Post on 03-Feb-2022
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2010ePayments: Emerging Platforms, Embracing Mobile, and Confronting Identity
By Tim O’Brien, Dave Sims, and the O’Reilly Radar Team
An O’Reilly Radar Report
Contents
ePayments: Emerging Platforms, Embracing Mobile, and Confronting Identity .. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The.Rise.of.Payment.Platforms.. . . . . . . . . . . . . . . . . . . . . . 3
PayPal.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Amazon.Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Google.Checkout.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Apple.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Facebook.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Comparing.Established.Payment.Platforms.. . . . . . . 6
New.Regulations:.Greater.Opportunity,.but.Greater.Scrutiny.. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The.Incumbents.React.. . . . . . . . . . . . . . . . . . . . . . . . . 9
Risk.Assessment:.Big.Data.and.Fraud.Detection.. . . 9
The.Future:.A.Bid.for.Every.Transaction.. . . . . . . . . 10
The.Mobilization.of.Money. . . . . . . . . . . . . . . . . . . . . . . . 12
Direct.Mobile.Billing.. . . . . . . . . . . . . . . . . . . . . . . . . 12
Mobile.Banking.in.the.Developing.World. . . . . . . 13
Contactless.Payments. . . . . . . . . . . . . . . . . . . . . . . . 13
The.Significance.of.Online.Identity. . . . . . . . . . . . . . . . . 17
Distinct.Identities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Identity.Standards.. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
©2011.O’Reilly.Media,.Inc..O’Reilly.logo.is.a.registered.trademark.of.O’Reilly.Media,.Inc...All.other.trademarks.are.the.property.of.their.respective.owners...10274.1
1.:. ePayments:..Emerging.Platforms,.Embracing.Mobile,.and.Confronting.Identity.
single.click,.buy.audio.books,.rent.movies.and.TV.shows,.
audit.university.classes,.or.purchase.software.for.their.
mobile.devices..What’s.more,.they.don’t.need.to.be.at.
their.laptop.to.do.it,.since.the.iTunes.store.travels.with.
the.iPhone—a.feature.that.makes.it.possible.for.Apple.to.
know.where.consumers.are.when.they’re.buying..Apple.
has.experimented.with.Starbucks.to.sync.purchases.with.
music.playing.in.their.coffee.shops,.and.it.isn’t.much.of.a.
stretch.to.imagine.Apple.extending.the.program.to.
other.retailers.through.similar.point-of-purchase.deals..
With.a.single.online.service,.Apple.has.managed.to.
disrupt.the.recording.industry’s.status.quo,.caused.TV.
networks.to.rethink.the.value.of.their.programming,.and.
taken.sales.away.from.retailers.inside.their.own.stores..
Apple.owes.much.of.this.success.to.a.deeper.level.of.
engagement.that.its.customers.bring.to.transactions..
Increasingly,.its.customers.aren’t.bothered.by.how.much.
Apple.knows.about.them;.in.fact,.they.appreciate.the.
benefits.they.receive.from.that.familiarity..They.share.
information.about.their.musical.preferences.in.exchange.
for.Genius.recommendations.on.new.music.they.might.
like..They.let.Apple.hold.their.credit.card.information.in.
return.for.the.ability.to.buy.media.quickly.and.easily..And.
increasingly.they.extend.this.trust.to.third-party.app.
ePayments: Emerging Platforms, Embracing Mobile, and Confronting Identity by Tim O’Brien, Dave Sims, and the O’Reilly Radar Team
Payment.technology.is.experiencing.a.series.of.
innovations.and.disruptions.that.promise.to.
change.the.way.that.consumers.buy.goods,.
media,.and.services.online;.changes.that.could.
shift.the.landscape.of.leading.players.in.this.industry..A.
billion.new.consumers.are.coming.online.in.developing.
markets.at.the.same.moment.that.mobile.commerce.is.
shifting.from.niche.to.mainstream—all.while.the.finan-
cial.industry.wrestles.with.reforms.in.the.wake.of.the.
economic.crisis..These.changes.are.occurring.on.top.of.
an.already.shifting.landscape.where.online.consumers—
who.only.a.decade.ago.were.skittish.about.entering.their.
credit.card.numbers.on.the.Web—appear.to.have.
crossed.a.threshold.of.trust.with.key.online.brands,.to.
whom.they.will.not.only.give.their.financial.information,.
but.location.data.and.personal.preferences.as.well..
Consider.the.impact.of.some.of.these.changes.on.
one.player:.Apple..In.the.seven.years.since.the.launch.of.
its.iTunes.store,.Apple.has.changed.the.way.that.con-
sumers.purchase.and.consume.music,.shifting.the.unit.of.
measure.from.the.$18.album.to.the.$1.29.single—and.
capturing.28%.of.all.US.music.sales.along.the.way..And.
songs.were.just.the.beginning:.the.iTunes.store.has.
emerged.as.a.common.platform.where.users.can,.with.a.
2.:. ePayments:..Emerging.Platforms,.Embracing.Mobile,.and.Confronting.Identity.
providers.on.Apple’s.iOS.mobile.platform..For.example,.
they’re.willing.to.let.services.like.Yelp.and.FourSquare.
know.where.they.are,.when.they’re.there,.and.how.often.
they.return,.all.in.exchange.for.simple.rewards.like.mayor.
badges..Once.upon.a.time,.consumers.worried.about.
online.services.knowing.too.much.about.them..We.
appear.to.be.seeing.a.complete.shift.to.a.world.where.
consumers.will.be.frustrated.if.merchants.(online.and.
off).don’t.know.enough.about.them..Why.should.I.have.
to.repeat.my.usual.order.when.I.come.to.my.favorite.
restaurant?.Why.doesn’t.the.sales.person.at.Old.Navy.
know.my.pants.size?.Why.don’t.cafés.compete.for.my.
business.by.sending.me.discount.coupons.when.I’m.in.
their.neighborhood?
This.research.report,.compiled.by.O’Reilly.Media.in.
the.summer.and.fall.of.2010,.aims.to.present.a.clear.
picture.of.the.financial,.technological,.and.cultural.
changes.occurring.in.the.online.payment.industry—and.
to.stimulate.thinking.on.how.players.should.seek.to.
understand.their.impact..The.report.considers.the.key.
players,.technologies,.and.decisions.being.made.within.
the.context.of.three.overriding.trends.in.payment.
technology:.
■■ The Rise of Payment Platforms..As.consumers.
become.more.comfortable.storing.their.financial.
information.online.with.brands.they.trust—brands.
like.Amazon.Payments,.Apple’s.iTunes,.Google.
Checkout,.or.PayPal—the.traditional.checkout.pro-
cess.that.asked.buyers.to.enter.a.credit.card.number.
is.becoming.obsolete..Now,.whether.buying.a.shirt.at.
Patagonia.or.a.ticket.on.American.Airlines,.it’s.increas-
ingly.likely.that.consumers.will.pay.instead.through.a.
payment.platform,.a.process.that.is.simpler.for.the.
buyer.and.easier.for.the.vendor.
■■ The Mobilization of Money..As.every.smartphone.
becomes.a.tool.for.buying.(and,.given.innovations.
like.The.Square,.for.selling.as.well),.mobile.devices.
will.usher.in.an.era.of.more.personal.transaction.
experiences..Instead.of.a.trail.of.impersonal.trans-
actions,.mobile.commerce.will.connect.not.only.a.
consumer’s.purchasing.history,.but.activities.and.
locations.as.well..For.example,.secure.devices.will.
allow.consumers.to.opt.in.to.programs.that.offer.
them.discounts.or.other.opportunities.based.on.their.
proximity.to.brick-and-mortar.stores.
■■ The Significance of Online Identity..Consumers.are.
likely.to.make.purchases.on.the.same.platform.where.
they.have.an.existing.identity.and.are.spending.time.
doing.other.things..A.payment.system.closely.tied.to.
other.aspects.of.online.identity.(for.example,.a.Gmail.
account.or.a.Facebook.page).stands.a.better.chance.
of.becoming.the.user’s.default,.providing.it.can.offer.
the.same.benefits.as.competing.systems..However,.
even.as.users.come.to.expect.online.systems.to.know.
more.about.them.in.order.to.facilitate.transactions.
and.reduce.friction.in.accomplishing.tasks,.they.are.
likely.to.want.to.maintain.control.over.which.online.
services.have.access.to.distinct.aspects.of.their.
identity..
3.:. ePayments:..Emerging.Platforms,.Embracing.Mobile,.and.Confronting.Identity.
interfaces.(APIs).in.an.ecommerce.operating.system..A.
game.developer,.for.example,.can.design.its.software.to.
a.standard.API.and.then.later.write.(or.find.someone.to.
write).simple.connections.that.make.it.possible.for.the.
game.to.run.on.different.platforms..Similarly,.an.online.
merchant.can.design.its.store.to.work.with.a.single.
payment.platform.(Paypal,.for.example,.or.Amazon.
Payments).and.not.have.to.worry.about.the.details.of.
how.to.receive.payments.from.credit.cards,.banks,.or.
other.payment.systems..For.a.fixed.transaction.fee,.the.
merchant.outsources.those.complications.so.it.can.focus.
on.marketing.and.fulfillment..
The Rise of Payment PlatformsThink.of.a.payment.platform.as.any.service.that.simplifies.
consumer.purchasing.and.merchant.payment.by.acting.
as.an.intermediary.among.buyers,.sellers,.and.financial.
institutions..As.the.intermediary,.a.payment.platform.
provides.a.range.of.benefits.to.the.consumers.(for.exam-
ple,.the.ability.to.purchase.items.at.many.different.sites.
with.just.one.click).and.to.the.merchants.(handling.the.
details.of.payment.processing,.whether.by.credit.card,.
bank.account,.or.other.method)..In.exchange.for.this,.the.
platform.generally.takes.a.share.of.the.transaction.fee.
Because.payment.platforms.can.simplify.the.way.that.
merchants.interact.with.various.forms.of.payment,.we.
can.think.of.them.like.standard.application.programming.
