CIC 2017 Mobile Payment and Transport—Briefing Note

By Frank Smith, Chair, ENLETS Mobile

This note summarises some points made at the Contactless Intelligence Conference on 28 April in London. The primary focus of the event was on contactless payments and banking, and on contactless ticketing for transport. Developments in these technologies are relevant generally to mobile applications and may therefore be of interest to ENLETS Mobile.

Banking and payments

Traditionally, banking services have been provided primarily by large banks. That model is changing, encouraged by the EU 2nd Payment Services Directive (PSD-2) coming into force in May 2018. New types of specialist service company—FinTechs—are delivering specialist types of banking service, boosted by the willingness of millennials (born from early 1980s to early 2000s) to use smartphones, mobile payment, internet services and new forms of banking in preference to traditional cheques, High Street banks and desktop PCs.

Payment Service Providers (PSPs) act as an intermediary to receive payment from a wide variety of payment forms (EMV contact cards, contactless cards, mobile payment, cash cards) and link to multiple banks and banking networks (e.g. Visa, Mastercard) to collect payment. So a transport operator can use a PSP, e.g. Creditcall, to enable many different forms of payment and ticketing to be used at their stations and on their busses or trains.

An aggregator provides a more complex service where a group of transport operators set up an integrated ticketing and payment scheme, tracking multiple travel events by the same passenger and calculating the appropriate charge shared between the operators according to an agreed scheme, applying pricing discounts, e.g. a cap on daily spend. An example is Visa, the aggregator for Transport for London (TfL). TfL now only accept contactless payment cards, mobile payment and pre-paid Oyster smartcards for travel on London busses and underground (the tube). Busses have a universal fixed fare charged immediately the passenger boards the bus. However underground fares depend on the distance travelled, so the aggregator has to match entry and exit events to calculate the correct fare.

CORRECTION TO ABOVE: Matthew Hudson ACA, Transport for London said in a correction, “Visa don’t act as our aggregator. We do all the aggregating ourselves. Barclays are our merchant acquirer. Visa has no role other than setting the scheme rules to its issuers over how transport payments are processed.”

Transport

Contactless payment cards and mobile equivalents are now an important form of travel ticket in their own right (e.g. TfL, above). In addition, smartcards or mobile apps are important as travel tickets and passes. Standards in this area include the ITSO ticketing standard defined by the European Smart Ticketing Alliance; and the CIPURSE standard defined by the OSPT Alliance; and the Calypso standard defined by the Smart Ticketing Alliance (STA).

The UK Rail Delivery Group see trials of mobile barcode tickets, smart payment and mobile wallet increasing over the next year or two; becoming a fully smart travel experience from 2019 and continuing to gain in user confidence / preference; the current paper-based train tickets with magstripes diminishing and becoming the least used form of ticketing by around 2020; digital wallet and cloud-based ticketing and payment becoming dominant by 2022. That timing would therefore take place alongside the introduction of 5G (2020?) and increasing adoption of smart devices—the Internet of Things (IoT).

New modes of payment

Lionel Baraban of Famoco described his company’s secure Android Point of Sale (PoS) terminal available in France and elsewhere in the EU in partnership with Banque Edel. This enables Chinese users of Alipay visiting the EU to make payments in Euro of up to €40,000 to the retailer’s Euro account when used in conjunction with the retailer’s Famcoco PoS mobile. Alipay has 450M users in China; carries 175M payments a day; and transmitted nearly $18Bn of payments on ‘Black Friday’ in 2016. €20Bn is spent by Chinese tourists in the EU annually, 50% in France.

Systems are increasing for easy transfer of money from person to person using mobile smartphones—examples: Swish (Sweden), PayM (UK) and Venmo (US).

Smartcards

Infineon are a major producer of secure smartcards for payment, passports and ID cards. Mobile payments would in their view begin to slow down use of EMV cards no sooner than 2020. Even where smarphone payment is used, customers may feel safer carrying a card as backup for some time. Dual Interface Payment (DIP) cards with EMV and contactless/NFC will become more widely used. Innovations will include biometric sensing and validation on card; cryptographic generation and display of a dynamic security code on card (to replace the pre-printed security number); Java operating system on card (more capable but requiring more memory); and plug-in chip modules manufactured separately from the card. This uses localised radio communication between the chip, and the card + antenna; can make personalisation easier; and increase reliability of card production (the thin wire connection with all-in-one manufacture can be a weak spot).

By 2020 the projection is for more smart devices than there will be people on the planet; and for 40% of smart devices (mobiles and wearables) to have smart payment capability. NFC wearables will continue to drive the adoption of forms of mobile payment.

Things that are very important

A summary of key points emphasised by speakers at the conference:

  • Customer experience is key to determining the success of online / mobile solutions not the technology used (Steve Jobs, Apple).
  • Back office services such as PSPs and aggregators to enable multiple passengers and payees with multiple payment cards and mobile applications / devices from multiple countries and suppliers to make seamless use of complex integrated transport networks.
  • Adoption of common standards to support interoperability.
  • Easy, fast, frictionless payment systems—high reliability, 24/7, fast transfer of funds, low admin cost, irrevocable payment (no risk to retailer that payment will be reversed), international.
  • Strong Customer Authentication since large number of customers not previously known to a transport operator will be using their service—authenticating the user and device is critical to secure operation.
  • Highly effective security to protect sensitive data on cards and mobile devices, e.g. hardware-based Secure Elements—to assure privacy and strong authentication.

Acknowledgements

Many good speakers at the event… this note drew particularly on presentations by:

  • Samee Zafar, Director, Edgar Dunn & Co., banking consultants
  • Dennis Rocks, Director of Technology Services—Smart Ticketing, Rail Delivery Group
  • Björn Scharfen, Infineon Senior Director, Payment and Wearables
  • Lionel Baraban, Chief Executive, Famoco

Thanks too, to Steve Atkins and Karen Brindley of Contactless Intelligence, organisers of the event. www.contactlessintelligence.com

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Categories: Editorial

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