (link)

Note:
1. Mercantile even earns its very own category at Netbanker: <netbanker.com/mercantile_bank_of_mi>. 

When CashEdge demo'd its new person-to-person (P2P) payment solution, POPmoney, at Finovate in September (video here), they said they expected four clients to be live by year-end. It looks like the first one is there, or almost there.

First Hawaiian Bank has a lengthy POPmoney FAQ posted on its website (see screenshot  below). Pertinent details on the new POPmoney service include (refer to full text below):

• Cost is $1 per transaction
• Users can send money via email address, mobile phone number, or directly into the recipient's bank account (if known)
• Online banking customers will find it in the Transfers section under a tab entitled Send Money
• P2P payments are limited to $5,000 per month subject to a daily maximum of $1,000 via email/mobile or $2,000 transferred directly to another bank account
• Payments can be scheduled up to one year in advance

For more on the P2P payments market, see our latest Online Banking Report, published 15 minutes ago: Making the Case for Person-to-Person Payments. 

First Hawaiian Bank's POPmoney FAQ (link; 8 Dec. 2009)

FAQ text:

What is "POPmoney"?
"POPmoney" is a feature of the FHB Online® banking service that lets you send money to someone electronically via their email address, mobile phone number, or directly to their bank account. Payments to someone's email address or mobile phone number are accompanied with a personalized message letting them know that the funds are available for electronic deposit to wherever they choose, while payments to someone's bank account are deposited automatically.

How much does POPmoney cost?
Sending money via POPmoney costs only $1.00 per transaction.

How do I sign up for POPmoney?
POPmoney is available to customers through the FHB Online service and can be accessed via the "Send Money" tab within the "Transfers" section. If you are not currently enrolled for FHB Online, visit www.fhb.com and click on the Online Banking "Enroll" button in the upper left-hand corner of the screen. If you are already enrolled for FHB Online, sign onto FHB Online, go to the Transfers section, and then click on the Send Money (Personal Only) link. Follow the three-step sign-up process:

• Step 1 POPmoney Agreement - Accept the FHB Online POPmoney amendment.
• Step 2 Contact Information - Your email address and mobile phone number are required as part of the sign-up process. You will need to verify the email address we have on file is correct. If it is incorrect, please close the window and click "Update Email Address" within the Customer Service tab to update your email address. After confirming your email address, return to the "Transfers - Send Money (Personal Only)" link and you will also be asked to provide a mobile phone number as part of the sign-up process.
• Step 3 Email/Mobile Phone Validation - We will send verification codes to your email address and mobile phone. Please check your email and your mobile phone for these codes and enter them in the boxes shown on-screen to complete the sign-up process.

Once you've completed the steps above, you will receive a confirmation message indicating that you have successfully signed up for POPmoney. Click "Continue to POPmoney" to start using the service.

Who can I send money to?
You can send money to someone just by knowing their mobile phone number or email address. The person receiving the notification will be able to deposit the money to any personal checking, savings, money market checking, or money market savings account at FHB or nearly any other U.S. bank. You can also send money directly to someone else's bank account if you have their bank routing and account number information.

How does the recipient receive and deposit funds?
If you are sending money to a mobile phone or email address, the recipient will receive a notification with a personalized message indicating that you have sent them a payment. The recipient has two ways of depositing the funds:

• If the recipient is a First Hawaiian Bank customer, they can deposit the funds into their account via the FHB Online service. Upon enrolling, or if the recipient is already enrolled for FHB Online, they can click on the "Send Money (Personal Only)" to access the POPmoney feature. Any payments that have been sent to them will be listed under the "Incoming Payments & Alerts" tab. They can then select an account to which to deposit the funds. They can also designate whether future payments should be automatically deposited to this account.
• If the recipient is a not a First Hawaiian Bank customer, or would like to deposit the funds into a non-FHB account, they can visit www.popmoney.com/FHB. They will be prompted to provide their mobile phone or email address along with their bank account information for the payment to be deposited.

Can I send money internationally?
No, you can only send money to individuals via their accounts within the U.S.

What is the maximum transaction amount I can make via POPmoney?
The maximum daily amount allowed for POPmoney transactions is the current available balance in the source account (plus any available credit in an associated Yes-Check^SM account if applicable) up to the daily limit mentioned below, whichever is less. This includes any single transaction or the total amount outstanding or "in process." For additional information, see below:

Sending Money to Bank Account

Maximum Amount

Daily

$2,000.00

Monthly

$5,000.00

Sending Money to Mobile or Email

Maximum Amount

Daily

$1,000.00

Monthly

$5,000.00

Can I set up recurring or future-dated transactions?
Yes, POPmoney transactions may be scheduled up to 365 days in advance of the date the transaction is to be made. Automatic recurring transactions may also be scheduled for substantially regular intervals (e.g., monthly) in the same amount between the same two accounts. You can schedule recurring transactions to be made weekly, every other week, twice a month, monthly, every four weeks, every other month, quarterly, twice a year, and annually.

How far in advance can I schedule a transaction?
You can schedule a POPmoney transaction up to one year in advance.

When are POPmoney transactions processed?
Transactions will be processed on the date you specify up to a year in advance. Transactions will take approximately three business days to process. Transactions scheduled to process on a weekend or holiday will be processed the previous Business Day.

What is the cut-off time to submit a transaction?
The cut-off time for submitting transactions is 7:00 p.m. HT each Business Day. Transactions submitted after 7:00 p.m. HT or on weekends or holidays will be processed the next Business Day. A Business Day is every calendar day except for Saturdays, Sundays, and bank holidays.

What is the cut-off time to change or delete upcoming transactions?
The cut-off time to change or delete an upcoming transaction is 7:00 p.m. Hawaii Standard Time the previous Business Day prior to the send date.

When does the transaction get debited from my account?
The transaction debit request is initiated on the "send date" but will not post against your account for one to two days.

What happens if I set up a transaction but do not have sufficient funds in my account on the "send date?"
If, on the "send date," there is insufficient balance in your account to make a transaction you authorized, we will delay the transaction and try again on the next Business Day. If there is still insufficient balance to make the transaction, we may either refuse to pay the item, or we may make the transaction and overdraw your account. In either event, you will be responsible for any non-sufficient funds ("NSF") or overdraft charges that may result.

How many people can I add to my list of contacts?
You may add up to a total of 50 contacts.

I used to send money to third parties via the External Transfers function. What will happen to this information?
As part of introducing POPmoney, we have migrated your third-party information and activity from External Transfers to POPmoney. This includes contacts or accounts, as well as upcoming and previous transactions. Categories for previous transactions will not be migrated and will need to be re-defined.

How do I disable POPmoney?
You may disable POPmoney by calling us at 643-4343 (1-888-643-4343 from the Continental U.S., Guam, and CNMI). Please note that disabling POPmoney will also disable your access to External Transfers.

It appears that the Obopay/Citibank co-branded service is being shut down. From the sparse note on the webpage <citi.obopay.com> (see screenshot below), it doesn't sound like a temporary hiatus: 

As of Dec. 22, 2009, "Citi Obopay" will no longer be available.
If you would like to use the Obopay service go to www.obopay.com.
The service available at www.obopay.com has no affiliation with Citibank.

The companies have been working together on Obopay-powered mobile payment for more than three years.

Citi Mobile SVP Marylou Dowd said on Thursday in American Banker that the Obopay tests were concluded this summer. Not coincidently, Citi's mobile joint venture MMV announced last week that it was partnering with CPNI Inc. of Toronto to build a mobile P2P payments service.

Obopay's website still shows Citi Obopay on its Financial Institutions page (see inset above). But Citigroup, which invested at least twice in Obopay in the July 2007 C-round and April 2008 D-round, is not listed on Obopay's investors page.

The site was never publicized by Citibank. Traffic peaked at 7,000 unique visitors in Feb. before falling so low that Compete could not measure it after April 2009:

Source: Compete, 3 Dec 2009, link

For future reference, we've archived the website screenshots below.

Citi Obopay homepage (3 Dec 2009, 4 PM Pacific)
Note: The <citi.obopay.com> URL now redirects to the Obopay homepage.

How Citi Obopay Works page <citi.obopay.com>

Get Citi Obopay page <citi.obopay.com>

Citi Obopay Fees page <citi.obopay.com>

Note: For more info on mobile banking, see our Online Banking Report: Mobile Banking via iPhone (March 2009) as well as our earlier reports on Mobile Banking (Feb. 2007) and Mobile Payments (April 2007).

Are you tired of hearing "there's an app for that" yet? Well, get used to it, we are still at the beginning of the great app rollout. 

Even as recently as our iPhone Banking Report published in March, I assumed most financial institutions would have a single iPhone app. One bank. One app. It's how the Web worked, for the most part.  

But when Starbucks unveiled a dedicated app just for its stored-value card (separate from the main Starbucks brand app), I realized that I wasn't thinking big enough.

For example, in August PNC Bank become the first U.S. financial institution to offer multiple apps when it released an app for its Gen-Y-focused Virtual Wallet. That was followed last week by Wells Fargo when it unveiled its cash-management app for larger businesses, CEO Mobile (screenshot below; press release).

Now, I believe that each major bank will roll out dozens of apps, perhaps hundreds, to support their business lines, major products and large segments. There will be an app for each major affinity credit/debit card, one for students, one for small businesses, one for large business, one for senior checking, one for home equity lines, and so on.

And, if that's not enough, there could be a dedicated app for each stock broker, loan officer and mortgage broker. There could be one app for every branch, neighborhood, or region. Right now the search-and-discovery tools at Apple would implode under the weight of all these apps. But they'll figure that out. It's worth billions to them. 

