Smart Card Talk September 2011

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a Smart Card Alliance ePublication

Smart Card Alliance Growth: Adding Resources for the Growing Industry This month the Smart Card Alliance unveils a new look for the monthly Smart Card Talk eNewsletter. Our goal with the new format is to provide our member and nonmember subscribers with a brand new way of viewing the important smart card industry news, events, and industry information that is happening in North America and Latin America. The Alliance and our media partner have invested in new ePublication technology that gives our readers the look and feel of a high quality print magazine, but with the freedom and convenience of an all-electronic distribu-

tion and viewing experience. We hope you will have patience with us as we try to get the kinks out and experiment with different layouts and content arrangements. We welcome your feedback on the newsletter by email to news@ smartcardalliance.org. We are also pleased to announce two new hires to the Smart Card Alliance staff. Debra (Debbie) Marshall has joined the organization as our new Communications and Operations Manager. Debra brings over 20 years of experience as a marketing communications consultant, corporate communication and marketing strategist, and director of communications with a number of non-profit associations and corporate clients. Click to Read More …

• Volume 12 : Issue 09

In This Issue: ② Executive Director Letter >> ③ Latin America Letter >> ④ Member Profile >> ⑥ Feature Article >> ⑪ From the Alliance Office >> ⑫ Council Reports >> ⑭ Members in the News >> ⑮ Industry Events >>

About Smart Card Talk Smart Card Talk is the monthly e-newsletter published by the Smart Card Alliance to report on industry news, information and events and to provide highlights of Alliance activities and membership.

About the Smart Card Alliance Feature Article:

The Mobile Financial Applications Landscape The numbers of mobile commerce applications (apps) and app types have grown at rates matching the rate at which Web sites were launched during the early days of the Internet commerce boom. A wide array of financial apps can provide value to the mobile phone owner, regardless of whether the owner is a business or a consumer. Click to Read More …

Member Profile:

Ingenico, North America This month Smart Card Talk spoke with Thierry Denis, President of Ingenico, North America. Recently, Denis relocated from Sydney, Australia to Atlanta, Georgia, to assume his new executive role with the company. As the President of Ingenico, North America (the U.S. and Canada), Denis is responsible for setting the overall leadership, direction and strategy for the region. Click to Read More …

The Smart Card Alliance is a not-for-profit, multi-industry association working to stimulate the understanding, adoption, use and widespread application of smart card technology.

191 Clarksville Road Princeton Junction, New Jersey 08550 1.800.556.6828 Fax: 1.609.799.7032 info@smartcardalliance.org www.smartcardalliance.org

executive director’s corner

Smart Card Alliance Growth: Adding Resources for the Growing Industry Dear members and friends of the Alliance, This month the Smart Card Alliance unveils a new look for the monthly Smart Card Talk eNewsletter. Our goal with the new format is to provide our member and nonmember subscribers with a brand new way of viewing the important smart card industry news, events, and industry information that is happening in North America and Latin America. The Alliance and our media partner have invested in new ePublication technology that gives our readers the look and feel of a high quality print magazine, but with the freedom and convenience of an all-electronic distribution and viewing experience. We hope you will have patience with us as we try to get the kinks out and experiment with different layouts and content arrangements. We welcome your feedback on the newsletter by email to news@smartcardalliance.org. We are also pleased to announce two new hires to the Smart Card Alliance staff. Debra (Debbie) Marshall has joined the organization as our new Communications and Operations Manager. Debra brings over 20 years of experience as a marketing communications consultant, corporate communication and marketing strategist, and director of communications with a number of non-profit associations and corporate clients. Debra will be responsible for managing our internal communications with our Alliance members, the Alliance web site, our social media communications, and member resources documentation. One of Debra’s first assignments will be to get to know our members and find out firsthand from our most loyal supporters how we can improve and bring more value-added services to our members and help grow the smart card market. Jaclyn (Jaci) Snyder has been hired as the Conference Services Coordinator. Jaci has a degree in communications/media and has had success developing member meetings and conference events for a number of large organizations. Jaci has jumped right into the active planning and coordination for the upcoming Smart Card Alliance Government Conference in November, by getting the event information and registration web site launched, working with the contractors and meeting facilities at the meeting venue, and supporting the conference program committee in coordinating speakers. Jaci will be splitting her time with the planning that 2

Smart Card Talk

has already begun on the 2012 Payments Summit in February in Salt Lake City and the new NFC Solutions Summit 2012 event with our partner, the NFC Forum, recently announced for May 2012 in San Francisco. Both of these hires have joined the Smart Card Alliance at a critical time in our history. The continued growth and expansion of the smart card markets in North America and Latin America demand that the Smart Card Alliance also expand and meet the needs of an organization that grew by 60 new members in the last 12 months and will surpass 200 members by the end of 2011, and whose annual budget will exceed $2 million this fiscal year, a 62% growth since 2009. New breakthroughs in the market environment involving EMV, NFC mobile payments, national cybersecurity, health IT security, and open bank card payments in transit will demand more deliverables from our industry councils, expanded media relations activities, new multi-media content for our web site, and better social media management in order to keep everyone informed as the smart card market evolves. The Smart Card Alliance has not even begun to reach its full potential. There are plenty of chip technology companies, financial institutions, government agencies, transit operators, mobile network operators, software developers, solutions architects, system integrators, end user organizations, consultants, and contractors that are just entering the smart card market in the U.S. and are not yet participating members of the Smart Card Alliance. As the market heats up in the United States, we are seeing increased membership coming from Canada, United Kingdom, Western Europe, China, and Korea. Many of these international organizations bring years of experience with smart card technology for payments, identity management, access control, mobile payments, healthcare, and transportation in their home regions. Next to China, the U.S. is poised to be the biggest adopter of new smart card technology and services in the world over the next 5 years. The migration to EMV alone could add nearly 1 billion new chip cards and NFC-enabled mobile phones, and an estimated 6 million new POS devices in that time frame. Our commitment to our members and followers is to keep the Smart Card Alliance moving the smart card market forward by investing in new technology, better communications, and better organization as demonstrated by this new ePublication-formatted newsletter, our two new professional staff members, better web resources and better organized conferences and events, and in building relationships with other industry organizations in the U.S. and internationally. The smart card industry is just getting interesting – and there is plenty of room for more of you to get connected and start helping to shape the industry in the years ahead. Sincerely, Randy Vanderhoof Executive Director rvanderhoof@smartcardalliance.org

Dear SCALA – Smart Card Alliance Latin America members and friends,

problems?

