Mobile Blueprint

Mobile Retailing Blueprint

Verbatim reproduction and distribution of this document is permitted in any medium, provided this notice is preserved.

Mobile Retailing Blueprint A Comprehensive Guide for Navigating the Mobile Landscape Version 2.0.0 2011/01/04

A Joint White Paper sponsored by the

National Retail Federation


Copyright 2010-2011 National Retail Federation. Page ii

All rights reserved. Verbatim reproduction and distribution of this document is permitted in any medium, provided this notice is preserved.

This blueprint is the culmination of research by retailers, vendors, and standards organizations, working together for the benefit of the retail industry. It would not have been possible without the assistance of the following people:

Chairs

Richard Mader, Chairperson ARTS

Jonatan Evald Buus Cellpoint Mobile

Frank Andryauskas Micro Strategy

Andrew Morris Morris Advisors

David Dorf Oracle Retail

Perry Kramer Retail Consultant

Cathy Medich Smart Card Alliance

Administration

Richard Halter ARTS

Bart McGlothin Cisco Systems Inc

Contributors

Andrew Paradise Aisle Buyer

James Schildknecht CellPoint Mobile

Kristian Gjerding CellPoint Mobile

Amit Chetal Cisco Systems Inc.

Michael Jett Copia Mobile

Scott Hines Copia Mobile

Francisca Vicente-Tamarin El Corte Ingles

Miguel Ligero El Corte Ingles

Nuria Gema Fernandez Fernandez El Corte Ingles

Leonid Rubakhin Epicor

Paul Gay Epson

Mike Julson Escalate Retail

Brian Walker Forrester

Sophie Vu Kony Solutions

Darrell Sandefur Kroger

Dirk Jaede Micro Strategy

Steven Kostrzewski Micro Strategy

George Throckmorton NACHA

Sebastien Taveau NFC Forum/Paypal

Graham Hill Royal Mail

Dennis Stokely Safeway

Tim Hood SAP

Bob Glaser Sears

Arish Ali Skava


Copyright 2010-2011 National Retail Federation. Page iii


Evan Schuman StorefrontBacktalk

Mickey Haynes The Home Depot

Jay Heavilon Think ARS

Neil Garnichaud Third Solutions

Roland Faubert Tibco

Rine le Comte To Increase

Asif Batada Verizon Business

Dennis Blankenship Verizon Business

David Tran Verizon Business

Mohammad Khan ViVOtech

Eric Dewey Yum! Brands

Thomas Powell Yum! Brands

Timothy Vogel Yum Brands

Participants

Dean A. Sleeper Accessvia

Gerald Griffin Ahold USA

Jeffrey Fackler Ahold USA

Clif Campbell AT&T

Tona Tsang Canadian Tire

Stephen Smalley Cellpoint Mobile

Sean Xu Cisco Systems Inc.

Will Anguish Darden Restaurants

Sanjeev Hans Darden Restaurants

John O’Dell Darden Restaurants

Chris Ross Darden Restaurants

Ray Carroll DCSG

Clayton (Bud) Russell DCSG

Nuria Gema Fernandez Fernandez El Corte

Juan Jose Monge Fernandez El Corte Ingles

Abram Powelson Family Dollar

Tom Reichert Family Dollar

Patti Freeman Evans Forrester

Sucharita Mulpuru Forrester

Kevin Swanwick Global Bay

Joe Finizio Gorspa

Varsha Anand GS1 US

Al Garton GS1 US

Bernie Hogan GS1 US

Rich Richardson GS1 US

Nav Bains GSMA

Virginia Carmon IBM


Copyright 2010-2011 National Retail Federation. Page iv


Roland Domer IBM

Greg Fitzpatrick IBM

Johanna Koester IBM

Robin Schwartz IBM

Diana Dib IBS Soft Solutions

Didier Serra Inside Fr

Charles Walton Inside Fr

Ed Gawronski Kohls

Bjorn Hildahl Kony Solutions

Madhav Mehra Kony Solutions

Nada Aried Limited Brands

Steve Miles Massachusetts Institute of Technology

Robert Bauer MBC / RSPA

Jim McNicol Micro Strategy

Vic Miles Microsoft

Marty Ramos Microsoft

Chi Park Mobile Systems

Rajarshi Chatterjee Motorola

Gopal Kiruthika Motorola

Dana Warsona Motorola

Henry Miller NCR

Tommy Miller NCR

Dennis Paisley NCR

Peter Coster NFC Forum

Mike Gatti NRF

David Hogan NRF

Karen Shunk NRF

Murtaza Ghadyali Reflexis Systems

John Coloe Roam Data

Abhishek Ranjan Safeway

Krystal Kolodziejak sasktellabs

Bob Glaser Sears

Joan Broughton Shop.org

Bill Klearman Sonic Corp.

Mike Parsel Sprint

Jerry Rightmer Starmount Systems

Venkat Gopikanth Tata Consultancy

Barbara Sanders The Home Depot

Domenic Cutillo Toys-R-Us

Asif Batada Verizon Business

Joel De Guzman Verizion Business

Joe (Joseph) Kearney Verizon Wireless


Copyright 2010-2011 National Retail Federation. Page v


Sulak Soysa ViVOtech

Pete Kinkead West Marine

Hendrik Scheider Wincor - Nixdorf

Rajat Agarwal Wincor-Nixdorf

Juan Salazar Wuauu

Copyright © National Retail Federation 20102011. All rights reserved.

This document and translations of it may be copied and furnished to others, and derivative works that comment on or otherwise explain it or assist in its implementation may be prepared, copied, published, and distributed, in whole or in part, without restriction of any kind, provided that the above copyright notice and this paragraph are included on all such copies and derivative works. However, this document itself may not be modified in any way, such as by removing the copyright notice or references to the NRF, ARTS, or its committees, except as needed for the purpose of developing ARTS standards using procedures approved by the NRF, or as required to translate the document into languages other than English.

The limited permissions granted above are perpetual and will not be revoked by the National Retail Federation or its successors or assigns.


Copyright 2010-2011 National Retail Federation. Page vi


This blueprint was developed with assistance from the following organizations:

The Association for Retail Technology Standards (ARTS) of the National Retail Federation is a retailer-driven membership organization dedicated to creating an open environment in which both retailers and technology vendors work together to create international retail technology standards.

GS1 is a leading global organization dedicated to the design and implementation of global standards and solutions to improve the efficiency and visibility of supply and demand chains globally and across sectors.

NACHA supports the growth of the ACH Network by managing its development, administration, and governance. NACHA brings together payments system stakeholder organizations to encourage the efficient utilization of the ACH Network and develop new ways to use the Network to benefit its diverse set of participants.

NRF's mission is to advance and protect the interests of the retail industry and to help retailers achieve excellence in all areas of their business. As the world's largest retail trade association and the voice of retail worldwide, the NRF’s global membership includes retailers of all sizes, formats, and channels of distribution as well as chain restaurants and industry partners from the United States and more than 45 other countries.

The NFC Forum was formed to advance the use of Near Field Communication technology by developing specifications, ensuring interoperability among devices and services, and educating the market about NFC technology.

The Retail Advertising Marketing Association (RAMA), a division of the National Retail Federation, provides unique networking opportunities, industry research, and educational programming for retail advertising and marketing professionals. NRF members are able to take advantage of the added value of participating in RAMA as a benefit of membership with NRF.

The Retail Solutions Providers Association is the only association dedicated to the retail technology industry. Members include resellers, distributors, hardware manufacturers, software developers, consultants, and service providers who bring retail technology solutions to the marketplace.


Copyright 2010-2011 National Retail Federation. Page vii


Shop.org, a division of the National Retail Federation, is a member-driven trade association whose exclusive focus is to provide a forum for retail executives to share information, lessons learned, new perspectives, insights, and intelligence about on-line and multichannel retailing.

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.


Copyright 2010-2011 National Retail Federation. Page viii


CONTENTS

1. EXECUTIVE SUMMARY ................................................................................................................................ 1

1.1 CONSUMER OPPORTUNITIES ............................................................................................................................. 1 1.2 OPPORTUNITIES WITHIN THE RETAIL ESTABLISHMENT ................................................................................... 4 1.3 HOW THIS DOCUMENT CAN HELP ................................................................................................................... 5

2. INTRODUCTION .............................................................................................................................................. 7

2.1 WHAT IS MOBILE RETAILING? ......................................................................................................................... 7 2.2 MOBILE DEVICES DEFINED .............................................................................................................................. 8 2.3 MOBILE APPLICATION TECHNOLOGY ............................................................................................................. 11

2.3.1 Browser-Based Applications ................................................................................................................ 11 2.3.2 Message-Based Applications ............................................................................................................... 12 2.3.3 Downloaded and Native Applications ................................................................................................. 13 2.3.4 Thin-Client Architecture ...................................................................................................................... 14

2.4 MOBILE RETAIL AND SOCIAL MEDIA ............................................................................................................. 14 2.5 MOBILE RETAIL APPLICATIONS ..................................................................................................................... 16

2.5.1 Mobile Marketing Applications ........................................................................................................... 17 2.5.2 Mobile Commerce Applications ........................................................................................................... 18 2.5.3 Mobile Operations Applications .......................................................................................................... 19 2.5.4 Mobile Application Design .................................................................................................................. 19 2.5.5 Day-in-the-Life Examples .................................................................................................................... 20 2.5.6 Mobile Market Statistics ...................................................................................................................... 22 2.5.7 Mobile Retailing Maturity Model ........................................................................................................ 26 2.5.8 Keys to Mobile Success ........................................................................................................................ 28

3. MOBILE MARKETING ................................................................................................................................. 30

3.1 ADVERTISING AND MARKETING..................................................................................................................... 30 3.1.1 Brand Marketing .................................................................................................................................. 30 3.1.2 Digital Signage .................................................................................................................................... 30 3.1.3 Augmented Reality ............................................................................................................................... 31 3.1.4 Example Applications .......................................................................................................................... 31 3.1.5 Technology and Standards Employed .................................................................................................. 32 3.1.6 Benefits and ROI .................................................................................................................................. 33 3.1.7 Implementation Considerations ........................................................................................................... 33

3.2 CUSTOMER SERVICE ...................................................................................................................................... 34 3.2.1 Store Locations and Hours .................................................................................................................. 34 3.2.2 Example Applications .......................................................................................................................... 36 3.2.3 Wish Lists, Shopping Lists, Gift Registries .......................................................................................... 38

3.3 SHOPPING TOOLS ........................................................................................................................................... 43 3.3.1 Case Studies ......................................................................................................................................... 44 3.3.2 Technology and Standards Employed .................................................................................................. 45 3.3.3 Benefits and ROI .................................................................................................................................. 45 3.3.4 Implementation Considerations ........................................................................................................... 45

3.4 PRODUCT INFORMATION ................................................................................................................................ 46 3.4.1 Review Product Information Transaction Process .............................................................................. 47 3.4.2 Product Information from Friends ....................................................................................................... 49 3.4.3 Share Product Information Transaction Process ................................................................................ 49 3.4.4 Product Comparisons .......................................................................................................................... 50 3.4.5 Compare Product Information Transaction Process ........................................................................... 50 3.4.6 Case Studies ......................................................................................................................................... 51 3.4.7 Technology and Standards Employed .................................................................................................. 52 3.4.8 Benefits and ROI .................................................................................................................................. 52 3.4.9 Implementation Considerations ........................................................................................................... 52


Copyright 2010-2011 National Retail Federation. Page ix


3.5 LOYALTY PROGRAMS .................................................................................................................................... 53 3.5.1 Loyalty Program Transaction Process ................................................................................................ 54 3.5.2 Case Studies ......................................................................................................................................... 57 3.5.3 Technology and Standards Employed .................................................................................................. 58 3.5.4 Benefits and ROI .................................................................................................................................. 59 3.5.5 Implementation Considerations ........................................................................................................... 60

3.6 PROMOTIONS AND COUPONS .......................................................................................................................... 61 3.6.1 Approaches to Mobile Offers ............................................................................................................... 62 3.6.2 Case Studies ......................................................................................................................................... 63 3.6.3 Technology and Standards Employed .................................................................................................. 64 3.6.4 Benefits and ROI .................................................................................................................................. 64 3.6.5 Implementation Considerations ........................................................................................................... 64

4. MOBILE COMMERCE .................................................................................................................................. 66

4.1 MOBILE COMMERCE CATEGORIES ................................................................................................................. 66 4.2 BROWSER-BASED M-COMMERCE ................................................................................................................... 66 4.3 APPLICATION-BASED M-COMMERCE .............................................................................................................. 68

4.3.1 Advantages ........................................................................................................................................... 68 4.3.2 Disadvantages ...................................................................................................................................... 69 4.3.3 Future Considerations ......................................................................................................................... 71

4.4 CASE STUDIES ................................................................................................................................................ 71 4.4.1 Mobile Ticketing .................................................................................................................................. 71 4.4.2 Other m-commerce Applications ......................................................................................................... 73 4.4.3 Technology and Standards Employed .................................................................................................. 79 4.4.4 Benefits and ROI .................................................................................................................................. 80

4.5 IMPLEMENTATION CONSIDERATIONS ............................................................................................................. 80 4.6 OTHER KEY CONSIDERATIONS ....................................................................................................................... 82

4.6.1 Easy Payment Solutions ....................................................................................................................... 82 4.6.2 Integrated Order Management and Customer Care ............................................................................ 82

4.7 THE VIRTUAL STORE ..................................................................................................................................... 82 4.8 PARENTAL APPROVAL.................................................................................................................................... 84 4.9 MOBILE PAYMENT OVERVIEW ....................................................................................................................... 84

4.9.1 Advantages of Mobile Payment ........................................................................................................... 84 4.9.2 Types of Mobile Payment ..................................................................................................................... 85

4.10 MOBILE REMOTE PAYMENT ...................................................................................................................... 85 4.10.1 Enabling Remote Payment .............................................................................................................. 86 4.10.2 Message-Based Remote Payment .................................................................................................... 87 4.10.3 Browser-Based Remote Payment .................................................................................................... 89 4.10.4 App-Based Remote Payment ........................................................................................................... 89 4.10.5 Funding and Settlement Accounts ................................................................................................... 89 4.10.6 Third-Party Providers of Alternative Payments .............................................................................. 93 4.10.7 Wireless Carrier Billing .................................................................................................................. 94

4.11 MOBILE PROXIMITY PAYMENT .................................................................................................................. 97 4.11.1 Mobile Contactless Payment ........................................................................................................... 97 4.11.2 EMV and Mobile Payments ........................................................................................................... 102 4.11.3 Bar Code Payments ....................................................................................................................... 104 4.11.4 Numeric Code Payments ............................................................................................................... 107

4.12 IMPLEMENTATION CONSIDERATIONS ...................................................................................................... 109 4.12.1 Mobile Proximity Payment Considerations .................................................................................. 109 4.12.2 Store Requirements ....................................................................................................................... 110 4.12.3 Roadblocks to NFC Mobile Payments .......................................................................................... 111 4.12.4 Security ......................................................................................................................................... 113

4.13 MOBILE PAYMENTS ECOSYSTEM............................................................................................................. 114 4.13.1 Payment Account Issuer ................................................................................................................ 116 4.13.2 Trusted Service Manager .............................................................................................................. 116 4.13.3 Mobile Network Operator ............................................................................................................. 116