Today, more than 100,000 apps are available for the iPhone. But fewer than 20 are for U.S. financial institutions. It's conceivable that in the banking vertical itself, well over 10,000 apps could be developed, possibly many tens of thousands (see notes 1, 2). 

Wells Fargo is first U.S. bank with a cash management iPhone app (12 Nov 2009)

Notes:
1. They won't all be iPhone apps. The mobile market is too big to have it all consolidated at one player. 
2. It's also conceivable that we'll move away from the dedicated app framework, and users will be able to configure their phones with hundreds of info feeds without needing to install an app for each one. More like the iGoogle portal model.  It will be fascinating to see how it plays out.

The biggest surprise of the year in the world of alt-payments is PayPal's newfound reach into banking circles as evidenced by their agreements with S1, FIS, and FirstData announced at last week's Retail Delivery conference.

But a huge question remains: Will banks play ball with PayPal or will they provide the same functions via home-grown solutions or non-PayPal alternatives such as CashEdge, Fiserv, or Visa/MasterCard?

I don't think anyone has that answer yet. There are simply too many variables. But if you believe there's no way a bank would use a "powered by PayPal" solution, read this quote by Mercantile Bank of Michigan's CIO, who plans on launching the S1/PayPal person-to-person mobile service next year (note 1):

"(PayPal) is a network, it doesn't scare me at all. They're never going to steal significant deposits out of our bank and keep [them] in PayPal accounts. Visa and MasterCard probably look at PayPal as the enemy, and they probably should, but that's their problem, not mine."
   -- John Schulte, CIO Mercantile Bank of Michigan in a
       Nov. 10 article from Digital Transactions

Note:
1. You might remember Mercantile Bank from our May post lauding its fee-based consumer positive-pay service.

My credit card number was stolen again. It's the third or fourth time since the Internet came along. It's annoying, and a little disconcerting, but not a major problem, thanks to efficient card issuers who take the info, credit my account, and send me a new card. On a ten-point "hassle scale," where 10 is having your hard drive crash, it's only a 2 or 3.

And my previous stolen cards resulted in little financial loss to the issuer, other than the cost to process the chargeback and reissue the plastic. In those cases, either the issuer caught the fraud before anything was shipped, or the items purchased were digital (online subscriptions) and didn't result in any lost inventory.

But this time was different. Someone used my card number to buy a PS3 gaming console and three games at a Best Buy in the Bronx. Assuming Best Buy follows proper procedures, Wells Fargo will be out more than $600 just for the merchandise. All told, with the cost of the investigation and processing, it's probably an $800 to $900 loss to the bank and merchant.

Wells Fargo is generally very good about suspicious charges and usually calls us. I've had the card for almost two decades, and it's been othe primary card for both my wife and me for much of that time. WF knows our purchasing habits better than we do.

Yes, we get to NYC at least once a year, but our charges are usually travel- and tourist-related ones in Manhattan. And we probably visit Best Buy in Seattle a couple times a year (we have teenage boys), so the gaming system charge is understandable. But it's highly unlikely we'd buy a system while visiting NYC, and we've never visited the Bronx, so the authorization request likely triggered flags.

But unless there was inside theft, the bank's authorization system evidently decided the $10 in interchange was worth the risk. Bad call this time, but probably right 99%+ of the time; otherwise, they'd be out of the card business.

What's mobile have to do with it?
But if Wells Fargo had a real-time connection to me via mobile phone, they could have texted me for an OK (similar to the screenshot above, which is a text-based activity request to Wells Fargo). If it really had been I who stood at Best Buy's register, it would have taken a second to reply "yes," and the transaction would have gone through.

Of course, in this case, I would have said 'no, I'm in San Francisco right now.' Or even better, in the not-so-distant-future, if I'd allowed the bank to track me via GPS, they would have known, without even contacting me, that I was 3,000 miles away from that store. Either way, the bank saves nearly a grand from that single text message. Multiply that by the millions of fraud purchases every year and you have serious money, billions by most estimates.

So yes, mobile banking (really mobile payments) does have a robust and tangible business case from fraud reduction and customer service savings. The technology is in the hands of the users now, and most know how to use it. So, let's get moving.

Note: For more information see our Online Banking Report on iPhone Mobile Banking. 

Day two of the Mobile Commerce Summit ran just for the morning (see Day 1 highlights), but anyone who overslept missed the highlight of the conference: the much-too-short panel discussion on revenue opportunities that started at 8:15 AM and ended at 9:00 (note 1). 

Panel: Mobile revenue opportunities 

• Drew Sievers, founder & CEO, mFoundry
• Joe Salesky, chairman & chief strategy officer, ClairMail
• Cameron Franks, director, Mobile Commerce Americas, Sybase 365
• Jayatsu Bhattacharya, SVP business development, Mobile Money Ventures (Citigroup & SK Telecom joint venture)
• Mustafa Patni, former director of mobile banking, WaMu

Observations from the panel:

• POS payment services: NFC at point of sale
• Value-added services
• Fees for mobile banking services: transaction, monthly, or annual
• Premium accounts with a rich mobile feature set
• Stock/investment trading (Citi Hong Kong is able to charge a premium for mobile trading)
• Bill pay: expedited payments
• Person-to-person (P2P) payments
• Much of the revenues will be indirect, from deepening and improving customer relationship
• Remote deposit capture for businesses
• Merchant advertising: offers to customers as they shop
• Loyalty programs: driving customers to certain merchants with alerts, offers, and discounts
• Lots of cost-saving opportunities: self-service customer service, moving bill payments to on-us transactions, loyalty program management, security, fulfillment, marketing, call deflection

Panel: Smartphone impact on the customer experience 

Armin Ajami, VP retail Mobile channel, Wells Fargo

• Almost half of smartphone users use the mobile Web daily (source: ABI research, Feb. 2009)
• 18% of U.S. consumers have smartphones
• 263,000 apps now available for smartphones, predicted to grow to about 700,000 by 2013
• There are 27 different app stores today
• Mobile-optimized website <wf.com> launched in July 2007, text banking launched Oct. 2007, native iPhone app launched May 2009
• Funds transfer on mobile-optimized websites takes 2 minutes with 5 clicks, no zooming or scrolling vs. 10 minutes via iPhone mobile browser with 7 clicks, 5 zooms, 7 scrolls and 10 minutes

Alain DeSouza, sr. mgr., market development solutions marketing, Research in Motion

• Globally, 12% to 14% of mobile phones sold now are smartphones; in North America, it's now above 20% (22% to 26%)
• Blackberry app store officially launched April 1, 2009
• Not excited about putting NFC chips into handsets (adds cost); will do it when it makes business sense (last year it was a top-5 opportunity, this year more of a top-20)
• P2P transfer is not a killer app, but could be important for adoption
• Be careful not to waste bandwidth in your app development

Note:
1. Note to conference organizers: Never start a session at 8:15 AM after a Thursday night in Las Vegas.

About 100+ folks gathered in the brand new M Resort near Las Vegas for the third annual Mobile Commerce Summit by SourceMedia. Jeff Dennes from USAA and Jim Simpson from City Bank of Texas, both provided an extraordinary amount of metrics on their mobile rollouts (details below).

The biggest innovation of the day was iPhone-enabled remote check-deposit capture soon to be available from USAA (official launch June 25; see picture below). 

Session highlights
Jeff Dennes, executive director, mobile money & movement, USAA:

• 7.9 million logins so far this year vs. about 7 million in all of 2008
• Highest week to date, 476,000
• 4.8 million USAA members own mobile; 1.5 mil use it to access Internet
• 20% say mobile is primary channel
• 11.4% of members using USAA mobile
• Why so much usage: no branches, members trust USAA, extremely mobile military-oriented customer base, more technically capable than average
• Have SMS, Firethorn downloadable app, WAP <mobile.usaa.com>, native iPhone app
• Native iPhone app released 2 weeks ago: Went to number 1 in first week with 55,000 downloads; 45,000 logins in first week, 93,000 in second week
• iPhone app built in-house and has patents filed
• Will be launching first iPhone remote deposit-capture app on June 25 (see photo above); tune in to the bank's webcast at 7 PM Central time at <budurl.com/usaaannouncement>
• Current iPhone app has insurance functions: filing a claim, roadside assistance
• Personal financial management functions coming soon
• With mobile rollout, are seeing call volumes going down
• 35% of access to mobile site comes from iPhone, 35% from Blackberry
• Will be building app for Blackberry; others as demand warrants (e.g., Pre)

Jim Simpson, VP IT, City Bank of Texas

• Mobile banking is powered by ClairMail (use Jack Henry for core processing and online banking)
• Launched 17 Oct 2008 with balance, history, funds transfers, "call me," near-real-time alerts (not batch) including reward-checking status/summary (sent out 7 days before end of checking cycle telling users how they stand on meeting necessary activity levels
• Have microsite: www.citybankmobile.com
• Made a major cross-channel marketing effort at launch: TV, print, radio, in-branch, and so on; used it to differentiate themselves in competitive Lubbock market
• 10.2% online banking penetration
• 64% use weekly
• Average age is 32
• Average account balance on primary account is over $5,000
• More than 3,000 active users
• Limited use of mobile browser site, bnkngo.mobi; text-message banking is much more popular (also have gocitybank.mobi); get 5,000 balance requests via text messaging each week vs. 25 or 30 mobile Web logins
• Real-time alerts (vs. batch) is one of the key benefits that users like; they often can text message a confirmation of the transaction while still standing at the checkout counter; not always that fast, sometimes can be a few minutes later
• Coming: End-of-day, text-based account summary, "payit" loan payment via text (in response to text alert), iPhone/Blackberry apps
• How to make money? Adding ad-supported links within text messages; e.g., link back to the restaurant where the transaction originated