As our industry expands, the form factors change, and the terminology begins to blur together. The smart integrated circuit (IC) chip is the only common element among the different industries that the Alliance serves. These industries, though different in essence, are all influenced by smart IC chip technology and thus smart cards. The use of our technology may be quite different in each vertical market, but the expected results are similar. ¿How does the smart card industry provide solutions to these industries’

The publication of industry white papers, best practice documents, case studies, and position papers gives each vertical market the opportunity to find solutions to their ever-growing problems through the use of smart card technology. These documents are like instruction manuals for implementing smart cards and for helping readers understand how different components fit together to create a best-in-class solution. Our most recent example, the SCALA EMV Roadmap White Paper for Latin America and the Caribbean, has helped many institutions to understand the necessary elements and infrastructure for a successful implementation. Sometimes, more risk-taking organizations start the implementation process and then face challenges in putting all pieces of the puzzle together to create a successful implementation. This is normally when most organizations begin reading the instruction manuals (e.g., white papers) and contact the Smart Card Alliance Latin America – SCALA for help in fixing their problems, identifying their pitfalls, and correcting their process and implementation. These adjustments to fix the process normally are expensive, reduce the credibility of the institution, and are time-consuming. This always makes me wonder if it is the institutional ego that causes an organization to jump into the process with little preparation. Some may say that it is the first mover advantage that drives these institutions to make high risk bets in their implementation, or that

the business people are making decisions based on opportunities of the smart IC chip/smart card implementation without understanding all elements of the technology. It is obvious that elements of fear and desire play roles in the implementation process. I find it challenging to understand the real cause behind the rush to implement without adequate know-how and the resulting large amounts of capital that is lost in the process. Another critical component to ensuring a successful implementation is to find the right vendors that align with the objectives of the implementing organization. Choosing an organization can be tricky, because sometimes they may want to sell their solution instead of solving the problems at hand. The advantage of working with SCALA and its members is that these organizations have worked to develop an industry-approved white paper (i.e., instruction manual) and roadmap that help to determine the best way to resolve problems being faced by each vertical market. Moreover, our members have proven their capability to work with other organizations satisfactorily to develop industry best practices and to grow the market as a whole. Our membership is important to ensure a successful implementation, guarantee return business for vendors, and expand our industry. This is the reason that SCALA is working on education programs -- conducting smart card fundamentals training and CSCIP certification in Latin America and the Caribbean. Some of these programs are planned to be conducted solely by SCALA, but others will involve collaboration with organizations with strong local support in particular markets. These organizations have seen the value of creating a base of highly educated professionals for their markets. These professionals will be at the forefront of the transformation of these markets to using smart IC chip technology. We welcome both the private and public sectors to work with SCALA to expand development of white papers, best practice documents, case studies, position papers, educational programs and open forums. By working together, we can build success stories on the implementation of smart IC chips and smart cards in Latin America and the Caribbean. SCALA will continue to work on our objective of reducing the risk of smart card implementation through education. The Alliance would also like to send its cheers and congratulations to Mexico and Brazil for the celebration of their independence days. We hope all of you have a wonderful month! Sincerely, Edgar Betts Associate Director, Smart Card Alliance Latin America (SCALA) ebetts@smartcardalliance.org

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latin america corner

Education Helps to Drive Successful Smart Card Implementations

member profile

1. Welcome to the Alliance, can you briefly tell our members about Ingenico?

This month Smart Card Talk spoke with Thierry Denis, President of Ingenico, North America. Recently, Denis relocated from Sydney, Australia to Atlanta, Georgia, to assume his new executive role with the company. As the President of Ingenico, North America (the U.S. and Canada), Denis is responsible for setting the overall leadership, direction and strategy for the region. An engineer by trade, Thierry Denis is one of the most seasoned executives in the payments industry and a proven smart card chipbased technology expert. He has been with Ingenico for over 20 years where he held multiple senior leadership positions. Before moving to the U.S., Denis served as Managing Director of Ingenico Australia and South East Asia. He has been instrumental in successfully leading Ingenico operations and assisting multinational customers with their migration to EMV payments in the Asia Pacific region. Ingenico point of contact Thierry Denis, President of Ingenico, North America Thierry.Denis@ingenico.com www.ingenico.com

Certainly, thank you for the opportunity to address the Alliance and its members. Ingenico is excited to join the Smart Card Alliance as your newest corporate member at the Leadership Council level. We are a 30-year old global company with over $1.4 billion in sales revenue. Headquartered in Paris, France, Ingenico is the #1 provider of payment solutions in the world, with 3,000 employees and over 15 million terminals deployed in more than 125 countries. Ingenico is the partner of choice for financial institutions, banks, major retailers and single shop outlets worldwide. Ingenico provides retail and single outlet operators with a “One Stop Shop” offer of secure transaction solutions. This offer combines payment terminals and terminal estate management, payment applications (local, international, debit, credit), connectivity, routing, acquisitions (when required), and value-added services (e.g., money transfers, mobile phone top-ups, loyalty card and credit card management, payment of fines, bills). This secure transaction solution is complete and inclusive, whatever the sales channel used by retailers: payment at points of sale, over the Internet, or by mobile telephone.

2. What are Ingenico’s primary smart card initiatives? Ingenico was the first POS manufacturer in the world to offer chip-based technology on its terminals. This technology is now used globally by consumers with EMV integrated circuit payment cards. As a major player in the payments ecosystem, we are constantly involved in the migrations and implementation of smart card chip-based technology payments across the world. Recently, we have begun to deploy chip-based-technology-enabled terminals throughout Canada. Today, we’re working with several major merchants on piloting smart chip card enabled terminals in the U.S.