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4.13.4 Retailers ........................................................................................................................................ 116 4.14 ALTERNATIVE AND MOBILE PAYMENT PROVIDERS AND APPROACHES ................................................... 117

5. MOBILE OPERATIONS .............................................................................................................................. 119

5.1 MOBILE POINT OF SALE ............................................................................................................................... 119 5.1.1 Mobile POS Examples ....................................................................................................................... 120 5.1.2 Technology and Standards Employed ................................................................................................ 122 5.1.3 Benefits and ROI ................................................................................................................................ 123 5.1.4 Implementation Considerations for Mobile Point of Sale .................................................................. 123

5.2 DIGITAL RECEIPTS ....................................................................................................................................... 123 5.2.1 Digital Receipt Examples ................................................................................................................... 124 5.2.2 Technology and Standards Employed ................................................................................................ 124 5.2.3 Benefits and ROI ................................................................................................................................ 124 5.2.4 Implementation Considerations for Digital Receipts ......................................................................... 125

5.3 WORKFORCE MANAGEMENT ........................................................................................................................ 125 5.3.1 Workforce Management Examples .................................................................................................... 126 5.3.2 Technology and Standards Employed ................................................................................................ 127 5.3.3 Benefits and ROI ................................................................................................................................ 128 5.3.4 Implementation Considerations for Workforce Management ............................................................ 129

5.4 INTERNAL COMMUNICATION........................................................................................................................ 129 5.4.1 Internal Communication Examples .................................................................................................... 129 5.4.2 Technology and Standards Employed ................................................................................................ 129 5.4.3 Benefits and ROI ................................................................................................................................ 130 5.4.4 Implementation Considerations for Internal Communications .......................................................... 131

5.5 MOBILE APPROVALS .................................................................................................................................... 131 5.5.1 Technology and Standards Employed ................................................................................................ 132 5.5.2 Benefits and ROI ................................................................................................................................ 132 5.5.3 Implementation Considerations for Mobile Approvals ...................................................................... 133

6. MOBILE IMPLEMENTATION STRATEGY ........................................................................................... 134

6.1 MOBILE KEY PERFORMANCE INDICATORS ................................................................................................... 135 6.1.1 KPIs for Customer-Facing Mobile Services ...................................................................................... 135 6.1.2 KPIs for Staff-Facing Mobile Services .............................................................................................. 136

6.2 SUMMARY OF IMPLEMENTATION CONSIDERATIONS ..................................................................................... 136 6.3 DEVELOPMENT CONSIDERATIONS ................................................................................................................ 138

6.3.1 Browser-Based Applications .............................................................................................................. 139 6.3.2 Downloaded Applications .................................................................................................................. 140 6.3.3 Mobile Payment ................................................................................................................................. 142 6.3.4 Other Application Types .................................................................................................................... 143

6.4 THE PATH TO MOBILE .................................................................................................................................. 143 6.4.1 Mobile Governance............................................................................................................................ 144 6.4.2 Achieving Control of the Mobile Channel ......................................................................................... 145 6.4.3 Privacy, Authentication, and Security................................................................................................ 146

6.5 MOBILE AS A BUSINESS DRIVER FOR SOA AND THE CLOUD ........................................................................ 148 6.5.1 Creating Services for Reuse ............................................................................................................... 149 6.5.2 Moving Retail Services into the Cloud ............................................................................................... 150 6.5.3 Delivering and Accessing Mobile Services in the Cloud ................................................................... 151

6.6 WI-FI AND WIRELESS LAN FOR NETWORK RELIABILITY ............................................................................ 152 6.6.1 Wireless LAN Benefits for Retail Environments ................................................................................ 153 6.6.2 Implementation Recommendations .................................................................................................... 154 6.6.3 Design Considerations for a Reliable Wireless LAN Deployment ..................................................... 155

7. MOBILE STANDARDS ................................................................................................................................ 157

7.1 TECHNOLOGY DETAILS ................................................................................................................................ 159 7.1.1 Wi-Fi and ZigBee ............................................................................................................................... 160


Copyright 2010-2011 National Retail Federation. Page xi All rights reserved. Verbatim reproduction and distribution of this document is permitted in any medium, provided this notice is preserved.

7.1.2 Near Field Communication ............................................................................................................... 161 7.2 CONTACTLESS SMART CARD STANDARDS ................................................................................................... 161 7.3 ASSOCIATION OF RETAIL TECHNOLOGY STANDARDS .................................................................................. 162

7.3.1 Service Oriented Architecture (SOA) Blueprint ................................................................................. 162 7.3.2 Cloud Computing Blueprint ............................................................................................................... 163 7.3.3 ARTS Data Model .............................................................................................................................. 163 7.3.4 ARTS UnifiedPOS .............................................................................................................................. 164 7.3.5 ARTS XML ......................................................................................................................................... 164

7.4 GS1 .............................................................................................................................................................. 165

8. TERMS AND ACRONYMS ......................................................................................................................... 166


Copyright 2010-2011 National Retail Federation. Page xii All rights reserved. Verbatim reproduction and distribution of this document is permitted in any medium, provided this notice is preserved.

Figures

Figure 1: Evolution of Customer-Retailer Touch Points ................................................................ 2

Figure 2: Number of NTT DOCOMO iD Subscribers and Payment Terminals ............................ 4

Figure 3: The Retail Store of the Future ......................................................................................... 8

Figure 4: U.S. Device Type and Operating System Mixes ............................................................. 9

Figure 5: Key Device Hardware Trends ...................................................................................... 11

Figure 6: Two Sears Web Sites: Non-Mobile (left) and Optimized for Mobile (right) .............. 12

Figure 7: Three Retailers’ Apps: Sears (left) Target (center) and Gap (right) ............................ 13

Figure 8: Thin Client Architecture ............................................................................................... 14

Figure 9: Mobile Retailing Classifications .................................................................................. 16

Figure 10: Mobile Retailing Ecosystem ...................................................................................... 17

Figure 11: Mobile Marketing Applications ................................................................................. 18

Figure 12: Mobile Commerce Applications ................................................................................ 19

Figure 13: Mobile Operations Applications ................................................................................ 19

Figure 14: U.S. Smartphone Operating System Share, Q3, 2010 ................................................ 22

Figure 15: Predicted Smartphone Market Share by Region ........................................................ 23

Figure 16: Mobile Technologies on Your Radar Screen ............................................................. 24

Figure 17: Gartner April 2009 Projections of Mobile Payment Technologies ............................ 26

Figure 18: Retail Mobile Maturity Model (Summarized) ........................................................... 27

Figure 19: 2-D Bar Code on a Billboard ....................................................................................... 31

Figure 20: Process Flow for a Device without Geolocation or GPS Capabilities ........................ 35

Figure 21: Process Flow for a Device with Geolocation or GPS Capabilities ............................. 36

Figure 22: Wish Lists, Shopping Lists, Gift Registries ................................................................ 39

Figure 23: List Creation Transaction Process ............................................................................... 39

Figure 24: List Consumption Transaction Process ....................................................................... 40

Figure 25: Likelihood of U.S. Consumers to Use Mobile Phones for Shopping.......................... 47

Figure 26: Review Product Information on e-commerce Site Transaction Process ..................... 47

Figure 27: Review Product Information with Retailer’s Application Transaction Process .......... 48

Figure 28: Retrieve Item Information from a Picture Transaction Process .................................. 48

Figure 29: Read Friend's Ratings Transaction Process ................................................................. 49

Figure 30: Post to My Friend's Site Transaction Process ............................................................. 50

Figure 31: Product Comparison Transaction Process .................................................................. 50

Figure 32: Example Loyalty Program Process Flow .................................................................... 55

Figure 33: Motorola Mobile Loyalty System ............................................................................... 56

Figure 34: Options for Enabling Phones with an NFC Chip ........................................................ 62

Figure 35: Best-Practice Mobile Web High-Level Architecture .................................................. 67

Figure 36: Typical Mobile Web High-Level Architecture ........................................................... 68

Figure 37: Mobile Applications High-Level Architecture............................................................ 71

Figure 38: Purchasing a DSB Ticket By Using an iPhone Application ....................................... 72

Figure 39: Simplified Architecture for DSB Ticketing Application ............................................ 73

Figure 40: Mobile Payment Access Technologies and Funding Options .................................... 85

Figure 41: Mobile Remote Payment (Stored Value) Payment Flow ............................................ 87

Figure 42: ACH Debit Purchase Transaction Process ................................................................. 92

Figure 43: ACH Credit Payment Transaction Process ................................................................ 93

Figure 44: Using Alternative Payment at Buy.com ..................................................................... 94


Copyright 2010-2011 National Retail Federation. Page xiii All rights reserved. Verbatim reproduction and distribution of this document is permitted in any medium, provided this notice is preserved.

Figure 45: Example of PSMS Ticketing Flow ............................................................................. 96

Figure 46: Mobile Phone with Wallet Software ........................................................................... 99

Figure 47: Example of NFC-Enabled Mobile Phone Provisioned with Wallet and Secure Element .................................................................................... 100

Figure 48: NFC Phone Wallet Used in BART/Jack in the Box Pilot Program .......................... 101

Figure 49: Mobile Proximity Payment at Starbucks .................................................................. 106

Figure 50: Mobile Proximity Payment at Target ....................................................................... 106

Figure 51: NFC Compatible Contactless Sticker ........................................................................ 111

Figure 52: NFC MicroSD Card................................................................................................... 112

Figure 53: Mobile Contactless Transactions: Provisioning and Purchase .................................. 115

Figure 54: mPOS Checkout at Apple......................................................................................... 120

Figure 55: Using an iPhone to Check Out at Magic Beans ....................................................... 121

Figure 56: Magnetic Stripe Reader for an iPhone ..................................................................... 122

Figure 57: Workforce Management Model ............................................................................... 126

Figure 58: Simplified Mobile Approval Flow ............................................................................ 133

Figure 59: iPhone and Sony Ericsson K790i Display Areas ...................................................... 140

Figure 60: Overview of Mobile Applications Built on a Centralized Mobile Platform ............. 146

Figure 61: SOA and the Cloud as Key Building Blocks for Mobile Services ........................... 149

Figure 62: Moving Services into the Cloud ............................................................................... 151

Figure 63: Accessing Services with a Mobile Device ............................................................... 152

Figure 64: Contactless Payments Hardware and Software with Associated Standards.............. 157

Figure 65: Provisioning............................................................................................................... 158

Figure 66: Wi-Fi and ZigBee Access Points............................................................................... 160

Figure 67: ARTS Standards ........................................................................................................ 162

Figure 68: SOA Platform and Services on a Cloud Infrastructure ............................................. 163


Copyright 2010-2011 National Retail Federation. Page 1


1. EXECUTIVE SUMMARY

The question of whether consumers will adopt smartphones and other mobile devices is becoming less relevant. The more relevant question is “What is the best way for retailers to capitalize on consumers’ rapidly evolving use of their mobile devices?” Mobile phones are changing the way retailers, suppliers, and consumers both communicate and do business. Our phones are always with us—and always on, connecting retailers to current and potential customers, regardless of location or time of day. A survey conducted by BIGresearch found that consumers plan to spend $688.87 per person during the 2010 holiday season, and 25 percent of adult smartphone owners plan to research or make purchases using a mobile device. That figure jumps to 45 percent when the subject population is young adults between the ages of 18 and 24.1

Adoption rates for mobile devices are accelerating so fast that forecasts from just a few years ago are completely outdated. In 2005, mobile payments totaled $155 million and were forecast to hit $10 billion by 2010.2 Actual mobile payments for 2010 are on track to be closer to $100 billion and double, to $200 billion, in 2011. In addition, mobile payments for digital and physical goods are forecast to reach almost $630 billion by 2014.3 There is no doubt that mobile technology for retail is no longer a trend, but a necessary way of doing business.

1.1 Consumer Opportunities

Over the past year, early adopters of mobile technology such as Target4 and The Home Depot5 have redefined how they want to interact with customers in their stores, on the Web, on mobile devices, and on social networks. These retailers (and other innovative retailers) recognize that mobile can be integrated into their business models to enhance the overall relationship between their brands and their customers. Other retailers have chosen to add mobile to current store, Web, or catalog channels without full integration. These retailers may take that approach simply because it is more straightforward than full integration, or it may be part of a broader strategy, to wait and see whether full integration yields a stronger competitive advantage.

To understand the current use of mobile technology and where it is headed, it is important to understand where we have been. Many retailers began the relationship with their customers through their retail stores or a catalog. Communication took place on TV and radio and through print advertising, in-store signage, and interaction with store associates. Marketing brought the customer into the store, and associates conducted the transaction and satisfied the customer. The relationship was a fairly low-technology, one-to-one relationship. As retailers grew and technology evolved, this channel grew to encompass multiple channels.

1 http://nrf.com/modules.php?name=News&op=viewlive&sp_id=1016

2 http://juniperresearch.com/viewpressrelease.php?pr=14

3 Juniper Research, "Mobile Payments Markets: Strategies & Forecasts 2010-2014.”

4 http://www.mobilecommercedaily.com/target-is-2010-mobile-retailer-of-the-year

5 http://risnews.edgl.com/retail-news/Home-Depot-s-$64-Million-Mobile-Investment-Rolls-Out-to-1,970-

Stores56966


Copyright 2010- 2011 National Retail Federation.


Slightly more than 10 years ago, emainstream; as the technology was adoptedconsumer shopping behavior and expectations grew. Ten years ago, it might have been acceptable for an associate to tell a customer that the store did not match the prices on the store’s Web site because “it is a acceptable for an associate to honor the prices on the store’s Web site for a customer but not the prices on a competitor’s Web site. Today, customers may not even set foot in a retailer’s store if they are able to find what they need to purchase using a mobile device. Even if the customer enters the store, the customer can easily use a mobile device to scan the bar code of an item of interest, find and purchase it at a lower price elsewhere, and leave the item sitting on the store shelf.

The optimum goal for retailers is to achieve a singular brand experience for customers, regardless of the technology used to interact with that brand. This means that legacy channel-based systems, business processes, evolve (Figure 1).

Figure 1: Evolution of Customer

While customers will not require a retailer to offer multiple integrated channels to win their business, leading retailers must focus on ways to strengthen the relationship between their brand and their customers and not necessarily focus on each channel individually. Consumers continue to usepay for purchases, but also to interact with retailers social media sites and third-party pricing and promotion applications. mobile device can use apps (like the ones from Amazon or eBay, which are integrated with apps such as Red Laser) to find a better price while standing in the middle of a retail


2011 National Retail Federation. Page 2

reproduction and distribution of this document is permitted in any medium, provided this notice is

10 years ago, e-commerce over the Internet started to enter the technology was adopted more widely, the level of sophistication of

consumer shopping behavior and expectations grew. Ten years ago, it might have been acceptable for an associate to tell a customer that the store did not match the prices on the store’s Web site because “it is a separate business.” Five years ago, it might have been acceptable for an associate to honor the prices on the store’s Web site for a customer but not the prices on a competitor’s Web site. Today, customers may not even set foot in a

ey are able to find what they need to purchase using a mobile device. Even if the customer enters the store, the customer can easily use a mobile device to scan the bar code of an item of interest, find and purchase it at a lower price elsewhere, and

the item sitting on the store shelf.

