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Unveiling the Mobile Payment opportunity: a deep dive into the Italian market Cashlog for MEF in collaboration with The ICT & Management Observatories Research Centre


A still unresolved dilemma: Mobile Payment, expectations vs. reality

The level of adoption: an overview

 Mobile Remote Payment  Mobile Commerce  Money Transfer services  Mobile Remote Payment  The satisfaction with Mobile Remote Payment services in Italy  The operators  A model?  Mobile Commerce Who’s The ICT & Management Observatories Research Centre?

CASE STUDY  Cashlog


The objective of this document is to unveil key aspects of the new payment methods that are changing our lives: the mobile payment. Leveraging the most updated data mined by Observatory NFC & Mobile Payment and taking a closer look at the Cashlog case, as an example of payment solution system for both merchants and customers that allows to sell or buy digital goods of low unit value (0,99€ - 15€) by using the mobile phone . Mobile Payment is a composite payment model which encompasses different paradigms, all characterized by the use of the Mobile phone as their primary means of interaction. There is a shift from paying “up close” in which the phone "emulates" a payment card (Mobile Proximity Payment), and the payment of services from a distance (remote) via SMS or Applications (Mobile Remote Payment), to managing in a broad sense, the entire process of purchase and payment remotely (mobile commerce) and the transfer of money between users or between users and financial institutions (Mobile Money Transfer). The common feature of these paradigms is the use of the phone and its distinctive features to innovate the payment methods: the huge population penetration (more than 5 billion devices worldwide), mobility, extreme portability and interactivity. However, the differences between the different paradigms are such that, beyond some common premises, the analysis of this present situation, the potentials and developments need to be addressed separately. Focalizing to the expectation versus reality the research of Observatory NFC & Mobile Payment evaluate the different types of mobile payment.


A still unresolved dilemma: Mobile Payment, expectations vs. reality By Osservatorio NFC & Mobile Payment – School of Management of Politecnico di Milano* 2010 was expected to be as the turning point in the market for Remote Mobile Payments in Italy (see the report entitled 'Mobile Payment in Italy: at last at the starting blocks!"). Expectations concerning its development were extensive and shared. With regard to those paradigms already technologically "mature" - Mobile Remote Payment, Mobile Commerce, Money Transfer - a wider spread of services and the emergence of some cases of excellence was expected. Regarding Mobile Proximity Payment all the conditions were there to start some serious pilot projects that would allow the assessment of its potential in real application situations. These expectations were also motivated by some fundamental changes in the contextual environment: - growth of the penetration of smartphones in the Italian population (1 out of 3 Italians) and a simultaneous increase in the use of Internet and Mobile Applications; - implementation of the new European legislation on payment services (PSD), which introduced new roles and market rules; - infrastructure development - such as the gradual introduction of contactless POS acceptance network - and announcements of the impending launch of new NFC mobile phones; - the emergence of some Mobile Payment services successful on the international level, potentially replicable in the Italian context as well. Although many of the aforementioned trends have become a reality and the market for Mobile Payment has made progress, the feeling is that there are still many open and largely unresolved issues: - Which Mobile Payment services best exploit the opportunities afforded by the mobile channel? - Which services will be appreciated and used by consumers and which will not? - How will the real value-added services of Mobile Payment be conveyed to consumers and merchants? - How will a virtuous system with high circularity involving a large number of operators and users be generated? - How can positive margins for all players involved in the Mobile Payment in light of the necessary organizational and monetary investments be obtained? - How long will it take for a significant portion of users to have NFC-enabled phones? And what strategies might manufacturers and Telco operators choose to help this process?

The level of adoption: an overview Mobile Remote Payment in Italy has grown little in terms of the offer (65 services in 2010, 2 more than in 2009); there are still few broad strategies that can be compared with the first 10 worldwide. In 2010 the Mobile Remote Payment offer in Italy presented a slow trend - 65 services compared to the 63 in 2009 were surveyed - with one important change represented by the emergence of the multi-operator platform Bemoov (which aims to aggregate a large number of already-active or soon-to-be-active merchants including Telepark), the emergence of new independent services (e.g., activation of the public waste fee in Rome) and the expansion of


