Critical Success Factors of Mobile Payments

Scientific Essay, 2002

106 Pages, Grade: 1,0 (A)






1.1 Motivation
1.2 Goals of the study
1.3 Structure

2.1 History of payments
2.2 Traditional payment methods
2.3 Fixed-line online payment methods
2.4 Summary

3.1 Market and players.
3.2 Mobile hardware
3.3 Connection technologies
3.3.1 Cellular network technologies GSM HSCSD GPRS EDGE UMTS SMS
3.3.2. Proximity technologies Bluetooth IR RFID
3.3.3 Wireless Internet technologies WAP I-Mode
3.4 Types of mPayment
3.4.1 mPayments applying cellular network technology mPayment linked to phone bill mPayment linked to bank or credit card account
3.4.2 mPayments applying mobile Internet technology Personal online payments Micropayments
3.4.3 mPayments applying proximity technology Single chip Dual chip Dual slot
3.5 Describing criteria.
3.6 Summary

4.1 Contingency factors
4.2 User specific factors
4.3 Value creating factors
4.3.1 Diffusion of innovations theory
4.3.2 Technology acceptance model
4.3.3 Network externalities theory
4.3.4 Customer perceived value
4.3.5 Critical value creating success factors Cost Complexity Trialability Acceptance Observability Convenience Security Anonymity Standard
4.4 Summary

5.1 Paybox
5.2 Speedpass
5.3 PayPal
5.4 Firstgate
5.5 Summary



A 1 Traditional payment methods
A 1.1 Basic payment procedures
A 1.1.1 Payment by cash
A 1.1.2 Payment by cheque
A 1.1.3 Payment by giro or credit transfer
A 1.1.4 Debit charge procedure
A 1.2 Card based products
A 1.2.1 Payment by cash card
A 1.2.2 Payment by debit card
A 1.2.3 Payment by credit card
A 1.3 Payment related terms
A 1.3.1 Cash on Delivery
A 1.3.2 Payment by bill
A 1.3.3 Electronic Bill Presentment and Payment
A 2 Fixed-line online payment methods
A 2.1 Electronic counterparts of basic payment procedures
A 2.2 Encryption channels
A 3 Mobile device related technologies
A 3.1 SIM
A 3.2 SAT
A 3.3 WIM
A 4 Relations between critical success factors

Table of Exhibits

Exhibit 1: Development of Payment methods German local POS 1995-2001

Exhibit 2: Traditional and fixed-line online payment methods

Exhibit 3: mPayment device connection overview

Exhibit 4: Radio frequency identification architecture

Exhibit 5: Wireless application protocol network model

Exhibit 6: Personal online payment process

Exhibit 7: Implementation alternatives of security element

Exhibit 8: Describing criteria

Exhibit 9: Technology acceptance contingency model

Exhibit 10: Elements of diffusion

Exhibit 11: Technology acceptance model

Exhibit 12: Impact of positive feedback over time on market share

Exhibit 13: Customer perceived value.

Exhibit 14: Paybox - describing criteria

Exhibit 15: Speedpass - describing criteria

Exhibit 16: PayPal - describing criteria

Exhibit 17: Firstgate - describing criteria

Exhibit 18: Cheque clearing

Exhibit 19: Giro transfer clearing

Exhibit 20: Credit card clearing

Table of Charts

Table 1: Cost by participant

Table 2: Comparison of application cases by critical success factors

Table 3: ATM, EFTPOS value and volume of transaction

Table 4: Credit transfer - relative importance in cashless transactions

Table 5: Direct debit - relative importance in cashless transactions

Table 6: Cash card - volume and value of transaction 1996 2001, Germany

Table 7: EC transactions 1996 - 2001 (retail and gas purchases) Germany

Table 8: Debit card - volume and value of transaction.

Table 9: Credit card market - volume and relative importance, Germany

Table 10: Credit card - volume and value of transaction, penetration

Table 11: Relations between critical success factors.


Abbildung in dieser Leseprobe nicht enthalten

1 Introduction

Convenient access [] to relevant information with the ability to easily take action on it when and where you need to.

IBMs definition of Pervasive Computing

M-Payment systems will continue to gain momentum in 2002 []. In the United States and Europe, the greatest challenge will be for vendors to create sufficiently compelling reasons for users to adopt a new payment system.

Gartner Research

1.1 Motivation

In the context of this research, payment is understood as the exchange of monetary value between participants either directly or using an intermediary.5 Mobile payment (mPayment) can be understood as every payment where at least one participant applies mobile phone technology, thus, uses a mobile phone.6 But due to technological progress it seems reasonable to classify other devices like a Personal Digital Assistant (PDA) or devices with embedded Radio Frequency (RF) technology as mobile payment devices.7 However, mobile phones today clearly outnumber every other mobile payment device. Penetration rates8 are forecasted to reach almost 80% in Europe by 2005.9 The number of worldwide cellular subscribers is expected to pass one billion by 2003.10 By 2005 there will be more mobile phones worldwide than TVs, fixed line phones, and Personal Computers (PC).11