The optimum goal for retailers is to achieve a singular brand experience for customers, regardless of the technology used to interact with that brand. This means that legacy

based systems, business processes, and organizational silos must continue to

: Evolution of Customer-Retailer Touch Points

While customers will not require a retailer to offer multiple integrated channels to win their business, leading retailers must focus on ways to strengthen the relationship

and their customers and not necessarily focus on each channel continue to use mobile devices not only to research products and

pay for purchases, but also to interact with retailers in ways that increasingly connect to party pricing and promotion applications. Cons

mobile device can use apps (like the ones from Amazon or eBay, which are integrated with apps such as Red Laser) to find a better price while standing in the middle of a retail


commerce over the Internet started to enter the more widely, the level of sophistication of

consumer shopping behavior and expectations grew. Ten years ago, it might have been acceptable for an associate to tell a customer that the store did not match the prices on the

separate business.” Five years ago, it might have been acceptable for an associate to honor the prices on the store’s Web site for a customer but not the prices on a competitor’s Web site. Today, customers may not even set foot in a

ey are able to find what they need to purchase using a mobile device. Even if the customer enters the store, the customer can easily use a mobile device to scan the bar code of an item of interest, find and purchase it at a lower price elsewhere, and

The optimum goal for retailers is to achieve a singular brand experience for customers, regardless of the technology used to interact with that brand. This means that legacy

and organizational silos must continue to

While customers will not require a retailer to offer multiple integrated channels to win their business, leading retailers must focus on ways to strengthen the relationship

and their customers and not necessarily focus on each channel research products and

that increasingly connect to Consumers with a

mobile device can use apps (like the ones from Amazon or eBay, which are integrated with apps such as Red Laser) to find a better price while standing in the middle of a retail


Copyright 2010- 2011 National Retail Federation. Page 3


store.6 Whole Foods Markets’ customers puzzled by an ingredient can use their phones to find and display recipes using that ingredient and even restrict their choices to cater to special food allergies or nutritional requirements, such as gluten or lactose intolerance. Shoppers headed for Target can search a friend’s gift registry for the perfect gift, locate the nearest store that has that item in stock (right down to the department and aisle location of the item within that store), and check the gift off the registry list—all on a mobile phone.

Phones can store and display loyalty, reward, and club membership cards (which most retailers then scan directly from the screen) and match a health condition with the correct over-the-counter medication. Some retailers have even enlisted the help of their consumers to retrieve competitors’ pricing using third-party apps that award the customer for taking a snapshot of a product display or scanning the bar code of an item on sale at a competitor’s location.

Using phones or other mobile devices for payment is advantageous for both consumers and retailers. Payment by phone can be combined with additional services to increase sales, speed up transaction times, and strengthen customer loyalties. Sales can close more quickly when shoppers looking at a product can access product information and reviews (for example, using their phones to read a bar code) and then pay for the product on the spot. Consumers using mobile phones as a payment method enjoy the convenience and security of not having to carry cash or a payment card. In Europe and Asia, consumers can reserve seats on a train, purchase their tickets, and use those tickets to board the train while carrying nothing but a phone. When consumers pay by phone, payment information that adheres to ARTS standards can be integrated into the retailer’s back-office systems, coordinating all-important inventory, customer relationship, enterprise resource planning, and financial data.

The mobile phone market has moved beyond smartphones to tablets such as the iPad, providing consumers with more computing power in their purses and pockets than ever before. Near Field Communication (NFC) technology, which enables short-range wireless interaction between devices (such as for payments), is rolling out to the U.S. market. The next version of the Android operating system (version 2.3) supports NFC,7 and Apple is rumored to be close behind. Mobile payments technology has been commercially available in Japan since at least 2005, with mobile Suica-card enabled devices and NTT DOCOMO’s iD mobile credit payment service. (The company issued a press release in September 2010 announcing the achievement of 15 million subscribers since the program’s launch.) In addition, 37.5 million subscribers are using handsets equipped with the contactless payment technology, which represents over 60% of the company’s subscriber base (Figure 2).8

6

A recent Wall Street Journal article, “Phone Wielding Shoppers Strike Fear Into Retailers” is a great point of reference on the subject. http://online.wsj.com/article/SB10001424052748704694004576019691769574496.html

7 http://android-developers.blogspot.com/2010/12/android-23-platform-and-updated-sdk.html

8 http://www.nttdocomo.com/pr/2010/001484.html




Figure 2: Number of NTT DOCOMO iD Subscribers and Payment Terminals

As more devices around the world are equipped with a mobile wallet, the number of consumers carrying payment and loyalty cards electronically will also increase. Consumers benefit—their cards are not only secure, they are easily cancelled and replaced if lost: one call, text message, or remote application does it all. Retailers benefit—mobile wallets can help solve the critical problem of wallet share and represent opportunities to offer customers new incentives to purchase, new ways to purchase, and new ways to pay.

To achieve universal consumer acceptance, mobile processing must be standardized around the world. What works in the United States must also work in Asia, the Pacific Rim, Europe, the Middle East, and Africa. There is only one way to ensure that processing is the same everywhere, and that is by creating and adopting global standards. Fortunately, numerous organizations, such as GS1, the NFC Forum, ARTS, and the recently formed Isis project, are already working to develop and promote the necessary standards. This document will also continue to evolve to support the needs of retailers.

1.2 Opportunities Within the Retail Establishment

As technology evolves and consumer sophistication increases, retailers have an opportunity to leverage mobile technology to streamline operations and generate incremental revenue. Functions such as distribution, operations, merchandising, marketing, human resources, and customer service already benefit from the integration of mobile devices with existing systems.




For example, making the point of sale (POS) mobile allows customers to avoid lines and retain receipts electronically, while retailers save on labor and materials costs, and sales associates can locate and assist customers anywhere in the store. Sales associates can also use mobile devices to clock in and out or sign up for automatic alerts from their company’s scheduling system when open shifts are available. Integration with workforce management capabilities, including appropriate labor forecasting, labor scheduling, and labor management and budgeting systems can optimize both daily internal operations and corporate-driven tasks at a store.

The retail supply chain will also benefit from the use of mobile technology, particularly when the manufacturers of specialized mobile devices incorporate new features into mobile phones, such as better bar-code and RFID readers. Both data and voice can then be transmitted effectively to receive and pick merchandise and track merchandise movement from warehouses to stores and within stores.

As with any new technology, retailers face integration challenges. Over the years, many retailers have accumulated multiple systems as point solutions and hired large onshore and offshore workforces to support them. Business processes and development lifecycles have been introduced to preserve this web of systems, while the demands of the web expand more and more quickly. Retailers now have an opportunity to alter their fundamental business models, to include mobile technology, even more significantly than they did to accommodate the introduction of the Web 10 years ago.

As retailers address the challenges of integration, software companies like MicroStrategy are partnering with their retail customers to enable seamless integration of mobile devices with their best-in-class business intelligence platforms. MicroStrategy’s platform has enabled mobile business intelligence for years using Blackberry handheld devices, and the platform has supported the iPhone and iPad since early 2010. The company has chosen to invest heavily in research and development to integrate emerging mobile device technology. Using their software, retailers experience multisource capabilities expressed in business terms, a consistent analytic foundation that can be shared and reused across common functional areas, and security that protects customer information. Retailers can use the platform to conduct a variety of transaction types. This approach to integration on a single platform means minimal risk and fast return on investment (ROI) for retailers.

1.3 How This Document Can Help

This updated version of the Mobile Retailing Blueprint is a product of the NRF Mobile Retail Initiative. The mission of the Initiative is to be a catalyst for mobile-inspired innovation that enhances the retail shopping experience and improves internal business processes. This retailer-led initiative will guide and direct the industry in the dissemination of mobile-related best practices and the development of standards and documentation for the purpose of maximizing benefits and minimizing implementation expense, ongoing maintenance, and fees.

Creating this document involved retailers, vendors, analysts, and standards organizations. The Blueprint relates the shared experiences of retailers and vendors who have experimented with mobile applications, leverages their experience, and tailors it to retail.




The Blueprint was created by members of GS1; NACHA; the NFC Forum;, the NRF and its ARTS, Shop.org, and RAMA divisions; RSPA; and the Smart Card Alliance to help retailers understand the current mobile retailing landscape, recognize the types of applications on the horizon, and determine how best to embrace this new technology. Based on the technology’s rapidly increasing pace of change, we anticipate that future updates to this material will be published online to capture the most current information within the industry.

Retailers should use this document as a reference, to understand what is possible using mobile devices. The Blueprint can help readers answer the following questions:

• How can our company create a total-enterprise mobile plan that improves our business?

• What capabilities do mobile devices currently offer, and how can we create a policy for privacy and security?

• What types of mobile applications help consumers shop, and how do we differentiate the needs of teenagers from the needs of our guests who are young at heart?

• How are mobile payment technologies evolving?

• What types of mobile applications help associates be more efficient?

• What technologies and standards apply in the mobile field?

• What implementation options should be considered?

The reader will come away with a better understanding of how mobile devices can and are affecting retailing and more ideas about how this trend can help the reader’s particular business.

The different sections in this document contain the following information:

• Section 2, “Introduction,” introduces the topic of mobile retailing in more depth.

• Section 3, “Mobile Marketing,” and Section 4, “Mobile Commerce,” describe some of the customer-facing applications to which mobile retailing lends itself and explore options for implementing different applications. Section 4 also describes the different mobile payment methods, their advantages and disadvantages, and the implications of adopting one method rather than another.

• Section 5, “Mobile Operations,” applies the concepts of mobile retailing to internal retail operations and illustrates how adopting a mobile approach can improve efficiency and drive incremental revenue.

• Section 6, “Mobile Implementation Strategy,” focuses on implementation, detailing some of the technical and business process challenges that implementation can entail.

• Section 7, “Mobile Standards,” describes the technology standards that underlie a successful implementation effort.

• Section 8 defines the terms and acronyms used both in this document and in discussions of mobile retail in general.




2. INTRODUCTION

2.1 What is Mobile Retailing?

Mobile devices are ubiquitous, outnumbering credit cards and bank accounts around the world. People depend on their mobile devices, and they carry them everywhere, including into stores. The capabilities of these devices, combined with the ease with which applications that support retail functions can be downloaded to them, create an opportunity to leverage mobile devices for shopping, improved analytic data, and more effective communications.

The e-commerce revolution of the late 1990s did more than just open up an additional channel through which retailers could sell products. It created new opportunities for analyzing shopper behavior. It facilitated new ways to share product information and help customers make purchase decisions, taking advantage of the Internet connection to communicate personally with the customer.

As mobile devices became more sophisticated, they became capable of e-commerce functionality. In addition, mobile customers can be identified automatically, through integration with mobile network operators (MNOs) such as Verizon, AT&T, and Vodaphone. Many e-commerce features, such as detailed product information, product comparisons, and customer reviews, are commonly available to a customer in a store who has a mobile device, with an additional benefit: immediate customer gratification. When the store offers the best deal, the customer can take the merchandise home right now, with no shipping or handling costs. Mobile payment functionality, targeted promotions, interactive displays, and digital receipts are quickly becoming new standards for retailers.

Mobile retailing has become an important and valuable means for retailers to reach consumers. Retailers who ignore mobile retailing risk being ignored in return by current and future generations of shoppers. Retailers must also begin to understand how social networking and competitors’ applications affect their business, not just how to streamline the interaction between their own internal lines of business.

Retail stores are not going to disappear anytime soon, but they are ripe for change.

Figure 3 illustrates what the retail store of the future could look like, leveraging mobile devices such as media shopping cards, consumer phones, associate dashboards, and scales. Mobile devices will play a large part in future commerce.




Bluetooth

Wireless POS

Peripheral Scales

Self Serve

Cashless

Payments

Bottom of Basket

Detection

Interactive

Customer

Displays

Biometric

Contactless Readers

Employee/Mgr

DashboardsAccess Points

Streaming Video

Consumer

Phones

RFID Shelf

Labels

Media

Shopping Carts

Shelf Edge

Displays XBOX 360

$399

Self assisted ordering

In-storeback office

RFID

Holographics

In-store

kiosks

Electronic

Menu Boards

Location Based

Services

RFID Gondola

Labels

Figure 3: The Retail Store of the Future

The degree to which physical stores retain their dominance in the long run may be up for debate. Consider, for a moment, the general purpose of a retailer. A retail organization exists to identify products that meet consumers’ perceived needs. A great deal of time is spent designing and sourcing those products, transporting them, and performing all kinds of analysis to determine optimum pricing and appropriate promotions for various customer segments, in order to drive sales. Now, imagine that your customer has the ability to purchase goods directly from the source, using a mobile device or computer, thus bypassing the need to enter a store. When all of the operating costs of maintaining a store are considered and compared to what a next-generation supplier might have to spend on shipping goods directly to the consumer, that supplier may still be able to charge lower prices than the retailer ever could.

There will always be certain product categories that consumers will prefer to touch before making the decision to purchase. In addition, shopping is entertainment for many people, and the social experience of stores and shopping malls is very much part of a world-wide consumer culture. There will also always be product categories that are only sold in their own branded stores, because the exclusivity of those brands demands nothing less.

2.2 Mobile Devices Defined

This Blueprint uses the term “mobile device” to refer to any mobile device that can connect to the Internet, including smartphones, portable music and video players, handheld gaming devices, laptop and ultra-mobile personal computers, e-book readers, and tablets. Consumers are more readily upgrading their smartphones, which have




advanced to the point of being handheld computers whose capabilities exceed those of the computers carried on board the first space missions. Figure 4 shows the distribution of smartphones, feature phones (less flexible smartphones), and other connected devices. It further distinguishes smartphones by their different operating systems.

Source: http://www.millennialmedia.com/research/mobilemix/thankyou/

Figure 4: U.S. Device Type and Operating System Mixes

Note that Millennial Media defines a connected device to be a handheld device that can access the mobile Web but is not a mobile phone, including the iPod Touch, Sony PSP, Nintendo DS, and the iPad. Since the first version of this Blueprint, adoption rates for tablet devices have increased dramatically. The iPad is the market leader, but Samsung, RIM, Dell, HP, and others have all introduced their own tablets. Originally dismissed by critics as a larger iPhone, the iPad has become a consumer favorite and is also used by executives at many companies. Software companies such as MicroStrategy9 and retailers10 alike are recognizing the value of arming their employees with anywhere, anytime access to information that creates a competitive advantage.

The typical mobile device includes most of the features described in Table 1 and illustrated in Figure 11Figure 5. Various combinations of these features can be leveraged to provide a richer experience for shoppers.

9 http://www.businessweek.com/technology/content/nov2010/tc2010111_549315.htm

10 http://risnews.edgl.com/retail-news/Home-Depot-s-$64-Million-Mobile-Investment-Rolls-Out-to-1,970-Stores56966




Table 1: Mobile Device Features

Feature Significance

Bluetooth wireless connectivity

Connects mobile phones to other devices (such as a headset or POS) without a cable. Bluetooth allows customers and employees to be “hands-free.” It is a type of Near Field Communication.

Still or video camera Can take pictures of products, receipts, and bar codes for item search, comparison or employee task management, and pictures or video for loss prevention.

Compass Can direct a person to a store and recognize the direction in which a person is facing. Can also be used for augmented reality applications for marketing and operations.