existing projects (such as the extension to more cities of the Telepark service), but also the decommissioning of some services (such as suspension, hopefully temporarily, of the ski pass payment service in some ski resorts). The offer remains highly fragmented – there are only 4 (Bemoov, CartaSi, PosteMobile, Telepark) platforms that have developed multi-operator solutions with very different models, aggregating a total of about 40 services - and very focused ones at that - almost 78% of which cover parking payment or phone cards. The total market size of almost € 200 million is almost entirely represented by the Mobile phone top ups. Besides phone top ups, none of the other services has reached a significant level of diffusion (except perhaps Telepark). The main causes of the limited outreach to consumers are, in our opinion, the lack of circularity of services, the complexity of the activation process for the user and reduced promotional activity. Even at an international level, to be fair, the market for Mobile Remote Payment is characterized by high turbulence with many services that appear and then disappear in a matter of a few years. However, at least a dozen cases of success can be indentified in which widespread diffusion has been achieved amongst users, cases such as Plusdial in Scandinavia; in Belgium, Pingping; Paybox in Austria; PaybyPhone in the U.S. and the UK; some GCash platform services in the Philippines; Obopay in the U.S., Africa and India; and finally, MParking in Estonia. Plusdial, for example, has sold since 2002 more than 53 million tickets for public transport in Sweden, Finland, Belgium and Turkey, with highly significant penetration rates (40% of single fare tickets in the city of Stockholm). In Belgium, Pinping offers a platform of Remote Payment services, of which those for parking payment via SMS are particularly popular (e.g., in the city of Antwerp, one in two parking places is paid with this option).

Mobile Commerce - albeit a still embryonic phenomenon – in 2010 reached 12 million Euros in transactions; more than 20 of the top 100 eCommerce operators have activated the mobile channel. By Mobile Commerce we mean those services provided through mobile sites and / or applications that allow the entire purchasing process and not only payment, to be carried out via Mobile phone, simulating the purchasing process typical of eCommerce from one’s PC. Mobile Commerce in Italy is growing, driven primarily by two factors: the growing number of those Italians who surf using the mobile phone - now 12 million, according to ComScore, and thanks to the improved usability of new generation cell phones and flat rates - and an increase in the offer of mobile sites and applications – jumping from 12 to 38 services.

Money Transfer services in Italy are still underdeveloped; unlike the same services internationally In Italy the offer of money transfer services is still extremely limited. 6 agencies were surveyed, most of which related to the transfer of phone credit – “Ti ricarico” by Tim, “SOS mi ricarichi” by Vodafone, “Ricaricami” by Noverca, “Ricarica SMS” by Wind - while there are only 2 services of Money remittance/p2p that have also used the Mobile component - Paypal and Moneygram with Post Office’s Mobile offer. In the sequel of this document the focus will be given to Mobile Remote Payment, as it appears to be the field with most opportunities for development in the near future in Italy because of the actual breadth of the offer and the high number of business areas in which Mobile Payment solutions can be implemented and adopted by consumers.

Mobile Remote Payment will spread in those areas characterized by immediacy in purchasing, limited range of choice and high frequency of use, provided the ability to propose fast, simple and open solutions – available transversally amongst the different Telcos and financial institutions. Buying tickets for urban transport, parking payment and phone top ups are the application areas that best meet the requirements outlined above and we believe that the Mobile Remote Payment can take hold the fastest. We believe there are opportunities even in the payment of theatre or cinema tickets and taxi rides. However, it is not enough to


focus on these areas to obtain consumer approval. The best national and international experiences teach that the critical success factors for a Mobile Remote Payment initiative are: "Openness", meaning availability of the service regardless of the phone company or financial institution selected; simplicity and speed, both in use as the initial service subscription; adequate and constant communication regarding the presence and value of the service, without which its diffusion can only come about by relying on weak, viral marketing trends. One debated issue is the validity of proposing a single platform that enables a greater number of merchants to share registration and association payment tools in order to expand the user base. Thanks to these platforms the opportunities to use the service could increase and obstacles tied to initial registration can be overcome. In that regard, it is fair to imagine that users expect to find similar services on the platform (for example, all taxi companies in the same city or different cities, or the payment of parking in many cities like the service in the U.S. PaybyPhone) or ones that are complementary (the ability to park and take the bus or take public transportation like the urban and regional service Plusdial in Sweden). The positive effects of the combination on a single platform could be reduced or disappear in the case of highly heterogeneous services without a design that offers a similar/unique shopping experience to the user.