Ginger Schmeltzer, SVP, SunTrust

• Currently at 2.5% penetration of online banking users powered by Firethorn
• 33% access via iPhone; 33% via Blackberry
• Have an RFP out now to find vendor(s) to increase functionality
• See real benefits from using mobile channel to decrease fraud

Patrick Reetz, VP & director, online banking, M&I Bank

• Rolled out mobile in Oct 2008 powered by MShift
• Within 11 days, achieved one-year goal of 2% penetration of online banking users (longer term, their initial goal was 10% by YE 2010)
• Currently have 7% penetration

Ellen Johnson, SVP retail online services, Huntington Bank

• Have just under 25,000 users of mobile Web banking, launched in June 2008
• Number of users of text banking surpassed mobile Web in April, launched 6 months ago
• Mobile banking customers are 38% more profitable; text banking, 13% more profitable
• Call center contacts per active user dropped 3.4% in first 6 months
• Have a mobile microsite for marketing

Juli Anne Callis, president & CEO, National Institutes of Health Federal Credit Union (previously at Keypoint Credit Union)

• At Keypoint Credit Union, even usage between iPhone and Blackberry access
• Keypoint powered by mShift and will be using mShift at her new CU
• Launched on Facebook Nov 2007 (OBR Best of Web winner)
  

Amy Johnson, channel manager -- CEO Mobile, Wells Fargo

• Launched 2 years ago (April 2007), and Wells Fargo remains the only major U.S. bank offering full corporate mobile banking
• Mobile Web-based system
• No charge except certain text messages (and those fees may go away)
• No set-up process -- just log in at mobile site with existing online credentials
• Will not disclose usage, but are targeting top-tier customers: top 10%-15%
• Access: 30% iPhone, 50%+ BlackBerry -- no Android so far
• $2.5 billion in wire approvals via CEO Mobile in 2008

Kevin Morrisson, AVP card products, H&R Block

• Using text messages to defer calls to call center (currently receive 80 million annually), especially people checking to see if their refund has arrived.
• Program was piloted this year and is expected to roll out nationwide later this year. Found dramatic decline in voice calls from test group.
• Mobile program powered by Metavante/Monitise joint program. 

Rebecca Mann, director of strategic alliances, Western Union

• Using mobile to replace either the sending or receiving part of a money transfer
• Partnering with US Bank for international remittances

Lisa Stanton, CEO, Monitise America

• Can do more secure services within an app compared to mobile Web or SMS

Matt Krogstad, VP business development, M-Com

• Critical for banks to be point of registration and source of funds
• Should be able to register outside online banking -- via call center, ATM along with mobile phone
• In Australia, mobile money transfers was slower to take off, approx. 18 months after adoption of mobile banking

Clint Heyworth, attorney, consumer finance group, Chambliss, Bahner & Stophel

• One-to-one relationship with phone (e.g., you have it with you) makes it better for security compared to PC where others have access
• Not a lot of legal differences between delivering banking services via mobile vs. online
• Don't expect to see specific regulation regarding the mobile channel; will likely be the same regulations as for online banking

Tom Wills, senior analyst, Javelin Strategy & Research

• Security is single biggest factor inhibiting mass consumer uptake
• Only 500 pieces of malware have been identified so far in mobile vs. thousands of new ones every day online
• 47% of respondents are uncomfortable with mobile security (Mar 2008 data)
• Main concern is hackers, mentioned by 73% of those above
• Expects anti-virus software makers to build mobile versions

Rebecca Sausner, editor, Bank Technology News

• Total revenues for mobile banking vendors this year will be $26 million (source: Aite)

Sean Moshir, CEO, CellTrust (also mobile banking sub-committee co-chair of Mobile Marketing Association)

• 66% of consumers still not yet comfortable using mobile device for financial transactions (source: 2009 KPMG Global Consumer Survey)
• 7% said they would pay a nominal fee to access online banking services via mobile phones (source: 2009 KPMG Global Consumer Survey)

While working my way through the RSS backlog tonight,
I found a post from Rob Findley at The Bank Channel, I wish I'd seen a week ago. It would have made a nice example in our latest Online Banking Report on the iPhone and other mobile applications. 

Last month, Dutch giant ING released a Google Android mobile application called ING Wegwijzer (see translated page below), that goes one step beyond the iPhone's GPS-enabled ATM finder apps.

In the ING (Netherlands) version, you have three choices of how to view the nearest ATMs (see below):

• List
• Map (regular or satellite)
• Camera

The camera option is very cutting edge. Users point the camera in their G1 mobile phone camera (inset) and the app overlays a pointer to the nearest ATM (see below). The application works for all ATMs, ING-owned and others, but only in The Netherlands. 

The application was developed for ING by SprxMobile using technology from Australia's Austria's Mobilizy.

I saw a Japanese startup demonstrate a broader mobile shopping app at TechCrunch50 last September, the Sekai camera from Tonchidot, but this is the first production app I've seen using the technology.

Bottom line: This is probably overkill in terms of a mobile ATM finder. However, it shows the power and versatility that's rapidly being engineered into mobile phones.   

ATM location as pointed out by ING app running in camera viewfinder

ATM locations also displayed via typical mapping

ING landing page for the Wegwijzer (link) (Google translation, 18 March 2009)

It will take years before the mobile phone fulfills its promise as a true mobile payments device. Or will it?

If you don't mind a bit of a work-around and you limit your purchases to MasterCard PayPass-enabled merchants, you can pay by cell phone today thanks to Blaze Mobile.

How it works:

1. Download the Blaze Mobile Wallet at the Apple App Store (iTunes link), cost $1.99 (note 2).
2. Sign up for a Blaze pre-paid MasterCard issued by MetaBank
3. Affix the MasterCard PayPass RFID sticker to the back of your iPhone
4. Wave and pay at MasterCard PayPass terminals

Granted, few people will go through this trouble just to buy an Arby's sandwich without pulling out their plastic (note 1). However, it shows that the technology is available today to enable at least some mobile payments. And for financial institutions, it provides a cool way to differentiate debit and credit cards.

Notes:
1. According to MasterCard, there are 463 PayPass locations within 25 miles of my Seattle location. 
2. The wallet also works on other mobile platforms, see the company's website.
3. Previous post on paying via credit card stickers (here).
4. For more info see our Online Banking Report on Mobile Payments.

MoBank, the U.K.-based mobile banking and payments said to be launching this month, is creating some buzz on the other side of the Atlantic (stories here, here, and here).  Given the pedigree of its two founders, Steve Townsend and Dominic Keen, who blazed many online banking trails at Egg and First Direct, it should provide a glimpse of the future of mobile finance.

The company is establishing a call center on the Isle of Man, run by Steph Gregg, a veteran of Egg, First Direct and Vodafone. Melanie Hunter is head of marketing, and David Rubin is head of mcommerce.

The company was named to Red Herring's top-100 global start-up list last month (here) along with FinovateStartup alum ClairMail (demo video here).

It appears at launch the service will support bill payment and certain mcommerce activities, such as purchasing movie tickets. An iPhone app is expected at launch. Users will register their credit/debit card(s) with the service. The company plans to expand into mobile banking and money-management activities in the future. 

The company has raised more than $1 million according to news reports. The company was founded in 2006 and presented at The Essential Web conference in June 2007
(p. 43, here) and had four employees at that time.

Here's how the company described itself 18 months ago:

MoBank is creating the world's first mobile-led online bank. The company believes that, for some sections of the population, small screen devices will become the channel of choice for most banking and payment services. moBank's business model is based on providing a free-to-use basic banking service with paid-for add-on features. Furthermore, moBank's users are enabled to participate in a range of unique, value-generating m-retail activities.

What's innovative: It sounds like a mobile-based account aggregation and bill-pay service, similar to Mint on the iPhone. But it could also contract directly with one or more banks like SmartyPig has (previous coverage). But as ING Direct proved, optimizing on a new delivery channel can pay off with great word of mouth and positive press.

MoBank pre-launch homepage (6 Feb. 2009)

Note: For more info on the growing market, see our Online Banking Report on Mobile Banking.

I've communicated with Privier founder Charles Polanco a number of times over the years. He's a Wachovia alum who's been working on a financial startup for several years. The company launched a suite of payment services on Oct. 16 that aims to get the plastic card out of the ATM business (press release).

Privier's value prop is straightforward and compelling: Enable money transfers from any device at any time with the cash delivered through the worldwide ATM network.

The system initiates transfers in three ways:

• ATMsend: ATM to ATM
• iTransfer: Web to ATM 
• mPayment: Mobile phone to ATM

In Privier's model the ATM card is replaced by a one-time authorization code that recipients key into the ATM to withdraw transferred funds.

Analysis
From a usability perspective, it's a great idea. After all, what's not to like? Consumers need to send cash. ATMs have cash. Why not let folks authorize a remote ATM withdrawal from the comfort of their own home or office. A proposed fee in the $7 range beats most alternatives for long-distance money transfers.

However, from a practical standpoint there are two massive roadblocks to overcome:

• Retrofitting ATMs to accept a keyed-in code instead of a mag stripe for authentication
• Convincing banks to add ATM-transfer capabilities to Web, mobile and telephone services

It will likely take an organization the size of Visa, MasterCard, or Bank of America to pull this off. To ensure that those behemoths work with it, Privier has a portfolio of patents pending on the business process. 

What it means for Netbankers
It may take decades, but eventually, the Web married to mobile will eliminate the plastic debit/credit card; however, unless you are a major bank or payments company, this isn't likely anything you need worry about for a number of years.