3. What do you see are the key factors driving smart card technology in the financial payments market in the U.S.? What role does smart card technology play in supporting Ingenico’s business? From what we’ve seen globally, the migrations from magnetic stripe to smart card chip-based payments indicate that smart cards are quickly becoming a global standard for chip payment and continuing to grow in usage. While this is not currently the case in the U.S., I believe that this is about to change. Recently, we have seen a number of financial institutions, such as Wells Fargo, J.P. Morgan Chase and Visa, issue their strategic plans to bring smart card chip technology to the U.S. as early as next year. There are multiple key drivers behind this new initiative: a growing need for card fraud mitigation, enhanced card authentication and security, and convenience for the U.S. consumers travelling abroad. Overall, in regards to smart card technology, Ingenico is, what I would consider, an enabler of smart card chip-based payments. Our POS terminals enable retailers to accept and process smart

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card payments. Currently, there are over 11.5 million payment terminals installed in the U.S. and only a fraction of them are capable of handling smart card payment transactions. With the arrival of smart card chip technology and EMV, merchants will have to upgrade their existing POS estate to accept and process smart card payments. Considering Ingenico’s global leadership in EMV payment, we are well-positioned to assist our partners to quickly and successfully implement this new technology. No doubt, we see the migration to this universal form of payment as a very positive sign for our business in North America. In fact we are already actively engaged and working with several U.S.-based multinational retailers on piloting Ingenico’s EMV-enabled payment terminals.

4. How do you see the new contactless and mobile payment initiatives changing the U.S. financial payments industry and Ingenico products? New contactless and mobile payments based on Near Field Communication (NFC) technology are revolutionizing the financial payments industry by changing the way consumers pay. Convenience, speed, loyalty programs, and couponing are the main drivers behind these new non-traditional payments. However, there is a great synergy between the migration to EMV and the different contactless and mobile payment initiatives in the U.S. The unifying catalyst here is the increased emphasis on security and convenience of payments. One has to equal the other. Our new Telium range of products comes standard with not only EMV-ready but also equipped with contactless and NFCenabled technology in order to provide our partners and customers with the wellrounded solution that will enable them to securely accept and process all forms of payment.

5. Where does the U.S. stand in terms of EMV? Today, there are one billion active EMV chip cards used for credit and debit payment, and 15.4 million EMV acceptance terminals deployed around the world. The U.S. is the last highly industrialized coun-

try in the world where smart card chip technology or EMV has yet to be used for payments. It is very unusual considering the fact that 37% of total payment cards, and close to 65% of total POS terminals deployed globally are EMV-enabled terminals. The good news is that EMV is starting to make its way into the U.S. A few weeks ago, Visa announced its plans to accelerate the migration to chip card technology in contact and contactless payments in the U.S. by providing incentive programs for merchants who choose to embrace the technology. Obviously, we welcomed the announcement. In our opinion, this type of public-facing corporate backing will serve as a catalyst to ignite the migration process.

carrying on in helping promote the arrival of smart card technology to the U.S. is very impressive. Ingenico’s primary role will be to support the Alliance in this mission. We will share our smart card expertise and best practices in developing the policy guidelines and standards, bringing the engineering innovations and applications of smart card technology in payments, and educating the merchants and consumers on the adoption of this exciting chip-based technology.

6. What obstacles do you see that must be overcome to capitalize on the new smart card opportunities in the U.S. financial payments market? The migration and adoption of smart cardchip based technology is a very complex and lengthy process which requires commitment and cooperation of all players in the payments ecosystem including card issuers, processors, POS hardware manufacturers, regulators, merchants, and consumers. Thus, a consistent unifying voice will be needed to create synergies to bring all these players together in order to accelerate the adoption of smart card technology in the U.S. Obviously, there will be significant investments required to upgrade the current payments infrastructure to be able to accept smart card payments--preliminary estimates by industry analysts indicate costs at greater than 13 billion dollars. Finally, education and training of both merchants and consumers will be critical in order to fully leverage smart card chip-based payments and capitalize on the opportunities created by this exciting technology.

7. How do you see your involvement in the Alliance and the industry councils helping Ingenico? As an organization possessing extensive global expertise in smart card chip-based payments, we are very excited to join the Alliance and look forward to actively engaging and contributing to the various councils. The work that Alliance is already Smart Card Talk

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feature article

The Mobile Financial Applications Landscape The numbers of mobile commerce applications (apps) and app types have grown at rates matching the rate at which Web sites were launched during the early days of the Internet commerce boom. A wide array of financial apps can provide value to the mobile phone owner, regardless of whether the owner is a business or a consumer. Currently, merchants or small business owners can run their entire businesses directly from a smartphone, providing a new level of freedom and convenience. Consumers also use their mobile phones for a wide variety of financial functions, including checking various account balances, performing bank transactions, making payments, and completing credit applications. Technology and business solutions are merging to provide powerful value propositions. This month’s Smart Card Talk article is the first in a series of articles on mobile payments. The article summarizes mobile financial apps: mobile banking, mobile commerce, mobile point-of-sale (POS), and mobile payments, including personto-person payment, remote payment, and mobile proximity payment.

Mobile Banking Mobile banking can be defined as the use of a mobile device by a consumer to access and manage financial services provided by a bank, credit union, brokerage, or other financial services provider. A recent commercial shows a woman receiving a text message on her mobile phone while hanging from the side of a mountain. Her bank is telling her that her account is about to be overdrawn. With a few clicks on her phone, she transfers funds from her savings account to her checking account to cover the overdraft. This commercial suggests that the future of banking is mobile banking, enabling mobile phone users to access basic financial services even when they are miles away from their nearest bank branch or home computer. In some parts of the world, such as the Philippines, Brazil, and Africa, mobile banking based on person-to-person remittance services is already flourishing. According to the Nielsen Company, mobile Web banking in the United States has grown to more than 13 million mobile subscribers—up 129 percent in just 2 years—and is now poised to level the playing field for customers of all kinds—banked, unbanked, young, old,

rich, poor, downtown, uptown, and out-oftown. The following factors point to the growth in mobile banking. First, banks are rolling out mobile banking solutions that reduce the need for branch visits while providing an increased level of services available anywhere, at any time. At the same time, mobile network operators (MNOs) are upgrading their networks to deliver data more quickly. Consumers are acquiring advanced, Internet-ready phones. Finally, consumer awareness and consumer confidence are increasing while the convenience of such solutions becomes more appealing.