Driven by the increasing penetration and resulting business opportunities, numerous mPayment solutions have been offered by payment service providers, telcos, and

financial institutions. The variety of applicable technologies, the possible linkage between the financial instruments, and the mPayment device combined with different payment scenarios offer a wide landscape of mPayment solutions. Besides technology, questions dealing with consumer expectations, factors thriving or inhibiting a widespread adoption, and with it related penetration strategies for payment service

providers have to be carefully researched to develop a successful mPayment.12

1.2 Goals of the study

Based on diverse motivations and influenced by recent technology development banks, telcos and start-up companies endeavour to build a successful mPayment that meets the expectations of consumers and merchants. The research question of this paper focuses on factors that can be identified as crucial to drive the success of mobile payment systems. Therefore, the first goal is to give an introduction to the mPayment landscape as a foundation for further research. The second goal is to derive key factors influencing the success of an mPayment from theoretical models and by reviewing related literature.

The research concentrates on business to consumer (B2C) and consumer to consumer (C2C) payment on the European and United States (US) market. Neither cross border payments nor business to business (B2B) payments are described in this paper.

1.3 Structure

The second chapter Traditional and fixed-line online payment methods includes a short historical part, and presents established payment methods in the real world and the fixed-line Internet world. Additionally, it explains the correlation to mPayments.

The third chapter Mobile payment addresses the first goal, the introduction to the mPayment landscape. After the discussion of the mPayment market and its players, the mobile device is specified. A detailed discussion of connection technologies provides the foundation to examine different types of mPayment. Finally, criteria to describe mPayments are developed.

The fourth chapter Critical success factors is designed to achieve the second aim, the development of critical success factors. Critical success factors are divided into contingency factors, user specific factors, and value creating factors.

To underline findings of the third chapter in practice, the fifth chapter Application cases examines mPayment solutions by applying describing criteria and critical success factors.

Finally the sixth chapter Conclusion and outlook summarizes the approaches taken in this paper, presents the major findings, provides a short outlook, and proposes issues which could be subjects for further research.

2 Traditional and fixed-line online payment methods

Chapter 2 is designed to briefly present traditional payment methods and fixed-line online payment methods. Moreover, it explains their link to mPayments.

To achieve this goal, chapter 2 starts with a short history of payments (chapter 2.1). Then traditional payment methods (chapter 2.2) and fixed-line online payment methods (chapter 2.3) are presented. Chapter 2.4 summarizes the most important aspects.

2.1 History of payments

An important piece of the foundation that supports every leading economy, is the possibility to exchange goods, services and money. The major part of trading is finally settled through payments. 13

Predecessors of todays payments are barter and commodity money. Bartering is limited by different individual interests in the exchanged goods14, also known as double coincidence of wants15. In a barter economy, the sum of exchange relations between n goods and the number of resulting relative prices is n(n-1)/2. The introduction of money, considered as a standard good, reduces the number of relative prices to n-1 absolute prices, and in overcoming the double coincidence of wants, simplifies the trading of goods.16 Commodity money, such as corn, salt, or gold, was the earliest

money. The value of these physical commodities were well known and used to effect payment. The next phase in the development of money were paper and coins backed by deposits of gold and silver held by the note issuer.17 The next step in the progress of money is called fiat money. Fiat money is not backed by commodities, it is only backed

by the issuing governments decree that it is acceptable as legal tender currency. Its value derives from the confidence in stable governments and the trust in central banks.18

Digital money is not new: bank historians found out about transferring bank account balances to conduct payments from Italian merchants 1200 AD.19 Today paper and coin, card based products, systems developed or tailored for the Internet use and more recently mPayments are brought into play to conduct payments. Paper and coin improved standardization, lowered the risk of trade and transaction cost. Card based systems mainly improved creditworthiness and the ease of pay.20 MPayments are designed to enable further improvements, such as the possibility to pay any time and anywhere.

2.2 Traditional payment methods

Traditional payments have been around for decades and are widely accepted. They can be grouped into basic payment procedures and card based products.

Basic payment procedures encompass payment by cash, payment by cheque, direct transfer, and debit charge procedure.21 They are called basic payment procedures because other payment systems are based on one of these payments and their settlement. For example, card issuing companies finally use a debit charge procedure to debit their customers accounts with accumulated purchases; also some micropayment systems and mPayment systems in Europe use the debit charge procedure to debit their customers accounts.22 Additionally, they are considered to be a key asset of the financial industry: depending on the offered form of payment, a European Monetary Institute (EMI) licence or a banking licence is required.23

Depending on the time of payment, card based products can be differentiated into pay before, pay now and pay later cards. Cash cards belong to pay before cards and debit

cards or EC-cards to pay now cards. Credit cards are typical pay later cards.24

The development of applied traditional payment instruments at the local Point of Sales (POS) in Germany provides an idea in terms of relevancy and future trends in the field of B2C retail transactions (cp. Exhibit 1).