Two-way e-mail messaging

Can deliver receipts and coupons to customers. Also useful for task management and field manager collaboration.

Interactive display Includes the ability to run a browser or native applications. Some phones include multitouch screens or screen addressable keys that provide enhanced functionality.

Internet access Enables most applications to be useful. The mobile device can be connected to the Internet either through a high speed cellular network (3G, 4G) or Wi-Fi.

Location recognition Can determine location using GPS satellites, cell tower triangulation, or Wi-Fi reference. Useful for targeted marketing, store location lookup, and in-store product location.

Multimedia Messaging Service (MMS)

Can send and receive rich content, such as pictures or audio. An alternative to communicating through native apps or a mobile Web browser.

Near Field Communication (NFC)

Enables the exchange of data between devices over about a 10-cm range. Useful for contactless payment and other contactless communication.

Short Message Service (SMS)

Can send text. Most mobile phones can use SMS to send and receive text messages.

Audio bar codes Allows data, such as text information describing Web site URLs, to be carried and transmitted on sound waves in the audible range (music and spoken word). NTT DOCOMO has been researching and developing "Audio Barcode."*

* http://www.nttdocomo.com/technologies/future/audio/index.html




Source: Michael King, The Mobile Scenario: A New Age of Mobile Services, Gartner Inc., October 29, 2010.

Figure 5: Key Device Hardware Trends

2.3 Mobile Application Technology

Mobile applications are categorized according to one of four implementation methods:

• Browser-based

• Message-based

• Downloaded to a device

• Preinstalled on the device (referred to as native applications)

2.3.1 Browser-Based Applications

Browser-based applications run in the browser on a mobile device. A retailer may often want to provide information that is available on the retailer’s Web site to mobile consumers or associates. Smartphones equipped with a browser can access these applications; however, their small screen sizes and keyboards provide a less satisfactory experience than when the application is accessed on a computer. In this case, people are better served with a mobile-specific user interface that is optimized for the capabilities of the typical smartphone.

For example, compare the Sears Web site that is displayed on a computer (found at www.sears.com), shown on the left in Figure 6, with the mobile version, shown on the right (found at m.sears.com).




Figure 6: Two Sears Web Sites: Non-Mobile (left) and Optimized for Mobile

(right)

Mobile browsers are currently including support for two important technologies, HTML5 and WebKit. These technologies allow retailers to create mobile shopping sites that take full advantage of smartphone capabilities without being tied to a specific mobile operating system (OS). Mobile Web site developers will thus be able to provide a rich, “application-like” user experience on mobile Web sites. These technologies are currently available in the Apple iPhone OS, Google Android OS, and Palm WebOS devices, as well as in new RIM BlackBerry devices and other smartphones.

2.3.2 Message-Based Applications

The second type of application, the message-based application, uses Short Message Service (SMS) or Multimedia Messaging Service (MMS) to exchange messages with the user. While not nearly as easy to use as the other types of applications, message-based applications work on the largest number of mobile phones. It is often more cumbersome to have to start the browser on the phone and then access a URL than to send a simple text message. Mobile applications such as Shopkick use SMS to alert users of nearby deals. Almost all mobile phones throughout the world support SMS for short messages. Services like TextBuyIt, used by Amazon, can interact with consumers, who can find and




order products over the mobile phone while standing in the middle of a competitor’s store.

2.3.3 Downloaded and Native Applications

Mobile applications can also be either downloaded applications or native applications. That is, a ready-to-run (compiled) application (typically referred to as an app) built for a specific mobile device is either downloaded to the device or preloaded and present when the device is purchased. These applications generally afford the user a better experience, because they take full advantage of the particular mobile device’s unique capabilities. But since these applications are device-specific, a separate application is required for every different type of device, thus increasing development costs exponentially. In addition, When applications are upgraded or new applications are developed, a mechanisms is required to deliver them to the devices on which they run.

Figure 7 illustrates three different apps.

Figure 7: Three Retailers’ Apps: Sears (left) Target (center) and Gap (right)

Almost every mobile OS vendor, such as Apple, RIM/Blackberry, Microsoft’s Windows Mobile and Google/Android, has created application stores, where users can find and download applications for a specific purpose written specifically for their phones. Companies are also developing “write once, run anywhere” functionality for mobile device application development. These companies allow the developer to create customer-facing and associate-facing apps once and deploy them on mobile devices from different vendors. The evolution of mobile device technology and the continuing OS wars mean that cross-platform integration is necessary to ensure that all of a retailer’s customers are treated equally.

Handsets with NFC chips also provide a secure and simple application solution. A variety of applications can be downloaded to the secure element in the phone and accessed easily. These phones interact with contactless terminals, other NFC devices, or




radio frequency (RF) tags, sending and receiving data by tapping. NFC phones have been available in Asia and Europe through various vendors and are being launched in the U.S.

2.3.4 Thin-Client Architecture

Clearly, one major challenge of mobile retail is how to support a multitude of mobile platforms, screen sizes, input capabilities, and customers. One implementation option that addresses these issues is a client-server architecture that relies on the phone as the client. In this so-called “thin client architecture,” a server stores customer and business intelligence about the workflow required for a particular service (e.g., the first screen shows a catalog, the second screen product detail, the third screen payment options). The client (the phone) needs only display-related capabilities and input handlers (Figure 8).

Figure 8: Thin Client Architecture

2.4 Mobile Retail and Social Media

Social media marketing has become a standard in today’s retail marketing mix, providing retailers with a broad range of offerings that can be used to connect to and interact with customers. Social media tools such as Facebook enable retailers to engage customers and build communities of interest around their brands while delivering targeted and personalized offers.

Retailers understand that customers need a reason to interact with their products and brands. Social networks are the fastest growing engagement point between brands and customers and will grow more quickly than any other form of interactive marketing. Retailers are starting to see the benefits of building groups with like demographic characteristics on social networking sites, such as Facebook, and on mobile social




networks, such as Twitter, so that they can communicate more effectively with particular customers, as opposed to using mass media to transport key messages and new promotions to the whole market.

Both a mobile strategy and a social media strategy will be at the forefront of a successful retailer’s market strategy. Successful retailers will learn how to integrate mobile strategies and social media strategies into a cohesive business strategy. A collection of social media data points, such as Facebook, Twitter, Groupon, Shopkick, and blogs, will be critical to customer and prospect interaction.

Mobile is a natural fit for social media, since mobile devices are at the center of how people communicate. The number of active users of Facebook mobile surpassed 200 million in November 2010, triple the number of users just one year previous.11 Retailers must therefore understand how to fit mobile into the social media component of their marketing strategy. More than 56 percent of customers follow a retailer’s online social media imprint, providing many retailers with a customer following that they can begin to engage with mobile promotions and incentives.

Mobile can be used to help enlist customers into a retailer’s social network. Customers can opt into a retailer’s rewards program directly, through the on-line social media environment, through their mobile phones in a retailer’s mobile Web environment, or by texting a unique keyword to a particular short code. The objective is to present relevant messages that encourage customers to sign up for a retailer’s rewards club or program. For example, a prominently placed window (mobile prompt) embedded on a retailer’s Facebook fan page could include a request to join the retailer’s Rewards Club. Customers would not have to move to a new mobile page but could enter core information, along with their mobile number, directly into the window. Customers would then send the information and potentially receive in return an immediate incentive, such as a mobile coupon or a link to multiple offers on the retailer’s mobile Web page. A similar approach could use a retailer’s Twitter feed; because not all customers have unlimited data plans, however, retailers might as an alternative embed a static link or banner prompting customers to opt into the program by sending a unique alias to a dedicated short code. Both approaches should reward the customer with an immediate incentive.

Retailers should also integrate their social media mobile strategy with their customer relationship management (CRM) database, to profile customers more accurately based on their interests and behaviors, and to help manage future two-way communication. Because customers interact in a number of socially focused channels, such integration can help retailers understand better which online communities and social networks customers are frequenting and through which they are choosing to engage with the mobile offering. This approach to a social media mobile strategy will enable retailers to extend their current CRM efforts, adding the ability to leverage their community building activities using the social Web and automate the conversation process. A retailer can then craft appropriate messages through the different communication channels as part of a connected conversation.

11

http://blog.facebook.com/blog.php?post=446167297130




Mobile

Marketing

Mobile

Operations

Mobile

Commerce

Both social media and mobile communications have unique attributes. Retailers must be aware of these attributes to give customers consistent and coordinated information. Retailers need a single view of each customer to maximize the results of a campaign. Figure 1 illustrates the separate channel approach; however, retailers who treat social media and mobile as separate and independent channels, as opposed to connected components of a brand strategy, will fail to achieve respectable response rates and weaken their customer relationships, rather than building customer communities.

By recognizing these best practices, retailers will be better positioned to improve the customer experience, providing a new touch point for customer acquisition and strengthening loyalty building programs through mobile devices.12

2.5 Mobile Retail Applications

As illustrated by Figure 9, mobile retail applications can be grouped into three categories:

• Mobile marketing (described in Section 3 and Figure 11)

• Mobile commerce (described in Section 4 and Figure 12)

• Mobile operations (described in Section 5 and Figure 13)

Figure 9: Mobile Retailing Classifications

Each category encompasses applications supporting multiple areas of the applications ecosystem. Although retailers can choose to implement applications dedicated to fulfilling only the functions in a particular category, it is more common for applications to support functions in several categories.

The key to driving application adoption is to ensure that applications are designed for specific needs, rather than attempting a “one-size fits all” approach. A low risk approach is to focus first on solving the business needs of a specific customer (or other user) group

12

The NRF Mobile Retailing Initiative hopes to publish additional information about social networking in the next version of the Mobile Blueprint for Retail as well as during numerous webinars and presentations in 2011.




with basic functionality, then add more functionality over time as part of an iterative collaborative development cycle.

Each function in the ecosystem has unique requirements that must be accommodated in an overall integrated architecture. Payment functions require secure interfaces to an authorization system, regardless of whether payments are contactless or remote. Marketing functions must securely interface with a customer or loyalty system for targeted marketing opportunities. Operations functions must securely interface with the variety of applications used to operate a store. The supporting applications in all three categories can reside either on a phone or in a data center accessible over the Internet. As retailers expand their use of mobile devices, it can be valuable to look for ways to integrate systems within a platform rather than purchase an additional point solution that stands on its own and will require incrementally more maintenance over time.

Figure 10 is an overview of the mobile ecosystem.

Figure 10: Mobile Retailing Ecosystem

2.5.1 Mobile Marketing Applications

Mobile marketing applications focus on advertising, marketing, and increasing brand awareness and loyalty. They also provide product information and shopping tools that can enhance the retail experience.

Mobile marketing applications can support the areas of the applications ecosystem shown in Figure 11.




Figure 11: Mobile Marketing Applications

Mobile marketing is discussed in Section3.

2.5.2 Mobile Commerce Applications

Mobile commerce applications include mobile payment applications and traditional e-commerce applications that are accessed from a mobile device. Mobile payment applications encompass all payments made using the mobile device, including remote payments and contactless payments.

Mobile commerce applications support the areas of the applications ecosystem shown in Figure 12.




Figure 12: Mobile Commerce Applications

Mobile commerce is discussed in Section 4.

2.5.3 Mobile Operations Applications

Mobile operations applications are tools used by retailers and associates that can lower costs and increase service for retailers. These applications focus on the functions shown in Figure 13.

Figure 13: Mobile Operations Applications

Mobile operations applications are discussed in Section 5.

2.5.4 Mobile Application Design

Once a retailer has determined the desired application functionality and settled on a basic technology, the next decision is whether to develop the mobile capabilities in house or outsource development. Many companies specialize in developing mobile applications. Outsourcing is often the least expensive solution, because it allows the retailer to avoid the costs of acquiring the right skill sets, tools, and test environments. However, effective




mobile application design requires close interaction between at least a subset of the application’s intended users and the design team. A team comprising a retail-function subject matter expert, a mobile application developer, and active end users works well.

The more complex applications require integration with back-end systems (like e-commerce), which can be expensive. If possible, retailers should design their systems using the principles of service-oriented architecture (SOA) so that common functionality can be shared across channels. (For more information, see the SOA Blueprint for

Retail13

). Additional benefits come from moving applications or SOA services into the cloud, following the recommendations in Cloud Computing for Retail.14

2.5.5 Day-in-the-Life Examples

To illustrate the potential for mobile technology in retailing, following is a hypothetical example of the day in the life of Eric, a consumer who uses his NFC-enabled mobile phone to redeem coupons at a shopping center and pay for a meal at a restaurant. Unless otherwise noted, all of the capabilities described are currently available.

2.5.5.1 Mobile and Retail Shopping

Eric’s NFC-enabled and location-enabled phone provides him with multiple services in the retail environment. The location services automatically recognize that Eric enters a shopping center, and various mobile apps provide the following directly to his phone:

• Shopping center loyalty points for returning to the center, such as with Shopkick, or created by third-party vendors such as CopiaMobile or AisleBuyer.

• Information linking the value of gift cards stored on his phone to stores within the center who are advertising a current sale and additional discounts for making a purchase within the next 30 minutes.

• Special offers customized to his Facebook or Groupon profile

While walking through the center, Eric notices a “smart poster” offering him a discount on a product in which he is interested. Eric scans the Microsoft “tag” code on the poster with his phone’s camera to retrieve the coupon.

Eric then enters a store to shop for an item he wants to buy. He sees a number of competing products on the shelf but does not know which to choose. He uses his mobile phone to read the products’ contactless tags (bar codes, quick response codes). The device reads the links provided with the products and displays product information and customer reviews on the retailer’s Web site. Eric also checks product information using an independent app on which he regularly relies.

Armed with this information, Eric selects a product to purchase and finds a sales associate with a mobile POS device. During check out, he shows the sales associate the competitor’s price for the same item on his mobile phone and asks the associate whether the store will match the price. The sales associate displays Eric’s shopping history on her mobile device, keys in the competitor’s price for the item he wants to buy, and receives a

13

Association for Retail Technology Standards, SOA Blueprint for Retail, version 1.2, http://www.nrf-arts.org 14

Association for Retail Technology Standards, Cloud Computing for Retail White Paper, http://www.nrf-arts.org




“yellow light,”’ letting her know that the price match can only take place if Eric’s total purchase is over a certain dollar amount. Good news for Eric—his total purchase exceeds the threshold, so he can obtain the price he requested. He then simply touches his phone to the sales associate’s mobile POS device to accomplish the following:

• Automatically redeems coupons for the item he is purchasing

• Makes the purchase

• Receives more special offers for future purchases, customized to his evolving profile

Eric can check his purchase history and remaining loyalty points on his phone whenever he wants. He can share information and coupons with friends who also have NFC-enabled phones, where permitted by the coupon issuer, by touching his phone to theirs.

2.5.5.2 Mobile and a Restaurant Transaction

Restaurants in Eric’s office building accept payment at contactless POS terminals, and contactless cards are widely used for payment. Eric has enabled several credit and debit card applications in his mobile phone. In the elevator going up to the restaurant, Eric sees a poster advertising next week’s special event and “reads” it using his phone. A Web link on the poster gives him more information and a discount coupon to use if he attends. Eric then pays for his lunch at the restaurant by touching his NFC-enabled phone to the POS terminal.