A better short-term solution for smaller financial institutions is to enable P2P funds transfers using PayPal so you can send money to anyone with a PayPal account (see note 1).

Privier's Web-based interface for sending cash to an ATM (5 Nov 2008)

Note:
1. See our latest, the Online Banking Report 2009 Planning Guide, for more info on project priorities for this year and beyond. 

Visa today put a stake in the ground to be viewed as the innovation leader, a position that American Express has claimed for some time with its chip cards, social media efforts, and even an online lab site. At today's "innovation briefing" in NYC, Visa announced several pilots and upcoming initiatives.

Mobile person-to-person transfers
The most far-reaching announcement was the ability for Visa cardholders to transfer funds from one card to another via mobile device. So far, just one bank is participating in the pilot. US Bank says it will make the service available to a few thousand cardholders as a test later this year. PaymentsNews has more details here.

It sounds good, but as always the devil is in the details. For instance:

• Through what hoops will cardholders have to jump to enable their card and phone for the service?
• Will the transfers be treated as cash advances triggering fees and finance charges?
• Will it be available to all cardholders using any mobile phones? 

Visa jumps on the android bandwagon
A more immediate innovation is a location-and-alert-based service built for Google's android platform, a new mobile system launching in late October. Visa's new service, to be rolled out initially by Chase Bank (no time frame given), promises some important new developments:

• "Near real-time" purchase alerts (see note 1) so you can see immediately whether your server added an extra digit in front of your tip on that bar tab. The real-time alert pilot was announced a month ago (here) involving several thousand accounts at PNC Bank, SunTrust Bank, US Bank, Wachovia, Wells Fargo, Royal Bank of Canada, TD Bank, and Vancity.
• Visa merchant finder based on your location-based/GPS technology  (nice!) with targeted marketing offers (hmmm??). The merchant locations will be integrated with Google Maps.

Again, PaymentsNews has the entire press release here.

Notes:
1. Visa says that the alerts will arrive "typically before (the consumer) leaves the store."

2. For more information, see our Online Banking Report on Mobile Money & Payments.

Since the July opening of Apple's App Store, we've been tracking the apps in the Finance category (see previous coverage here). But there are also several apps in the Productivity category of interest to financial institutions: the eWallets.

There are two wallets available in the U.S. iTunes store:

• eWallet from Ilium Software: #46 in popularity in Productivity with a cost of $9.95 and rated 3.5 stars (out of 5) across 143 reviews (see inset)
• Memengo Wallet: #48 in Productivity with a $0.99 cost and rated 4 stars across 43 reviews (website)

Web-based eWallets never took off because of security concerns and because they provided only marginal improvements in desktop productivity. However, a mobile version has more utility owing to sticky notes with password reminders and credit card info, helpful to users away from their desks.

How it works
Storage of usernames and passwords for websites is the primary use of eWallet, but it also has a Finance category (see inset above) where users can store credit card numbers and contact info (see screenshots below).

That info is helpful when using a card to make a purchase online or through the mobile phone. It's also a great place to store the info in case the card itself is lost or stolen.

Financial institution opportunities
While these apps haven't gained an overwhelming following, a financial institution could offer a free version that highlights its own card offerings while providing storage space for other card numbers. That way, you get your logo on the iPhone instead of Mint, Wesabe, or some other financial institution. 

The bank-branded eWallet could also include a financial calculator and direct connection to online banking.

 Note:
1. For more info see our Online Banking Repot on Mobile Money & Payments.

Even though I have credit cards from Citibank, Wells Fargo, U.S. Bank, American Express and Chase, I have never been offered the opportunity to add contactless payment capability to my card, so I still have no firsthand experience of that particular wave of the future. 

And it hasn't been too high on my list of things to try, since it still requires carrying a piece of plastic or an additional device such as keychain fob (inset). I don't see much benefit to tapping a piece of plastic compared to swiping it.

However, I do look forward to NFC-enabled mobile phones. But given the hurdles for adoption among carriers, payment processors, and issuing banks, I wasn't expecting that much before the next summer Olympics.

But now an interim workaround is being tested around the world: the contactless payment sticker. It's a quarter-sized sticker you plop on the back of your mobile phone making it instantly payment-enabled.

That allows consumers to leave their wallets at home, a nice benefit for outdoor enthusiasts, club goers, or anyone who doesn't want to worry about losing their wallet while on the go. Of course, we'll need a few million more contactless-enabled merchants before the wallet-free world is realistic for most, but widespread use of stickers could move that along (see note 1).

Who has it?
There are several rollouts under way around the world. For example:

• Turkish banking giant GarantiBank recently won an industry-innovation award for its RFID sticker (press release). The sticker is produced by On Track Innovations. The bank began a pilot a year ago with several thousand Turkish customers.
• Silicon Valley-based Blaze Mobile says it will be delivering a Blaze Debit MasterCard with PayPass payment sticker to subscribers to its $4.99/mo Blaze Wallet this month.
• Though not yet connected to a major credit card, Malvern, PA-based USA Technologies launched its Pay Dot contactless sticker this spring (press release).

Note:
1. There are about 110,000 PayPass merchants worldwide, less than 1% of the 25 million locations that accept regular MasterCard cards. 

Last week, the Puget Sound Business Journal reported on a Pacific Northwest stealth startup that's receiving a lot of attention from Silicon Valley, at least measured in dollars. The $10 million round for Finsphere is an impressive endorsement, especially given the apparent involvement of prominent VC Mohr Davidow.

There's not a lot we know about the company other than the founders are out of the wireless industry, and the company's services are described as "location-based transaction verification services." That sounds like using the GPS-based or triangulated location of mobile phone users to authenticate card transactions and/or online banking logins. Armed with the GPS reading, card companies would know that you (or at least your mobile phone) are where your credit card activity says you are, e.g., buying a tank of gas in Washington D.C.

With GPS capabilities coming to the iPhone next month, this could be a very large market indeed. If we are right about the product, we'll try to convince the company to demo at one of our Finovate conferences. 

Are you interested in learning more about the mobile payments stalemate? Earlier today, as I was browsing for information about mobile banking, I found a number of articles that may help.

First, to provide an overview of the existing card payment landscape, I would recommend an article by Jeremy Simon titled Merchants encourage use of PINs for debit card payments. In the article, Mr. Simon provides a sampling of the fees that retailers pay to banks every time a card transaction occurs. This example assumes a customer bill of approximately $40:

* Debit card purchase (customer enters PIN number) = $0.24 paid to bank
* Debit card purchase (customer signs the receipt) = $0.35 paid to bank
* Credit card purchase = $0.50 paid to bank

Next, I would recommend an article by Richard Winston titled Mobile Wallet Will Take Time to Mature in U.S. This article does a very good job of providing an overview of the mobile payments landscape, the challenges ahead, and the parties involved.

Finally, to understand the granular perspective, I would recommend downloading the white paper from Diamond Management and Technology titled: Mobile Payments: Mobile Operator Market Opportunities and Business Models.

As you dig into the data you will notice that the critical element is trying to determine how the carriers will be compensated for their role in mobile payments initiative. While merchants, customers and banks would appreciate the carriers performing this service for free, the fact remains it’s unlikely to happen.

Yet, the money to pay the carriers must come from somewhere, and it is equally unlikely to come from:

* Retailers volunteering to pay higher fees
* Banks volunteering to forego a portion of their fee
* Processors volunteering to forego a portion of their fee
* Customers paying a premium to utilize a virtual wallet

So that's the quandary. Will the standoff be resolved? I'm not sure. In the article Wave-Pay-Go by Bank Systems and Technology, I read, "Alarmingly for banks, carriers may take a more aggressive position by assuming direct control over processing, billing and collection of payment transactions, thereby removing banks from the process and threatening payment transaction revenues."

Brandon McGee is vice president and senior product manager at The Huntington National Bank. He is not only the real deal, a genuine industry insider, but also knows exactly what's on the minds of financial service pros as they contemplate the various mobile options. For more great content, check out his blog, Mobile Banking.

Our parent publication, Online Banking Report, has just released its latest in-depth report: Mobile Money & Payments 2.0: Why credit & debit card issuers should embrace mobile delivery now

• Link to the full report here
• Link to the abstract here

The report builds on last month's Mobile Banking Report (report here), this time looking at the rollout of mobile payments in North America. The report recommends tactical and strategic options for financial institutions both in the short-term and into the next decade. In addition, several innovators are highlighted including Obopay, PayPal Mobile, and NTT DoCoMo.

In today's special Technology Report in Wall Street Journal, the lead article was "What's New in Wireless," by Amol Sharma. The article's main focus is mobile video and advertising, but there are several paragraphs about mobile payments, mentioning the Cingular/AT&T/Citibank cellphone payment trial through MasterCard's PayPass. The only statistical backup provided was the 1.3 million Japanese mobile users signed up for NTT DoCoMo's year-old mobile credit-card service (note 1).

That number seemed low based on what I've been hearing about the popularity of all things mobile in Asia. It turns out the 1+ million number is just DoCoMo's credit-card slice of the mobile payments pie. 

In Japan, per capita credit card usage is just one-seventh that of United States (note 2) and stored value is much more popular. DoCoMo has 20 million stored-value mobile wallets in place, 15x the number of credit users. The mobile wallet penetration is approximately 40% of DoCoMo's 52 million wireless subscribers (note 3). 

That's a healthy uptake rate for a product that was introduced less than three years ago. Even the year-old mobile credit card adoption is dramatic given the country has just 130 million credit cards outstanding. DoCoMo's market share is already higher than 1% of total cards outstanding, the equivalent of 8 million accounts in the United Sates (note 4).