Abbildung in dieser Leseprobe nicht enthalten

Exhibit 1: Development of Payment methods German local POS 1995-2001 25

The development indicates that there is fierce competition between already existing payment methods. Cash is losing its importance. Cheques are becoming more and more insignificant. In general, all existing payment methods lost their importance to card based products. However, the German Geldkarte, a card based stored value system26 designed to substitute cash, completely failed. Exhibit 1 clearly indicates that mPayments are so far insignificant at German local POSs. Contrary to the German local POS situation, mPayments in form of Radio Frequency Identification (RFID) payments27 are gaining traction on the North American retail market.28 There, RFID payments are mainly challenging cash payments because RFID payments are in a strict sense another way to initiate card based payments.

2.3 Fixed-line online payment methods

This chapter briefly explains payment instruments derived from the rise of the Internet, and the resulting changes in the commercial environment29. Coherent with the logical transfer of traditional payment methods to the online environment, the two groups electronic counterparts of basic payment procedures and card based products combined with Internet technology were built. The last group within online payments, having obviously no predecessor, are payments evolved from the Internet revolution.

Electronic counterparts of basic payment procedures consist of electronic money, electronic cheques, paperless direct debit, and paperless direct transfer. Apart from the paperless direct debit and paperless direct transfer, all electronic counterparts failed.30

Applicable card based products in the Internet environment are cash cards which are either stored value cards or scratch cards, debit cards, and credit cards. The difference to traditional card based products is the transmission of payment information residing on the cards to the POS. The card information can be sent without any security precautions via Secure Socket Layer (SSL), via Three Domain (3D) Secure Electronic Transaction

(SET) or via 3D Secure.31 The first two options are classified as Mail order / Telephone

order (MoTo). MoTos are considered as card not present transactions which do not result in liability shift in favour of the merchant towards the banks, as it is the case with 3D SET or 3D Secure transactions.32

Typical payments evolved from the Internet revolution are micropayments, personal online payments, and encashment via accounts maintained by third parties.

As in the field of traditional payments, there are several payment options at the virtual POS. Due to existing differences in the underlying international traditional payment infrastructures, applied payment instruments in the online environment vary from country to country: in Germany for instance, direct debit procedures are very common for Internet purchases. In the US, however, direct debit procedures play an inferior


Generally, credit cards are the most preferred payment method in the US and Europe at the virtual POS.34

2.4 Summary

Chapter 2 gave a brief introduction to B2C and C2C payment with a focus on the European and US market. Exhibit 2 depicts the main groups, traditional payments, and fixed-line online payments that have been identified.

Abbildung in dieser Leseprobe nicht enthalten

Exhibit 2: Traditional and fixed-line online payment methods

A crucial outcome is that basic payment procedures which are built on the proprietary network of the financial institutions, are the foundation of all other payment instrument methods. Next to this, card based products are still gaining importance among traditional payment methods and are the most successful payment methods in the online environment. The strong position of card based products in the fixed-line online environment might be propelled by the increasing use of Interoperability Domain

Security Protocols (IDSP), such as 3D SET and 3D Secure. However, MoTo will remain in use, which is applied considerably in todays online purchases.35

Another outcome is that until today mPayments at local POSs are insignificant.36 At virtual POSs, recent research is revealing an increasing use of mobile phones to pay for online purchases.37 Reliable information about the situation in the C2C scenario are not available.

3 Mobile payment

Chapter 3 is designed to introduce mPayment. Therefore, it outlines the potential mPayment market, the motivation as well as the unique value proposition of the main players (chapter 3.1). Then the introduction is lead by a technological approach. It describes the mobile hardware (chapter 3.2) and the technical foundation for a wireless connection (chapter 3.3). Based on the technological approach, three main mPayment groups are built and examined: mPayments based on cellular network technology (chapter 3.4.1); mPayments based on mobile Internet technology (chapter 3.4.2) and mPayments based on proximity technology (chapter 3.4.3). To classify emerging mPayments chapter 3.5 develops describing criteria. Finally, chapter 3.6 draws a summary.

3.1 Market and players

The growth of the mPayment market relies on the ongoing spread of mobile telephony and the related expansion of mobile commerce (mCommerce). At this early stage, mCommerce market forecasts and related mPayment market forecasts are rather imprecise and therefore have to be interpreted carefully38: the mCommerce market is expected to reach 13 billion US Dollar (USD) in 2003, 50 billion USD in 2006 and approximately 270 billion USD in 2010.39 Forrester is predicting the mPayment market in Europe to be 23,4 billion USD in 2005.40 According to Frost & Sullivan, the mPayment market in Europe is predicted to reach 25 billion USD in 2006.41

Players of the mPayment market have to regard consumers and merchants with partially opposite demands: consumers payment behaviour has changed dramatically. In a nutshell, the consumer wants to pay any time and anywhere with a convenient payment method. Merchants on the other side are always looking for a payment option

cutting down their costs and at the same time guaranteeing payment. The following parties can be identified as likely candidates to provide mPayment services: 42

Telecommunication companies (telcos),


Financial service industry,

Alliances of the parties above.