Typical Online Payment1. AcustomerchoosestopaywithPayPal.Themerchant
directsthecustomertoPayPaltoauthorizethetransaction.
2. ThecustomerlogsintoanexistingPayPalaccountandsecurelyauthorizesthetransactionwithoutsendingfundingsourceinformation(suchasacreditcardnumber)tothemerchant.
3. PayPalprocessesthepaymentusingaPayPalbalanceorbydrawingfundsfromthecustomer’sbankorcreditcard,perpreviousagreementwiththecustomer.
4. Themerchantreceivesamessageaboutthesuccessorfailureofthetransactionalongwithinformationaboutthecustomertoconcludethetransaction.
Paymentplatform
Credit/debitaccounts
Bankaccounts
Mobilepayment
Other(bill me later)
Transactiondatabase
Customerdatabase
Customer
Merchant
1
23
4
Figure1.Paymentplatformsactastheintermediarybetweenmerchantsandpaymentoptions,simplifyingthetransactionforboththecustomerandtheseller
4.:. ePayments:..Emerging.Platforms,.Embracing.Mobile,.and.Confronting.Identity.
Google CheckoutWhile.Google.insists.it.is.not.competing.in.the.same.
space.as.other.payment.providers—CEO.Eric.Schmidt.
said.at.the.recent.Web.2.0.Summit.that.Google.is.merely.
a.“technology.provider”.and.does.not.aspire.to.be.a.
payment.platform—its.dominating.presence.online.and.
in.the.mobile.operating.system.space.inevitably.make.it.
a.key.player..Google.Checkout.is.available.at.several.
hundred.thousand.merchant.sites,.and.the.system.
boasts.“tens.of.millions.of.buyers.”.It.seems.most.likely.
that.Google’s.real.play.in.this.space.will.be.via.the.
Android.operating.system,.the.fastest.growing.smart-
phone.OS..Google.Checkout.is.increasingly.integrated.
with.Android,.and.at.the.Web.2.0.Summit.Schmidt.
demonstrated.technology.that.allows.an.Android.device.
to.tap.a.payment.point.and.make.a.purchase.via.the.
phone..Schmidt.said.this.contactless.payment.option.
will.be.incorporated.in.the.next.Android.update.(code.
named.Gingerbread).and.will.be.incorporated.by.hand-
set.manufacturers.in.coming.months..
AppleApple’s.iTunes.platform.has.amassed.150.million.custom-
ers.in.seven.years,.and.while.Apple.does.not.operate.a.
traditional.payment.platform.that.can.be.compared.
directly.with.PayPal,.Amazon,.or.Google,.it.has.estab-
lished.a.platform.that.has.captured.large.segments.of.
the.entertainment.and.application.market..As.with.
Google’s.access.to.Android.phones,.Apple’s.control.over.
the.iOS.and.the.iPhone.hardware.offer.it.a.great.deal.of.
control.over.the.future.of.mobile.commerce..As.noted.
later.in.this.report,.several.patents.indicate.that.Apple.is.
looking.at.the.use.of.the.iPhone.as.a.purchasing.device.
in.real-world.stores,.a.concept.that.could.shake.up.retail.
to.the.same.degree.that.the.iTunes.Store.has.shaken.the.
recording.industry.
PayPalPayPal.is.the.most.visible.player.in.the.payment.platform.
space..It.offers.services.to.buyers.and.sellers.in.24.
currencies.and.190.markets.around.the.world..In.2009,.it.
processed.$71.billion.in.payments.(a.19%.increase.over.
2008).for.81.million.active.users..Although.eBay.bought.
PayPal.in.2002,.it.has.maintained.the.service.as.a.sepa-
rate.brand,.with.ambitions.far.beyond.a.simple.payment.
service.for.eBay’s.auctions..PayPal.offers.a.suite.of.pay-
ment.services.to.individuals.and.merchants,.from.simple.
payment.services.to.full.ecommerce.services.with.authen-
tication,.fraud.detection,.and.other.risk-management.
services..
Amazon PaymentsAmazon.had.an.early.lead.in.the.payments.arena,.but.it.
squandered.that.competitive.advantage.by.reserving.its.
technology.for.use.on.its.own.site..Only.in.the.past.few.
years.has.it.begun.to.deploy.its.system.across.the.
Internet.as.the.Amazon.Flexible.Payment.System,.part.of.
its.broader.offering.of.cloud-based.web.services...
Still,.with.data.on.118.million.customers,.their.shop-
ping.and.buying.behaviors,.consumer.reviews,.and.access.
to.media,.Amazon.remains.a.key.player.in.the.payments.
arena..As.commerce.moves.onto.mobile.platforms,.
Amazon.may.appear.to.be.in.a.weaker.position.than.
Apple.and.Google.with.their.iOS.and.Android.phones..But.
it.has.successfully.used.its.Kindle.as.a.hardware.front-end.
for.its.media.sales,.and.its.Kindle.apps.give.it.a.hook.into.
the.Apple.and.Google.platforms.as.well.
It.remains.to.be.seen.whether.Amazon’s.suite.of.
cloud.services.will.be.a.boon.to.its.payment.platform..Its.
storage,.security,.and.payments.services.are.affordably.
priced.compared.to.similar.services.from.traditional.
software.vendors,.but.Amazon.still.struggles.to.gain.
credibility.among.business.customers.who.are.hesitant.
to.adopt.these.cloud.services.unless.Amazon.can.offer.
service-level.guarantees.that.match.those.of.traditional.
vendors.
5.:. ePayments:..Emerging.Platforms,.Embracing.Mobile,.and.Confronting.Identity.
Credits.have.been.primarily.for.buying.virtual.objects.
(for.example,.gifts.that.are.pictures.of.items.you.can.send.
to.someone.else.on.Facebook).or.for.use.within.online.
gaming..But.that.could.change:.Facebook.is.beginning.
to.allow.users.to.set.up.store.fronts,.and.given.the.time.
and.dedication.that.users.afford.to.the.site,.the.commer-
cial.opportunities.within.could.be.transformative..
FacebookFacebook.is.a.recent.entry.to.the.payment.platform.
space,.but.given.its.huge.audience.and.its.members’.
devotion.to.the.space,.it.could.pose.a.serious.challenge..
Facebook.has.hired.an.experienced.payments.team.and.
launched.Facebook.Credits,.a.system.that.rests.on.PayPal.
and.lets.members.load.and.store.value.on.their.accounts.
for.purchasing.things.on.Facebook..To.date,.Facebook.
Payment HistoryVisaandMasterCardwerethefirstorganizationstotrytodevelopabroad,secureplatformforInternetcommerce.Inthemid-1990stheyworkedwithotherfinancialinstitu-tionstodefineastandard:SecureElectronicTransactions(SET).Butthesolutiontheyproposed,targetedprimarilyattheneedsofcreditcardproviders,wasunworkableformostoftheWeb’ssmallcommercesitesgivenitsimple-mentationcostsofmorethan$30,000pervendor.
BythetimeSETfailedin1999,Internetcommercepio-neerslikeeBay,Amazon,andYahoo!werealreadyhack-ingtogethertheirproprietarysystemsbasedondirectcreditcardbillingbackedbySSL(securesocketslayer,aformofencryption).Amazonhadamillioncustomersby1997andhadalreadybeguntoestablishitselfastheleadingretailerontheWebusingablendofhome-brewedpayment-processingandfraud-detectionsystems.Toinsiders,itwasclearthatthemomentumofinnovationhadshiftedfromtheoldguardtothestart-ups.RenePelegero,whowasatAmazonin2000,wasquotedinthejournalAustralian Banking & Finance:“We’realwayswill-ingtoworkwithfinancialinstitutions,butIthinktheyhavetobecarefulwheretheircompetitioniscomingfrom.[It’s]comingfromcompaniesthatareabletomoveinInternettime.”
MerchantsontheWeb,largeandsmall,werelookingfortheirownsolutionforpaymentprocessing,andmanyfounditinPayPal,thefirstwidelyacceptedservicefortransferringmoneybetweenindividuals(includingbuy-ersandsellers).PayPal,whichgrewoutoftwoSiliconValleystartupswithcomplementarycapabilities(pay-ments,encryption,andfinancialservices),beganlicens-ingitspaymentsystemtoeBay,whichprovideditasapaymentoptiontoauctionwinners.eBayeventually
acquiredPayPalin2002for$1.5billion,buttheservicecontinuedtodevelopbeyondauctions,growingintoafull-spectrumpaymentssystemforindividualsandmer-chantsalike.
Meanwhile,Amazonwasalsodevelopingplatformstoofferpaymentandothercommercesystemstomer-chants.In1999,itlauncheditszShopswhich,likeeBay’sauctions,offeredavirtualstorefrontformerchantsalongwithapaymentsystem.AmazonPayments,whichgrewoutofzShops,hasevolvedintoafull-fledgedcompetitortoPayPal,offeringasuiteofservicestomerchantsofallsizes.
Anotherkeyplayer,Apple,launcheditsiTunesStorein2003,notonlyrevolutionizingthewaythatconsumersbuymusic(and,eventually,TVshows,movies,andmaga-zines)but,perhapsasimportantly,demonstratingasuc-cessfulmodelforsmallerpurchases—99centsinmostcases.PayPalandAmazonfollowedsuit,loweringtheirtransactionfeefrom30centsto5centsonsmallertrans-actions.Apple’splatformdiffersfromPayPalandAmazonPaymentsinthatitstilldeliversservicesforasinglevenue,theiTunesStore—though,aswe’llsee,thepossi-bilitycertainlyexistsforAppletoextenditsplatformviatheiPhoneandiPad.
Akeyinnovationinrecentyearshasbeentheintroduc-tionofopenAPIsforAmazonandPayPal’splatforms,allowingthirdpartiestocreatenewcapabilitiesontopofthesepaymentsystems.Developershave,forexample,createdsystemsthatpaymultiplepeopleatonce,collectfrommultiplepeopletowardsacommongoal(WePay),oractasaproxy,takingpaymentfromonepartyandpass-ingitalongtoanotherwithacutforthebrokerinthemiddle.