The satisfaction with Mobile Remote Payment services in Italy is high, even if users are still very few - less than 1% of Mobile users. The research carried out on existing users of the parking payment systems in Italy via Mobile phone (over 450 users of the 1,700 respondents surveyed) shows a high satisfaction rate. 55% of users state being very satisfied and say they use the service often (68% use it 2-3 times or more in a month and between 1 and 4 users use it almost every day). The main reasons are the convenience (61%), the speed of payment (53%), the ease (for 61% it is even "extremely easy"). An analysis of the criticalities confirms that the low level of adoption in Italy - compared with the best international experiences - is not due to the difficulty in using the solution, but rather to the complication of the process of registering for the service and inadequate communication campaign and poor training to users and employees. The research highlights a second very interesting element. People who have already learned to use the services of Mobile Remote Payment - albeit in a specific area - show a strong interest in using them in other contexts: to the question "How much would you be interested in using the Mobile phone to make other payments?" 73% answered that they were very or fairly interested, and in particular in buying buy bus tickets; (57% of respondents considered it quite or very interesting); tickets for the train (50%); for entry to cinema/theatre shows (50 %), or to pay the taxi (45%) - a confirmation of the areas considered most attractive.

The operators are on the one hand very interested in the services of Mobile Remote Payment, but on the other little aware of the real benefits. We have conducted a campaign of interviews involving 15 operators in local public transport and parking management. It revealed a good knowledge of these tools (90%) and widespread interest (around 80%), although there are still a few who already offer services to Mobile Remote Payment (only 3 of respondents). The main reason hindering investment in these tools is the lack of knowledge of their real benefits: an increased level of service and improved efficiency of internal processes. A more in-depth analysis of two operators that have already implemented Mobile Remote Payment services - respectively in the fields of "parking" and "public transport" - actually showed significant benefits in several areas. In particular, from the standpoint of internal process efficiency, a significant reduction in costs related to sales commissions on the physical channels and costs of collection and cash management was estimated. The analysis of time of return on investment - despite the presence of positive results with a payback time of less than 5 years in both cases - at the same time highlights the dependence of benefits on an adequate "critical mass" of users who move from the physical to the mobile phone, certainly higher than ten percentage points.


Hence the importance of acting on the levers to rapidly increase the level of adoption: ease of registration and use, and the communication campaign.

A model of dominant sector has not yet emerged, and perhaps never will; whereas it is almost always true that the successful projects have an actor who plays the role of leading aggregator. It is not possible a priori to determine whether a “broken down” Mobile Remote Payment sector/chain, with more players involved and a composite offer is better, rather than a lean one with few players focused on providing a few services: for both configurations, there are positive and negative aspects, ranging from potential size of the user base to the complexity of the revenue sharing models. To better understand the possible configurations we looked to the international success stories. Typically, the main drawback of lean value chains with a few players involved - such as an operator in conjunction with a service provider - is the lack of openness, namely the difficult access to several payment tools and several types of services. The case of Plusdial is an example of a rather slim configuration - in addition to the service provider, local public transport companies and Telcos are involved – that guarantees an extremely simple registration and payment process, through the involvement of Telcos and the model of the debiting the ticket price to the available telephone credit. The flip side is that the services are extremely focused and there is no way of charging other payment instruments. At the same time, there are successful projects that aim to incorporate a large number of players to increase the "circularity" of the service. The main advantage of these configurations is that they can create a larger user base, thanks to the involvement of several banks and Telcos that facilitate service subscription, and the availability of more operators that increase the breadth of services offered. For example, in the case of Pingping, all the Telcos are involved, as well as an Electronic Money Institution and, marginally, a bank, in order to allow users to pay with a variety of tools, from phone credit/phone bills to the bank account. In the case of Paybox, several types of merchants are involved, from municipalities for the parking to vending machines operators for snacks. The downside in these cases is that the business model is much more complex to develop and maintain and it increases the risk of providing a less immediate and less simple service. In all successful cases analyzed however, there is always an element of commonality: the presence of a leader who has played the role of promoter of the initiative, able to bring together other players around a business model.

Mobile Commerce – the extension of Mobile Remote Payment to include all stages of the buying process - expands the opportunities for use; to today, with the current mobile devices, it is an interesting model when the benefits of mobility are higher than its usability limits. Mobile Commerce is suited mainly to those application areas where the mobile channel, thanks to its mobility and immediacy, can strengthen the value proposition of those goods or services for which a purchase may be necessary when in mobility and not near one’s PC, as well as those with an intrinsically simple buying experience. For those cases in which a purchase requires a complex experience characterized by interaction with other multi-media elements such as viewing photos, videos, comparing prices and products, configuring the product / service before choosing what to buy - the Mobile device does not easily represent an added value in comparison to the PC (or tablet). The purchase of transportation tickets (trains, planes, ships), hotel reservations for business users, whose purchase is often last-minute in nature – e.g., food, coffee refills - or a raise at an auction, in our opinion, are examples that can best and first seize the development opportunities during the 2011 year. In the configuration of a mobile commerce service, it is important to design ad hoc services with a purchasing process consisting of only a few steps to fill the shopping cart, a site that is not too heavy on the system to avoid network slowdowns and the provision of a fast payment system. Focusing on payment systems, copying the eCommerce system’s characteristic of entering the card information for every purchase can run up against the limits of Mobile usability. For this reason "quick check-out" systems from the Mobile site - such as PayPal’s Mobile Express Checkout, Google Checkout or Amazon Mobile


