Definition and Scope of Mobile Payments
Mobile commerce is a natural successor to electronic commerce. The capability to pay electronically coupled with a website is the engine behind electronic commerce. Electronic commerce has been facilitated by automatic teller machines (ATMs) and shared banking networks, debit and credit card systems, electronic money and stored value applications, and electronic bill presentment and payment systems. Mobile payments are a natural evolution of e-payment schemes that will facilitate mobile commerce. A mobile payment or m-payment may be defined, for our purposes, as any payment where a mobile device is used to initiate, authorize and confirm an exchange of financial value in return for goods and services (Au and Kauffman, 2008). Mobile devices may include mobile phones, PDAs, wireless tablets and any other device that connect to mobile telecommunication network and make it possible for payments to be made (Karnouskos and Fokus, 2004). The realization of mobile payments will make possible new and unforeseen ways of convenience and commerce. Unsuspected technological innovations are possible. Music, video on demand, location based services identifiable through mobile handheld devices—procurement of travel, hospitality, entertainment and other uses are possible when mobile payments become feasible and ubiquitous. Mobile payments can become a complement to cash, cheques, credit cards and debit cards. It can also be used for payment of bills (especially utilities and insurance premiums) with access to account-based payment instruments such as electronic funds transfer, Internet banking payments, direct debit and electronic bill presentment.
Several mobile payment companies and initiatives in EU have failed and many have been discontinued (Dahlberg et al., 2008). In Europe and North America with few exceptions such as Austria, Spain and Scandinavian countries the development of mobile payments have not been successful. However, mobile payment services in Asia have been fairly successful especially in South Korea, Japan and other Asian countries (e.g., Mobile Suica, Edy, Moneta, Octopus, GCash). NTT DoCoMo has 20 million subscribers and 1.5 million of them have activated credit card functionality in Japan. There are 100,000 readers installed in Japan (Ondrus and Pigneur, 2007). The main difference between successful implementations of mobile payment services in the Asia Pacific region and failure in Europe and North America is primarily attributed to the ‘payment culture’ of the consumers that are country-specific.
This chapter discusses a generic technical architecture for mobile payments. First a literature review framework outlines the broad context in which mobile payments operate. Following this we outline the general characteristics of mobile payments. The technology considerations of mobile payment solutions bring out the differing communication channels that a mobile device has and its implications for mobile payment solutions. The generic architecture provides a framework to understand how the mobile payment model works internally. Systemic issues such as the need for a clearing and settlement arrangement are highlighted. Finally, security and standards are touched upon. The final section concludes the chapter.