6.:. ePayments:..Emerging.Platforms,.Embracing.Mobile,.and.Confronting.Identity.
PayPal’s.focus.on.payments.only—avoiding.the.
grander.platform.struggles.that.Amazon,.Google,.and.
Facebook.are.involved.in—may.give.it.a.competitive.
edge.in.its.quest.for.universality..Although.all.three.of.
the.latter.platforms.also.offer.a.payments.platform,.they.
appear.to.view.PayPal.as.a.different.kind.of.competitor..
Consider.Facebook.Credits:.you.can.purchase.them.with.
a.credit.card,.a.mobile.phone,.or.PayPal,.but.there’s.no.
way.to.buy.them.with.Amazon.or.Google’s.payment.
options..One.explanation.for.this.is.that.Facebook.
doesn’t.view.PayPal.as.a.direct.competitor,.unlike.
Amazon.and.Google.who.vie.with.it.for.attention.and.
traffic.
Another.key.differentiator.is.likely.to.be.the.ecosys-
tems.around.each.platform.and.the.ease.or.difficulty.that.
third-party.developers.have.in.creating.applications.that..
tap.or.ride.on.top.of.an.existing.payment.platform..
Apple.has.maintained.a.robust.developer.program.for.
years.and.has.now.extended.that.to.its.mobile.iOS.plat-
form;.approved.apps.are.distributed.(sold.or.given.away.
through.the.App.Store)..PayPal.launched.a.series.of.APIs.
last.fall.that.enabled.developers.to.create.applications.
that.used.the.PayPal.network.but.did.not.require.users.to.
check.out.at.PayPal.com..To.give.its.developer.program.
an.even.bigger.boost,.PayPal.sponsored.contests.offer-
ing.prizes.up.to.$100,000.for.the.best.applications..At.its.
most.recent.developer.event.in.October,.PayPal.reported.
more.than.50,000.developers.in.its.program.who.are.
working.on.more.than.1,000.applications.that.rely.on.its.
platform..
Comparing Established Payment PlatformsAlthough.PayPal.and.Amazon.have.achieved.a.certain.
level.of.feature-for-feature.parity.in.the.payments.space,.
PayPal.also.offers.traditional.payment.gateway.options..
that.neither.Amazon.nor.Google.offer..Both.Amazon.and.
PayPal.offer.sophisticated.APIs.and.an.array.of.
approaches.to.integration.that.target.merchants.of.
differing.scale.and.sophistication..Google’s.offering.
seems.limited.in.comparison.to.both.PayPal.and.
Amazon’s.product.offering..
Merchants.may.be.wary.of.offering.too.many.options.
at.checkout,.and.this.plays.to.the.advantage.of.estab-
lished.platforms.like.PayPal..PayPal’s.primary.association.
is.with.payments,.and.this.could.continue.to.give.it.an.
advantage.over.Amazon,.whose.brand.is.connected.with.
moving.product.(especially.media),.and.Google,.which.is.
primarily.thought.of.as.a.search.engine.and.a.handful.of.
interesting.online.and.offline.experiments..Other.pay-
ment.platforms.are.further.from.the.action,.offering.their.
platform.primarily.within.their.walled.garden.(see.the.
sidebar.on.the.next.page)..
Figure2.Facebookoffersseveraloptionsforbuyingcredits,butGoogleCheckoutandAmazonPaymentsarenotamongthem
7.:. ePayments:..Emerging.Platforms,.Embracing.Mobile,.and.Confronting.Identity.
The Return of Walled GardensTheriseoftheopenWebinthemid1990susheredoutaneraofwalledgardenswherecompaniessuchasCompuServe,Prodigy,andAmericaOnlineexertedpro-prietarycontroloverprivateonlineservices.Whilesomeconsumersappreciatedtheorganizationandcontrolofferedbytheseenvironments,theadvantagesoftheopenWebprevailed—especiallyastheadventofgoodsearchtoolsmadeiteasiertofindwhatyouwerelookingfor.
Morethanadecadelater,walledgardensappeartobemakingacomeback.Facebook,forexample,isonesuchgardenwhereeveryonewhoplayswithinit—members,merchants,anddevelopers—playsbytherulessetforthbyasinglecompany.Apple’siOSapplicationsconstituteanothertypeofwalledgarden:appsformagazinesandnewspaperspresentthecontentinaformatdesignedforaspecificpieceofhardwareanddisplay.Someconsumersandusabilityadvocatesapplaudthecleanandelegantuserexperience,butthetrade-offisthatmerchantsandpublishersmustagainplaybytherulesofasingleintermediary—inthiscase,Apple.
Foralltheirbenefits,walledgardenslimitcompetitionandchoice.InarecentcommentaryforScientific American,TimBerners-Lee,theinventoroftheWorldWideWeb,warnedagainsttheriseofthese“closedworlds”becausetheygivecontrolofcontenttoindividualcompanies,ratherthankeepingitopenanduniversallyavailable,aswebaddressesare.1
1 “Berners-Lee: Facebook ‘threatens’ web future,” The Register, Nov. 20, 2010, http://www.theregister.co.uk/2010/11/20/berners_lee_says_facebook_a_thret_to_web/.
Fromapaymentsperspective,thereareotherdrawbackstothesewalledgardens:
■■ From a merchant perspective,ifanapplicationorproductcompeteswithApple’sapplicationsorprod-ucts,don’texpecttobeabletosellitontheirplatform.Platformoperatorscandecidetoexcludecompetingcontentfromtheinfrastructuretheycontrol.
■■ From a consumer perspective,acustomercan’texpecttouseherAmazoncredentialstopayfordigitalmusicontheiTunesplatformwhenAmazoncompetesdirectlywithApple.
■■ From a platform perspective,twosocialnetworksmaynotbeabletocommunicateiftheycan’tagreeonterms.Forexample,ApplehadoriginallyhopedtoallowitsPingservicetoworksmoothlywithFacebook.ButwhenitlaunchedPinginSeptember2010,thetwocompanieshadn’tagreedtotermsandFacebookConnectwassubsequentlyremovedfromPing’sinter-face.Atpresstime,thetwocompaniesstillhaven’tresolvedtheirdifferences,despiteareporteddinnermeetingbetweenSteveJobsandMarkZuckerberg.
8.:. ePayments:..Emerging.Platforms,.Embracing.Mobile,.and.Confronting.Identity.
Dodd-Frank.also.increases.the.regulatory.scrutiny.on.
payment.platforms,.which.are.likely.to.be.regulated.
under.the.new.Bureau.of.Consumer.Financial.
Protection.1.It.remains.to.be.seen.how.the.bureau.will.
regulate.players.like.PayPal,.Google,.and.Amazon,.but.it’s.
sure.to.place.a.new.burden.on.companies.that.have.little.
experience.working.under.financial.regulation.in.the.US.
1 Title X, Section 1002 gives the bureau power to regulate entities that provide “payments or other financial data processing products or services to a consumer by any technological means, including processing or storing financial or banking data for any payment instrument, or through any payments systems or network used for processing payments data, including payments made through an online banking system or mobile telecommunications network.”
New Regulations: Greater Opportunity, but Greater ScrutinyNew.laws.aimed.at.regulating.financial.institutions.and.
protecting.consumers,.passed.in.2010.in.the.wake.of.the.
financial.crisis,.aim.to.limit.the.power.of.incumbents.like.
Visa.and.MasterCard..The.centerpiece.of.this.reform,.the.
Dodd-Frank.Act,.prohibits.credit.card.companies.from.
dictating.restrictive.terms.to.merchants,.such.as.whether.
they.can.discount.noncredit.transactions,.whether.they.
can.enter.into.other.financial.relationships,.and.whether.
they.can.set.minimum.and.maximum.limits.on.cards..
American Airlines Integrates a Payment PlatformMosttransactionsonAmericanAirlines’websitearehan-dledbycreditcard,buttheairlinewantedtoacceptmoreformsofonlinepayment.LanceSleeper,anoperationsmanagerwiththeairline,explainedthegoal:“AmericanAirlineswantstohaveeveryconceivablewaythatevery-onewantstopayusavailable.Fromanoperationalper-spectiveIdon’thaveanyopinionaboutwhatformofpaymentacustomeruses,Ijustwantthemtohaveasuc-cessfultransaction.”
ButintroducingnewoptionslikeelectronicchecksandWesternUnionimposedadditionalburdens,particularlyintheairline’sexposuretofraud.“Thecreditcardindustryandelectronicpaymentsnetworkshaveexperienceiden-tifyinganddealingwithfraud,”Sleepersaid,“butthetechnologiesfordealingwithfraudonanythingotherthancreditcardjusthaven’tmaturedinthesameway.”
AmericanturnedtoPayPalbecauseitofferedthemasecurewaytohandlearangeoftransactionswhilehand-ingoverthecomplexityofdealingwiththoseoptions.“FromanoperationalperspectivePayPalisprobablythe
mostsecuretransactionthatwehave,”Sleepersaid.“Themostimportantpartofmyjobismakingsurethatpeo-ple’sprivatedatastaysprivate. WhenthecustomerpayswithPayPal,Idon’thavetoworryaboutstoringacreditcardnumber.”
PayPalalsobringsawholebucketofpaymentmethodstoAA.comwithouttheairlinehavingtoinvestintheinfra-structuretosupportthoseformsofpayment.Amongthemostimportantoftheseareinternationalcreditcards.Sincerulesvaryfromonemarkettoanother,theairlinecanoffloadtheburdenofdealingwithdozensofplat-formswithvariousregulationstoPayPal.
AsidebenefitwasPayPal’sbrandrecognitionandinstalledbaseofusers.“Wedidn’tdoalotofmarketingwhenweaddedsupportforPayPal.Weturneditonat1p.m.,andIwasmonitoringthevariousfrequentflyerdis-cussionboards.Wehadourfirsttransactionat1:15andat1:30someonehadstartedadiscussionaboutthenewsitechange.”