Mobile Commerce Mobile commerce (also known as mcommerce) refers to the use of a mobile phone, smartphone, or other mobile device to support a commercial transaction. Mobile commerce can be defined as any transaction that involves searching or paying for goods or services using a mobile phone’s Web browser, a specialized app, or a text message. Like Internet-based ecommerce, m-commerce activities include both shopping and paying for products using the mobile phone. For example: A retailer’s Web site may be optimized for mobile devices, allowing consumers to shop on the Web site using a mobile phone’s Web browser. Retailer applications can run on a mobile device, allowing consumers to use a downloaded application to shop and pay for products from the retailer. M-commerce is already one of the major trends affecting small business owners. As of January 2011, the number of Americans who owned smartphones was 65.8 million, up from 45.5 million the previous year. According to a ComScore survey, 48 percent of these people, or more than 31 million, are using their phones to shop. In addition, people can use mobile devices to research products, recommend products to friends on social network sites, and compare online product prices to the

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Smart Card Talk

prices in brick-and-mortar stores. That is, m-commerce is not restricted to selling and paying for products; it encompasses many of the activities involved in shopping and in establishing relationships between retailers and customers.

software. For direct marketing merchants and those merchants who need inventory control, gateway providers, such as USAePay, offer mobile POS solution applications that can be securely routed to the appropriate financial processor.

Mobile POS

Although there is some concern in the payments industry about the security of wireless transactions, both consumers and merchants can benefit from the freedom and convenience of mobile POS. Retailers and service companies who invested in mobile have realized improved employee productivity and lower labor costs while improving customer service and ensuring quicker payment for goods and services rendered.

Mobile POS is defined as the use of a mobile device to replace a traditional merchant POS terminal or system and is typically used for inventory management, electronic payment, and queue busting. Smartphones and mobile commerce have made a significant impact on mobile POS. Mobile technology can deliver a restaurant order to the kitchen in an instant, allow riders to pay a taxi fare by credit card, and let shoppers scan their groceries as they place them in their carts. Mobile POS can support different types of payment devices – from traditional magnetic stripe cards to contactless bank cards to mobile proximity payment with a smartphone – and can also be an NFC-enabled device configured for POS acceptance.

Mobile Payment Mobile payment is a transfer of funds in return for goods or services in which a

mobile device is functionally involved in executing and confirming payment. The payer can be standing at a POS or be interacting with a merchant located somewhere else. [2] Consumers can use a mobile device to pay for goods and services such as: • Music, videos, ringtones, online game subscriptions, wallpapers, and other digital goods • Transportation-related items, such as bus, subway, or train fares and parking at meters • Any merchandise in a physical merchant location Characteristics of Mobile Payments As shown in the figure below, mobile payments are typically differentiated by technology, transaction size, location (remote or proximity), and funding mechanism.

Some retailers are replacing centralized checkout facilities with smartphones, providing store associates with the ability to roam the store. Apple stores have removed cash registers and equipped each representative with an iPhone or iPad to answer customer questions, check stock, and finalize sales. The Hampton Jitney bus service, which carries passengers from New York to the Long Island beach communities, uses a smartphone-based system that allows attendants to check reservations, take payments, and print out receipts. [1] A wide variety of systems are available for merchants. One example is the offering from Square that enables small merchants (such as flea market vendors and bake sale operators) to accept credit cards and process transactions using an iPhone, iPad, or Android device. Another small merchant payment solution, Quicken® Mobile POS, allows a merchant to process any major credit card, send receipts by e-mail, and export transactions to QuickBooks Financial

Mobile Payment Differentiators [3] Smart Card Talk

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Technology . Mobile payments can use a number of different technologies to perform a transaction. Remote payments typically rely on text messaging (short message service, or SMS), a mobile browser, or a mobile app. Proximity payments rely on either bar codes or a contactless interface to chip-enabled payment technology, such as NFC-enabled mobile phones, contactless stickers, tags, or fobs. Transaction Size. Transaction size affects the choice of mobile payment technology and approach. Mobile payments typically fit into one of two transaction size categories. Micropayments (less than $10-$25) are typical for paying for ring tones, music, parking, transit, coffee, and items in convenience stores. Macropayments (over $25) are typical for all other transactions, such as person-toperson domestic and international remittances, charitable donations, Web site purchases, bill payment and retail POS. Location. Remote mobile payments and proximity mobile payments are distinguished by the location of the mobile handset in relation to the merchant’s POS, as well as by payment account information and the payment acceptance device or service. A remote mobile payment is a payment in which the payer does not interact directly with the merchant’s physical POS system (for example, transferring funds through a mobile phone app to a merchant’s PayPal account). A proximity payment is a payment in which the mobile phone interacts in some way with a physical POS device to transfer the consumer’s payment information and perform the transaction. Funding Mechanism. Mobile payments can rely on multiple funding mechanisms. Transactions can be included on a telephone bill or funded by a prepaid account associated with the phone (typically used for textmessage-based payments). Alternatively, cash can be loaded into a virtual account at an agent location that is then used for payment. Another source of funds is a traditional bank account or credit, debit, or prepaid card, accessed through a virtual wallet (a wallet that is accessed using the mobile phone’s browser or a mobile application). The wallet may provide access to one or more of the above funding sources, which are loaded into the wallet.

P2P Mobile Payment Person-to-person or peer-to-peer (P2P) payment allows individuals to pay one another through a third party. P2P payment services, which are offered by many banks and third parties, can also allow business owners to transfer money to a customer or supplier account (and vice versa) using an e-mail address or mobile phone number. Users can conduct transactions using funds from a bank, credit, debit or prepaid account, or the payment can be funded through the mobile phone bill. 8

Smart Card Talk

According to Javelin Research, nearly 44%, or 38 million, of the 86 million online households completed at least one online P2P fund transfer in 2009, up from 27% in 2008. Javelin is forecasting that 60 million American households will use P2P transfers by 2014. [4] PayPal is the leader in the P2P category, with the largest global Internet-based payment network (approximately 94.4 million customers). In June 2000, PayPal diversified to support payments between businesses and consumers (B2C). PayPal offers a mobile phone app that allows consumers to send and request money using an e-mail address or phone number and a service based on SMS. PayPal has just announced a P2P payments solution for Android NFC phones that allows money to be transferred by tapping two NFC phones together. [5] Other examples of P2P mobile payment solutions include the following: • In 2010, Visa announced a new P2P payment service that gives its U.S. customers the ability to receive and send money from their Visa accounts. Visa’s service includes a partnership with CashEdge and Fiserv, two P2P financial transaction companies that now have access to VisaNet, the company’s payment processing network. [6] • MasterCard MoneySend uses the mobile browser, SMS, or a mobile app to enable customers to transfer money from person to person using a mobile phone. • ZashPay, a service provided by Fiserv, offers a public Web site that allows people to transfer money using e-mail addresses or mobile phone numbers. The banks involved determine the sender’s fee, with a suggested fee of 50 cents.