Interestingly, part of the reason for the popularity of cash replacements in Japan is that the lowest paper-money denomination is 1,000 Yen, or about $8.80, making coins more common and somewhat less convenient for low-value payments compared to the U.S. and its ubiquitous $1 bill. However, the stored-value mobile wallet is expected to eventually become popular in the U.S. once merchant acceptance grows, especially in the youth and underbanked segments with less access to traditional bank cards; but it won't likely reach current levels of Japanese penetration for another five to seven years (note 5).   

Notes:

1. According to a Feb. 1 article in the Motley Fool, DoCoMo has 1.5 million users who've applied for and activated the credit card function in their phone. The number of outlets accepting DoCoMo mobile payments was expected to top 150,000 this month. DoCoMo allows other credit card issuers to use its ID platform to delivery card services to its customers. DoCoMo also began issuing its own mobile credit card under the DCMX brand last year. For more information, watch the DoCoMo's video about its mobile wallet (here). The wallet discussion begins at about the 4.5-minute mark of the 16 minute video. DoCoMo's ID credit-card platform and its own DCMX credit card discussion begins at the 6-minute mark and ends a little before the 10-minute mark. The rest of the video discusses i-Mode's international growth and is not directly related to payments.  

2. According the Federal Reserve Bank of Philadelphia, in 2004 American's made 84 credit card purchases annually per capita, vs. 11 in Japan (see report here). According to the online CIA Sourcebook, in mid-July 2006 the population of Japan was 127 million compared to 298 million in the United States.

3. According to the company, DoCoMo has a 55% share of the Japanese cellphone market.

4. The U.S. has about 800 million credit cards outstanding (according to FRB Philadelphia, see #2.  

5. See our forecast in Online Banking Report 138/139 published three weeks ago.

I attended the public portion of the 2-day Mobile Payment Forum Spring Member Meeting in San Diego yesterday <mobilepaymentforum.org>. The group was formed by MasterCard, Visa, American Express and JCB more than five years ago to help develop standards and promote best practices in mobile payments.

The current board of directors:

• Simon Pugh, VP Standards & Infrastructure, MasterCard 
• Stephanie Ericksen, VP Product Technology & Integration, Visa
• Martin Harrison, Head of Sales and Strategy, First Data
• Christopher J. Bierbaum, Product Development, Emerging Products Group, Sprint
• Bob Adamany, VeriSign
• Oliver Kelly, Vodafone

It was a pay-to-present day, with each sponsor allotted time based on the size of their financial contribution. Six gold sponsors spoke for 30 minutes, a silver sponsor was allotted 15 minutes, and the only platinum one was handed the podium for a full hour. Consultant Richard Crone of Crone Consulting gave the keynote and handled the introductions and wrap-up.  

Platinum Sponsor:
ClairMail: Joseph Salesky, CEO

Gold Sponsors:
Firethorn Mobile: Tripp Rackley, CEO
PayCash Mobile (Cyphermint): CEO, Joseph Barboza
eBizMobility: CEO, Jeremy Kagan
Erico: VP Marketing, Larry Loper
mFoundry: VP Product, John Pizzi

Silver Sponsor:
Sapphire Mobile Systems: Rick Rasansky, CEO

For the most part, the speakers did a commendable job keeping things informative and not heading straight to sales-pitch mode (see note 1). The highlight was Firethorn CEO Tripp Rackley and ClairMail CEO making impassioned pitches on opposite sides of the SMS banking (ClairMail) vs. downloaded app (Firethorn) continuum (note 2). And as usual, Richard Crone of Crone Consulting set the stage with an entertaining and fact-filled keynote (note 3). 

Despite being a payments forum, most of the talk centered around online banking (Firethorn, ClairMail, mFoundry, Sapphire), mobile advertising (Erico), and ecommerce (eBizMobility). Only PayCash Mobile and keynoter Richard Crone spent more than a few minutes on payments. 

The main reason: Mobile banking is on the verge of breaking out, and banks are reaching for their checkbooks. With far more infrastructure hurdles, cellphone-based payments will lag mobile banking adoption by five years (see forecast in our most-recent Online Banking Report, 138/139).

I'll post a few more items from the conference during the next few days.

Note:

1. Hint for conference attendees: Always look for private-company CEO presentations. Private-company CEOs usually do a great job speaking about the broader issues, understanding that their industry knowledge is a far better sales pitch for their organization than a dozen "About us" slides. Marketing VPs on the other hand, seem enamored with how many times they can work their company and client names into the presentation deck. Unfortunately, the same cannot be said of many public-company CEOs who are so ham-strung by disclosure regulations, they can hardly say anything that's not already widely known.  

2. For more on the mobile banking debate, see our latest Online Banking Report, "Mobile Banking & Payments" (OBR 138/139 here).

3. Disclosure: Mr. Crone has been an occasional contributor to our sister publication Online Banking Report. His first article appeared in our 1996 issue.

In a multi-page look at mobile banking (here), BankRate.com reporter Laura Bruce quotes Citibank's Rob Julavits as saying the bank will be:

...testing (mobile banking) in March and allowing customers to enroll in April, with a broad launch expected before midyear

That's a few months later than originally expected. The bank sent Citi Mobile disclosures to checking account customers in January indicating the service would be live in February (see article here). Citibank already provides mobile access to its credit cards in Japan (link here).

Conde Nast's Lucky magazine will use PayPal Mobile technology to allow users to buy products from 18 advertisers in its September issue (see inset). Using PayPal's Text2Buy technology, readers will be able to purchase products from magazine advertisers by simply sending a text message to the number in the ad, then confirming the purchase when PayPal automatically calls back a few seconds later (see NB June 5 for more on how it works).

This is believed to be the first major offline promotion of PayPal's new service. According to The New York Times, the following advertisers have signed on: Avon, Bulova, Dooney & Bourke, Estee Lauder, Ford, Le Tigre, Liz Claiborne, L'Oréal, Perry Ellis, Sephora, Target, and Unilever.

Readers will also be able to order online via a special website <livebuyit.com> that was not operational at press time.

Banking applications
While spur-of-the-moment buying is not a major part of financial services, Text to Buy in financial advertising could be a simple way to order information, such as a loan application, mutual fund prospectus, or a new account kit. Advertisers would list a code in their print ad, billboard, or other offline promotional device (see UNICEF example in the inset; buyers simply text "water" to the 5-digit number to make a $10 donation). This would allow users to request info by simply entering 10 characters into their cellphones or mobile device. The information packet would ship to the "buyer's" PayPal address.

An even bigger application, especially around the holidays, would be ordering prepaid MasterCard/Visa/American Express gift cards. Different codes could be set up for different amounts. For example, text "card25" for a $25 gift card, "card50" for a $50 card and so on. A handling charge could cover the 3% processing fees due to PayPal.

Finally, financial institutions could use Text to Buy for non-financial items such as:

• Donations to community causes
• Entry fees for a community event such as 5k run
• Signups for seminars
• Schwag, e.g., t-shirts, hats and so on

Obopay and PayPal both offer phone-and-text based payments along with a linked debit card for spending the money sitting in your payments account. But it's not as powerful as a true mobile wallet with a cellphone preprogrammed to connect to online banking and various payment options.

Here are the specs of the perfect mobile wallet:

• One-key access to common banking functions: check account balances, confirm transactions, and so on
• Money movement between the user's own accounts
• Send money to others using the bank's bill pay system or inter-institution funds transfer (A2A)
• Pay for purchases at the point of sale (debit card or credit card) using an embedded RFID chip
• Authenticate users at ATMs, branches, and remote terminals
• Person-to-person payments (potentially by linking to the PayPal network)
• Text message data entry: Update bank account records by sending a text message to the bank (for example, if you paid $22 cash for a business lunch, text to the bank, "22.00 biz lunch" which would be posted to your transaction records)
• Priority customer service: Voice, text, or IM customer service with minimum wait times with transcripts emailed for future reference
• Text-message-based alerts
• Real-time virtual "panic button" to disable phone: If the phone is misplaced, users should be able to temporarily disable payment and banking functions with a simple email or phone call to an automated system

Where will users purchase their mobile wallets?
While first-generation mobile wallets will come from tech startups, wireless phone companies, and Internet giants such as Google, a bank-based model has a number of potential benefits:

1. Trust
2. Integrated online banking features (balance lookup, transaction history)
3. Integrated bill payment (use pre-existing bill-pay merchants)
4. Mobile payment transaction history integrated with online banking history

As cool it sounds, mobile wallets will not replace cash or plastic until RFID-equipped POS terminals are widespread. Until then, you'll still need to carry plastic. That brings to mind a practical interim solution, a plastic clip that attaches an RFID-enabled mini-credit card to the back of a cell phone. Users would have the convenience of waving their cell phone to pay, but could also easily swipe the mag stripe through a conventional terminal.

-- JB

One of the better overviews of mobile payments appeared in the Wall Street Journal several months ago (April 26). It looked briefly at TextPayMe, Obopay (see screenshot below) and PayPal Mobile (NB June 5). The article does a good job of contrasting these systems to the more common "mobile wallet" where a cellphone is used in place of a credit/debit card.

Analysis
While we see much promise for the mobile wallets, the mobile payment feature appears far less useful, at least in the United States.

Mobile Wallets: It's inevitable that today's plastic-based payments systems morph into cellphone-based services using radio frequency (RFID) technology as the enabler. For many people, especially younger cellphone-toting, debit-card users, it will be easier to point their phone at the POS terminal and press # than to swipe a card and enter a PIN or sign a receipt. Arthur D. Little projects $37 billion in mobile wallet transactions in 2008, a twelve-fold increase from the $3 billion in 2003.