9.:. ePayments:..Emerging.Platforms,.Embracing.Mobile,.and.Confronting.Identity.
predictive.technology.to.encourage.greater.sales..In.
April.2010.it.launched.an.online.mall,.MasterCard.
Marketplace,.which.makes.use.of.algorithms.from.Next.
Jump.that.analyze.consumer.behavior.across.multiple.
sites.to.deliver.recommendations.more.likely.to.drive.
purchases.5
American.Express.recently.hired.a.team.of.senior.
executives.from.Sprint.Nextel’s.Virgin.Mobile.USA.to.
guide.its.mobile.payments.efforts..Last.autumn,.AmEx.
bought.Revolution.Money,.a.small.Internet.payment.
network,.for.$300.million..AmEx.has.rebranded.the.
service.as.Serve.Enterprise.and.plans.to.build.its.digital.
and.mobile.payment.initiatives.around.it.6
Risk Assessment: Big Data and Fraud DetectionPayment.platforms.have.a.tremendous.challenge.com-
bating.fraud,.greater.in.complexity.than.that.faced.by.
traditional.payment.processors..But.the.solutions.they.
have.devised.to.deal.with.it.have.created.some.enor-
mous.new.opportunities..
First,.the.problem:.payment.platforms.have.to.pro-
cess.orders.from.many.more.sources.than.do.credit.card.
companies..“Traditional.processors.have.to.deal.with.
tens.of.thousands.of.sources.of.fraud.at.each.individual.
point-of-sale.or.merchant.site,”.said.Matthew.Mengerink,.
VP.of.customer.quality.and.engineering.services.at.
PayPal..“PayPal.has.to.be.able.to.identify.potential.
sources.of.fraud.from.the.almost.90.million.browsers.and.
mobile.phones.that.are.constantly.connecting.to.our.
payment.processing.services..We’re.dealing.with.a.much.
larger.challenge,.and.we’ve.designed.systems.to.identify.
and.manage.fraudulent.activity.often.before.it.has.
started.”.
5 “MasterCard partners with Next Jump to rebuild online strategy,” Bank Systems & Technology, April 9, 2010, http://www.banktech.com/showArticle.jhtml?articleID=224202457.
6 “In Mobile Payments, Amex Steps Up, But It’s Playing Catch-Up,” AmericanBanker.com, October 28, 2010, http://www.americanbanker.com/issues/175_207/mobile-payments-amex-1027739-1.html.
The Incumbents ReactSpurred.by.a.number.of.factors,.including.reduced.
consumer.spending,.new.rules.protecting.cardholders.
and.merchants,.and.the.rapid.growth.of.web-based.
payment.platforms,.the.old.guard.are.scrambling.to.get.
back.into.the.game..In.case.anyone.wondered.whether.
the.traditional.credit.card.payment.networks.would.be.
satisfied.with.a.place.behind.the.scenes—one.level.down.
the.stack,.as.it.were,.serving.PayPal,.Amazon,.and.Google.
Payments—Visa’s.CEO.Joseph.Saunders.recently.clarified.
their.ambitions,.saying,.“We.are.going.to.compete.not.
just.with.PayPal,.but.other.emerging.payment.schemes.”2
Visa’s.most.ambitious.recent.move.in.this.direction.
has.been.its.$2-billion.acquisition.of.CyberSource,.a.
provider.of.electronic.payment,.risk.analysis,.and.security.
solutions.for.ecommerce.3.CyberSource’s.existing.mer-
chant.relations.with.companies.like.Facebook.and.
Google.will.help.Visa.expand.its.role.with.these.online.
platforms..Meanwhile,.it.continues.to.develop.its.
approach.to.mobile.payments.working.with.
DeviceFidelity.on.a.range.of.solutions,.including.a.
microSD.card.that.consumers.can.install.in.their.phones.
and.a.protective.sleeve.with.hardware.to.enable.pur-
chases.with.an.iPhone.4
MasterCard.has.responded.by.purchasing.DataCash,.
a.London-based.company.that.offers.online.payment.
services.similar.to.CyberSource..Although.the.company.
is.considerably.smaller.than.CyberSource.($58.million.in.
revenue.in.2009.compared.to.CyberSource’s.$256.mil-
lion),.it.has.stronger.relationships.with.merchants.in.
Europe,.which.should.help.MasterCard.establish.market.
share.there..Mastercard.is.also.experimenting.with.
2 “Visa Meeting Threat from Alternative Payments,” AmericanBanker.com, Oct. 29, 2010, http://www.americanbanker.com/issues/175_208/visa-threat-from-alt-payments-1027803-1.html.
3 “Visa Picks Up CyberSource For $2 Billion,” TechCrunch.com, Apr. 21, 2010, http://techcrunch.com/2010/04/21/visa-cybersource/.
4 “Visa and DeviceFidelity working to bring mobile payments to iPhone,” Engadget.com, May 6, 2010, http://www.engadget.com/2010/05/06/visa-and-devicefidelity-working-to-bring-mobile-payment-function/.
10.:. ePayments:..Emerging.Platforms,.Embracing.Mobile,.and.Confronting.Identity.
Hadoop.allow.us.to.do.things.that.were.previously.
impossible.”
Mitigating.risk.is.just.one.use.for.all.this.data..With.
everything.that.payment.platforms.know.about.their.
customers—transactions,.searches,.messages,.likes,.and.
dislikes—they.can.increasingly.use.this.information.to.
devise.sophisticated.advertising.models.or.predictive.
analytics.for.selling.products.and.services..Privacy.advo-
cates.might.be.alarmed,.but.the.payment.providers.are.
just.continuing.a.model.pioneered.by.financial.institu-
tions.decades.ago.for.identifying.consumer.preferences.
and.identifying.fraud.risks..The.emergence.of.tools.for.
processing.Big.Data.creates.new.opportunities.for.pay-
ment.platforms.and.vendors.to.get.better.at.what.they.
already.do...
The Future: A Bid for Every TransactionA.payment.system.built.on.top.of.systems.that.facilitate.
real-time.analytics.creates.interesting.possibilities.for.
consumers.and.merchants.alike..Consider.the.architec-
ture.of.a.modern.advertising.network.like.Google’s.
DoubleClick.(see.Figure.3)..DoubleClick.and.other.ad.
networks.have.perfected.real-time.auctions.that.deliver.
targeted.ads.to.users.in.milliseconds..When.a.request.for.
an.ad.comes.in.from.a.browser,.it’s.quickly.passed.to.one.
or.more.advertisers,.each.of.whom.has.10–20.milliseconds.
to.match.that.user.to.a.profile.and.assign.a.potential.
value.to.its.bid..The.high.bidder.gets.to.place.its.ad—and.
it.all.happens.in.under.a.second..These.interactions.are.
happening.with.every.click,.generating.a.massive.
amount.of.real-time.modeling.and.calculations.that.
drive.an.efficient.market.for.advertising.
Now,.the.opportunity:.to.confront.that.risk,.PayPal,.
Amazon,.and.Google.have.all.developed.sophisticated.
analytical.tools.and.infrastructure.to.identify.patterns.of.
fraudulent.activity..PayPal.has.even.spun.out.some.of.its.
fraud-detection.tools.as.Palantir.Technology,.which.the.
United.States.federal.government.uses.for.a.range.of.
activities,.including.analysis.of.geographical.information.
and.activity.in.Afghanistan..PayPal.and.Amazon.have.had.
years.to.amass.databases.of.the.transaction.details.for.
hundreds.of.millions.of.customers.across.thousands.of.
merchants..These.massive.datasets.contain.not.only.
financial.details.for.transactions,.but.IP.addresses,.
browser.information,.and.other.technical.data.that.will.
help.these.companies.refine.models.to.predict,.indentify,.
and.prevent.fraudulent.activity..
These.tools.vastly.improve.on.the.periodic,.offline.
analysis.that.has.been.the.norm..Institutions.traditionally.
sampled.existing.data.and.ran.nightly.or.weekly.analysis.
using.fraud-detection.models..The.newer.approaches.
perform.continuous,.real-time.analysis.on.large.datasets,.
applying.some.of.the.lessons.that.Google.has.learned.for.
indexing.the.Web.to.the.problem.of.calculating.the.risk.
of.fraud.for.individual.consumers.or.merchants..We.see.a.
swarm.of.activity.around.a.new.crop.of.“Big.Data”.tools.
like.Hadoop,.MapReduce,.and.BigTable—tools.that.can.
deal.with.huge.amounts.of.data..The.fraud.question.is.a.
large.driver.of.all.this.activity.
“Sampling.is.dead,”.said.Abhishek.Mehta,.a.Big.Data.
lead.at.a.large.financial.institution...“When.banks.stored.
petabytes.of.information.on.magnetic.tape,.it.was.impos-
sible.for.them.to.develop.appropriate.models.to.measure.
risk.without.resorting.to.sampling.techniques..Today.we.
can.run.analysis.on.upwards.of.50.petabytes.of.data.to.
more.accurately.calculate.risk..Technologies.such.as.
11.:. ePayments:..Emerging.Platforms,.Embracing.Mobile,.and.Confronting.Identity.
site.could.automatically.select.the.credit.source.offering.
the.best.terms..From.your.perspective,.your.funding.
sources.and.credit.card.don’t.have.a.fixed.APR;.the.rate.is.
variable.and.can.change.depending.on.your.evolving.
real-time.risk.and.the.risk.of.the.merchant.
Real-time.analysis.like.this.was,.until.recently,.an.
impossible.idea..But.the.innovations.of.ad.networks.like.
DoubleClick.and.Google.AdSense.have.shown.their.
potential.and.created.an.efficient.market.for.advertising..
A.real-time.approach.to.analytics.in.payment.will.
undoubtedly.lead.to.a.wave.of.innovation.among.mer-
chants.and.banks.at.the.point.of.sale...