Remote Mobile Payment Remote mobile payment refers to transactions in which consumers use a smartphone or mobile phone to make purchases without interacting with a physical POS. Most mobile phones deployed over the last five years are equipped with the functionality required to support remote mobile payments, including SMS, secure mobile browser sessions, and mobile apps. Practical use cases for remote mobile payments include making purchases from a Web merchant, paying a merchant who does not have traditional acceptance capabilities for physical goods, paying a merchant for the purchase of digital goods, or sending money to another individual. Remote mobile payments can be implemented using the existing financial payments infrastructure (e.g., for payment at a Web merchant) or a closed loop mobile payments system. One example of the remote mobile payment process is as follows: 1. The consumer and merchant set up an account with a trusted third party or mobile payment service provider.

2. When a transaction is initiated, an SMS message is sent to the mobile payment service provider. Authentication can be accomplished using a variety of mechanisms, such as entering a secret password, validating handset hardware information, or verifying other sender personal information. 3. After the transaction request is received and authenticated, the mobile payment service provider transfers funds from the consumer’s account into the merchant’s account and notifies the merchant that the funds have been transferred. 4. In a closed loop system, the merchant may then move the funds into a standard bank account. Remote mobile payments are ideal for use in markets that require P2P payments and for underbanked consumers and merchants who are not part of the normal POS acquirer payment process, such as flea market vendors and seasonal outside vendors. One major retailer who has taken advantage of remote mobile payment is Foot Locker, Inc., a specialty athletic retailer with more than 3,400 stores in North America, Europe, and Australia. Using a smartphone, Foot Locker customers can access any of Foot Locker’s sites anywhere. They can then view and purchase products, find the nearest store, look at inventory, and check model, size, and color availability. Customers can also use the sites to monitor their Foot Locker loyalty account status and sign up for mobile alerts about new products and offerings. [7] Remote mobile payment represents a convenience for consumers as well as merchants. For example, PayByPhone, a brand owned by Verrus, features consumer payment options in several transportation categories, including car parking, taxi fare payment, and bicycle rental. Over 2 million people have signed up to use the PayByPhone service globally, and PayByPhone processes 2–3 transactions per second all day.

Proximity Mobile Payment Proximity mobile payment refers to a transaction in which a consumer uses a phone to pay for goods or services at a physical POS or with a mobile POS device. Proximity mobile payments can be used at both attended POS locations, such as stores, and unattended locations, such as vending machines. The consumer uses a mobile phone to interact with the merchant’s POS system. Proximity mobile payments can rely on the financial industry’s payment infrastructure or a closed loop payment infrastructure. Merchants can implement proximity mobile payments using NFC technology or other contactless technology and bar codes. Bar Code-Enabled Proximity Mobile Payment One form of proximity mobile payment is based on the use of bar codes. A two-dimensional (2D) bar code is displayed on a smart-

phone screen and read by an optical scanner at a retail POS, or the smartphone’s camera is used as an optical scanner to read a bar code displayed on a POS terminal. [8] Starbucks has rolled out mobile payment using 2D bar code technology to its nearly 6,800 company-owned stores in the United States. [9] Consumers can download the Starbucks Card mobile app to an iPhone or iPod Touch, a variety of BlackBerry models, and select models of Android phones. The app displays a bar code that the customer uses as a Starbucks Card to make purchases. When the bar code is scanned at the POS, Starbucks deducts the amount of the purchase from the customer’s Starbucks Card account. The app also lets a cardholder track the card balance, add to it with a major credit card, check the status of rewards points, and locate nearby Starbucks outlets. NFC-Enabled Proximity Mobile Payment Another implementation of proximity mobile payment uses NFC technology (also referred to as mobile contactless payment). An NFC-enabled phone is provisioned with a version of a payment application (e.g., American Express ExpressPay, Discover Zip, MasterCard PayPass, Visa payWave) and personalized with a payment account (i.e., credit , debit or prepaid) issued by the consumer’s financial institution. The phone can then use NFC technology to communicate with a merchant’s contactless payment-capable POS system. To pay, the consumer holds or taps the phone close to the merchant’s reader. The consumer’s account information is sent to the contactless POS reader via radio frequency (RF). The payment and settlement processes are the same processes used when a consumer pays with a traditional contactless or magnetic stripe credit or debit card. NFC technology can be built in and integrated with new mobile devices or can be added to existing mobile devices using a bridging technology (e.g., microSD or sticker). Numerous NFC-enabled payment and mobile marketing applications have been piloted and implemented globally (see Appendix B: Examples of NFC Mobile Payments Deployment). In the United States, Isis and Google have announced NFC-based mobile contactless payment services to be piloted within the next 12 months. Isis, the mobile carrier joint venture that includes AT&T, Verizon, and T-Mobile, will be piloting its service in Salt Lake City, UT, and Austin, TX. Users will be able to tap their phones to pay for fares on Utah Transit Authority buses and trams and make purchases at merchant outlets that accept contactless payment in both Salt Lake City and Austin. The pilot projects will begin in the first half of 2012. Isis will work with American Express, Discover, MasterCard, and Visa for its NFC rollouts. Google announced Google Wallet in May 2011, with general availability planned during October 2011, in New York and San Francisco. Using the Google wallet, consumers can use a Sprint NFCSmart Card Talk

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enabled phone and a MasterCard PayPass or Google prepaid card to pay for purchases at merchants who accept MasterCard PayPass. Google is also working with POS system companies and top retail brands to allow consumers to be able to redeem promotions, and earn loyalty points.

Note

Summary

References

Mobile commerce is growing dramatically and affects every component of the retail industry. Financial apps—including mobile banking, POS, m-commerce, and payment apps—provide consumers, merchants, and small businesses with the ability to run their financial lives entirely from a smartphone. Solutions for accepting payments using a mobile phone have been introduced over the past several years but have not gained the traction or attention that they are receiving today. Accepting payments using a mobile phone is becoming more common. Solutions improve employee productivity and effectiveness and customer service, and extend the ability to accept payment cards to many new small merchants. Increasingly, consumers research, recommend, compare, and buy on line or in combination with brick-and-mortar retailing.