And for those who don't carry a cellphone, or who prefer a different access device, companies are working on RFID-enabled watches, jewelry, key chains, and something Citibank is said to be preparing for market later this year, an RFID money-clip, which I'd love to use, although I've yet to see a contactless point-of-sale location in Seattle (see, "Creating the Perfect Mobile Wallet," NB June 7). 

Mobile Payments: On the other hand, text-message-based services, designed to send money to individuals, are a solution seeking a problem. As cool as they look on a well-crafted homepage (see Obopay's homepage right), there just isn't enough payoff for changing deep-seated consumer payment habits.

Even the WSJ couldn't dig out a rational anecdotal example, though the writer tried. The usual "splitting the dinner bill" straw man was trotted out, but upon closer look, too many variables could make it unworkable. Imagine you had a group splitting a $100-tab four ways. The vendors want us to believe that one person will pay the entire bill, then his or her three friends will each text-message their $25 share. Outside of Silicon Valley and a few Manhattan neighborhoods, it just won't fly.

It is not only a hassle (what if the phone call is disconnected, or the wrong button is pushed in a dark eatery), but also each of the three parties will likely incur one or more transaction fees (from the payments gateway, the cell phone provider, and possibly one or more financial institutions along the way). Finally, the person receiving those payments then has to initiate some type of transaction to tap the $75 sitting in their account. 

This makes about as much sense as ordering dog food online. Current methods of sharing costs, either with cash, having the restaurant apply it to two or more debit/credit cards, or by agreeing to "get the next one" works just fine.

--JB

Most people interested in electronic payments have probably read reviews of PayPal's mobile payment system launched in March. However, if you haven't had a chance to use it, by all means head over to PayPal Mobile and activate your phone.

The service covers two mobile payment services:

1. Person-to-person payments: PayPal's email-payments service is extended to phones, mobile or land-line, allowing users to send money to anyone with a phone number using text messaging or by following the prompts on PayPal's toll-free number (800-4PayPal).
2. Text to buy: To buy things at participating merchants, users send the text message a code to the merchant's text-message number; for example, listed on the PayPal site today is a special offer to purchase a DVD Of X-Men 2 from by texting "X2FF" (full-frame) or "X2WS" (widescreen) to 63336 to FoxStore.com.

Sign-up Process
The sign-up process is absolutely painless (click on screenshots below for a closer look). Assuming you already have a PayPal account, just enter your phone number and then a few seconds later answer the verification call on that number. After that, you can send money to any other phone by sending a text message from your phone or calling PayPal's toll-free access number and following the simple prompts to make a payment.

The company ran a sweepstakes during the first month to encourage activation with instant prizes valued up to $1,000 (see screenshot left). The sweepstakes has ended, but not before we bagged a fresh $5 credit to our account. All entrants are also in the running for a new BMW.

Security
Although it will take some convincing before PayPal Mobile hits the mainstream, it's really far more secure than using a credit card. When you text money to someone or to pay for goods and services, PayPal first confirms the purchase by calling your designated phone number for confirmation with a self-selected PIN number. At that time, you are also able to make changes, such as altering the default funding source, which is always bank transfer (see inset for PayPal's how-to-use instructions).

Analysis
In the United States, payment by phone is likely to be a small subset of the "online payments" market. It provides a good solution for situations where a computer is not available (purchasing a new DVD from a magazine ad or paying your friend for the concert ticket she just gave you).

However, in other parts of the world where mobile phone usage is far higher than computer usage, it could become an important payments vehicle.

--JB

An unpublished study being completed by Market Platform Dynamics says there’s little data to support assertions that mobile payments will become the payment vehicle of choice for the people under the age of 40 called Gen X and Gen Y. According to the company’s multi-year research, 62 percent of respondents said they think using cell phones as payment vehicles is unnecessary, and 38 percent said they don’t use their cell phones enough to make it worthwhile. The good news: People born since 1977—Gen Y’ers—like the idea better than their Gen X elders. Last week, founder Market Platform founder David S. Evans spoke with NetBanker about his findings, and their implications.

NB: Tell us about the difference in attitude between the 16-to-19-year olds and older people.

Evans: The very young people indicated they’re more interested in using their mobile phones as a payment device, and the very old people—real geezers in their late-30s to early-40s—are less enthusiastic. Everyone else is about the same [as the geezers]. But still, even 50 percent of the real kids say ‘not really interested.’

NB: Most of the enthusiasm for mobile payments is based on the idea that these children are going to be flocking to use their cell phones like they do in Asia, and that therefore, mobile payments is not only the wave of the future, but also the demise of the credit card and the credit card brand as we know it.

Evans: Let’s be careful about a couple of things there. First of all, and despite the survey results, I’m still bullish on mobile phones eventually becoming payment devices. The thing you need to keep in mind is that people can’t really imagine what it is like to use one of these things until you actually present them with the goods. So, despite these numbers, I’m still bullish on mobile phones.

Number two, you say ‘Displace the credit card industry.’ There are two issues: One, whether the mobile phone is going to become the new form factor—just a physical thing that people use instead of a magnetic stripe card. The other question is whether the possibility of the mobile phone carriers being in the loop has an implication for the card system.

Those are two different questions. For the second question: What is currently happening in the U.S. is that the mobile carriers are not expressing, at the moment, great enthusiasm to be card systems. But having said that, it’s ultimately the mobile operator that has the relationship with the customer, so the mobile operators are being injected into the payment eco-system, and it’s possible that that could have some implications for the card associations. But it’s pretty complex.

NB: It seems to me that the real impetus here is going to be the first question—will the form factor impel the cell phone operators into the loop.

Evans: That’s correct: If consumers are interested in using their mobile phones as payment devices, then you can be sure that ultimately, the mobile phone operators are going to want to figure out some way to get a piece of that action.

NB: Based on your research so far, what are those indications?

Evans: Based on what’s happening in Asia, and looking at the U.S., our sense is that in the long run, and despite the lack of enthusiasm that we get in the survey, the mobile phone has many advantages as a form factor, because of the possibility of its being a contactless device with a graphical user interface—able to do lots of different stuff and being ubiquitous as well. So it’s a natural thing for them to become an important—if not the—form factor for paying for things.

NB: So I take it that your ultimate conclusion here is that this will happen, but it will take longer than some enthusiasts may be suggesting.

Evans: That’s correct, and I think the survey results indicate that people aren’t going to flock to this thing just because it’s new, and whoever is trying to push this form factor on consumers, or on merchants, is going to have to present a solid value proposition to the consumers. Consumers will have to be able to do something with this device that they can’t do with their current, easy-to-use magnetic stripe card. It underscores the fact that the introduction of a new technology in the payment card space is always an uphill battle.

NB: So first of all, the way to accelerate adoption will be to offer something the cards don’t do, aside from being able to use your cell phone as a gizmo; and number two, the people who want to push adoption will have to be willing to buy market share by accepting lower margins today.

Evans: I don’t necessarily agree with that. If you can come up with a clever, valuable thing on the mobile phone that is of interest to consumers, consumers will be interested in it. And that can happen without necessarily taking a hit on margins.

NB: Would that include rewards programs?

Evans: It may turn out that mobile phones make it easier for card issuers and merchant participants to have rewards programs, because you have a graphical interface on the phones. That implies that you can basically beam rewards to people. There are more clever things you can do with a computer than you can do on a mag stripe card, or even a contactless chip card. So that’s one of the value propositions that one can start thinking about with mobile phones: Are there ways to turn the mobile phone into something that’s valuable to both consumers and merchants?

NB: And what do you think?

Evans: Once you start moving towards a smart computing device with a screen, there is an enormous amount of things, including rewards, that people in this business can start thinking about—things we can’t even imagine. The mobile phone is most interesting because it truly is a computer. And in other parts of the information technology world, we’ve seen that once you start talking about software platforms for computers, developers come up with all sorts of ideas about how to use that computing power. That’s the true excitement of the mobile phone.

NB: So the payments mechanism will just be included in the phone, and over time, people will use it more.

Evans: We have to be careful about one thing, though: When you think about people using mobile phones, we’re talking about contactless, and therefore the adoption of mobile phones as a payment device is tied to the adoption of contactless at the point of sale by merchants.

NB: Which is the chicken-and-egg issue.

Evans: It’s a chicken-and-egg issue. There are all these contactless cards out there now, but there aren’t a lot of merchants that accept them. But if consumers wind up really liking the idea of contactless mobile phones as a payment device, and people start getting those sorts of phones, it could propel adoption of contactless. Having said that, if I gave you a mobile phone with a contactless chip today that was an incredibly powerful payment device, you could use it at your local McDonald’s to buy a Big Mac, but not much else.

NB: Everything you’ve said is contingent on a screen. What does your research tell you about what people say will be the generation after cell phones—a chip embedded in a wristwatch or token?

Evans: I don’t think that’s after mobile phones—I think it’s pre-mobile phones. One of the things that came out of our research is that our respondents exhibited utter lack of enthusiasm for fob-like devices.

NB: Yet most people have predicted that that is the next generation after this, and that’s what’s going to atomize the brand value.

Evans: The Gen Y people indicated slightly more interest in fobs than Gen X, but no one expresses a lot of interest in fobs.

NB: I infer from that that some of the anxieties that I’ve heard about the next generation of payment devices atomizing brand value is, at a minimum, overdone.

Evans: Yes. I don’t think there’s any reason to think that mobile phones are going to atomize the brand. I think that the major implication is that in the long run—five to ten years—mobile phone carriers are potentially important players in the eco-system, and whether they  become allies of the card systems, or whether they think about becoming alternatives, or allying with someone else, remains to be seen. But it’s certainly not going to atomize the industry—it’s just going to inject another set of interested parties into the business.