Payment - may have some success because they allow memorization of payment tool data, thereby accelerating the payment stage. It is clear that many of these considerations will have to be extensively revised if the Mobile Commerce paradigm is to include highly advanced mobile devices, such as next-generation smartphones and even more, tablets.

* The ICT & Management Observatories Research Centre is an integral part of Politecnico di Milano and its Department of Management, Economics and Industrial Engineering . Many of the approximately 60 research team members, comprising full and associate professors, researchers, PhD students and contract professors hold academic roles within Politecnico di Milano. The Observatories are directed to all those companies that offer ICT services and solutions (software and hardware vendors, service providers, consultants, channel operators), and provide a detailed picture of the different Italian market scenarios, with the objective of supporting companies in setting up the most effective offers.

Case Study: Cashlog1 Cashlog is the innovative mobile payments solution system for both merchants and customers that allows to sell or buy digital goods, by using the mobile phone number only. Since April 2011, Cashlog is available in Italy with the full coverage of the four national carriers; it is also part of a commercial bundle of innovative payment services with CartaSi, the Italian leader in the credit card market, consisting of Virtual POS and e-wallet facilities, plus the Cashlog m-payments solution. Currently also available in Spain, the Cashlog solution will be progressively rolled out in the other European countrie sby the end of the year.

Description of the Service Cashlog allows to pay for a digital content from an online site through the “Cashlog button”. By clicking the button, the customer is redirected to a webform where he types the telephone number and confirms the purchase. As a response, Cashlog sends a secure PIN code via SMS, that needs to be typed into the webform, to have the purchase completed.

Benefits and targets of the Service Cashlog does not foresee any hidden fees or additional ‘network fees’, it allows the immediate opportunity to verify the transaction status, working only with reputable companies and with industry clean track record Cashlog’s customer care service is also available on a 24/7 basis. Cashlog makes fast and easy the payment process by mobile phones, in a safe and secure environment - boosting revenue for merchants by attracting potential customers who either do not own a credit card or prefer not to use it. In fact, Cashlog has two key targets, Merchants and Customers:


To learn more, visit or join Cashlog on LinkedIN at:





Merchants who sell low value digital goods (0,99â‚Ź - 15â‚Ź), such as virtual currency, news, e-Books, multimedia, ticketing and couponing, service bookings etc, can use Cashlog to have much higher conversion rates compared to credit cards or bank trasfers, due to the direct connections to the mobile operators powered by Buongiorno. Customer, that can take advantage from using Cashlog as a fast and secure way to pay as a replacement for credit cards.

The Company Cashlog is developed by Buongiorno**, a leading global enabler of the mobile connected life. With direct connections to more than 130 telecom operators in 57 countries, 10 years experience in the mobile ecosystem and a team of 1000 professionals, Buongiorno makes the mobile internet experience happen. Buongiorno is the preferred partner for telecoms, enterprises, handset and connected device manufacturers, supporting them in delivering customized mobile data experiences. Buongiorno has a potential reach of over 2 billion mobile consumers and an array of services and content spacing from mobile content based value added services (VAS), innovative solutions to deliver personalized mobile experience which are marketed or reside on many of the most popular OEM handsets and digital stores; to mobile loyalty programs and mobile advertising and marketing campaigns.

**Since 2003, Buongiorno, a leading global enabler of services and solutions for the mobile connected life, and the ICT & Management Observatories Research Centre, Politecnico di Milano, feed a strong and mutual collaboration, jointly aimed at supporting the research in the telecom industry. Buongiorno considers the research activity of the Observatories as the most authoritative voice on the Italian mobile scenario.This fruitful collaboration is today even more empowered since the recent launch of Cashlog, Buongiorno’s new solution in the promising sector of mobile payments.


Unveiling the Mobile Payments Opportunity  

The objective of this document is to unveil key aspects of the new payment methods that are changing our lives: the mobile payment. Leveragi...

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