[1] Is Small Business Ready for Mobile Commerce?, Small Business Computing, March 16, 2011. [2] Mobile payments 2010, Innopay. [3] Adapted from Mercator Advisory Group, “US Mobile Banking and Mobile Payments: Finding the Seams, Accelerating the Pace” and Smart Card Alliance, Proximity Mobile Payments: Leveraging NFC and the Contactless Financial Payments Infrastructure, September, 2007. [4] Peer-to-Peer Payments Gain Momentum, Fox Business Small Business Center, June 17, 2010. [5] PayPal announces NFC peer-to-peer payments, Near Field Communications World, July 13, 2011. [6] Visa Announces P2P Payment Service for U.S. Customers, March 16, 2011. [7] Foot Locker upgrades mcommerce strategy to more complete experience, Mobile Commerce Daily, May 10, 2011 [8] Mobile Retailing Blueprint: A Comprehensive Guide for Navigating the Mobile Landscape. National Retail Federation, January 2011 [9] Starbucks Rolls Out Bar-Code Mobile Payment Nationwide, NFC Times, Jan. 19, 2011

As described in this article, many mobile financial applications are being used, with a variety of approaches for mobile payments being offered in the market. With the number of new mobile payments players and the innovative approaches being implemented, the mobile payments landscape will be evolving rapidly in the next few years. NFC-enabled mobile proximity payments show great promise, with major stakeholders in the U.S. announcing services based on NFC. Part 2 of this article series, which will appear in the October 2011 Smart Card Talk, will focus on NFC mobile proximity payments and review the current state of the NFC infrastructure in the U.S.

This article does not endorse any specific company, product or service. Company, product or service references are provided to illustrate the points being made.

About this Article This article is an extract from a new Payments Council white paper, “The Mobile Payments and NFC Landscape: A U.S. Perspective,” which was developed to provide an overview of the current state of the market for mobile payments and NFC-enabled payment applications in the U.S. and to evaluate the advantages and disadvantages of different mobile payment approaches. The full white paper is available on the Smart Card Alliance web site at http://www.smartcardalliance.org.

About the Smart Card Alliance Payments Council The Smart Card Alliance Payments Council focuses on facilitating the adoption of chip-enabled payments and payment applications in the U.S. through education programs for consumers, merchants, issuers, acquirers/processors, government regulators, mobile telecommunications providers and payments service providers. The group is bringing together payments industry stakeholders, including payments industry leaders, merchants and suppliers, and is working on projects related to implementing EMV, contactless payments, NFC-enabled payments and applications, mobile payments, and chip-enabled e-commerce. The Council’s primary goal is to inform and educate the market about the value of chip-enabled payments in improving the security of the payments infrastructure and in enhancing the value of payments and payment-related applications for industry stakeholders. Council participation is open to any Smart Card Alliance member who wishes to contribute to the Council projects.

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Smart Card Talk

• Q-Card company, Sunbury, PA Membership level: General Member Contact: Jeff Bedell, VP of Sales & Marketing Description: A provider of smart card products and testers as well as a third-party test lab to help produce better cards and readers

The Alliance has an active communications program to promote industry messages in business, vertical market, and technology publications. Coverage results from both Alliance press releases and interviews with publications writing articles about smart cards. Selected recent coverage is shown below with links to online articles.

• Toni Merschen Consulting, Simmerath, Germany Membership level: Associate Member Contact: Dr. Toni Merschen, Principal Description: 25 years of hands on experience managing payments technologies including smart cards in all of its variations for banking and global technology companies

August 2011 • Associated Press, 8/15/2011, Chip-based cards start to replace magnetic • American Banker, 8/15/2011, Visa’s Liability Shift May Come Too Soon for Small Merchants [link not available] • BankInfoSecurity, 8/15/2011, Visa Pushes EMV in U.S. • Bankrate, 8/15/2011, Citi adds EMV to corporate cards • Bloomberg, 8/10/2011, Visa Unveils Incentives to Speed Shift to Mobile-Payment Systems • Chicago Sun-Times, 8/12/2011, Consumers may not hear ‘swipe your card’ for long • CMP Techweb, 8/11/2011, Visa Pushes PIN Requirement With Credit Card Purchases [link not available] • Contactless News, 8/24/2011, Smart Card Alliance Latin America publishes EMV white paper • Credit Card Guide News, 8/10/11, Visa Reverses Course on Chip-and-PIN Credit • Florida Today, 8/15/2011, Chip-based cards start to replace magnetic • Fox Business News, 8/12/2011, The Future of Credit Cards • GovInfoSecurity, 8/15/2011, Visa Pushes EMV in U.S. • HealthID News, 8/23/2011, SCA hosting patient ID webinar • InformationWeek, 8/11/2011, Visa Pushes PIN Requirement With Credit Card Purchases • Network World, 8/9/2011, Visa to make it easier for merchants to adopt chip-based card payments • New York Times, 8/9/2011, Visa Wants U.S. Cards to Catch Up With the World • NFCNews, 8/23/2011, Smart Card Alliance Latin America publishes EMV white paper • San Francisco Chronicle, 8/10/2011, Visa Unveils Plan to Speed Adoption of Mobile-Payment Systems • Security Systems News, 8/18/2011, CIV cards: Just like PIV cards, but for the commercial market • TMCnet.com, 8/19/2011, ViVOtech Releases NFC mCommerce and EMV Payments • Wireless News (10Meters.com), 8/25/2011, Smart Card Alliance to Host Webinar on Smart Health ID Cards [link not available] • Wireless News (10Meters.com), 8/25/2011, Smart Card Alliance Latin America Releases EMV Roadmap White Paper [link not available]

WEB SITE NEWS Updated web content: • Registration for the Payments Council webinar, EMV for Merchants and Acquirers: U.S. Migration Considerations • Archived recording of the Healthcare Council webinar, Smart Health ID Cards: Addressing Challenges with Patient Identity Management and Authentication • New FAQ on the National Strategy for Trusted Identities in Cyberspace • Updated EMV Resources with new industry announcements and resources • Card Payments Roadmap in Latin America: How Does EMV Impact the Payments Infrastructure?

AUGUST 2011 WEB STATISTICS • • • • • • •

79,821 visitor sessions for the month 2,574 visitor sessions per day 365,740 total page views for the month 160,631 Industry News items viewed 1,167 Card Reader Catalog items displayed 12,551 PDF downloads 26,177 Product and Service Directory page views

If you have any suggestions on content that you’d like to see on the Alliance web site, please send them to info@smartcardalliance.org.