NB: What’s happened in Japan [where DoCoMo already operates a thriving mobile payments system] could be done in this country just as easily. Do you think that could be the disruptive element that could marginalize cards?

Evans: It’s possible, but there are very important differences between Japan and the U.S. Japan has a poorly developed card industry and not a lot of interest in the use of credit cards. It has enormous interest in the use of mobile phones. DoCoMo got established in Japan mainly because people don’t have personal computers, and there is an extensive broadband penetration, so Japanese consumers standardize all their Internet activities on mobile phones. And you have companies that are able to push the mobile phone manufacturers around and tell them what to do. When you come to the U.S., you have totally different sorts of operators and a very, very well-developed card industry, with plenty of muscle behind it. So I think the [U.S.] mobile operators are an interesting set of entities that, as the mobile phone becomes a more important payment device and gets injected into the [U.S.] payments eco-system, could alter that eco-system. It could possibly take on a more significant role. But I think that’s a long time coming, and certainly not imminent. It remains to be seen whether that is even a plausible outcome in the U.S.

(Contact: Market Platform Dynamics, David Evans, 617-266-6839)

Contactless payments systems in their various stripes are the future of retail point-of-sale systems, and banks still own the networks. But unless they stop trying to control the process, they could lose the system to merchants with their own private-label card programs, thinks Bruce Cundiff, a research analyst with Javelin Strategy and Research.

There’s really nothing to stop such merchants from outmaneuvering the banks, if they want to, he says. “The possibility exists among those merchants considering contactless, and really have a robust card issuance card network to begin with. They’re well-versed in credit, debit, and closed-loop card operations—and they see their private label brand as a lower cost channel.”

The merchants have plenty of good reasons for moving away from bank-owned cards. Doing so would not just give merchants more money from each transaction, it would also reinforce customer loyalty—making for more repeat business—and enrich marketing programs by giving merchants better access to the customer data in the payments stream.

Merchants increasingly view private-label, contactless payments as their best bet for driving revenue. According to Cundiff’s research, 20 percent of merchants considering enhancements to point-of-sale payments consider the technique among the most productive choices they can make. Only signature debit (31 percent) and ACH payments (33 percent) scored higher among merchants as possible new payments options.

Even worse news for banks: Cundiff’s survey of 900 retailers included all sorts of merchants, from large chains to the iconic Mom-and-Pop store. “We reached out to all types of merchants, even to those with only one location,” he says.

The irony here is that banks started this phenomenon in the first place.

“Contactless payments are the wave of the future because issuers like (JPMorgan) Chase got into the game,” he says. It was Morgan Chase’s decision to jump into contactless payments with both feet that solved the chicken-and-egg question surrounding contactless payments, because it was a signal to cell phone manufacturers that there would be a market for RFID (radio frequency identification) chip-enabled cell phones that can facilitate payments. “Prior to that, merchants were saying ‘It’s not broke, and I’m not going to fix it. They didn’t think people were going to come in and ask ‘Where’s your contactless terminal?’”

But that historical fact is irrelevant to the future, because with the genie out of the bottle, the challenge for issuers is to do everything they can to enable the technology now, before merchants do it for them. And since, as Cundiff’s research indicates, those merchants are a substantial fraction of the overall universe, the prospect that banks could be disintermediated by these merchants is a very strong possibility.

The fact that banks will have laid the foundation for this turn of events by educating merchants about the benefits of the technology is merely one of life’s injustices; the most disturbing element in this scenario is that bank disintermediation is entirely avoidable, if institutions will just make it in the merchants’ interest to work with the banks—even if that won’t be so easy. “If I’m Macy’s, and I’ve invested millions of dollars in contactless, I’m going to make sure that as many transactions that flow over that system are going to be Macy’s cards,” says Cundiff.

That prospect will be made easier by the widespread availability of cell phones that can make payments, he adds. The logic is perfectly clear, if brutal: With so many people carrying payments-enabled cell phones, he says, it makes perfect sense for stores to offer to download their own card onto a customer’s cell phone at the point of sale. Then, unless the banks have already beaten the merchant to it, more and more payments volume will go to merchant cards—edging out the bank and cutting into the fastest-growing segment of payments-fee revenues.

How to avoid this? “They (banks) need to consider the fact that they need to work with the merchants in a more integrated fashion—especially a large merchant that has a high profile and has plenty of locations and payments volume,” he says. A promising tactic to make sure the banks are still involved is to approach the merchant and offer to issue a co-branded, contactless card.

But to do this, banks have to recognize that contactless payments are the key to the future at the point of sale, and that they either turn the lock, or don’t. And if they do, they either continue to insist that everything be done their way, or they can start working with their customers to integrate themselves into that next generation of payments.

Luckily, the best banks already get this, says Cundiff. When Morgan Chase went to market last year with their Blink contactless cards, for instance, “they were talking about how they had to approach merchants and not only build acceptance, but build affinity for the product with both cardholders and merchants—that meant co-marketing agreements and signage,” he says.

But what this also means is an apparent shift in the balance of power between issuers and merchants. While some will argue that issuers have always valued their customers and tried to accommodate them, that posture is undermined some by the ongoing interchange war: After all, if the issuers had always been so accommodating, the years of complaints from merchants that interchange was too high would have resulted in adjustments—not lawsuits.

At this point—as many observers have argued—the better part of valor for issuers may be collaboration with merchants instead of battle, lest contactless, private-label cards prove to be yet another army rising on the issuers’ flanks. (Contact: Javelin Strategy and Research, Bruce Cundiff, 925-225-9100)

In today's WSJ, there's a good roundup of the text-message payment systems attempting to find traction in the United States. The article looks briefly at TextPayMe, Obopay, and PayPal Mobile. The article does a good job of contrasting these systems to the more common "mobile wallet" where a cellphone is used in place of a credit/debit card.

Analysis
We see much promise for the latter. In fact, it's almost inevitable that today's plastic-based payments systems morph into cellphone-based services using radio frequency (RFID) technology as the enabler. For many people, especially younger cellphone-toting debit card users, it will be easier to point their phone at the POS terminal and press # than to swipe a card and enter a PIN or sign a receipt. Arthur D. Little projects $37 billion in mobile wallet transactions in 2008, a twelve-fold increase from the $3 billion in 2003.

However, text-message-based services, designed to send money to individuals, are a solution seeking a problem. Even the WSJ couldn't dig out a rational anecdotal example, though the writer tried. The "splitting the dinner bill" straw man was trotted out, but it just doesn't fly. Imagine you had a group splitting a $100-tab four ways. The vendors want us to believe that one person will pay the entire bill, then his or her three friends will each text-message their $25 share.

Not only is this a hassle (what if the phone call is disconnected, or the wrong button is pushed in a dark eatery), but each of the three parties will likely incur one or more transaction fees (from the payments gateway, the cellphone provider, and possibly one or more financial institutions along the way). Finally, the person receiving those payments then has to initiate some type of transaction to tap the $75 sitting in their cell phone.

This makes about as much sense as ordering dog food online. Current methods of sharing costs, either with cash, having the restaurant apply it to two or more debit/credit cards, or by agreeing to "get the next one" works just fine.

Mobile Wallets
Obopay and PayPal both offer a linked debit card for spending the money sitting in your payments account. But it's not as powerful as a true mobile wallet where the bank offers its debit card base a cell phone preprogrammed to link customers to their card and online banking account. The device could be used to check bank account balances (a walking ATM), transfer money between the user's own accounts, or send money to others using the bank's bill pay system or inter-institution funds transfer (A2A); and, if equipped with RFID, the device can be used to pay for purchases at the point of sale.

The bank-based mobile wallets have significant advantages over the start-up, non-financial systems:

1. Trust
2. Integrated online banking features (balance lookup, transaction history)
3. Integrated bill payment (use pre-existing bill pay merchants)
4. Mobile payment transaction history integrated with online banking history

As cool as the mobile wallet sounds, it will not replace cash or plastic until RFID-equipped POS terminals are widespread. Until then, you'll still need to carry plastic. That brings to mind a practical interim solution, a plastic clip that attaches an RFID-enabled mini-credit card to the back of a cell phone. Users would have the convenience of waving their cell phone to pay, but could also easily swipe the mag stripe through a conventional terminal.

--JB

Aite Group’s Gwenn Bezard thinks he’s figured out the avenue cell phone carriers may find themselves taking on their way to becoming financial services providers: By selling air time to nontraditional markets like the under- and unbanked through prepaid cards. Over time, he thinks, serving that market could lead them to become merchant acquirers.

Cell phones are the great disruptive technology for the financial services industry: To the extent that mobile payments take market share from other vehicles, they have the potential to atomize the value of bank brands and even minimize payments cards’ market share.

Continue reading "Prepaid Topup May Mainstream M-Payments" »

With the recent Motorola/C-Sam mobile payments announcement followed by similar payments platform launches from PayPal, Black Lab Mobile Inc., Commerciant LP, Sify Ltd. in India, Q-Pass, and SVC Financial Services Inc., it’s obvious that mobile payments aren’t the mere pipedream they seemed to be last year.

What’s less obvious is the change about to befall the payments industry and, especially,  banks, that mobile payments embodies. To hear Ray Kurzweil tell it in his newest book, The Singularity is Near (Viking, 2005), the rate of such change in the next ten years will be exponential, and a line graph of it will be vertical. The change grows slowly and imperceptibly at first, he says, but when the pieces are all in place, its acceleration explodes.