The phone provides Eric with additional financial services:

• He can choose a credit, debit, or alternate payment method (as described in Section 4.10.5) with which to pay, depending on whether his lunch is a business or personal expense.

• He can link to a mobile banking site, to check the balance on a card before making a payment or to view his use and purchase history.

• He can receive messages indicating that the balance on a card is low or indicating that a credit card payment is due.

• Depending on the transaction amount, his NFC-enabled phone can prompt him to authorize payment. Authorization methods might range from no confirmation, in the case of smaller amounts, to special authentication mechanisms, such as biometrics, for large amounts. He may use a password to start the payment application.

• If the restaurant has chosen to add NFC to its contactless reader, Eric can also receive a receipt transmitted directly to his phone when he confirms payment. The receipt can be stored in the phone and accessed for expense tracking. Loyalty points or a coupon for a future dinner discount can be added in the same way.

It is also be possible for Eric, who sells cleaning products in his spare time, to use his NFC-enabled mobile phone as a POS terminal and accept contactless payments from his customers’ NFC-enabled mobile phones or contactless cards. In fact, Eric completes such a transaction with the restaurant’s manager after noticing that the restroom is completely out of supplies.




2.5.6 Mobile Market Statistics

When considering mobile retail, it is helpful to understand both the current mobile phone market and how a retailer’s own customers use mobile phones. Understanding long-term trends can help retailers avoid investing in technologies that will not survive and can also indicate which technologies are emerging on the horizon.

The following mobile market statistics are current as of this document’s publication date:

• The market share for the different smartphone OSs in the U.S. (as of Q3, 2010)

• Retail priorities

• Mobile payment statistics

• Projected growth in mobile technologies

2.5.6.1 Mobile Smartphone Market Share

Figure 14 shows the market share for the different smartphone OSs for the third quarter of 2010. The most popular phones are those from Nokia, Apple, RIM, and Android. HTC, Motorola, and all others account for the rest.

Figure 14: U.S. Smartphone Operating System Share, Q3, 2010

All smartphones must run a mobile operating system. Figure 15 shows the predicted market share for different operating systems worldwide. On a global basis, Symbian, the operating system from Nokia, is the clear market leader. However, Symbian has achieved much less market penetration in North America.





Figure 15: Predicted Smartphone Market Share by Region

According to Gartner:

• The proportion of smartphones in the overall installed handset base will approach 90 percent by 2014.

• Android devices will have the leading market share in North America by 2012.

• Operating system market share in North America is not predicted to match that in other regional markets.

2.5.6.2 Current Retail Priorities

Gartner completed a survey in October 201015 that found that different retailers focus on different mobile retailing technologies, as represented by Figure 16. Retailers should prioritize their focus, based on their own customers’ needs, as business strategies and tactics evolve.

15

Michael King, The Mobile Scenario: A New Age of Mobile Services, Gartner Inc., October 29, 2010.





Figure 16: Mobile Technologies on Your Radar Screen

2.5.6.3 Mobile Payment Statistics

Mobile payments are defined as payments for goods or services that are initiated from a mobile phone or similar device (such as a personal digital assistant). The related technology is changing so rapidly that statistics vary from publication to publication and from survey to survey. Included here are some of the most recent statistics.

Analysts predict significant growth in the mobile payments market:

• Insight Research Corporation estimates that 2.2 billion consumers will generate $124 billion in mobile financial transactions by 2014.16

• Mercator Advisory Group estimates that payments from remote devices will grow from an estimated $389 million in 2009 to $8.6 billion in 2014.17

• Frost & Sullivan estimates that the mobile transactions market (non-NFC-based mobile payments, mobile banking, remittance, and NFC-based mobile payments) in Europe will grow to €4 billion–€5 billion by 2013.18

16

"Insight Research Says Financial Applications on Cell Phones to Attract 2.2 Billion Users," eNewsChannels, April 22, 2009, http://enewschannels.com/2009/04/22/enc6821_192943.php

17 “Mobile ACH Payments: Request for Comment,” NACHA, September 9, 2009

18 Money in Mobile —European Transactions, Frost & Sullivan, October 14, 2009.




• Gartner reports that worldwide adoption of mobile payments in 2009 grew by 70 percent, to 73 million people. Gartner forecasts that 190 million people will adopt mobile payments worldwide by 2013 and estimates that 3 percent of the U.S. population will be using mobile payments by 2012.19

Analysts are also forecasting rapid adoption of NFC-based mobile contactless payments. While adoption of such payments is centered in Asia and Europe, analysts predict global growth as NFC-enabled phones are launched worldwide.

• According to Juniper Research,20 one in every six mobile subscribers globally will have an NFC-enabled device by 2014.

• Juniper Research is forecasting that the global gross value of NFC transactions will exceed $110 billion by 2014. Of this total, global NFC-based mobile payment transaction values are forecast to exceed $30 billion by 2012.21

Driving these forecasts for growth in mobile payments is strong consumer interest.

• Yankee Group (United States) states that “most consumers, 84 percent, are interested in mobile payments.”22

• Wired reports that a majority of respondents to a recent survey said they were interested in using their phones to purchase items at a cash register just as they would use a credit or debit card.23

2.5.6.4 Mobile Payment Technology Projected Growth

The mobile technologies most often used for payment include SMS, wireless application protocol (WAP), unstructured supplementary service data (USSD), and NFC. Error!

Reference source not found.Figure 17 shows Gartner's estimates for the growth of payments using each technology.24 Mobile payments as defined by Gartner include transactions that use banking instruments such as cash, bank accounts, or credit/debit cards, and non-mobile operator stored value accounts (such as travel cards, gift cards, or PayPal). The forecast does not include transactions that use mobile operator billing systems or telebanking by mobile device to a service center that uses an interactive voice response (IVR) system. The forecast does include IVR transactions when used in combination with other mobile channels (such as SMS) to verify user information.

19

Gartner, "Wallet of the future? Your mobile phone,” CNN.com, August 13, 2009, http://edition.cnn.com/2009/TECH/08/13/cell.phone.wallet/index.html

20 Juniper Research, "1 in 6 mobile subscribers to have NFC Mobile Phones by 2014, according to Juniper Research," press release November 9, 2009, http://juniperresearch.com/shop/viewpressrelease.php?pr=163

21 Juniper Research, "Transaction Complete! NFC Solutions," September 2009.

22 Ibid.

23 "2010: The Year of Mobile Banking & Payment," Wired, January 30, 2010, http://www.wired.com/epicenter/2010/01/mobile-banking-payment

24 Gartner, "Dataquest Insight: Mobile Payment 2006-2010," April 27, 2009, ID: G00168197




Figure 17: Gartner April 2009 Projections of Mobile Payment Technologies

Early industry trials indicate that all industry stakeholders are interested in mobile payments. Mobile payment technology is a great opportunity to change the payment paradigm, as competition should lower the interchange rates and improve service. For consumers, such payments represent convenience. For merchants, they open up opportunities for new payment types and for applications that leverage payment (e.g., loyalty and rewards programs). For mobile operators, they provide the opportunity to attract customers, improve customer retention, and increase average revenue per user. For financial services providers, they provide a new payment channel and the opportunity for differentiation and increased transactions. Mobile payments have also created opportunities for new service providers to offer value-added services. Section 4.14 provides information on over 30 alternative payment methods.

2.5.7 Mobile Retailing Maturity Model

Mobile is challenging retailers to implement the “right” processes to attract consumers and grow their business as they when they leveraged the Web just a few years ago. The stakes are extremely high: those retailers who successfully implement mobile will be the winners.

The Retail Mobile Maturity Model (Figure 18) illustrates various stages and approaches to achieving mobile success.

0

500

1000

1500

2000

2500

3000

3500

2007 2008 2009 2010 2011 2012

Mobile Payment Transactions by Technology (in Millions)

SMS WAP/Web USSD NFC




Consumer

Experience

Technology

Approach

Market

Opportunity

Data and Process

Standards

Value

Figure 18: Retail Mobile Maturity Model (Summarized)

The model leverages the key elements of the mobile ecosystem (commerce, operations, and marketing) to derive solutions that are based on five key indicators:

• Technology approach

Planning and implementing a secure, reliable, high speed mobile infrastructure is the foundation for mobile success. No matter how enticing or innovative an application may be, consumers will not use it unless it is available on demand with reasonable response times.

• Consumer experience

Consumer experience transforms mobile devices into “smart assistants” that help with or even influence retail choices and decisions. The experience provided by a mobile application can be based on a combination of information delivery, ascetics, social immersion, and rewards.

• Data and process standards

Data and process standards drive retailers by defining levels of integration of mobile for consumers as well as associates. Bidirectional transactional data exchange for both identification and payment functions is quickly changing what customers look for in mobile retail sites.




• Market opportunity

Market opportunity represents the ability to use technological and functional innovations in mobile to create an advantage in a particular retail space.

• Value

Value represents the overall effect of introducing a particular aspect of a mobile retail solution within a particular domain (the biggest impact will be felt by innovators and early adopters).

Technology leaders, from small startups to “big box” traditionalists, are combining technology, customer experience, and a changing business model to influence the mobile retail landscape. The current “leading edge” mobile solutions for retail suggest that focusing on making the end user experience more personal and allowing retailers to take advantage of information in real time are the factors that are driving innovation and adoption.

2.5.8 Keys to Mobile Success

This Blueprint can guide retailers in planning and implementing a successful mobile environment. In summary, mobile success requires the following:

• Web pages must be optimized for the limited screen sizes of most mobile devices.

In a recent study, less than one-third of the top 300 retail sites had optimized their offerings for mobile.25

• GPS positioning is a “must use” capability that allow retailers to offer real-time information that matches a consumer’s preferences to the consumer’s present location.

Retailers can use GPS to guide consumers to their stores and find products within them. Location-based services are just one of the functions that differentiate m-commerce from e-commerce.

• For optimum success, mobile payments must be linked with shopping enhancement tools, such as electronic couponing (including group couponing), individualized targeted offers, and loyalty programs, allowing customers to perform a seamless transaction in which they can realize the full benefit of discounts in one paperless action.

CopiaMobile is one such provider of innovative couponing applications.

• It is important to consider linking mobile applications with social networking tools, to create personalized services that can be leveraged by consumers who share similar interests.

Target teamed up with Facebook to deliver an application (My TargetWeekly) that is intended to help save time and money by delivering focused offers over Target's Facebook page. After a consumer spends a few minutes setting up

25

Mobify Consulting, Current State of Mobile e-Commerce, http://blog.mobify.me/2010/10/26/current-state-of-mobile-e-commerce/ 2010.




preferences, the app delivers in-store special offers based on the consumer’s personal choices and location information.

All of these keys to success are discussed in detail in the following sections of this Blueprint, which offers retailers information critical to successful mobile implementation.




3. MOBILE MARKETING

Mobile marketing represents a simple first step for retailers who want to embrace and benefit from m-commerce. It can transform the way they interact with their customers.

Mobile marketing activities are categorized as follows:

• Advertising and marketing

• Customer service

• Shopping tools

• Product information

• Loyalty programs

• Promotions and coupons

3.1 Advertising and Marketing

Not every mobile activity must fall within the traditional boundaries of retail. One of the simplest activities can be drawn from the entertainment realm: an application that advertises or reinforces brand image. This class of application stands alone; no integration is necessary with existing systems. The goal of such applications is to market the brand and refer consumers to other lines of communication with the retailer. This approach is often tightly integrated with social media efforts.

While brand marketing does not require integration, promotions do. For such offers to be truly effective, they should be integrated with the retailer’s customer relationship management (CRM) system to make them personalized and targeted. Spamming customers is the fastest way to lose them.

3.1.1 Brand Marketing

Every brand wants to be represented on a consumer’s phone. But not every brand deserves that placement. Brands with no obvious reason for phone presence can achieve that presence by sponsoring an application. For instance, Charmin (the toilet paper manufacturer) sponsors an iPhone application called “Sit or Squat” that locates nearby public bathrooms on a map.

3.1.2 Digital Signage

Digital displays that advertise products and promotions can facilitate in-place interaction with customers. (For example, scanning a food item might show recipes using that item.) This interaction is typically accomplished using NFC tags or quick response (QR) codes that allow the phone to “read context.” (QR codes are two-dimensional bar codes that can contain a lot of information, including URLs.) A unique number, simple data, or a Web site link is communicated to the mobile phone, through which information specific to the display can be accessed.




One example of such digital signage is the display of bar codes on large billboards (Figure 19). A consumer with a phone takes a picture of the bar code and an action occurs, such as displaying a Web site, sending a message, or requesting a promotion.

Figure 19: 2-D Bar Code on a Billboard

3.1.3 Augmented Reality

Phones equipped with global positioning system (GPS) capabilities (to ascertain location), a compass (to ascertain facing direction), and a video camera can add labels to a video with information about what the consumer is seeing. The consumer holds the phone so that the camera in the phone views the landscape. Information is then overlaid on the image. For example, this capability can be used to locate coffee shops, post reviews on storefronts, and display promotions on storefronts to entice shoppers inside.

3.1.4 Example Applications

Examples of advertising and marketing mobile applications are described in Table 2.

Table 2: Examples of Advertising and Marketing Mobile Applications

Gucci’s iPhone application allows the consumer to browse current fashion collections, see news and events, and browse the designer’s playlist. Several videos are also available. This application focuses on brand awareness.

Adidas provides an Urban Art Guide for Berlin as an iPhone application. Using maps, the consumer is directed to different sites in the city to view many forms of urban art. A gallery of pictures and the ability to upload new ones is also provided. This application associates the brand with the “street scene.”




3.1.5 Technology and Standards Employed

Several technologies are particularly mobile applications:

• ISO/IEC Standard 18004




The Hugo Boss iPhone application provides videos of fashion shows, including behind-the-scenes footage. It includes a color matching feature that lets the consumer find items that fit the consumer’s wardrobe and a feature that can save items to a wish list.

Google has identified over 100,000 businesses in the United States as "Favorite Places on Google," based on Google user interaction with local business listings. Each business receives a window decal with a unique QR code that can be scanned with a phone to (for example) read reviews or star the business as a favorite. QR reader applications are available for a variety of camerphones.

Brightkite is social connection application available on several phone platforms that leverages location to determine who is nearby. Brightkite has also been experimenting with advertising within its augmented reality tool.

My Mall is a mobile shopping application that aggregates retailers. The application is available for iPhone, Android, and Palm devices and is based on the affiliate business model, working through affiliate networks such as LinkShare, Commission Junction, and Gooapplication allows retailers to establish a mobile presence at no cost by becoming part of a mobile shopping mall through their affiliate network. The application also drives traffic to the retailers’ own mobile sites.