NEW CSCIP Adam Bisi Scott Etherington Jon Langley

Gemalto Gemalto Gemalto

Sept 2011 Sept 2011 Sept 2011

Read these articles and more online: http://www.smartcardalliance.org/pages/news-alliance

Smart Card Talk

11

from the alliance office

ALLIANCE IN THE NEWS

NEW MEMBERS

council reports

Updates from the Alliance Industry Councils PAYMENTS • The Payments Council has announced its first EMV webinar, EMV for Merchants and Acquirers: U.S. Migration Considerations, on Thurs., October 6, 2011, at 1pm ET. The webinar will cover global EMV migration status, the key considerations for merchant and acquirer migration to EMV, Visa’s announcement of EMV migration incentives and mandate, and lessons learned from a Canadian acquirer. Speakers include: Guy Berg, Datacard Group; Simon Hurry, Visa Inc.; Oliver Manahan, MasterCard Worldwide; Amer Matar, Moneris; and Randy Vanderhoof, Smart Card Alliance. Registration for the webinar is at: https://www1.gotomeeting. com/register/313190192 • The Council completed a new white paper, “The Mobile Payments and NFC Landscape: A U.S. Perspective.” The white paper reviews available mobile payment approaches and outlines the state of the Near Field Communication (NFC) mobile proximity payments infrastructure in the U.S. The white paper will be available on the Smart Card Alliance web site in late September.

HEALTHCARE • The Healthcare Council held a well-attended webinar, Smart Health ID Cards: Addressing Challenges with Patient Identity Management and Authentication, on Tuesday, September 13, 2011. The webinar focused on smart health ID cards for patients, reviewing the key challenges with patient identity management and authentication today and discussing how patient ID cards and smart card technology can address the critical issues. The American Medical Association Health Security Card pilot and the Wyckoff Heights Medical Center medical smart card were featured as examples of smart health ID card programs. • The Council is working on a smart card guide for health insurance cards that comply with the WEDI Health Identification Card Implementation Guide specifications. • The Council’s LinkedIn group, Healthcare Identity Management, is open for discussion on healthcare identity security and management. The group is open to both members and non-members.

• The Council’s LinkedIn group, Smart.Payments, is open for discussion on payments and fraud. The group is open to both members and non-members.

Alliance Members: Participation in all current councils is open to any Smart Card Alliance member who wishes to contribute to the council projects. If you are interested in participating in any of the active councils, please contact Cathy Medich.

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Smart Card Talk

IDENTITY • The Identity Council is working on a white paper that will include four use cases for non-Federal organizations issuing and using PIV-I credentials. The white paper will be available later this fall.

TRANSPORTATION • The Transportation Council is working a new white paper on the benefits of open bank card payments for transit. The white paper is expected to be available later this fall. • The Council has just started two new white papers, one on NFC and transit and one on the impact of bank card payments regulation on the transit industry. Both white papers are scheduled to be available by the Payments Summit, February 8-10, 2012 in Salt Lake City, UT.

PHYSICAL ACCESS

• The Council is reviewing a draft Federal CIO Council document on federated PACS and will be submitting comments on the document in October.

OTHER COUNCIL INFORMATION • Members-only council web pages are available at http:// www.smartcardalliance.org/councils. These are passwordprotected pages that contain council working and background documents and contact lists. Each Council area has a separate password since Councils may have different membership policies. If you are a Smart Card Alliance member and would like access to a council site, please contact Cathy Medich. • A Council meeting calendar is available on the members-only web site at http://www.smartcardalliance.org/pages/memberscouncil-resources. • If you are interested in forming or participating in an Alliance council, contact Cathy Medich.

• The Physical Access Council is developing a white paper on technical specifications and best practices for leveraging FIPS 201 and the PIV card specifications for commercial enterprises. The white paper will be available later this fall.

Smart Card Talk

13

members in the news

Smart Card Alliance to Host EMV Webinar for U.S. Merchants and Acquirers

Smart Card Alliance to Host Webinar on Smart Health ID Cards

Princeton Junction, N.J., September 13, 2011–Merchants and acquirers wanting to learn about EMV chip migration in the United States should attend the upcoming Smart Card Alliance educational webinar, where speakers from Datacard Group, MasterCard Worldwide, Moneris, and Visa Inc. will answer their most pressing questions.

Princeton Junction, N.J., August 22, 2011–One of the most pressing questions in healthcare today: how do we correctly identify patients and ensure that they are who they say they are? A September webinar from the Smart Card Alliance Healthcare Council will address this question, and outline the use of smart card-based patient IDs as a solution.

Gemalto Provides First Multi-Application EMV Cards in Colombia

Smart Card Alliance Latin America (SCALA) Releases EMV Roadmap White Paper for Latin America and the Caribbean

São Paulo, Sept 13, 2011–Gemalto, the world leader in digital security, announces that it is providing Colsubsidio, the major Compensation Fund in Colombia, with the country’s first multiapplication EMV cards.

Swedbank Deploys Global Identity Management System Based on Protiva Solution from Gemalto

Seamless implementation across Swedbank’s Nordic and Baltic networks Amsterdam, Sept 6, 2011–Gemalto (Euronext NL0000400653 GTO), the world leader in digital security, announces that Swedbank is deploying the Protiva corporate solution across its organization, as well as in 60 savings banks in Sweden. The result: a single global identity management system to provide better access protection for networks and cloud resources. Swedbank is the leading bank in Sweden and the Baltic countries, with 10 million private customers and nearly 700,000 corporate clients. The Protiva solution, part of Gemalto’s cloud computing security offer, will secure access to data networks and physical access for 20,000 employees, irrespective of country, branch or IT system. Implemented initially in Sweden, the solution is being deployed across the Baltic countries, as well as in a number of smaller representative offices internationally.

ING Belgium Secures eBanking for Nearly One Million Customers with Gemalto’s Ezio End-toEnd Authentication Solution Amsterdam, Sept 1, 2011–Gemalto (Euronext NL0000400653 GTO), the world leader in digital security, announces that ING Belgium is deploying its Ezio suite of end-to-end strong authentication solutions to deliver increased security to circa one million online banking customers. The Ezio solution builds on Gemalto’s strong authentication platform, security software and Ezio devices to deliver enhanced eBanking protection. Gemalto also provided a full set of complementary services including server integration, packaging and direct delivery of the Ezio Classic card readers to ING Belgium customers anywhere in the world.