Telcos are pressured to charge off their investments for licenses to operate the so-called Third Generation (3G) of mobile networks.43 The cost for the 3G infrastructure is estimated to total 250 billion USD in Europe alone, of which 110 billion USD is in licences.44 However, 3G technology is considered an unproven technology: it stays unclear whether the consumer will adopt the offered products and services, generates the planned volume and value, or whether the technology might be substituted by, until today, unknown products.45 In order to pay the high amount of interest and considering the fact that simple data transport over mobile networks is becoming a commodity46 telcos endeavour to expand their business to so far untouched segments.47 Additionally, the failure of mPayment might lead to decreasing traffic in the operators network and could hinder new value-creating opportunities.48 A solid mPayment is also expected to foster customer loyalty.49 Thus, the development of mPayment is substantial for telcos.

Main advantages of telcos are their technical experience in wireless technology, their control over mobile networks, their existing billing systems and their large customer base.50

The challenges depend on the technical realization of mPayment: a solution based on

standard phone call technology would give the telcos a rather low influence, in that they could only charge for the resulting traffic.51 However, a severe challenge is a solution requiring a regulatory permission. The management of multi purpose prepaid accounts make a banking licence or an EMI licence mandatory if the accounts are not only accepted by the company hosting the accounts, but also applicable to purchase services and goods at other companies.52 Moreover, the ability to grant a payment guaranty to merchants requires a banking licence. Telcos can obtain a licence via direct application or in cooperation with a bank.53 The next challenge is identified as the increasing exposure to financial risk. Fraud and unpaid bills involving just air time result in little additional cost. However, unpaid bills consisting of accumulated purchases at merchants, who are given a payment guaranty, would severely impact the operators cost.54

For start-ups the unclear development of the mPayment market seems to bear two opportunities: they can act as intermediaries between consumers, merchants, banks and credit card issuing companies, e.g. as Payment Service Provider (PSP). Secondly, due to the need of completely new payment systems, derived from the development of new market places like private auction sites, start-ups can enter the market as first movers with new sophisticated payment solutions.

The main advantages of start-ups are seen in their flexibility to explore emerging technologies faster, compared to cumbersome competitors, such as banks or telcos. Additionally, they are embracing the risk to fail easier than other parties, especially banks, which are afraid to lose their reputation.55

In terms of challenges, they might face similar problems to telcos depending on the solution. A recent example is PayPal, a US start-up in the field of personal online56 payment. In order to operate in Europe, PayPal is in need of an EMI licence, because its prepaid accounts are designed to buy services and goods from other parties.57 Another

challenge is to gain trust and a good repudiation: merchants are not preferring start-ups as mobile payment provider.58

In the financial industry, payment is a core business. According to the Boston Consulting Group, payment fuels about 40% of costs and constitutes up to 35% of revenues. Therefore, payment is clearly a core business within a bank. To exploit its enormous value a clear strategy is necessary.59 There are statements about payment services being a loss producing activity, but crucial to establish customer relations. Payments are seen as an access to the consumer market to sell financial services. Private and corporate customers are expecting banks to deliver financial services at acceptable


Their main advantages are the control of the existing payment infrastructure, the profound knowledge about security issues, established risk management and consumer trust.61 Internationally operating financial institutions are very suitable to cope with cross-border problems.62

The challenge for banks is related to the fact that mPayments might well be offered by other industries, e.g. telcos. Banks are endangered to become disintermediated. The outcome would be profit loss to competitors offering new or better services based on emerging technologies, and the loss of close customer contact. To avoid disintermediation they have to focus on their customers expectations when providing

convenient payment services.63

It is important to understand that the three parties discussed above do not necessarily have to compete. Banks could establish fruitful alliances with telcos64 to better fulfil the expectations of the consumers in combining the advantages of both sides: banks are experienced in financial products, have risk management in place, are trusted by

customers and are in the possession of a banking licence. Telcos also have a large customer base and are experienced in mobile technology. A cooperation could finally lead to a win-win-situation.65 Both parties can also build up alliances with start-ups adopting the new technology and offering experience in their field of competence.

3.2 Mobile hardware

Some mPayment definitions have in common that they posit the mobile phone as the device to conduct payment. But there are payment solutions which can also be considered as mobile although not involving a mobile phone, but e.g. RFID key fobs.66 Additionally, PDAs are increasingly equipped with mobile phone technology and vice versa.67 Therefore, it might be suggested to expand the circle of mPayment devices. Next to mobile phones, smartphones, PDAs, and RFID fobs can be considered as mPayment devices according to the following criteria:

Physical criteria: a mobile device should be highly portable.

Connection criteria: a mobile device has to establish a wireless connection. The payment information can be exchanged by a local short range connection, as in the case of RFID, or by a cellular network connection or both.

Acceptance criteria: a mobile device should qualify for any time and anywhere usage. Points of acceptance should be widespread and not bound to a single location, e.g. an RFID technology based bridge toll payment system, which can only be used at one single bridge cannot be considered as an mPayment system. However, if this toll collecting system could also be applied for another purpose,

e.g. to purchase gas, it could be considered as an mPayment system.