Adnetwork Advertiser
Trafficprofile50 msLoad page
500 ms
Get ad120 ms
Network bid20 ms Profile
data
Impressiondata
Figure3.Witheveryclick,adnetworksauctiontheavailableimpressionstoadvertisers,whobidonplacingtheiradbasedonthebrowserprofile,allinunderasecond
Imagine.a.similar.system.for.electronic.payments.in.
which.a.payment.platform.offers.potential.transactions.
to.competing.credit.issuers..As.you.browse.an.ecommerce.
site,.your.browsing.history.and.the.item.you’re.consider-
ing.come.together.to.create.a.risk.profile..The.site.or.
payment.platform.may.offer.that.profile.and.the.details.
of.the.transaction.to.a.handful.of.competing.lenders.so.
that.at.checkout.you.receive.several.offers.for.financing.
from.different.banks..If.you.have.previously.chosen.to.
pay.automatically.with.the.most.advantageous.offer,.the.
12.:. ePayments:..Emerging.Platforms,.Embracing.Mobile,.and.Confronting.Identity.
for.secure.transactions,.including.financial.data.on.the.
buyer.and.an.ability.to.confirm.someone.is.who.they.say.
there.are.by.sending.them.a.secure.token..Other.
enhancements.coming.online,.including.wireless.sys-
tems.for.contactless.payment.and.the.ability.to.confirm.
identity.through.biometrics,.are.sure.to.increase.the.
mobile.phone’s.viability.as.a.tool.for.commerce..
In.this.section.we.look.at.some.of.the.interesting.
experiments.using.mobile.phones.for.payments.in.
developing.markets.and.in.virtual.environments..We.also.
consider.some.of.the.technology.innovations.that.will.
make.the.phone.a.more.robust.tool.for.transactions...
Direct Mobile BillingDirect.mobile.billing.is.an.emerging.platform.for.paying.
for.goods.or.services.online.by.adding.them.to.a.mobile.
phone.account..The.process.is.straightforward:.a.user.
supplies.his.or.her.mobile.phone.number.to.one.of.the.
players.in.this.space,.which.sends.a.text.message.to.the.
phone.and.waits.for.a.response.text.authorizing.the.trans-
action..Once.the.transaction.has.been.authorized,.a.
direct.mobile.billing.service.will.charge.the.user’s.mobile.
phone.account.when.prompted,.and.all.charges.will.
show.up.in.the.next.billing.statement..These.services.
work.with.most.major.wireless.providers,.and.they.can.
also.be.used.with.prepaid.phones.
Boku.and.Zong.are.two.early.leaders.in.this.space..
Their.focus.on.online.games.and.services.allows.users.
(some.of.whom.are.too.young.for.traditional.bank.ser-
vices).to.pay.quickly.and.easily.for.credits.in.online.
environments,.relying.upon.already.established.relation-
ships.between.wireless.phone.subscribers.and.wireless.
carriers..The.service.is.ideal.for.the.14-year-old.who.
needs.to.buy.a.virtual.tractor.in.Farmville.but.doesn’t.
have.a.checking.account..As.long.as.he.has.a.mobile.
phone,.he.can.place.the.charge.on.his.phone.bill—at.
least.until.his.parents.cut.him.off..
Wireless.carriers.charge.significantly.higher.fees.for.
this.convenience.than.do.traditional.payment.services:.
as.much.as.35–40%.of.the.transaction.value..One.reason.
The Mobilization of MoneyAs.impressive.as.the.growth.of.online.commerce.has.
been.over.the.past.ten.years,.its.extension.into.the.
mobile.realm.promises.to.dwarf.the.previous.curve..
Mobile.commerce.will.not.only.increase.the.volume.of.
electronic.transactions,.it.will.also.change.their.nature..
The.trail.of.transaction.and.location.data.will.empower.
merchants.and.financial.service.companies.to.learn.more.
about.buyers,.both.as.a.whole.and.as.individuals..Mining.
this.data.will.allow.them.to.present.offers.in.real.time.
(and.in.specific.locations).tailored.to.buyers’.preferences..
Combined,.these.changes.are.likely.to.bring.about.the.
greatest.revolution.in.electronic.commerce.since.it.
moved.onto.the.Web..
Based.on.the.way.that.online.users.have.embraced.a.
new.generation.of.social.media.and.shared.hitherto.
unimagined.detail.on.their.lives,.we.expect.that.buyers.
will.continue.to.embrace.these.changes,.willingly.shar-
ing.details.about.their.purchases,.habits,.and.preferences.
in.exchange.for.relatively.small.benefits..Far.from.being.
offended.by.invasions.of.privacy,.younger.buyers.who.
have.come.of.age.with.Facebook,.Flickr,.and.YouTube.
may.expect.a.level.of.service.and.personalization.that’s.
only.possible.with.this.level.of.familiarity..
The.mobile.device.is.central.to.this.shift..Smartphones,.
which.currently.make.up.about.one-fifth.of.the.installed.
subscriber.base.in.the.US,.are.expected.to.make.up.
nearly.half.of.new.sales.by.2012.(Source:.Nielsen)..
Smartphone.subscribers.are.already.comfortable.buying.
media.through.these.devices,.including.ring.tones,.
songs,.and.in.some.cases.TV.programming.and.books..
But.to.date,.despite.promises.of.the.mobile.phone.acting.
as.a.digital.wallet,.experiments.in.using.mobile.to.pay.for.
goods.in.the.physical.world—at.least.in.developed.
markets—have.been.sporadic..
We.expect.that.to.change.rapidly.in.coming.years..As.
smartphones.become.more.ubiquitous,.users.may.come.
to.expect.that.they.can.use.these.devices.to.purchase.
goods.and.services.in.the.real.world..Phones.are.already.
capable.of.providing.some.of.the.key.factors.necessary.
13.:. ePayments:..Emerging.Platforms,.Embracing.Mobile,.and.Confronting.Identity.
poverty.rate12.and.a.GDP.1/52.the.size.of.the.US.is.pro-
viding.a.model.for.the.future.of.the.mobile.wallet..The.
population.of.“unbanked”.in.the.US—that.is,.people.with.
no.checking.or.savings.account—is.certainly.high.
enough.to.warrant.a.similar.model.
Vodafone.is.now.partnering.with.Safaricom.to.extend.
the.model.to.other.developing.countries,.including.
Afghanistan,13.Tanzania,.Fiji,14.South.Africa,.and.others..
The.potential.for.platforms.like.this.to.change.the.lives.of.
millions.of.unbanked.consumers.in.developing.markets.
is.obviously.significant,.but.there’s.an.opportunity.in.
developed.markets.as.well..The.economic.downturn.has.
contributed.to.the.growth.of.the.unbanked.population.
in.the.United.States.and.Europe,.where.immigrant.and.
expat.communities.often.want.to.make.remittances.to.
family.and.friends.in.other.countries..Merchants.could.
begin.to.see.M-PESA.and.services.like.it.as.an.opportu-
nity.to.reach.a.massive,.global.audience.that.was.once.
virtually.unreachable..
Contactless PaymentsContactless.payment—the.ability.for.a.consumer.to.
wave.her.phone.or.tap.it.against.a.receiver.in.order.to.
make.a.purchase—promises.to.change.the.game.and.
help.make.mobile.commerce.ubiquitous..Visa.and.
MasterCard.have.been.experimenting.with.contactless.
payments.with.their.payWave.and.PayPass.systems.for.
several.years..But.these.systems.have.yet.to.hit.the.
mainstream..One.reason.is.that.the.benefits.to.mer-
chants.have.been.somewhat.limited.in.exchange.for.the.
expense.and.hassle.of.having.to.host.the.hardware.to.
read.them..
12 https://www.cia.gov/library/publications/the-world-factbook/geos/ke.html.
13 “Vodafone money transfer in Afghanistan,” Total Telecom Online, Terrapinn Holdings Ltd., Feb. 11, 2008, http://www.highbeam.com/doc/1G1-174620194.html.
14 http://www.fijitimes.com/story.aspx?id=155107.
they.can.do.so.is.that.online.merchants’.capital.costs.are.
so.much.lower.than.those.that.sell.real.goods..It.costs.
Zynga.nothing.to.crank.out.a.million.more.poker.chips..
But.unless.wireless.carriers.dramatically.reduce.their.cut,.
don’t.expect.to.see.these.services.showing.up.as.pay-
ment.options.for.merchants.selling.real.goods..
Mobile Banking in the Developing WorldIn.developing.markets,.wireless.carriers.have.gone.
beyond.games.to.provide.something.closer.to.real.
banking.services.for.the.many.people.who.have.mobile.
phones.but.no.bank.account.7.In.Kenya,.for.example,.
Safaricom’s.M-PESA.service.is.the.country’s.largest.finan-
cial.service,.handling.more.than.2.million.transactions.
each.day8,9.for.the.service’s.9.5.million.customers..
Customers.can.send.and.receive.payments.to.or.from.
other.mobile.phones.and.purchase.goods.or.services.at.
a.network.of.participating.merchants..You.can.pay.for.a.
taxi.ride,.buy.a.beer,.or.access.cash.at.an.ATM.by.getting.
a.code.from.M-PESA..Safaricom.also.lets.subscribers.use.
their.prepaid.minutes.as.a.form.of.currency,.which.can.
be.transferred.from.one.user.to.another.via.text.
message.
M-PESA.advertisements.appeal,.for.example,.to.a.
younger.generation.of.office.workers.in.Nairobi.who.may.
need.to.wire.Kenyan.shillings.to.parents.working.on.a.
rural.farm.10.Ads.aimed.at.the.Kenyan.expat.community.
in.the.UK.tout.the.ease.with.which.you.can.use.M-PESA.
to.transfer.money.to.relatives.back.in.Kenya.11.Consumers.
can.now.side.step.the.banking.infrastructure.and.
engage.in.commerce.without.having.to.carry.around.
currency..It’s.worth.noting.that.a.country.with.a.50%.
7 http://www.youtube.com/watch?v=tarvxihFd8c&NR=1.8 “Kenya’s M-Pesa Customers Secure Greater ATMs Access,” ATM &
Debit News, SourceMedia, Inc., July 1, 2010, http://www.highbeam.com/doc/1G1-230285111.html.