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Smart Card Talk

Princeton Junction, N.J., August 22, 2011–The Smart Card Alliance Latin America (SCALA) chapter released today a white paper providing roadmap options for Latin American and Caribbean countries migrating to EMV. The white paper is an impartial tool for all payments stakeholders, including issuers, acquirers, merchants, processors, and suppliers of hardware, software, and support services, to educate themselves on the actions they need to consider to issue, accept and process EMV transactions.

Blackboard Financial Aid Solution Sees Strong Momentum

Fee-Free Approach Protects Students from $2 Million in Service Charges Annually Washington, August 12, 2011–More than 120,000 students are now participating in BlackboardPay™, a prepaid card program that simplifies the delivery of student federal financial aid, Blackboard Inc. (Nasdaq: BBBB) announced today. By enabling students to receive financial aid on their current student ID cards, BlackboardPay™ eliminates an estimated $2 million per year in student overdraft and PIN debit fees based on average fees for the total number of students now using the solution.

LifeMed ID, Inc. to provide PETLinQ, LLC with Secure Patient Identity, Automated Registration, and Brand Patient Loyalty to its customer base August 2011–LifeMed ID, a “Trusted Patient Identity” software company, is deploying its SecureReg™ software to PETLinQ’s customer base nationwide. LifeMed’s automated card registration solution authenticates and accurately identifies patients for each visit or procedure, automatically evokes the correct medical record using current registration software and workflow, verifies insurance, and provides photo ID on card and registration screen. LifeMed will be placing card readers at multiple locations throughout each provider facility for effortless check-in, eliminating the need for handwritten forms. LifeMed’s deployments will also include encrypted Smart or Magnetic cards and onsite branded card issuance.

Irvine, Ca. August 10, 2011 – CardLogix, a leading supplier of smart cards and software, has joined the United Nations Global Compact, a worldwide alliance of private business. The Global Compact helps international companies align their business practices to Ten Principles of human and environmental responsibility set forth by the United Nations. Member companies agree to maintain these principles as they sell into worldwide markets, so that expansion does not come at the expense of local people and environments.

events calendar

CardLogix Joins UN Global Compact

NFC World Congress Sophia Antipolis, France September 19-21, 2011

Online Trust Forum 2011, Realizing the Promise of Trust Washington DC October 17-18, 2011 Alliance members - Save Up to $200, Use discount code PTRORG.

The 10th Annual Smart Card Alliance Government Conference

Visa Announces Plans to Accelerate Chip Migration and Adoption of Mobile Payments

Smart Strategies for Secure Identity Washington, DC November 1-4, 2011

Visa dynamic authentication roadmap will reduce fraud and enhance international acceptance San Francisco, August 9, 2011–Visa Inc. (NYSE: V) today announced plans to accelerate the migration to EMV contact and contactless chip technology in the United States. The adoption of dual-interface chip technology will help prepare the U.S. payment infrastructure for the arrival of NFCbased mobile payments by building the necessary infrastructure to accept and process chip transactions that support either a signature or PIN at the point of sale.

CARTES and IDentification 2011 Paris, France November 15-17, 2011

2012 Payments Summit

A Smart Card Alliance conference event Salt Lake City, UT February 8-10, 2012

NFC Solutions Summit 2012

A joint Smart Card Alliance and NFC Forum event San Francisco, CA May 22-24, 2012

Members submit news each month to the Smart Card Alliance, with news items highlighted on the Alliance web site and in the monthly news letter. Members are invited to submit their news releases (as a Word document) to news@smartcardalliance.org to contribute to the Members in the News content.

Smart Card Talk

15

The 10th Annual

Smart Card Alliance Government Conference Smart Strategies for Secure Identity

Nov. 2–4, 2011

Pre-conference Workshops Nov. 1

Ronald Reagan International Trade Center, Washington, DC

The Leading Showcase for Government Projects in ID and Security Who Should Attend? The conference draws key decision makers from every level of government and industry. Over 700 will attend, including government and industry executives, administrators and technologists

Join the Leaders

The 10 Annual Smart Card Alliance Government Conference will look at the opportunities and challenges ahead for government issuers, accreditation and testing authorities, procurement programs, and the industry to meet the government’s market demands. th

Building on years of development and tens of millions of government-issued smart cards, the conference expands its focus on emerging identity and security developments by including new government initiatives to improve and implement electronic medical records (EMRs). The conference will cover new smart card applications with the potential to improve the security and privacy of patient information, provide the secure carrier for portable medical records, reduce healthcare fraud, provide secure access to emergency medical information, and provide the platform to implement other electronic applications as needed by the healthcare IT industry. Conference sessions will reflect and amplify the though leadership of the Smart Card Alliance Healthcare and Identity Councils.

Surveying Recent Deployments of Secure Electronic Medical Records

Continuing Coverage of Current Strategies for Secure Identity

The conference features comprehensive coverage of efforts toward strong authentication technology in government identity programs, including federal and non-federal Personal Identity Verification (PIV) credentials, developments in National Strategy for Trusted Identities in Cyberspace (NSTIC), trusted ID on the Internet and on mobile devices, developments in state and local ID, as well as evolving global standards. Presentations emphasize real-world use-cases directly from the implementors and administrators.

Key Government Agency Participants and Presenters

For exhibit and sponsorship opportunities contact Bill Rutledge scaservices@smartcardalliance.org, 212-866-2169

OVER 50 EXHIBITORS IN A SHOWCASE OF INDUSTRY-LEADING TECHNOLOGY ActivIdentity • AMAG Technology • ASK intTag • AVISIAN Inc. • Aware Inc. • CPI Card Group • CSC • Datacard Group • Digital Identification Solutions • Exponent Inc. • Gemalto • Giesecke & Devrient • HID Global • HP • Identification Technology Partners, Inc. • Identity Stronghold • International Card Manufacturers Association • Kaba Access Control • L-1 Identity Solutions • LaserCard Corporation • Lenel, a UTC Fire & Security Co. • MorphoTrak • Muhlbauer Inc. • NXP Semiconductors • Oberthur Technologies of America Corp. • SafeNet • SMARTRAC Technology Group • Software House/Tyco International • Teslin Substrate by PPG Industries

Mark Your Calendar: Registration Opens this July • www.smartcardalliance.org