However, mobile phones are equipped with a combination of features and functionality which gives them an outstanding position among other mPayment devices. Among the features is the ability to send and receive text and speech. Other key technologies, such as the Subscriber Identity Module (SIM), the SIM Application Toolkit (SAT) or the

Wireless Identification Module or WAP Identity Module (WIM)68 might be incorporated depending on the device.69 The Mobile electronic Transactions (MeT) initiative posits the following aspects to define a mobile phone as Personal Trusted Device (PTD):70

The personal nature: a mobile phone is usually not shared but controlled by one single person. Additionally, the owner carries the phone most of the time. Thus, the mobile phone is a quick and correct link to a certain person.

The application platform delivers user interfaces necessary to undertake transactions like banking, payment or ticketing.

The requirements for devices to make legally binding digital signatures, e.g. according the European Electronic Signature Standard Initiative (EESSI)71, are fulfilled.

In terms of security, features to protect the transactions and the critical data on the device are existent.

3.3 Connection technologies

The mPayment device establishes a wireless connection (cp. Exhibit 3). The communication can either be established by cellular network technologies (chapter 3.3.1) or proximity technologies (chapter 3.3.2). Internet access by the mPayment device based on cellular network or proximity technology requires wireless Internet technologies (chapter 3.3.3). Depending on the investigated connection, communication bearers are of different nature.

Abbildung in dieser Leseprobe nicht enthalten

proximity connection


Exhibit 3: mPayment device connection overview72

3.3.1 Cellular network technologies

Key cellular network technologies are: Global System for Mobile Communication (GSM) (chapter, High Speed Circuit Switched Data (HSCSD) (chapter, General Packet Radio Service (GPRS) (chapter , Enhanced Data Rate for GSM Evolution (EDGE) (chapter, Universal Mobile Telecommunications System (UMTS) (chapter Additionally, Short Message Service (SMS) (chapter, which is based on GSM, is an important enabling service. GSM

GSM is a digital wireless network standard, also referred to as Second Generation (2G).73 In April 2002, approximately 70% of the total of wireless subscribers are GSM subscribers. The number of GSM subscribers is 684.2 million worldwide. GSM is prevailing in Europe with 357.1 million subscribers, and in most of the Asia-Pacific region with 249.9 million subscribers. In North America only 14.7 million subscribed to GSM.74 The North American mobile market is approximately 2 years behind the development in Europe due to the Called Party Pays principle and the wide acceptance of other technologies, such as pagers.75 GSM operates in the 900 MHz and

1800 MHz frequency band.76 To enable data transport, a circuit-switched connection is established. The data throughput is limited to 9.6 Kbps.77

A main advantage is the widespread acceptance of GSM. A disadvantage is that the wireline circuit and the radio channel resources are reserved, even if data is not transferred. These resources could be used for other traffic. Alternatively, they could be released if there is no data traffic and again reserved if necessary. However, GSM requires a long call set up time which cannot be tolerated by many applications and each

set-up call produces extra traffic.78 HSCSD

The HSCSD protocol is based on GSM. The typical user scenario is the frequent business traveller accessing internet application while on the move.79

One advantage is the higher throughput. HSCSD enables a data throughput of up to

57.6 Kbps by making use of up to 8 Time Division Multiple Access (TDMA) time slots simultaneously instead of one time slot.80 Due to the higher throughput, large file transfers and multimedia applications are possible.

A disadvantage is the call set-up time of approximately 40 seconds. Additionally, fewer users can share GSM services because more resources are assigned to an individual consumer.81 HSCSD is expected to have a limited opportunity window and is seen as an interim technology to enhance existing GSM services.82 GPRS

GPRS is a packet switched wireless protocol defined in the GSM standard. GPRS is able to provide connections up to theoretically 115 Kbps, but it will initially only provide 43.2 Kbps downstream and 14.4 Kbps upstream. GPRS is considered as a step in the evolution towards UMTS because both technologies are packet-switched based.83

A major advantage of GPRS is the always on connection, improving end user experience. GPRS will enable any service that currently runs on the fixed internet, such as web browsing, chat, e-mail, or File Transfer Protocol (FTP) to work on the mobile network. The key idea is that data are only transferred if necessary. Compared to HSCSD, spectrum efficiency is further increased: GPRS supports more users on one to

eight channels.84

A disadvantage is the necessary investment in new infrastructure: GSM circuit- switched architecture needs to be expanded to enable packet switching.85 EDGE

EDGE is an enhanced GPRS version introduced under the same GSM infrastructure.

One advantage is the introduction of user data rates up to three times higher and an up to six times higher spectrum efficiency than GPRS.86 Data transmission of up to approximately 384 Kbps is achieved. EDGE supports the migration channel from GPRS to UMTS because for UMTS necessary modulation changes will already be in place. Compared to the GPRS/UMTS scenario a GPRS/EDGE/UMTS scenario cuts operators capital expenditure by half.87

A disadvantage is the operators low commitment and the limited availability of triple- mode GPRS/EDGE/UMTS handsets.88 Thus, EDGE is considered as an interim technology with a short opportunity window.89 UMTS