9 http://www.mobilemarketingmagazine.co.uk/content/rackspace-powers-kenyan-mobile-money-solution.
10 http://www.youtube.com/watch?v=nEZ30K5dBWU.11 http://www.youtube.com/watch?v=xozpEcTFtew.
14.:. ePayments:..Emerging.Platforms,.Embracing.Mobile,.and.Confronting.Identity.
Apple’s.summer.2010.hiring.of.Benjamin.Vigier,.a.
prominent.expert.in.near-field.communications,.as.
mobile.commerce.product.manager.further.fueled.
speculation.about.the.prospect.for.contactless.payment.
in.the.near.future.17
Google.has.also.shown.innovations.coming.in.its.
Android.mobile.operating.system.to.facilitate.contact-
less.payment..At.the.Web.2.0.Summit.in.San.Francisco.in.
November,.CEO.Eric.Schmidt.demonstrated.a.tap-and-
pay.system.on.an.unspecified.hardware.device.running.
the.upcoming.Gingerbread.release.of.Android.that.
combined.purchasing.capability.with.geolocation.
possibilities..
Paypal.is.working.with.Bump.Technologies.to.enable.
contactless.payment.through.its.network..Bump’s.system.
allows.two.mobile.phones.(iPhone,.Android,.or.
BlackBerry).to.exchange.data.when.tapped.together..
That.data,.which.travels.through.the.network.rather.than.
via.radio.waves.between.the.two.devices,.could.be.
photos,.contact.information,.or.payments..PayPal’s.Send.
Money.application,.which.allows.users.to.pay.each.other.
(or.merchants).or.to.split.a.bill,.is.built.on.top.of.Bump’s.
technology..The.company.also.holds.several.patents.that.
define.ways.to.transfer.money.from.one.user.to.another.
A case study of contactless payment: Bling Nation
Bling.Nation.provides.a.low-cost.contactless.payment.
solution.that.relies.on.near-field.communication.tech-
nology.and.RFID.tags,.called.Bling.Tags..Subscribers.
attach.the.tag.to.their.mobile.phone,.and.they.can.then.
use.it.to.pay.for.goods.and.services.at.participating.
merchants.by.tapping.the.tag.on.a.piece.of.hardware.(a.
Blinger).at.the.point.of.sale..Bling.subtracts.the.purchase.
amount.from.a.prepaid.account.or.bills.it.to.the.user’s.
PayPal.account..Bling.then.texts.a.receipt.and.any.rel-
evant.balance.information.to.the.user’s.phone..
17 “Apple hires NFC expert as mobile commerce product manager,” Near Field Communications World, Aug. 13, 2010, http://www.nearfieldcommunicationsworld.com/2010/08/13/34302/apple-hires-nfc-expert-as-mobile-commerce-product-manager/.
Embedding.this.technology.in.mobile.phones.prom-
ises.to.change.this,.for.several.reasons..Foremost.among.
these.is.that.connecting.payment.to.the.mobile.phone.
offers.merchants.more.incentives,.including.the.possibility.
to.send.messages.back.to.consumers.who.have.opted.in.
for.such.a.program..For.example,.weaving.the.geolocation.
factor.into.the.equation,.it.could.be.possible.to.text.a.
coupon.to.a.consumer.when.they.are.again.within.range.
of.the.store,.or.at.a.certain.follow-up.date.of.the.original.
purchase..
For.this.and.other.reasons,.the.widespread.adoption.
of.smartphones.promises.to.drive.contactless.payments..
However,.most.consumers.don’t.own.a.smart.phone.yet.
despite.all.the.excitement.among.early.adopters.for.
iPhones.and.Android-based.phones.15.In.anticipation.of.
this,.industry.observers.have.been.watching.patent.and.
alliance.announcements.in.recent.months.as.key.players.
position.themselves.to.cash.in..
Apple’s.patent.applications.in.2010.have.fueled.
speculation.that.it.is.preparing.to.add.near-field.commu-
nications.capabilities.to.the.iPhone.that.could.enable.
contactless.payments..These.patents.cover.topics.
including:.
■■ phone-based.purchase.of.concert.tickets.(and.pre-
paying.for.drinks.at.the.concert).
■■ a.smart.shopping.basket.that.works.with.the.iPhone.
to.track.items.placed.in.it
■■ a.fingerprint.reader
■■ a.point-of-purchase.(POP).application.that.allows.
payment.from.various.funding.sources,.along.with.
offers.for.rewards.and.financing16
15 comScore reports smart phones had only 17% market penetration in 2009.
16 “Apple Gearing up for the Coming NFC iPhone Revolution,” Patently Apple, April 8, 2010, http://www.patentlyapple.com/patently-apple/2010/04/apple-gearing-up-for-the-coming-nfc--iphone-revolution.html.
15.:. ePayments:..Emerging.Platforms,.Embracing.Mobile,.and.Confronting.Identity.
supply.a.PIN..In.this.way,.Bling.Nation.adapts.from.sin-
gle-factor.to.multifactor.authentication.based.on.a.series.
of.real-time.risk-analysis.algorithms.
Bling.Nation.is.currently.running.a.trial.with.approxi-
mately.150.vendors.in.Palo.Alto,.California,.and.plans.to.
expand.this.trial.to.San.Francisco.in.the.near.future..
7,000.customers.signed.up.during.a.four-week.trial.
period.in.September.2010,.indicating.that.interest.and.
demand.are.high..Bling.has.made.several.significant.
deals.in.recent.months,.including.an.agreement.with.
Verifone.to.allow.Bling.payments.through.several.of.
Verifone’s.point-of-sale.terminals,.and.a.partnership.with.
PayPal.to.use.its.platform.as.a.payment.option..
Bling.also.works.with.merchants.to.follow.up.on.
future.offers.(for.example,.coupons.on.subsequent.
purchases)..Bling.says.these.rewards.programs.account.
for.about.15%.of.the.transactions.on.Bling..
To.protect.against.fraud,.the.Bling.Tag.technology.
contains.the.equivalent.of.a.one-time.password,.which.is.
updated.after.each.tap.transaction.to.prevent.replay.
attacks..Bling.Nation.also.provides.real-time.risk.analysis.
that.can.trigger.a.request.for.a.PIN.for.a.transaction.that.
falls.outside.of.normal.parameters..If.the.customer.
exceeds.a.predetermined.rate.of.transactions.or.pur-
chases.an.expensive.item,.or.if.Bling.Nation.notices.a.lot.
of.geographic.variability.over.a.short.period.of.time,.
when.a.consumer.taps.a.BlingTag,.she.will.be.asked.to.
Key Technologies for Payment by Phones■■ Bluetooth. Mostmobilephonesalreadyhave
Bluetoothantennas.Butthesystemisslowcomparedtoalternatives—anywherefrom1to6secondstoestablishaconnection.Thislagmakesitlessdesirableforcommercialtransactions.
■■ Radio-frequency identification. RFIDtagsalreadypowersomemobilepaymentsolutions,liketheelec-tronictoll-collectiondevicesmountedonyourcar’swindshield.Visa’spayWave1andMasterCard’sPayPass2offermobilecontactlesspaymentfortradi-tionalcreditcardsusingapassiveRFIDtagembeddedinatraditionalcreditcard.Buttherangeofthesesys-temsissogreat(10meters,insomecases)thatitleavesthemsusceptibletoeavesdropping.
■■ Near-field communicationsisapromisingwirelesstechnologyforcontactlesspayment.ItcombinesRFIDtechnologywithaprotocolforlimitedrangecommu-nicationsbetween4and8inches(soit’sdifficultforeavesdropperstoconnectto).Thedatarateisquick
1 http://www.visa.com/visapaywave/.2 http://www.paypass.com/.
(between100and800kbits/s),thetechnologyencryptswhatit’ssending,anditmakesconnectionsinabout1/10ofasecond.NokiasaysitwillintroduceNFCinsomeofitsmobilephonesin2011.NFCreaderscanalsoreadpassiveRFIDtags,makingitpossibleforplatformproviderstodeployinexpensivesolutionsthatalsomeettheneedsofcustomerswhomaynotbeabletoaffordmoreexpensiveNFC-capabledevices.
■■ The network.Bumpisonetechnologythattakesadif-ferentapproachtocontactlesspayment,usingthemobilenetworktotransferdatabetweenmobiledevices.WhentwophoneswiththeBumpapptap,theappcantransferanyselecteddata—contactinfo,pho-tos,or(withtheassistofathird-partyapplikePayPal)payments—fromonephonetotheother.Itdoesn’tuseBluetoothoralocalradiotechnologytodothis.Instead,theappidentifiesthetwophonesbytheirproximityandroutesthedata(orpayment)throughthenetworkanditsservers.
16.:. ePayments:..Emerging.Platforms,.Embracing.Mobile,.and.Confronting.Identity.
New Approaches to PaymentGroup paymentsSeveralstartupsareworkingtoprovidesolutionsinwhichahandfulofuserscancontributetoacommongoal—forexample,collegestudentssplittingrentoragroupoffamiliessharingtheweek’sfoodatarentedbeachcottage.WePayallowsyoutosetupasystemforrequestingpaymentfromgroupmembersandshowingwhooweswhattowhom.ItholdsmoneyinFDICpro-tectedaccounts,acceptingcreditcardsanddirectbanktransfers.PayItSquareoffersasimilarservice,andacceptscreditcardsandPayPal.Bothserviceschargeapercentage—between0.5%and3.5%dependingonthepaymentmethod—andbothintegratewithFacebook,illustratinganotherimportanttrend:paymentsontopofthesocialgraph.
Figure4.PayItSquare’sinterfaceshowswhooweswhattowhom
SubscriptionsThemostsuccessfulmodelforsubscription-basedpay-mentshasbeenonlinegaming;companieslikeBlizzardhavemademillionsofdollarsfrommonthlyandannualsubscriptionstogameslikeWorldofWarcraft.Nowthemodelisbroadeningtobusinessuses.Zuoraisawell-financedstartupbackedbyMarcBenioff,CEOofSalesforce.com.Itspecializesinsubscriptionsandrecur-ringpaymentsforsoftware-as-a-service(SaaS),offeringarangeofsolutions,includingmeteringbasedonusageandpaymentsforspecialcharges.Aimingtobe“theSalesforceofonlinebilling,”1it’soneofthefirstthird-partypaymentsolutionstotakeadvantageofPayPal’sAdaptivePaymentsAPI.