Standards Employed

particularly useful in implementing advertising and

ISO/IEC Standard 18004 QR codes


Hugo Boss iPhone application provides videos of scenes footage. It

ng feature that lets the consumer find items that fit the consumer’s wardrobe and a feature

Google has identified over 100,000 businesses in the United States as "Favorite Places on Google," based on

action with local business listings. Each business receives a window decal with a unique QR code that can be scanned with a phone to (for example) read reviews or star the business as a favorite. QR reader applications are available for a variety of camera-enabled

Brightkite is social connection application available on several phone platforms that leverages location to determine who is nearby. Brightkite has also been experimenting with advertising within its augmented

is a mobile shopping application that aggregates application is available for iPhone,

Android, and Palm devices and is based on the affiliate business model, working through affiliate networks such as LinkShare, Commission Junction, and Google. The application allows retailers to establish a mobile presence at no cost by becoming part of a mobile shopping mall through their affiliate network. The application also drives traffic to the retailers’ own mobile sites.

and marketing




• ISO/IEC Standard 18092 NFC

• Location-based services

3.1.5.1 ISO/IEC Standard 18004 QR Codes

ISO/IEC Standard 18004 is one standard for QR codes. These codes are popular for use with mobile phones because they are easier to read with cameras than are traditional bar codes. They are often used to bridge the physical and on-line worlds: a camera-equipped phone “reads” the QR code in a magazine or poster; a Web site (identified by the URL embedded in the code) is then loaded into the phone’s browser. Mobile phones require a QR code application to read and process the codes.

3.1.5.2 ISO/IEC Standard 18092 NFC

NFC is a short-range communication technology that is used by mobile phones and standardized as ISO/IEC 18092. NFC is compatible with contactless smart card RF technology (ISO/IEC Standard 14443); NFC-enabled devices can communicate with current contactless smart cards and readers. This ability is often leveraged for payment and interaction with NFC-tag-equipped posters. NFC data throughput is slower than Bluetooth’s, and NFC has a shorter range, but it connects more quickly and is compatible with current contactless payment infrastructures to create a better consumer experience overall.

3.1.5.3 Location-Based Services

Location based services (LBS) leverage the ability of a mobile phone to determine its location. Location is determined either using triangulation between cell phone towers or the GPS.

3.1.6 Benefits and ROI

Advertising and marketing over a mobile phone increase brand awareness and affinity, but as with other forms of marketing, it is difficult to measure the ROI. The benefits of applications that enforce an image are less tangible (albeit no less real). For applications in which the mobile phone communicates with an in-store device, interactions can be counted, but there is no good way to establish a direct correlation between an interaction and an ultimate conversion.

3.1.7 Implementation Considerations

Advertising and marketing applications can reside on the device, be accessible over a network connected to a hosted application, or be implemented as a service on the Internet (the “cloud”). Other implementation considerations are listed in Table 3:

Table 3: Advertising and Marketing Application Implementation Considerations

Consideration Implementation

Security n/a

Privacy n/a





Loss prevention n/a

SOA A SOA approach is often warranted so that channels can share the same functionality.

Cloud computing Applications can be connected to a hosted application over a network or as a service in the cloud.

Data source Various data sources can be leveraged.

Store operations n/a

Hardware costs n/a

Application development costs Applications can be written in house, but using one of the many available outside development firms may be more cost effective.

Application integration These types of applications rarely require integration with existing systems.

Ease of use on mobile device To gain mainstream use, applications must be useful and very easy to use. No documentation should be required.

Platform support Supporting multiple platforms is best to extend application reach.

Customer support n/a

PLC management n/a

Software development Outsourcing development can be a cost-effective solution.

Payment options n/a

Application type These applications can be browser-based, message-based, downloaded, or native applications.

3.2 Customer Service

Customer service applications enable customers on the move to obtain information from retailers and use their customer service functions. Customer service information and functions include:

• Store locations and hours

• Wish lists, shopping lists, and gift registries

3.2.1 Store Locations and Hours

A store locations–store hours application gives a consumer the ability to search for stores nearby using a mobile device. This ability offers even more benefit to the consumer when used in conjunction with product services, such as extended product information and item availability. In many cases, what a customer really wants to do is to “find the stores nearby that have product X in stock.”




Store location is a basic function that is typically displayed immediately by a mobile application. The function is most often made available using a browser-based application or a downloaded native application. Locations can also be shown as a map on a smart poster, which can be read by tapping the poster with an NFC-enabled phone and storing the received information about the nearest store locations, hours, and specials. When security is not an issue, the technology commonly employed is SMS. That is, the consumer sends a text message that contains the consumer’s zip code and receives the address of the nearest store.

Two process flows can support this function. One is applicable to devices without geolocation or GPS capabilities (Figure 20); a much simpler one is applicable to devices that have these capabilities (Figure 21).

Figure 20: Process Flow for a Device without Geolocation or GPS Capabilities

As Figure 20 shows, when a device has no geolocation or GPS capabilities, the process is as follows:

1. A customer selects the Find Store option.

2. The customer enters location information, such as a postal code, street address, city, state, country, or cross streets.

3. The customer initiates the action.

4. The system returns a list of the nearest stores.




Selects

“Find Store”

Send GPS

Coordinates

Find Closest

Store Locations

Display Selected

Store Locations

Figure 21: Process Flow for a Device with Geolocation or GPS Capabilities

As Figure 21 shows, when a device has geolocation or GPS capabilities, the process is as follows:

1. The customer selects the Find Store option.

2. The device transmits the customer’s location, using GPS coordinates.

3. The system returns a list of the nearest stores. The screen on which the list is displayed should offer the option of entering a location manually, to enable a consumer to find the stores close to an alternate location.

The list is typically limited to 5–10 stores. The store location information includes operating hours and maps for each store.

3.2.2 Example Applications

Examples of customer service mobile applications are described in Table 4.

Table 4: Examples of Customer Service Mobile Applications

myStarbucks can find an open store with a drive through, explore Starbucks whole bean coffees, find nutritional information, and build a drink. It includes integration with Facebook and Twitter (social media).

Using the consumer’s current location, this application can find nearby retail stores, sorted by category, and display maps that direct the consumer right to a store.

3.2.2.1 Technology and Standards Employed

Customer service applications can use different technologies and standards, depending on the implementation. For example:




• GPS capabilities add the mobile user’s location to a query. Location information gives consumers more accurate information and allows them to receive answers to questions such as “where is the nearest store?”

• A link to a mapping capability can help consumers get to a store quickly. Web services protocols to invoke/embed the mapping functions are available from many providers, such as Google, Yahoo, and Bing.

• A GS1 Global Location Number (GLN) can identify a location, uniquely where required.

3.2.2.2 Benefits and ROI

The intent of implementing these customer service functions is to drive more traffic to a retailer’s physical stores. However, it is very difficult to measure the effectiveness of such functions. There is no measurable link between their invocation and store sales. Measuring marketing effectiveness suffers from a similar problem.

3.2.2.3 Implementation Considerations

Table 5 lists considerations applicable to implementing customer service applications.

Table 5: Customer Service Application Implementation Considerations


Security n/a

Privacy n/a

Loss prevention n/a

SOA Store location services are often shared by multiple channels.

Cloud computing Mapping services are often sourced from the cloud.

Data source Data must be updated on a regular basis.


Hardware costs n/a


Application integration Applications can be integrated using ARTS XML standards, such as Item or Customer.

Ease of use on mobile device Since this is likely to be a customer’s first interaction with the retailer, it is important that the user experience be simple and informative.







PLC management n/a

Software development n/a

Payment options n/a


3.2.3 Wish Lists, Shopping Lists, Gift Registries

Consumers commonly make lists of items to be purchased. Mobile devices offer a convenient method for adding items to such lists, as well as for displaying a list during a shopping excursion. Because entering data into mobile devices can be cumbersome, adding an item to a list must be as simple as possible. Once created, the list of items can be stored on the device, to be recalled later or sent through something like a social medium (Facebook, for example) to the consumer’s friends. Consumers typically create three kinds of lists: wish lists, shopping lists, and gift registries.

Wish lists are lists created by an individual that itemize desired future purchases. These lists can be published to friends and family as suggestions for future gift-giving opportunities. Retailers can leverage wish lists to notify the list owner when the price or availability of an item on the list changes. Knowing that consumers have not yet purchased items can help drive changes in the retailer’s business (for example, by assessing demand for future new product introductions, adjusting the size curve for specific locations, or understanding price sensitivity).

Shopping lists serve as reminders for future purchases but are not intended for others to use. Shopping lists are common to grocery shopping and are often based on previous purchase history. Some implementations may allow consumers to scan an item’s bar code as the item is consumed at home, resulting in a list of “out of stock” items in the home. Shopping lists can be combined with m-commerce capabilities to provide a complete shopping solution from a mobile device, without requiring a visit to a physical store.

Gift registries are lists put together by an individual and published to friends and family as recommendations for gifts given in honor of a specific event (weddings, a new child, birthdays, graduations).

Figure 22 illustrates the general process used to create all types of lists. In all cases, it is common to use a mobile device to create the list of items and then display the list while shopping.




Customer

Select

Items

Manual

Note

Retailer’s

SiteCSE

Save

In CRM

Publish

To Friends

Through

Social

Media

Save

Locally

Purchase

Item

Figure 22: Wish Lists, Shopping Lists, Gift Registries

A valuable feature is near-real-time list management when items are purchased, to minimize or avoid duplicate purchases. For example, traditionally the POS updates a gift registry as items in the registry are purchased. A slight modification to this feature would enable the POS to send the purchase information to a list on a mobile device (such as a friend’s list).

List capabilities can often be integrated with extended product information capabilities. For example, recipes might be suggested for items included on a shopping list, along with the ability to add any missing ingredients to the shopping list. NFC tags can also be embedded in goods or in permanent shopping lists so that consumers can tap a product or product description and create their own lists for storage on an NFC-enabled phone.

3.2.3.1 Transaction Process

Figure 23 illustrates the list creation transaction process.

Figure 23: List Creation Transaction Process

As Figure 23 shows, the process is as follows:

1. The customer registers with a retailer.




2. The list type is defined (perhaps implicitly), and relevant list attributes (event dates and other details) are defined. It is important to include enough detail to enable other shoppers to find the appropriate list.

3. The list is created.

• The list can be created by using the mobile device to select items in the store or at home. An item can be selected by scanning the item’s bar code or RFID tag. Size, color, style, and quantity information can be added. The current in-store price should be displayed (and not the online price if it differs).

• As an alternative, the list can be created based on past purchase history.

Figure 24 illustrates the list consumption transaction process.

Figure 24: List Consumption Transaction Process


1. The consumer downloads an m-commerce application or displays a mobile Web site. The consumer can do so anonymously; however, it may be considered a benefit for a retailer to request that the consumer register, to enable future direct marketing.

2. The consumer selects a shopping list based on search criteria (e.g. “Jones Wedding,” “Smith Graduation”) or by using a list selection process.

3. The items being purchased are scanned on the mobile device.

• The customer is notified if an item has already been purchased.

• Otherwise, the list is updated to indicate that that item has been purchased. Lists can also be updated at the POS.

3.2.3.2 Case Studies

Examples of list creation mobile applications are described in




Table 6.




Table 6: Examples of List Creation Mobile Applications

The Target application provides tools to simplify and streamline the shopping experience at Target stores and on Target.com. The application can locate sales, store hours, or “the perfect gift. Putting the power to save money and shop more conveniently at your fingertips is part of our Expect More. Pay Less promise.”

Using a location or ZIP code, consumers can use the application to find the nearest Target. They can then receive information specific to that store. A Search feature allows consumers to find items in the store in which they are shopping, including specific department and aisle locations.

Consumers can shop by department and category to see what is available both at stores and on line. They can display the weekly advertisement for a store in their neighborhood. They can also search for and view Club Wedd and Target Baby registries and TargetLists, check off items they have purchased, and manage their own registries or lists.

The application lets consumers view images of items, read guest reviews, and check for availability at other Target stores. They can also search for items by gender, age, price, personality, or occasion.

Whole Foods Market Recipes can be searched for recipes featuring natural and organic foods. Consumers can search by ingredients and dietary preferences, such as gluten-free, low fat, or vegetarian/vegan. Recipes include nutritional information and cooking instructions.

The application's store locator can be used to find nearby Whole Foods Market stores. Each store’s page includes links to the store’s Web site and lists the natural and organic foods on sale at the consumer’s local Whole Foods Market.

Beauty.com’s application lets consumers shop for more than 200 prestige brands anywhere, any time. “Read product ratings and reviews to find beauty must-haves, and restock your beauty stash quickly and easily with Your List™.”




3.2.3.3 Technology and Standards Employed

List applications can use a variety of technologies and standards, depending on the implementation. For example:

• Bar code scanning technology embedded in a mobile device

• Mobile Web or mobile application

• GS1 barcode standards

• NFC Forum tag types

• ARTS XML Item Maintenance

• ARTS XML Product Content Management

3.2.3.4 Benefits and ROI

The potential benefits and ROI of using a mobile device for wish lists, shopping lists, or gift registries include:

• Increased basket sizes (shopping lists, wish lists)

• Increased sales (gift registries)

• New customer acquisition (gift registries, wish lists)

• Conversions (wish list promotions)

3.2.3.5 Implementation Considerations

Table 7 lists considerations applicable to implementing wish list, shopping list, and gift registry applications.

Table 7: List and Registry Application Implementation Considerations


Security Shopping lists are generally not considered private information, so there is no particular need to protect them (in fact, they are often published for anonymous user consumption). However, the lists are typically linked to customer data that does require protection.

Privacy Retailers who wish to use the information gathered from the list function for direct marketing purposes should generally require registered users to agree to such communications.

Loss prevention n/a

SOA These lists are often shared by the e-commerce channel, so using common services makes sense.

Cloud computing Cloud computing might be applicable.

Data source Product information, like price and inventory, must be kept current.






Hardware costs n/a


Application integration These applications are usually integrated with e-commerce and sometimes with in-store kiosks.

Ease of use on mobile device Typing on a mobile device is cumbersome. So the ease with which a site can be navigated and items selected is of paramount importance.


Customer support Interfacing with a retailer’s CRM program is a nice addition.

PLC management n/a


Payment options n/a

Application type These applications are almost always synchronized with a traditional Web access mechanism (i.e., this solution should not be considered a mobile-channel only solution).

3.3 Shopping Tools

Many useful shopping tools are available for consumers from both retailers and third parties. These tools enhance the shopping experience and generally influence consumers indirectly. Adding these tools to a retailer’s application adds value to the application, making it more likely that a consumer will rely on the application. Such tools include:

• Reservations and product holds

Reservations and product holds enable a consumer on the way to a restaurant or store to hold a table or product.

• Card aggregation

Consumers want to minimize the number of different cards they carry. Mobile phones provide a unique opportunity to consolidate cards, especially loyalty cards, which have become more popular in recent years, on one easily accessible device.

• Nearby search

Applications running on phones equipped with GPS capabilities can determine the consumer’s location; the application can search for nearby stores, restaurants, products, and events.




• Recommendations

Deciding which product to purchase can be daunting; fortunately, guides are available on the Internet. Mobile applications can provide product recommendations at the time of purchase, which can influence consumer behavior. Retailers who can become trusted advisors to their customers will establish long-term relationships that can be very profitable.

3.3.1 Case Studies

Examples of mobile shopping tools are described in Table 8.

Table 8: Examples of Mobile Shopping Tools Applications

“Restaurant Reservations – Free, Instant, Confirmed.” OpenTable for iPhone allows consumers to make free restaurant reservations at over 11,000 OpenTable-enabled restaurants in the United States, Canada, and the United Kingdom. OpenTable members also earn Dining Rewards Points, redeemable for Dining Cheques that are good at any OpenTable restaurant.