UMTS, also called Third Generation (3G)90, is the next big step in mobile phone technology development. International Mobile Communication 2000 (IMT-2000) is the official standard for 3G.91 The goal is one single standard Code Divison Multiple Access (CDMA) enabling the use of one single handset worldwide. Within this standard

are three coexistent modes: Wideband CDMA (W-CDMA) for the GSM countries Europe and Asia, Multicarrier CDMA for North America, and Time Division Duplexing (TDD) CDMA for the Chinese.92 3G operates on the 2100 MHz band.93

One advantage is that UMTS technology supports 144 Kbps bandwidth for high speed movements, 384 Kbps for pedestrians and 2 Mbps for stationary, e.g. in buildings. UMTS technology is designed to support full-scale multimedia services, such as teleconferencing and instant access, to a wide variety of Internet applications. Next to higher user data rates and increased spectrum efficiency, 3G is paving the way towards

a worldwide, homogenous, and ubiquitous communications network.94

Main disadvantages are cost and the lack of guaranty of consumer demand. It is expected that 3G handsets will be equipped with complicated functions to enable complex information access. These handsets will be more expensive than existing handsets and are likely to be more difficult to operate.95 3G is mainly based on supplier push instead of consumer demand. However, there is no clear statement of 3G infrastructure cost from manufacturers.96 SMS

SMS enables to send and receive text messages of up to 160 alphanumeric characters via mobile phone. There are two types of SMS services: cell broadcast service and point-to-point service. Cell broadcast service delivers SMS messages to all subscribers in an area, whereas point-to-point messages are delivered to a specific user.97 Approximately 90% of SMS messages are voice mail notification or simple C2C messaging.98 24 billion SMS messages were sent in March 2002.99 Recent research revealed that the heavy SMS users are under the age of 25.100

One advantage is that a SMS message can be received during conversation.

100 A.T. Kearney (2002) p. 16.

A major disadvantage is the security issue. SMS messages cannot be blocked. Mobile phones can become subject of denial of service attacks, mail bombs and spamming through SMS. Also viruses are can be delivered via SMS. Additionally, SMS is considered to have a weak encryption. SMS messages are consuming memory in the mobile phone. Finally, the sending of SMS messages can become expansive if SMS

messages are charged on per-message basis.101

3.3.2. Proximity technologies

The following technologies are applicable to establish a proximity or short range connection: Bluetooth (, Infrared (chapter and Radio Frequency Identification (chapter Bluetooth

Bluetooth is a computing and telecommunications industry specification describing how different devices can establish a wireless short-range connection to exchange data. Bluetooth technology was an internal Ericsson project on wireless connectivity developed in 1995.103 In 1998 the Home RF Working Group (HRFWG) and the Bluetooth Special Interest Group104 (SIG) started to develop industry standards for an integrated voice/data home wireless network. Bluetooth uses the Industrial Scientific and Medical spectrum (ISM)105. It provides 79 channels, operates at 2.45 GHz, and is almost globally available.106 Every Bluetooth device is equipped with a low cost chip transmitting and receiving at the 2.45 GHz band. To establish a network each device owns a unique 48-bit address from the IEEE 802 107 standard. The network throughput is 723.2 Kbps. Bluetooth utilizes fast-frequency hopping at a rate of 1600 times per second108 with spread-spectrum techniques. This enables communication even in areas with heavy electromagnetic interference. Built-in encryption and verification is


One advantage is that Bluetooth does not require a line of sight to communicate. The connection can be point to point or multi-point at a range of 10 meters.110

Disadvantages are found in the field of security. There is the possibility to datajack a mobile phone via Bluetooth. This allows an unauthorized third party to make phone calls via someone elses phone. Another possibility is to record a communication between two Bluetooth devices by recording all possible 79 channels. If the intruder finds out the hopping frequency he could repeat a transaction. It is also possible to

conduct a denial of service attack by jamming transmission frequencies.111 IR

Infrared light can be used to connect devices to transfer data wirelessly. The Infrared Data Association (IrDA) recently launched Infrared Financial Messaging (IrFM) Point and Pay Profiles to standardize the way payments are made when using IR connections for proximity payment.112 IrFM is designed to enable users with IR equipped devices to pay for purchases by beaming their virtual financial instruments to a POS. Virtual financial instruments consists of so called soft cards (electronically stored credit cards, debit cards), stored value or other information to initiate a payment.

One advantage of IR is that the user is no longer required to swipe his physical credit card through a reader. The whole transaction is beamed and can be kept totally paperless. The backend processing is exactly the same as the backend processing triggered by a credit card swipe.113 IR has a very high throughput, up to 16Mbps and it is relatively cheap. The short range and the necessity of line of sight limit the possibilities of attacks, such as data interception.114 Depending on the application this advantage can also become a disadvantage: e.g. the user is forced to point the device exactly to the other device or POS which can lead to inconvenience. RFID

Radio Frequency Identification is a technology that incorporates the use of electromagnetic or electrostatic coupling in the radio frequency portion of the electromagnetic spectrum to uniquely identify an object. RFID is no bearer, such as Bluetooth or IR. It is rather a complete system based on the principle of sending data via RF. A RFID system consists of three components: a tag, a reader and application components (cp. Exhibit 4).