1 http://www.zuora.com/company/index.html.
Virtual, in-game paymentsFacebookranksfourthinthetotalnumberofregisteredusersonline(behindGoogle,Yahoo!,andMicrosoft),butcomScoreranksitfirstintheamountoftimeitsusersspendonline.ManyofthoseminutesarespentinsocialgameslikeFarmvilleandZyngaPokeronplatformsthatletusersbuyandtradevirtualgoodsusingcreditstheypayrealmoneyfor.InSeptember2010,FacebookandZyngaagreedtoconsolidateallin-gamepurchasesasFacebookCredits,whichcanbepurchasedonlineoratbrick-and-mortarretailerslikeTarget.2FacebookCreditscanbepurchasedusingacreditcard,severalmobilepay-mentsystems,andPayPal(but,worthnoting,notAmazonPayments).
Social storefrontsSocialstorefrontsallowmerchantstosellgoodsandser-viceswithinsocialnetworkslikeFacebook.OnecompanyofferingsocialstorefrontsisPayvment,whichallowsauserwithaPayPalbusinessaccounttosellproductsthroughFacebook.
Storefronts-as-a-serviceServiceslikeBigCommerceandShopifyofferecommercestorefrontsforafractionofwhattheywouldhavecostjustafewyearsago.Forafewhundreddollarsamonth,theyoffercatalogmanagementtools,marketingfeatures,returnmanagement,inventorycontrol,integrationwithFacebook,andmobile-friendlyversionsofthesite.ShopifyoffersasmallersetoffeaturesthanBigCommerce,butitallowshooksthatmakeiteasierfordeveloperstointegratestoreactivitywithotherapplica-tions.ShopifyintegrateswithPayPal,GoogleCheckout,andAmazonPayments.BigCommerceintegrateswithPayPal,GoogleCheckout,andAmazonSimplePay.
Crowdsourcing micropaymentsFlattrisaninnovativeservicethatattemptstodelivermicropaymentstopublishersbytrackingthenumberoftimesusersclickaFlattrbuttonontheirsite.Thesystemreliesonthegoodwillofuserswhoagreetopayamonthlyfeetosupportthewebcontenttheylike.Astheyconsumeblogs,music,andothermediaontheWeb,theycanclickonaFlattrbuttontosignaltheysupportthatcontent—providingthemediaproviderhasaddedonetotheirsite.Attheendofthemonth,Flattrdistributestheuser’smonthlypaymenttothenumberofsitesthey’veclickedon.Themodelisinteresting,butunlessitpairswithalargerdistributionchannel,it’slikelytoremainacuriosity.
2 http://www.reuters.com/article/idUSTRE6803HU20100901.
17.:. ePayments:..Emerging.Platforms,.Embracing.Mobile,.and.Confronting.Identity.
Compare.this.to.the.way.ad.networks.manage.your.
identity.as.you.move.from.one.site.to.another..Search.
DIY.sites.for.information.on.fixing.a.printer.problem.and.
when.you.later.visit.Facebook.you’ll.see.ads.for.ink.
cartridges..How.is.it.that.sites.like.Facebook.have.grown.
so.sophisticated.that.they.know.what’s.wrong.with.your.
printer—in.fact,.they.can.even.predict.future.romantic.
interests.based.on.historical.browsing.patterns18—but.
we.still.have.to.reenter.our.financial.and.identity.infor-
mation.at.every.ecommerce.site.we.buy.from?..
Perhaps.the.main.reason.is.that.users.are.less.chary.
about.sharing.their.browsing.history.than.they.are.about.
sharing.their.credit.card.numbers..But.they.do.appear.to.
be.increasingly.comfortable.giving.billing,.shipping,.and.
identity.information.to.one.or.two.trusted.sources.and.
then.referring.purchases.to.them.
Something.like.this.has.already.begun.to.happen.
with.PayPal.and.Google.Checkout..Users.place.their.
financial.information.with.these.trusted.sources.and.
then.reference.other.sites.to.that.account.when.they.
make.a.purchase..Merchants.who.use.platforms.like.
PayPal.or.Amazon.Payments.can.identify.you.without.
asking.the.same.series.of.questions..This.secure,.central-
ized.financial.identity.is.the.current.realization.of.the.
long-sought-after.digital.wallet..Like.a.physical.wallet,.
your.identity.with.a.payment.platform.carries.data.that.
proves.at.least.three.things:.your.identity,.your.ability.to.
pay.(debit.and.credit.cards,.cash),.and.the.history.of.your.
payments.(the.receipts.you’ve.stuffed.in.your.pocket.
after.purchases.or.ATM.withdrawals)..
18 http://www.salon.com/life/broadsheet/2010/05/18/facebook_relationship_predictions.
The Significance of Online IdentityOnline.identity.is.central.to.the.payment.issue..Payment.
providers.obviously.need.to.determine.who.someone.is,.
not.only.to.manage.the.risk.of.doing.business.with.them,.
but.also.to.understand.their.broader.interests.and.pref-
erences.so.they.can.deliver.an.online.experience.that.
suggests.content,.merchandise,.and.other.opportunities.
But.the.significance.of.identity.goes.far.beyond.that..
A.platform.that.keeps.someone’s.online.identity.is.the.
easiest.place.for.that.person.to.do.business..Consider.the.
rise.of.Google’s.Android.platform:.some.people.who.
were.comfortable.on.the.iPhone.are.now.shifting.to.
Android.phones.because.they.work.better.with.Gmail.
and.Google.calendar,.where.they.have.been.doing.
business.for.years..With.an.Android.phone.in.their.
pocket,.it’s.likely.those.users.will.use.mobile.commerce.
solutions.on.that.platform.rather.than.one.from.Apple.
Payment.platforms.today.confirm.identity.primarily.
through.credit.card.or.banking.information..Privacy.
concerns.dictate.that.sites.generally.get.this.information.
from.you.before.your.first.transaction.and—barring.any.
security.breaches—they.keep.it.to.themselves..Because.
you’ve.already.given.Amazon.your.billing.information.at.
some.point.in.the.past,.you.can.buy.a.Kindle.edition.of.a.
new.bestseller.today.with.one.click..But.wander.off.
Amazon.to.a.site.that.specializes.in,.for.example,.ironic.
T-shirts,.and.you’ll.find.yourself.having.to.reenter.all.of.
your.shipping.and.billing.information—unless.that.site.
offers.Amazon.Payments.
18.:. ePayments:..Emerging.Platforms,.Embracing.Mobile,.and.Confronting.Identity.
Levels of AssuranceAnyoneprovidingfinancialorcommercialtransactionsonlineneedstoknowyouarewhoyousayyouaresothattheycaneithergiveyouaccesstoyourpaymenttoolsor(ifsellingtoyou)beassuredthey’llreceivepayment.Buthowsecureissecure?TheNationalInstituteofStandardsandTechnologypublishedasetofguidelinesinApril2006thatarewidelyusedasbenchmarkswhendiscuss-ingidentityandauthorization.Theydefinefourlevelsofassurance(seeFigure5)andrelyonthreetypesofinformation:
■■ Somethingtheuserknows(likeaPINorapassword)
■■ Somethingtheuserhas(likeaphoneoracard)
■■ Somethingtheuseris(likeafingerprintoraretinascan)
Mostcommercesitesstillaskforasimplepassword.Financialsitestendtowantabitmore,acookiethatthesitehaspreviouslystoredonyourmachineandoftenathirdpieceofrecognition,likeacatchphrase.
Butastheonlinepaymentsindustrymaturesandmovestoclaimalargershareoftheelectronictransactionsthattranspireeveryday,it’slikelythattheywilltrytomoveuptoLevel3authentication,whichreliesnotonlyonapasswordandacookie,butalsosomeotherformofidentification—forexample,athumbprintorretinascan,oranumbergener-atedbyanRSAsecurityfob.
Level 1 Level 2 Level 3 Level 4
Little Very high
Single-factor Multifactor
HighSomeConfidence
Auth factor
CredentialsPIN,
PasswordPIN,
Password,Soft token
PIN,Password,Soft token (password, biometric)
None ExtremeModerateLightIdentityproofing
PIN,Password,
Hard token(password, biometric)
What is a hard token? A hardware device that contains a protected cryptographic key. Authentication is accomplished by proving possession of the device and control of the key by: • Requiring the entry of a password or a biometric to activate the authentication key • Not allowing the export of authentication keys
ApplicationsTwitter National
securityHealthcare,
Onlinebanking
Payment, Education,
Gmail
Hard token of the future? A mobile device (like an iPhone 5 or Android phone) with: • Location-based verification • Biometric sensors (face, voice, and fingerprint) • Cryptographic keys
Figure5.NIST’sfourlevelsofsecurityofferbenchmarksthattheindustryandthepublicsectorcanusetoagreeonmethodsofidentityauthentication
19.:. ePayments:..Emerging.Platforms,.Embracing.Mobile,.and.Confronting.Identity.
OpenID.like.paying.with.PayPal..If.you.want.to.buy.con-
cert.tickets.but.would.prefer.not.to.give.your.credit.card.
number.to.the.ticket.broker,.you.can.choose.to.pay.with.
PayPal.(which.you.may.trust.more),.which.mediates.the.
purchase.from.your.credit.card.or.bank.account..
Similarly,.if.you’re.hesitant.about.giving.a.site.your.
identity—maybe.it’s.a.medical.information.site.that.
you’d.prefer.to.remain.anonymous.on—you.could.log.in.
via.your.OpenID.provider,.who.would.in.turn.arrange.
login.privileges.at.the.medical.site..You.can.then.decide.
how.much.profile.or.other.identity.information.you.want.
to.provide.the.site..