CardStar lets consumers store and retrieve loyalty, reward, and club membership cards, which can be scanned directly from the screen at most retailers.

“Shop every store with every product on the web from your iPhone.” TheFind: Where to Shop determines which stores carry the products a consumer is looking for, where those store are located, and the on-line prices for those products. TheFind: Where to Shop locates the nearest store that carries a particular item. It can also find and display the prices charged for an item at other nearby stores and on line.

RedLaser uses state-of-the-art bar code recognition that can read virtually any product bar code using the iPhone’s camera, even without autofocus. RedLaser searches for low on-line and local prices from hundreds of thousands of retailers.




PICKKA Med identifies the right over-the-counter medicine for a health condition, based on symptoms and other factors such as age and preferences, and locates the product quickly. The application is an “expert pharmacist in your pocket.”


Shopping tools can use a variety of technologies and standards, depending on the implementation. For example:

• Bar-code scanning technology embedded in a mobile device allows products to be identified quickly and uniquely. Identification can be accomplished using specialized bar-code reading hardware or the phone’s camera.

• Shopping tools that adhere to GS1 standards can read all bar codes.

• NFC Forum tag types support reading NFC tags on products.

• The ARTS XML Item Maintenance schema (see Section 7.3.5) can be leveraged as the format for retrieving item information from the system of record.

• The ARTS XML Product Content Management schema (see Section 7.3.5) can be leveraged as the format for retrieving extended product information, like images, from the system of record.


Tools that help consumers shop can be both beneficial and detrimental. Providing more information than your competitors can provide an advantage. When done well, investments can lead to:

• Increased basket sizes

• Increased sales

• New customer acquisition

• Conversions


Table 9 lists considerations applicable to implementing shopping tool applications.

Table 9: Shopping Tool Application Implementation Considerations


Security n/a

Privacy n/a

Loss prevention n/a





SOA Many mobile shopping tools are extensions of current e-commerce tools. When this is the case, it is best to create a shared service following a SOA model.

Cloud computing Depending on the functionality, cloud computing may be applicable.

Data source Third-party tools often obtain product data from e-commerce sites. It may be better to formalize the partnership and explicitly export data.


Hardware costs n/a


Application integration Integration requirements vary by application type.

Ease of use on mobile device Many of the tools from third parties are limited by their access to information. Providing high quality and timely data can give retailers an edge over the competition.


Customer support Hopefully not applicable.

PLC management n/a


Payment options n/a

Application type These applications can be browser-based, message-based, downloaded, or native applications but are often more usable if they are native applications.

3.4 Product Information

Since the introduction of e-commerce, customers have come to expect rich product information that includes images, detailed descriptions, product comparisons, and reviews. Such information has traditionally been difficult to provide within a store due to space constraints. However, the mobile phone makes access to this information possible anywhere and at any time.

According to recent studies, a growing number of consumers are using their mobile devices to view product information in stores. A recent Motorola annual research study of holiday shoppers 26 found that more than half (51 percent) of consumers across 11

26

Motorola Global Holiday Shopper Study, January 11, 2010, http://85.133.72.103/ImageLibrary/detail.aspx?MediaDetailsID=861




countries used their mobile phones for in-store activities such as comparison shopping and for obtaining peer feedback, product information, and coupons. Figure 25, from a Gartner report,27 illustrates the frequency of different uses in a retail setting. The same report shows that the trend is increasing; more and more shoppers are using their mobile phones for shopping, and especially for obtaining product information.

Figure 25: Likelihood of U.S. Consumers to Use Mobile Phones for Shopping

3.4.1 Review Product Information Transaction Process

Figure 26 illustrates the general process customers use to review the product information available on an e-commerce site.

Figure 26: Review Product Information on e-commerce Site Transaction Process


1. The customer uses a mobile phone to access a retailer’s e-commerce application.

2. The customer displays the product information, typically by using the search function to search for a particular item and then clicking on a product image.

27

Gartner, February 2009.




3. The product display page (optimized for mobile) is presented.

Figure 27 illustrates a similar process that allows customers to review product information using a retailer’s application.

Figure 27: Review Product Information with Retailer’s Application Transaction

Process

1. The customer uses a mobile phone to log in to the retailer’s application, using an e-commerce login ID and password. (As an alternative, customers can use social networking credentials, such as a MySpace/Gmail ID to sign in or authenticate themselves to the application.)

2. A home page is presented that is optimized for mobile. This condensed page includes all the top-level categories.

3. The customer navigates to a category, selects it, and is then presented with all the products within that category.

4. The customer selects a product image, displaying a product information page optimized for mobile. The item can be added to the customer’s shopping cart, a product comparison list, or a mobile shopping list.

A simpler process, shown in Figure 28, allows a customer to review product information by first identifying the product.

Figure 28: Retrieve Item Information from a Picture Transaction Process

1. The customer selects an item.




• The customer can take a photo of the item with the camera in the mobile phone.

• As an alternative, the customer can select the item by scanning the item’s bar code (using the phone’s built-in camera) or by reading the NFC tag embedded in the product packaging.

2. The identifying data is analyzed (either using automated algorithms or manually) to determine whether the item is included in the retailer’s catalog.

3. The mobile phone retrieves the product information and displays it to the customer.

4. The product image and a rich set of item information are displayed on the screen and include, for example, additional information about the product, related items, and reviews.

3.4.2 Product Information from Friends

Mobile social networking is a growing phenomenon that is extending to retail in the form of social commerce. Shoppers have mobile access to a wide range of digital content created by others, including ratings, reviews, and images. Content can be shared with others over the mobile device. Rich community content can be tied to an item and identified by a bar code that the mobile device reads and displays. Shoppers can share specific information with specific friends.

3.4.3 Share Product Information Transaction Process

Two processes can allow friends to share product information. In the first process (Figure 29), a customer displays product information and is given the option to read ratings and reviews posted by other shoppers. (In the social context, this information can be filtered or sorted by friends.)

Figure 29: Read Friend's Ratings Transaction Process

The second process (Figure 30) allows a customer to display product information and provides an option for posting a new rating and reviewing the item.




Product Inform

ation

Customer

Retailer’s

application

My

friends

site

Figure 30: Post to My Friend's Site Transaction Process

3.4.4 Product Comparisons

Consumers in the store aisle can use mobile devices to view and compare information about multiple products, as they do on many e-commerce sites. Bringing this type of functionality into the store aisle is only possible using mobile devices. Retailers need to be careful that consumers do not have access to more and better information than store staff.

3.4.5 Compare Product Information Transaction Process

Figure 31 illustrates a process that allows a customer to compare information about products.

Figure 31: Product Comparison Transaction Process

1. The customer displays the retailer’s home page, optimized for mobile.

2. The customer finds the product category and displays a list of all of the products in the category.

3. The customer selects two products for comparison.

4. The mobile device displays a condensed comparison page that lists the attributes of both products in a table. The products can then be compared quickly, based on attributes and price.




3.4.6 Case Studies

Examples of product information mobile applications are described in Table 10.

Table 10: Examples of Product Information Mobile Applications

The Home Depot application lets consumers browse products by department, shop the local ad, find stores, obtain project know-how (including videos), and keep a shopping list.

The GAP's StyleMixer application lets consumers beam an outfit onto the consumer’s Facebook wall to solicit a friend’s reaction.

Amazon.com customers can use text messages to find and buy products sold by Amazon. Customers can find a product in less than 1 min and complete the purchase. The customer sends a text message to Amazon that includes product keywords, and Amazon replies with products and product prices. Customers can buy the item by replying to the text message.

In December 2008, Amazon.com launched an iPhone application that enables customers to search for items using photographs taken by their phones. Amazon tries to match the picture with products in inventory and returns the results, along with suggestions for other items the customer might like. The application also offers access to other retailers, such as Target, and allows users to buy with one click. The application includes a feature called “Amazon Remembers,” which allows customers to keep track of items they see.





Product information applications can use a variety of technologies and standards, depending on the implementation. For example:

• A mobile device with a camera can identify products, either visually or by scanning the product bar code.

• A bar-code scanning application can read GS1 bar codes.

• NFC Forum tag types can implement product information tags.

• OpenID, OAuth, or some other standard supports authentication.

• ARTS XML Item Maintenance, ARTS XML Product Content Management, and ARTS XML Price schema (Section 7.3.5) can be leveraged as the format for exchanging data. All three of these retail-specific standards make it easier to integrate multiple sources of data.

• ARTS XML Video Analytics (Section 7.3.5) can enable communication of content of an image for ease of analysis.


Providing additional product information at the time of purchase is one way to increase sales rates, but it can just as easily confuse consumers if they receive inaccurate or conflicting information. When done correctly, retailers who provide additional product information can realize the following benefits:

• Increased basket size

• Increased sales

• New customer acquisition

• Increased conversion rate

• Increased retention rate

• Increased shopping frequency


Table 11 lists considerations applicable to implementing product information applications.

Table 11: Product Information Application Implementation Considerations


Security The social aspects of this type of application require authentication using one or more standards such as Twitter, Facebook, or OpenID.

Privacy n/a

Loss prevention n/a





SOA Many product information tools are extensions of current e-commerce tools. When this is the case, it is best to create a shared service following a SOA model.

Cloud computing Depending on the functionality, cloud computing may be applicable.

Data source Most product information comes from the e-commerce system, but it is crucial to show in-store prices and not just e-commerce prices (which may be different).


Hardware costs n/a


Application integration Integrations necessary to obtain product information are fairly straightforward. Integrating with social applications can be more difficult.

Ease of use on mobile device The most difficult part is identifying the product. The easiest method seems to be by using a camera to read a bar code. Several libraries of application software are available for this purpose.



PLC management n/a


Payment options n/a

Application type These applications can be browser-based, message-based, downloaded, or native applications but are often more usable if they are downloaded applications.

3.5 Loyalty Programs

Typical loyalty programs include three major functions. One function allows the participant to sign up for the program; another provides some method of identifying the participant at check out, to award or redeem points; a third, administrative function, allows consumers to manage their accounts, typically using a Web site. Mobile phones allow all three functions to be combined in such a way that a consumer has constant access to the loyalty program. This convenience benefits both the program participant and the retailer.




The ability to tie a loyalty membership number to a mobile phone not only dramatically increases consumer participation in a loyalty program, it also enhances the data that is collected about that consumer. The average household belongs to 14.1 loyalty programs but is only active in 6.2.28 The main reasons for this discrepancy are typically a lengthy sign-up process, not understanding the program, not being able to quickly redeem the rewards, or simply not wanting to carry multiple cards or key fobs. The mobile phone can address all of these issues while allowing the program owner to develop data in addition to data about what the consumer does at the POS.

3.5.1 Loyalty Program Transaction Process

Typical examples of current mobile-based loyalty programs range from SMS-based text or mobile applications with bar codes or numeric codes to RF chips attached to cell phones. NFC-enabled phones and terminals allow consumers and retailers to interact directly when updating loyalty points, tracking, and redeeming rewards. Figure 32 illustrates one typical loyalty program process flow. Figure 33 illustrates an alternative flow (this specific implementation is included for illustrative purposes only).

28

Report by Colloquy, 2009, http://directmag.com/crm/news/less-half-loyalty-membership-colloquy-0413/?smte=wr




Figure 32: Example Loyalty Program Process Flow




Figure 33: Motorola Mobile Loyalty System29

Today’s solutions all provide similar functions. Customers can opt in to the programs from their cell phones by sending a short text message or going to a Web site. Once they have joined the program, customers using a bar-code based system are sent a phone application that contains an image of a unique bar code. As an alternative, the customer can receive the bar code through an MMS message or be sent something as simple as a text code, delivered using SMS. Follow-on coupons are sent to the customer, who can redeem them by scanning the bar code at the store’s POS system. (An SMS text code can be entered manually at the POS by a store associate.)

Another solution that works in much the same way uses special codes that are sent to the customer in a text message (avoiding the need to download an application). The customer opts in to the program in the same way as in the bar code system. Text messages are sent with the latest offers, which customers can redeem on line or in the store by providing the code at checkout.

NFC allows terminals to send loyalty points back to an NFC-enabled phone at the time of purchase or redeem them when the phone is held close to a contactless POS reader. Interim alternatives use RF tags affixed to cell phones or integrated into removable microSD cards that provide NFC capabilities. Weekly specials or coupons are then sent out in a text message or picked up by the consumer touching a smart poster with an NFC-enabled phone. To redeem the coupon, the customer’s phone is tapped on the POS

29

Mobile Marketing Associations, U.S. Consumer Best Practices Guidelines for Cross-Carrier Mobile Content Programs, V5.0, April 2010.




terminal. While neither the customer’s name nor any personal information is shared with the retailer, the customer’s buying behavior is tracked through an ID number assigned to each phone. Future offers can be tailored to specific items, times of visit, or other purchase data.

3.5.2 Case Studies

Examples of loyalty program mobile applications are described in Table 12.

Table 12: Examples of Loyalty Program Mobile Applications

IKEA has implemented a loyalty program that uses SMS text messages and a short code for enrollment. Discounts and coupons are sent to the consumer’s phone. The consumer scans the code at a mobile kiosk in the store to print out a physical coupon.

[No logo available]

Super Stop USA is a Minnesota gas station that is using SMS text messages to alert customers when gas prices go up. If the price has gone up by the time they arrive, they can save 5–10 cents per gallon by showing an attendant the text message. A sample text message might read “SUPER STOP GAS ALERT! Prices are rising to $2.99. We will follow soon. If we have already gone up, show us this message and save 10 cents/gal until 1pm tomorrow!”

Kerr Drug supports an application with a unique bar code that is downloaded to the phone. New offers are sent to the application on a weekly basis, and consumers receive a weekly text message reminding them to review new offers. The bar code is scanned at the POS using an image scanner, and all appropriate discounts are applied. This application is implemented by Motorola, using the process flow shown in Figure 33.

[No logo available]

Select quick service restaurants are implementing loyalty program participation that relies on an NFC sticker affixed to the customer’s phone. Weekly specials are sent out in a text message. The NFC chip is read at the restaurant’s POS terminal to redeem the coupon.

NFC stickers can double as two-dimensional (2-D) bar codes, so that retailers who do not have an NFC-enabled POS terminal can scan the bar code instead. NFC stickers are currently being tested by the following quick-service




restaurants:

• Dairy Queen

• Qdoba (Mexican fast-casual)

• Arbys

• Hot Box Pizza

Best Buy’s Reward Zone application allows consumers to access their points, purchase histories, and currently available certificates along with exclusive offers. The application lets them “browse all the great benefits that you get as a Reward Zone member and stay up-to-date on program announcements and membership tips.” Members can also shop for Best Buy products, check product availability at stores, read customer reviews, and share favorite products.

Starwood program members can access their Starwood Preferred Guest accounts, including point balances and upcoming stay details, from their phones. Members can also browse and reserve a stay at any of Starwood’s 890+ hotels and resorts worldwide, across nine brands.

Starbucks Card Mobile is a companion to the Starbucks Card. Starbucks Card Mobile allows consumers to check their Starbucks Card balance, reload the card, and view transactions. In 16 Starbucks stores located in California’s Silicon Valley and in Seattle, consumers using an iPhone or iPod Touch can actually pay with their Starbucks Card.