Abbildung in dieser Leseprobe nicht enthalten

application components

Exhibit 4: Radio frequency identification architecture115

The tag, also called transponder 116, is attached to the objects that shall be identified. It consists of a microchip and an antenna. The tag becomes active within the reader zone. Outside the reader zone the tag remains idle. There are passive tags without their own energy supply and active tags powered by batteries. If a passive tag enters the reader zone, it is activated by electromagnetic induction resulting from electromagnetic waves sent by the reader. The electromagnetic waves received by the tags antenna give rise to an electromagnetic field that propagates through space, transmitting information residing on the chip. Low frequency systems (30 KHz to 300 KHz) have a short range. High frequency systems (3 MHz to 30 MHz) and ultrahigh frequency (300 MHz to 3 GHz) possess a longer

transmission range. The size of the antenna and, in case of active tags, the battery size determine the size of the tag.117 The antenna size increases with the range of the tag and decreases with frequency. 118

The reader, also called interrogator, produces the carrier signal for three purposes: firstly, to provide the energy for the chip on the tag: the closer the chip to the reader is, the higher the induced voltage on the chip. Secondly, to provide a clock source for the tag: many RFID chips derive from the carrier signal clock functions, such as counters, and the data transmission bit rate. The third purpose is to act as a data carrier.119

Application components link the reader via standard interfaces120 to application systems, like Enterprise Resource Planning (ERP) systems or POS software.121

One advantage of RFID systems is that direct contact or line-of-sight scanning becomes superfluous.122 RFID systems can interact with several tags in the reading range at the same time.123

A disadvantage is that it allows only communications with a low amount of data because passive tags are not designed to perform sophisticated computational tasks.

3.3.3 Wireless Internet technologies

In the context of this paper, currently applied enabling wireless Internet technologies are the Wireless Application Protocol (WAP) (chapter and I-Mode (chapter WAP

WAP is a global open standard designed to communicate information between wireless devices and the Internet. It originated from the WAP Forum, a joint development, of Ericsson, Nokia, Motorola, and Today numerous companies have joined the


1 Engl.: public company.

2 G Second Generation

3 Engl.: debit charge procedure.

4 Engl.: guaranty of payment.

5 See Dahlberg/Mallat (2002) p. 651.

6 See Krueger (2001) p. 1; see IWW (2002a) p. 5; see Kreyer/Pousttchi/Turowski (2002) p. 1 f.

7 See Thing/Rouse (2001); cp. chapter 3.2.

8 Users as a percentage of the population.

9 See Barnett/Hodges/Wilshire (2000) p. 164.

10 See Barnett/Hodges/Wilshire (2000) p. 164; see Krueger (2001) p. 3; see GSM Association (2002b).

11 See Datta/Pasa/Schnitker (2001) p. 72.

12 See Dahlberg/Mallat (2002) p. 650.

13 See Arnold/Martin (2000) p. 575.

14 See Huschke (1998) p. 179.

15 See OMahony/Peirce/Tewari (1997) p. 5.

16 See Crameri (2000) p. 94.

17 See OMahony/Peirce/Tewari (1997) p. 5.

18 See Fitch (2000) p. 183.

19 See White (1997) p. 15.

20 See Mantel (2000) p. 33.

21 Basic payment procedures are explained in chapter A 1.1.

22 See FRSFS (2001) p. 10; see IWW (2002b).

23 See Lelieveldt (2000) p. 8 f.

24 Card based products are explained in chapter A 1.2.

25 See Rter (2002) pp. 4-6.

26 Cp. chapter A 1.2.1.

27 Cp. chapters and 5.4.

28 See Kountz (2002) p. 1.

29 Cp. chapter 4.1.

30 Cp. chapter A 2.1.

31 Cp. chapter A 2.2; for more information on 3D SET or 3D Secure: see Visa (2002).

32 See Kanniainen (2001b) p. 30.

33 Cp. chapter A 1.1.4.

34 See Kerr (2001).

35 See Kanniainen (2001b) p. 30.

36 Cp. Exhibit 1.

37 See IWW (2002c) p. 8.

38 See Schneidereit/Padurch/Rueda (2001) p. 876.

39 See Barnett/Hodges/Wilshire (2000) p. 163; see Reuters (2001); see Krueger (2001) p. 4.

40 See Forrester (2001); (cross rate USD/EUR 0,9).

41 See Mobile CommerceNet (2002).

42 See Krueger (2001) p. 4; see Schneidereit/Padurch/Rueda (2001) p. 877; a detailed description of the mCommerce value chain can be found at: Barnett/Hodges/Wilshire (2000) p. 166 f.;

Durlacher (1999) pp. 15 18.

43 See Henkel (2001) p. 15.

44 See Trintech (2002) p. 10.

45 See Clifford (2002) p. 46; see Schneidereit/Padurch/Rueda (2001) p. 878.

46 See Barnett/Hodges/Wilshire (2000) p. 163; see Barnett/Hodges/Wilshire (2000) p. 166;

see Henkel (2001) p. 15.