This is important not just because the world we’ve lived in is about to more or less end, but because of the backdrop against which innovations like mobile payments will take place. The current crop of cell phone-based payments will preserve bank and card brands, but the second generation of mobile payments will be made with very small devices that will eliminate the possibility of displaying any sort of logo and, thus, branding. The third generation—taking place in hyperspace, for all we know—will follow in less than ten years, and make the second generation’s futuristic world seem quaint.

Technology has ceased being only a more efficient tool to accomplish traditional jobs; now, it’s changing the jobs themselves. The capabilities created by technology create the premise for ever-greater changes in what’s achievable, in turn raising expectations of what can be accomplished; meanwhile, the abilities of that transforming technology lay a foundation for even more change. Banking and payments is unlikely to escape this phenomenon, and in the approaching world, the past is a poor predictor for future performance.

Sound familiar? Sure. Consultants and other wise men have been intoning about this for 20 years, and financial professionals can be excused for being skeptical about this latest round of warnings that the sky is falling—especially since the sky’s still blue.

But technology has always been the instigator of change and not just its messenger. The telephone and private automobile turned concentrated cities with economic specialties into sprawling, economically-diversified megalopoli, eventually allowing people like this reporter to live in rural America and still make a living in the mass market (I was doing this before the Internet). The idea of just-in-time delivery didn’t just turn Indianapolis and Nashville into thriving metro areas because each is at a nexus of the Interstate Highway system. It made the idea of a national industrial base obsolete, which in turn paved the way for the minimization of the nation state.

That still-evolving transformation took two generations following World War II to become visible, even though the pieces were in place before World War I. But this next chapter will take much less time, and be more transformational: Scientists, for instance, have already created two different types of machine-based muscle tissue, paving the way for real androids right out of Bladerunner, while experiments leading to computer-enhanced humans—cyborgs—are underway today.

Finance cannot escape the revolution it helped create. Ten years ago, foreign-exchange trades were cleared over long time periods, all over the globe. Today, most are cleared outside Coventry, England, at the Continuous-Linked Settlements Bank. Credit derivatives, now a multi-trillion dollar market made possible by computers, barely existed ten years ago; today, the global hedging market is probably bigger than the equities market being hedged. And certainly Basle II compliance, which frees so much capital for business purposes from regulatory reserves, is built entirely on the idea that creating a computer-generated, intraday picture of institutional risks is achievable.

But in most cases, banks have been following change and trying to adapt it to their internal considerations. They have rarely embraced it. This may be rational and seems prudent—both virtues in a period of great change.

But as Harvard’s Clayton Christensen points out in his work, this is also what destroys institutions—even industries. Acting rationally and prudently, institutions focus on building on their core competencies, and serving their best customers: Little-regarded businesses pick up the unwanted crumbs, and sooner or later, the market for the big company’s products is hollowed out, and the disregarded company, now a dominating giant, is buying the former colossus.

That phenomenon is what created First Data Corp., and what today undermines the business case for credit cards. It’s also what underlays the idea of the so-called “cannibal” bank of the 1990s: An entirely new institution sponsored by a traditional bank that, using the latest technology, would create the next generation of banking and eventually “eat” the parent.

Jamie Dimon pretty much scuttled that latter idea when he shut down Wingspan Bank and took the reins of Bank One. The dot-com bust did the rest. But the dot-com bust didn’t bury technology or technological change—it just weeded out businesses whose primary asset was a preposterous story, and left the adults in charge. The Internet is still growing, and computers are faster, smaller, more common and more capable than ever.

It’s not impossible that the Wingspan idea was just a little early. Certainly banks, which rely more and more on payments—entirely a computer operation—can’t afford to minimize how computers are changing the nature of their business, just because their internal politics finds “Wingspan” to be a convenient buzzword for dismissing a threatening new idea.

Those discussions typically revolve around banks being either this, or that—fully automated, or merely assisted by useful tools. This premise is nonsense. The world banks and payments operations we live in today wasn’t created by Kierkegaard; it was created by people like Ray Kurzweil and Andy Grove. The Medici Bank closed a long time ago.

Mobile payments is the path to the next generation of retail payments, and even if they do threaten to minimize—or atomize—the idea of what a bank’s brand is worth, that’s no reason to avoid the reality that there’s plenty of money to be made in the future of payments, and that clinging to old forms is unlikely to prove a useful response to new facts.

In the American Civil War, infantry doctrine was still attached to ideas of how to overwhelm the enemy’s position, based on the idea that slow-loading muskets made it possible to march up to their line in formation, and give ‘em the bayonet. But new guns made mincemeat of that idea—and of the men who charged entrenched positions defended with those guns. There’s no reason for banks and their payments operations to suffer similar fates if they embrace change.

Two weeks ago, Motorola Inc. introduced the same mobile payments platform already being used in Japan and India, opening the door for U.S. banks on a retail payments future that could spell prosperity or doom, depending on the choices they make.

Those loaded alternatives have little to do with the immediate future for mobile payments in this country. Buying cheeseburgers by waving a cell phone will begin as a gee-whiz novelty in this country, packaged in ways that will preserve the bank brand, and allay the current boardroom anxiety that banks are fated to become mere payments utilities.

The real danger to banks is the next generation of m-payments, when the payments chip is miniaturized to fit into a ring or necklace; at that point, opportunities to remind customers of which bank’s card they’re using will disappear, along with the visible screen, taking with them much of the bank’s relationship with its customers. But this generation is here now, says Dan Schatt, a Celent Communications analyst, and likely to shake things up.

Continue reading "Motorola Introduces Real Mobile Payments to US Market" »

Right around the corner is a world with neither cash nor payment cards. Contactless payments mechanisms—built into cell phones or even jewelry—are helping create this world, and the result will help change banking, thinks Theodore Iacobuzio, managing director of Tower Group’s executive research office.

The reality is that companies that once fed the banks’  payment networks—merchants, for instance—will be future competitors. But banks shouldn’t panic about this, any more than when, not so long ago, the Internet was supposed to be extinguishing banks. And banks won’t be disappearing now, either, thinks Iacobuzio: the anxiety over banking’s future, so prevalent in boardrooms around the country, is overdone.

Continue reading "Cash and Cards Are Both Endangered Species" »

The potential of cellphone-based mobile payments to eventually squeeze banks out of their central role in payments can already be seen in East Asia, says Andrei Hagiu, a principal at Market Platform Dynamics, and by ignoring it, American banks have nothing to lose but their business.

Hong Kong’s Octopus prepaid debit card (see inset) is one example: Issued by Hong Kong’s subway system and several other transportation companies—with no bank involved—Octopus cards drive about $2.2 billion in annual payments volume.

Continue reading "Mobile Payments: Japan Leads the Pack" »

The proliferation of microprocessors, wireless communications, and the Internet will change the way we use various payment devices. Case in point: Mobil Oil has begun a nationwide roll-out of a wireless payment device called Speedpass. The free device has been in testing at 50 St. Louis-area stations since last August. Mobil expects to issue one million Speedpass’s in 1997. More than 14,000 have been issued so far. The technology was developed for Mobil by Texas Instruments and Dresser Industries.

For Mobil, this is the second major payment innovation in the past six months. Mobil launched the first full-scale bill presentment program on its Web in December. Mobil was also first to provide card payment capabilities at the pump in 1986.

Users order a Speedpass online at www.mobil.com/speedpass/h_home.html.

SpeedPass uses technology primarily deployed today on toll roads and toll bridges referred to as Electronic Toll Collection (ETS). The Mobil version allows users to automatically pay for their gasoline purchase simply by waiving the transponder “key tag” in front of the pump (recommended 1-2 inches away). An antenna on the pump sends a low-frequency radio signal to the key tag to determine the user’s ID number. The transaction is authorized against a Mobil credit file and the pump automatically turns on. After filling the tank, the purchase is automatically charged to a the MasterCard, Visa, or Mobil credit card account designated on the users enrollment form.

Mobil is also looking at locating transponders in tags affixed to the car’s rear window so the pump would automatically turn on as soon as the driver pulled up. The devices could also be used to personalize service station visits with user-specific messages such as a reminder that their car is due for an oil change.

Simply being able to purchase gas at Mobil stations with a key tag won’t change your life. But consider the implications if an industry standard and secure RF transponder was issued to credit card customers. It could be used anywhere that transaction speed is of paramount importance or where there is no clerk available to swipe a plastic card, such as parking garages, taxis, telephones, ATMs, vending machines, mass transit, fast food restaurants, etc. Users could swipe the device as they entered a queue and already be authorized for purchase when they got to the front of the line. The technology also offers the benefit of allowing users to charge a purchase without revealing their card number at the point-of-purchase. Transponders could also be used to control physical access to banking locations by automatically unlocking the door to a branch or bank of ATMs.

Wireless payment is just one of many innovations coming to the payments industry. Widespread use of electronic bill presentment, automatic payment services, digital cash, smart cards, and whatever else comes along, will provide new opportunities for financial institutions to add value to their online offerings. Financial institutions, building on 100 years of consumer trust, are in a great position to be the retailer of choice for new payment services. And the Web will be the logical point of contact for disseminating information, signing on new users, and tracking usage.

Contacts: David McGettigan is Mobil Speedpass Project Manager, www.mobil.com. Bill Wallis is President of Arch Energy/Wallis, owner of the St. Louis stations that piloted the service www.wallisco.com/new.htm. For more information on Electronic Toll Collection (ETC) refer to pelican.its.berkeley.edu/ PATH/DSS/etc.html, sponsored by the California Partners for Advanced Transit and Highways (PATH), a joint venture among the University of California, California Dept. of Transportation, and private industry.