Some.platforms.(Google,.Facebook,.Yahoo!).offer.
OpenID.as.one.authentication.method.for.users..A.
related.standard,.OAuth,.lets.users.specify.how.much.
access.sites.and.services.have.to.your.personal.informa-
tion.stored.online..Twitter.has.recently.adopted.OAuth.
so.that.if.users.want.to.use.a.third-party.piece.of.soft-
ware.to.receive.their.twitter.feed,.they.can.now.do.so.by.
authenticating.that.access.through.Twitter.rather.than.
by.giving.their.Twitter.login.details.to.the.third.party.20
While.OpenID.and.OAuth.spell.out.ways.to.authenti-
cate.a.user.or.rules.on.how.to.share.that.user’s.informa-
tion,.they.don’t.lay.out.rules.describing.who.can.be.a.
provider..The.Open.Identity.Exchange.(OIX).was.devel-
oped.to.fill.this.function..It.looks.at.organizations.that.
want.to.become.identity.providers.and.confirms.that.
they.meet.the.necessary.criteria.to.be.considered.trust-
worthy...The.first.of.OIX’s.trust.frameworks.has.approved.
only.a.handful.of.identity.providers.thus.far,.including.
Google,.Equifax,.PayPal,.and.VeriSign.
Still,.it.remains.to.be.seen.whether.users.will.embrace.
this.form.of.identity.authentication..If.open-standard.
advocates.want.to.convince.consumers.that.switching.
over.to.a.central.identification.is.a.good.idea,.they’ll.
need.a.strong.incentive.that.appeals.to.users,.either.by.
improving.ease.of.use.or.reducing.the.friction.of.transac-
tions.on.sites..
20 http://wiki.openid.net/OpenID-and-OAuth-Hybrid-Extension.
Distinct IdentitiesCurrently,.each.payment.platform.(indeed,.every.ecom-
merce.site.you.do.business.with).maintains.a.separate.
version.of.your.identity.data..While.this.constrains.their.
ability.to.simplify.payment.by.collaborating.across.sites,.it.
does.achieve.an.important.goal.for.many.users,.which.is.
segmenting.identity..A.person.may.be.comfortable.with.
Facebook.knowing.who.her.friends.are,.Foursquare.know-
ing.her.favorite.coffee.spot,.iTunes.knowing.her.favorite.
performers,.and.Amazon.knowing.her.credit.card.number..
But.she.may.be.less.comfortable.with.the.idea.of.each.of.
those.sites.knowing.all.those.things.about.her..
Thus,.one.of.the.goals.of.emerging.online.identity.
standards.should.be.to.ensure.that.users.have.control.
over.which.aspects.of.their.identity.get.shared.with.
whom..Facebook’s.recent.embarrassments.involving.
third-party.apps.(such.as.Zynga’s.Farmville).leaking.
personal,.identifiable.information.about.users.highlights.
the.risks.that.platforms.face..Users.who.were.comfort-
able.sharing.that.information.with.Facebook.balked.at.
Zynga.redistributing.it.19
Efforts.to.standardize.the.rules.of.online.identity.(see.
the.sidebar.on.the.next.page).seek.to.clarify.the.ways.
that.individuals.manage.elements.of.their.identity.online...
And.while.in.practice.the.rules.of.identity.are.likely.to.be.
defined.and.enforced.by.private.organizations.with.
dominant.platforms.online—players.like.PayPal,.Google,.
Amazon,.and.Apple—they.will.probably.draw.on.efforts.
to.develop.industry.standards.for.the.definition.of.online.
identity.and.parameters.for.how.it.is.controlled..
Identity StandardsOpenID.is.one.such.attempt.to.define.an.identity.stan-
dard..It.works.much.the.same.way.as.a.payment.platform,.
though.with.identity.rather.than.payment..OpenID.sets.
up.a.process.for.confirming.someone’s.identity.through.
a.third-party.site..You.can.think.about.logging.on.using.
19 “’Farmville’ creator Zynga facing class-action lawsuit,” USAToday.com, Oct. 20, 2010, http://content.usatoday.com/communities/gamehunters/post/2010/10/farmville-creator-zynga-facing-class-action-lawsuit/1.
20.:. ePayments:..Emerging.Platforms,.Embracing.Mobile,.and.Confronting.Identity.
Government as Identity ProviderGovernmentshavelongbeenthedefactoidentityauthorityformostpeople.IntheUS,passports,driver’slicenses,andsocialsecuritynumbers—allissuedbyvari-ousstateandfederalagencies—aretheprimarywaystoestablishsomeone’sidentityoffline.NowtherearesignsthattheUSmaylooktoprivatelydefinedsolutionsasawaytoverifysomeone’sidentityonline.Thisisincontrasttoeffortsinmanyothercountries,includingIndiaandseveralEuropeancountries,wherethegovernmentisplayinganactiveroleindefiningalevelplayingfieldforanewidentitystandardthatwouldsynconlineandofflineidentities.
Consideroneexample:Estonia,whichisprovingtobealeaderintheGov2.0principlesofaccessandtranspar-ency,issueseverycitizenanidentitysmartcardwithaPINcode.EstonianscanalsogetaSIMcardfortheirmobilephonethatallowsthemtousethephoneasanauthenticationdevice.Theseidentitycardsallowthemtoaccessgovernmentandotherpublicwebsites,onlinebanks,andecommercesites.Thecardscanalsobeusedasidentificationforvoting.SinceotherEuropeanUnion
countriesareinvestinginsimilarprograms,anEU-wideprogramknownasSTORK—SecureIdentityAcrossBordersLinked—aimstoensureinteroperabilityamongelectronicidentificationcards(eIDs).
Inanother,broaderexample,India’sgovernmenthaslaunchedtheworld’slargestelectronicidentityinitiative,calledAadhaar,anefforttocreateadatabasetosupportdeliveryofgovernmentservicestoits1.2billioncitizens.TheprogramismanagedbytheUniqueIdentificationAuthorityofIndia,whosechairman,NandanNilekani,iswellknownastheformerCEOofInfosysTechnologiesandtheauthorofImaginingIndia.Aadhaarwantstocol-lectthefingerprintsandirisscansofIndia’scitizensandlinkthisbiometricdatatoasecuritycardthatcanprovidesecureidentityauthenticationonlineandoff.AswithEstonia’sprogram,theplanisforthatsameidentitycardtobeusedforgovernmentalandprivatesectorpurposes.Forexample,thegovernmenthopesthatbybearingthecostofobtainingthebiometricidentityinformation,itcanspareIndianbankssomeoftheexpenseofenrollingandauthenticatingcustomers.
21.:. ePayments:..Emerging.Platforms,.Embracing.Mobile,.and.Confronting.Identity.
■■ Mobile.commerce,.still.in.its.infancy,.promises.to.
become.a.larger.share.of.the.payment.platform.
business..Apple’s.and.Google’s.mobile.operating.
systems.may.give.them.a.lead.in.this.arena..Other.
players.are.making.moves.to.place.themselves.onto.
the.mobile.platform.through.application.develop-
ment.and.hardware.partnerships..The.financial.ser-
vices.offered.to.mobile.users.in.some.developing.
countries.will.help.shape.the.model.in.developed.
markets.as.well,.as.will.early.efforts.in.buying.and.
selling.virtual.goods.with.mobile.phones..
■■ New.mobile.technologies,.including.contactless.
payment.and.biometric.recognition,.are.coming.
online.quickly.and.will.make.mobile.phones.a.power-
ful.tool.for.payments.over.the.next.few.years..
■■ Online.identity.will.play.a.role.in.shaping.the.pros-
pects.for.payment.platforms,.as.consumers.will.likely.
choose.to.make.payments.from.platforms.where.they.
are.already.spending.time.or.doing.business..
■■ Private.industry.and.governments.both.have.an.
interest.in.authenticating.identity.online..In.some.
regions,.governments.may.take.the.lead.in.creating.
secure.identity.systems.that.validate.an.individual.
online.and.off..In.the.United.States,.although.the.
government.has.been.the.arbiter.of.offline.identity,.it.
appears.to.be.letting.private.enterprise.take.the.lead.
in.hashing.out.the.details.of.digital.identity.
Conclusions
■■ The.online.payment.industry.is.moving.quickly,.
acquiring.new.customers.and.developing.new.tech-
nologies..While.some.players.like.PayPal.may.have.a.
lead.in.name.recognition.and.universality,.newer.
players.like.Google.and.Facebook.have.extensive.
relationships.with.hundreds.of.millions.of.users.and.
cannot.be.overlooked..Traditional.credit.card.issuers.
are.also.trying.to.reestablish.their.position.at.the.
front.line.of.consumer.relationships,.but.they.have.a.
fair.amount.of.catching.up.to.do..Competitors.should.
continue.to.work.collaboratively.in.the.interests.of.
growing.the.market,.while.innovating.solutions.that.
give.them.a.competitive.edge..
■■ Development.platforms.will.rise.around.each.of.the.
payment.platforms,.and.each.player.will.seek.to.
create.a.strong.ecosystem.of.third-party.develop-
ment.to.support.and.encourage.activity.on.its.plat-
form..Developers.will.have.to.choose.which.platforms.
they.want.to.invest.resources.in.and,.as.with.the.
desktop.operating.system.and.web-browser.plat-
forms,.these.developer.decisions.will.help.decide.
which.platforms.become.most.popular..
■■ Just.as.real-time.data.analytics.dramatically.changed.
the.way.advertising.is.sold,.so.too.is.it.likely.to.
change.transactions..Risk.analysis.is.a.key.focus.of.
research.in.this.area,.and.the.work.there.is.likely.to.
deliver.innovations.that.open.up.new.opportunities,.
like.instant.competitive.bidding.on.transaction.
financing.
■■ Payment.platforms.are.likely.to.find.themselves.more.
heavily.regulated.than.in.the.past,.due.in.part.to.
stricter.consumer.protections..Credit.card.issuers.are.
also.likely.to.find.themselves.more.regulated.in.ways.
that.could.create.new.opportunities.for.other.players.