47 See Schneidereit/Padurch/Rueda (2001) p. 877.

48 See Krueger (2001) p. 5.

49 See Henkel (2001) p. 15.

50 See Barnett/Hodges/Wilshire (2000) p. 167.

51 Corresponding mPayment solutions are explained in chapter 3.4.1.

52 See Lelieveldt (2000) p. 8 f.

53 See Henkel (2001) p. 15.

54 See Krueger (2001) p. 9.

55 See Schneidereit/Padurch/Rueda (2001) p. 876.

56 Cp. chapter 5.2; cp. chapter

57 See Krueger/de Geest (2001) p. 10.

58 See De Lussanet (2001).

59 BCG (2002).

60 See Prast (1995) p. 431.

61 See Maude/Raghunath/Sahay/Sands (2000) p. 92; see Prast (1995) p. 431; see Krueger (2001) p. 17; see Raina/Harsh (2002) p. 272.

62 See Henkel (2001) p. 16.

63 See Krueger (2001) p. 1.

64 See Datta/Pasa/Schnitker (2001) p. 78.

65 See Schneidereit/Padurch/Rueda (2001) p. 878.

66 See Thing/Rouse (2001); see Trintech (2002) p. 8.

67 See Noble (2002).

68 MeT (2001b) p. 8.

69 SIM, SAT and WIM are explained in chapter A 3.

70 See MeT (2001a) p. 4.

71 For more information on EESSI: see EESSI (2002).

72 I-Mode is only working with the GSM network. WAP is not supported by the RFID technology.

73 See Nichols/Lekkas (2002) p. 16.

74 GSM Association (2002a).

75 See Durlacher (1999) p. 19.

76 See Lin/Chlamtac (2001) p. 415.

77 See Lin/Chlamtac (2001) p. 165.

78 See Lin/Chlamtac (2001) p. 165.

79 See Durlacher (1999) p. 19.

80 See Lin/Chlamtac (2001) p. 166.

81 See Lin/Chlamtac (2001) p. 166.

82 See Durlacher (1999) p. 19.

83 See Durlacher (1999) p. 20.

84 See Lin/Chlamtac (2001) p. 166.

85 See Lin/Chlamtac (2001) p. 166.

86 See Lin/Chlamtac (2001) p. 352.

87 See Nordstrm (2001).

88 See Nordstrm (2001).

89 See Durlacher (1999) p. 20.

90 See Nichols/Lekkas (2002) p. 16.

91 See IMT (2002).

92 See Durlacher (1999) p. 20.

93 See Lin/Chlamtac (2001) p. 415.

94 See Lin/Chlamtac (2001) p. 414.

95 See Lin/Chlamtac (2001) p. 424.

96 See Lin/Chlamtac (2001) p. 438 f.

97 See Lin/Chlamtac (2001) p. 219.

98 See Durlacher (1999) p. 22.

99 See GSM Association (2002c).

101 See Nichols/Lekkas (2002) p. 26.

102 IEEE 802.11b, a Wireless Local Area Network (WLAN) technology is not examined. It is not suitable for mPayment devices mainly because of its high power consumption.

103 See Hansen/Neumann (2001) p. 1237.

104 Members of SIG in 1998: Ericsson, Nokia, Toshiba, Intel, IBM; today number of members about 800.

105 More information on ISM see: Lin/Chlamtac (2001) p. 11.

106 See Hansen/Neumann (2001) p. 1237.

107 The IEEE fosters the development of standards that often become national and international standards.

108 See Hansen/Neumann (2001) p. 1237.

109 See Lin/Chlamtac (2001) p. 488.

110 See Hansen/Neumann (2001) p. 1239.

111 See Raina/Harsh (2002) p. 407.

112 See IrDA (2002a).

113 See IrDA (2002b) p. 8.

114 See Raina/Harsh (2002) p. 307.

115 IDTechEx (2002) p. 11; see Hansen/Neumann (2001) p. 803; see DHont (2002);see Finkenzeller (1999) p. 9.

116 See Finkenzeller (1999) p. 9; see Hansen/Neumann (2001) p. 820; the term transponder originates from the radar and navigation technology. Devices in that field are usually bigger in size, bearing their own energy supply, and transmit a signal after being interrogated: see IDTechEx (2002) p. 10.

117 See Finkenzeller (1999) p. 13.

118 See IDTechEx (2002) p. 10.

119 See IDTechEx (2002) p. 11.

120 Standard interfaces: RS 232, RS 485.

121 See IDTechEx (2002) p. 10.

122 See DHont (2002).

123 See Finkenzeller (1999) p. 170 f.

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Critical Success Factors of Mobile Payments
Technical University of Darmstadt  (Finance and Banking Management (TUD); Institute of Information Mangement (HSG))
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Es handelt sich um eine Studie innerhalb eines Forschungsprojektes, die parallel in der Schweiz (HSG) und Deutschland (TUD) betreut wurde. Parallel between Switzerland and Deutschland
Mobile Zahlungsverfahren, Mobile Internettechnologie, Kartenbasierte Zahlungen, Online Zahlungen
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Christian Hort (Author), 2002, Critical Success Factors of Mobile Payments, Munich, GRIN Verlag,


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