Currently the primary technology used to support customer loyalty programs is SMS text messaging, which provides for quick, simple, and widely available distribution. RF has also been used by retailers for some time; however, its use is limited. (Only the retailer who provides the customer with the RF chip can use the functionality.)

For use cases that involve scanning a mobile bar code, an image scanner is required; laser scanners are not able to read a bar code off a mobile phone. It is important, however, to assure that the image scanning technology has been optimized for reading a mobile phone, as some image-scan engines still lack the enhancements necessary to assure seamless performance on each scan.





Customer loyalty programs that are accessible from a mobile device can benefit the retailer in numerous ways, due to their unique features. Features and benefits include the following:

• Digitized membership cards are less costly than physical magnetic stripe cards.

• Automatic coupons and special offer redemptions that are offered on line can be brought into stores on the mobile phone. Providing such promotions at the time of purchase tends to increase redemption rates.

• Because it is easier to enroll in a loyalty program over a mobile device, membership, participation, and redemption rates increase.

• When a consumer has enrolled in the loyalty program using a mobile device, it is possible to track the consumer’s movements within the store (with their permission). This information can be valuable in understanding how consumers shop.

• When consumers opt in to a program over a mobile device, coupons can be sent to consumers’ phones when they are near stores, increasing the traffic in stores.

Allowing consumers to sign up for a loyalty program from their phones gives them the freedom to sign up at any time and anywhere. This added convenience not only increases the opportunities for someone to join a retailer’s loyalty program, it also enhances data accuracy and increases the efficiency of membership acquisition over current paper processes. Because information on how the program works resides on the consumer’s mobile device (as a mobile app or dedicated mobile Web page), the consumer can access this information and the consumer’s standing in the program at any time.

Consumers can take advantage of their rewards immediately when loyalty programs are available on a mobile device. Loyalty points can be transformed on the device into reward redemptions (such as mobile gift cards, mobile coupons, or even orders for physical rewards), thereby enhancing customer satisfaction and increasing the likelihood that customers will participate in the program.

Making a loyalty program available on a mobile phone assures that consumers will be able to use the program without the need to carry cards or key fobs. Using a mobile application, the consumer builds brand equity with the program and can start a one-on-one dialogue with the retailer. Since the mobile phone can communicate both voice and data, a retailer can collect valuable data on a consumer's viewing actions and purchase intentions, allowing the retailer to begin personalizing offers and communications for each member of a program. The ability to scan a mobile bar code, read an NFC-enabled mobile phone at the POS, or type in a mobile phone number will ensure that a consumer's purchases are always recorded. Data will not be missed because the consumer forgot to carry a card or key fob.

The demographic, technological, and behavioral data that the mobile device helps collect provides enhanced information about customers, giving retailers the ability to understand (with customers’ permission) who the customers are, where they are, what they want, and what they do not want at any time.




The ability to collect “closed-loop” data allows a retailer to deliver more relevant and personalized one-to-one offers over time at a fraction of the price of using mass market media. When a consumer views, indicates interest in, and ultimately redeems an offer, data can be collected, analyzed, and used to determine the next offer the consumer sees. The more data that is collected on an individual or across a population segment, the more intelligent a program owner can be about what drives consumer behavior and, therefore, what should and should not be sent in the future.


Table 13 lists considerations applicable to implementing customer loyalty program applications.

Table 13: Customer Loyalty Program Implementation Considerations


Security If a phone is stolen, there must be a way to deactivate the loyalty account.

Privacy Certain information must be protected, such as data to be collected at signup and on the mobile device (number of offer views, time, location), and spending patterns.

Loss prevention An application must protect against the use of fraudulent coupons.

SOA Most modern loyalty programs already support SOA for easier integration.

Cloud computing n/a

Data source Loyalty data typically comes from a CRM system, while targeted offers usually come from a promotions systems.


Hardware costs Depending on the technology used (NFC, fingerprint), readers attached to the POS can be expensive.


Application integration Readers must be integrated with the POS, and the POS must be integrated with the back-end loyalty system (as is true for most loyalty programs, mobile or not). ARTS UnifiedPOS can help.

Ease of use on mobile device To achieve widespread use, applications must be useful and very easy to use. No documentation should be required.


Customer support Integration is required with a CRM system, using standards such as ARTS XML Loyalty





PLC management n/a

Software development Customers should be able to access the following on their mobile devices (as opposed to other media): A unique membership bar code Coupons Rewards points Rewards options

Payment options n/a


3.6 Promotions and Coupons

The use of mobile smartphones by millions of consumers presents retailers with an opportunity to differentiate through advertising and promotion campaigns, loyalty programs, and merchandizing programs. Consumers typically carry mobile phones with them wherever they are—shopping, eating out, or riding public transportation. As a result, retailers can send personalized ads, coupons, and offers to customers that are based on who the customers are and where they are, creating and delivering better value for consumers and resulting in higher response rates. Retailers can also use smart posters and other media with embedded tags that can be tapped for detailed offers to let consumers with NFC-enabled phones decide which offers are of interest.

Currently, paper-based coupons typically produce a 0.5 percent redemption rate; the maximum rate does not exceed 1 percent. Early results show that personalized coupons delivered by mobile phone achieve redemption rates of up to 30 percent, according to Eagle Eye,30 a mobile coupon company in the UK, and Tetherball, a mobile loyalty company in the United States. Such data clearly show the power of mobile.

Retailers have begun to recognize this power and are beginning to participate in various types of mobile coupon and promotion programs. Interestingly, some retailers do not want to label such programs coupons or promotions, thinking that the concept of using coupons may not be well received by their typical customers. They are bundling coupons or promotions with their mobile loyalty programs, for which consumers sign up by providing their cell phone numbers and preferences. A consumer is given a contactless sticker on which a loyalty number is coded and asked to put the sticker on the back of the mobile phone. Merchants are seeing better participation from their customers with such loyalty programs (offered, for example, by Zapa Technologies in Europe or Tetherball in the United States) as compared to traditional programs.

The NFC-enabled phones with built-in contactless technology that are starting to emerge, such as the Samsung Star Smartphone, represent another option. Wallet software can be

30

http://www.nearfieldcommunicationsworld.com/2009/04/03/3928/eagle-eye-solutions-and-vivotech-to-offer-retailers-nfc-mobile-vouchers/




provided with NFC phones that allows consumers to carry their payment cards and loyalty cards, provision coupons into their phones over the air (OTA), touch smart posters to download coupons of interest, and redeem coupons electronically by tapping the phone to a contactless-enabled POS system. Figure 34 depicts different options for enabling phones with NFC chips.

Figure 34: Options for Enabling Phones with an NFC Chip

3.6.1 Approaches to Mobile Offers

Multiple approaches are possible for driving mobile-enabled promotions and coupons:

• WAP-based offers

• Text- or SMS-based offers

• Loyalty-program-based offers

• Smartphone-based wallet

• NFC-enabled phone-based wallet

WAP-based offers allow consumers to use the on-line browser and search engines on their smartphones to find ads, coupons, or promotions. Such coupons can be retailer specific (a discount coupon for Pizza Hut) or product specific (a discount coupon for a six-pack of Coke). The coupon or promotion can be redeemed through a 2-D or three-dimensional (3-D) bar code on the coupon or through a numeric code that can be entered manually by a sales clerk. (Some retailers accept such coupons manually.)

Text- or SMS-based offers require a consumer who signs up for a promotion program with a merchant to give the merchant a cell phone number. The merchant then uses text messages or SMS to send coupons and promotions directly to the consumer’s phone.

Loyalty-program-based offers allow consumers who sign up for a loyalty program to receive coupons, instant awards, and real-time redemptions. Coupons are sent by SMS or




MMS and redeemed by tapping NFC-enabled phones on a contactless-enabled POS. Coupons and promotions are settled through a back-end server (cloud based).

To receive offers in a smartphone-based wallet, consumers download a coupon management application to the smartphone. Consumers can search for and receive coupons using SMS or MMS. The coupons can be redeemed manually, by displaying the coupon on the screen and showing it to a sales clerk, or automatically, through a back-end server.

Consumers can also receive offers in an NFC-enabled phone-based wallet, downloading personalized coupons and promotions. They can receive a coupon by tapping the phone on a smart poster or shelf tag, or retailers (with permission to do so) can send them coupons and promotions. Consumers can carry and manage their coupons and promotions at all times and redeem them electronically by tapping their phones on a contactless-enabled POS reader.

One factor that is critical to the success of mobile advertising, coupons, and promotions is that consumers must be allowed to trigger the mobile marketing program. A consumer should be able to request (or opt in to) anything the consumer wants, whenever the consumer needs it, such as a promotion, coupon, or product information. An SMS-based proactive promotion campaign may be a good way to get started; however, a consumer may not always welcome SMS-based coupons or offers. Retailers want to avoid the spamming problems with which e-mail message campaigns contend. Currently such messages typically end up in the e-mail junk mailbox.

The contactless capability offered by NFC-enabled phones gives the consumer a greater level of control and makes it easier for consumers to trigger a promotion or a loyalty or merchandising program by tapping their phones on a shelf tag, smart poster, or POS terminal.

3.6.2 Case Studies

Examples of promotions and coupon mobile applications are described in Table 14.

Table 14: Examples of Promotion and Coupon Mobile Applications

Cellfire brings consumers coupons from their favorite brands, allowing them to save money at the grocery store. They can also access deals from multiple grocers and brands. A consumer can view the offers available in the area, select an offer, save it to the grocer’s savings card, and then use that card at check out to receive the discount.




Coupons.com’s application lets consumers access printable coupons, savings card coupons, and local coupons.

This application from Kohl’s displays all of the deals offered by the Kohl’s weekly ad on a phone. Ads can be browsed by category or brand to focus on items of interest. The application can also find the closest Kohl’s store locations.


Promotional applications can use a variety of technologies and standards, depending on the implementation. For example:

• ARTS XML Loyalty schema

• ARTS XML Customer schema

• ARTS XML Pricing and Promotion schema

• NFC


Mobile offers can produce in several benefits for retailers.

First, redemption rates for mobile offers are generally higher. This may be because the concept is novel, or it may be because the offers are delivered in context. For example, a coupon can be delivered to a person walking outside a store to entice the person to enter the store. When a coupon is immediately actionable, it provides greater value to the consumer. It should be noted, however, that increased redemption also means loss of margin. The offers must be used to influence behavior in a way that increases the long-term value of the consumer.

In addition, mobile offers increase a retailer’s ability to measure coupon effectiveness.

Finally, the costs of handling paper coupons can be significantly reduced by using digital coupons accessible over a mobile phone.


Table 15 lists considerations applicable to implementing mobile offer applications.

Table 15: Mobile Offer Application Implementation Considerations


Security n/a





Privacy Promotions delivered over a mobile phone almost always involve participation in a loyalty program, and all personal information must be protected.

Loss prevention In some cases, digital coupons are easier to counterfeit, so care must be taken to ensure that coupons are redeemed as the program intends.

SOA Coupon applications fit nicely as an SOA service.

Cloud computing Moving coupon applications into the cloud allows for the variability of the retail sales cycle by allowing for expansion and contraction of hardware and software needs as required.

Data source n/a

Store operations Mobile offers move the management of coupons to the digital arena and reduce the cost of managing paper coupons.

Hardware costs Modern scanners are able to read a bar code directly from the mobile device, resulting in no impact on the hardware infrastructure.


Application integration Applications can be integrated with the customer loyalty system using ARTS XML loyalty schema.



Customer support Mobile offers are a great way to interact with the customer to increase customer loyalty. The only requirement is an interface between the loyalty or coupon application and the scanner.

PLC management n/a


Payment options n/a

Application type These applications can be browser-based, message-based, downloaded, or native applications. Message-based (SMS) applications seem to be the most popular, due to the general availability of SMS on both smart and feature phones.




4. MOBILE COMMERCE

Mobile commerce (m-commerce) is the term used to refer to the sale of products and services using handheld devices and wireless networks. An m-commerce transaction typically involves mobile payment, in which money (or some other legal tender) is exchanged for goods and services using a mobile device.

Sections 4.1–4.8 describe mobile commerce. Mobile payment is discussed in Sections Error! Reference source not found.–4.14.

4.1 Mobile Commerce Categories

m-commerce activities can be grouped into two categories:

• Mobile browser-based m-commerce, which delivers Web sites optimized for mobile devices with which the consumer interacts using the mobile device’s Web browser.

Customers browse, search, research, select, save, and purchase from a retailer in much the same manner as through the retailer’s e-commerce Web site. The major difference is that the interface is optimized for the resolution and display space available on the mobile device.

• Application-based m-commerce, which relies on applications that are downloaded to and run natively on a smartphone or other mobile device.

Customers browse, search, research, select, save, and purchase from a retailer using the application and within the environment created by the application. The application is tied to the retailer’s IT systems through an application programming interface (API), through which content and shopping information is communicated to the consumer and order and customer information is integrated with the retailer’s systems.

4.2 Browser-Based m-commerce

The mobile Web is how many consumers interact with commerce opportunities over their mobile devices. Unlimited data plans are available from certain wireless carriers, so the costs to consumers of using the mobile Web can be low, and use of the mobile Web is becoming increasingly common.

For smartphone owners, using the mobile Web is almost the same as using a PC-based Web browser. But the typical mobile Web user today is probably frustrated. Mobile Web access currently suffers from interoperability and usability problems. These problems stem from the fragmentation of mobile device platforms and mobile operating systems and the variety of Web browsers found on different devices. Challenges are encountered in differing screen resolutions, screen sizes, various content delivery speeds, and the wide variety of user input methods, which cover the map from touch screen to stylus to buttons.




It is currently difficult for a retailer to design and manage templates that render well on may be just as hard to support all browsersdifferent mobile operating systems.phones comply (specifically, XHTML MP and WCSSimplementing cross-platform sites. Additionallyof further optimizing the browsing experience.

Figure 35 and Figure 36 contrast two popular approaFigure 35 illustrates an approach thatfor the consumer’s particular mobile device. This

Figure 35: Best-Practice Mobile Web High

Figure 36 illustrates an approach in whichdevice type. While this approach is effective, inconsistencies. Therefore, this

31

Forrester Research.




difficult for a retailer to design and manage a variety of mobile Web that render well on all browsers on all platforms and phones. In some cases

support all browsers as it is to support native appdifferent mobile operating systems. Standards exist with which most or all mobilephones comply (specifically, XHTML MP and WCSS) that are very useful for

platform sites. Additionally, some vendors offer technology capable of further optimizing the browsing experience.

contrast two popular approaches for enabling millustrates an approach that leverages common e-commerce services

particular mobile device. This approach is considered a best practice.

Practice Mobile Web High-Level Architecture

illustrates an approach in which specific content is provided for each mobile device type. While this approach is effective, it is not efficient and can lead to

this approach is not recommended as a long-term design.


ety of mobile Web platforms and phones. In some cases, it

as it is to support native applications for Standards exist with which most or all mobile

are very useful for some vendors offer technology capable

m-commerce. commerce services, optimized

best practice.

Level Architecture31

for each mobile not efficient and can lead to

term design.




Figure 36: Typical Mo

4.3 Application-Based

Much of the excitement about mapplications. Such applications have both advantages and disadvantages mobile Web-based m-commerce.

4.3.1 Advantages

Using m-commerce applications offers some key benefits over mobile Webcommerce:

• Enhanced customer experience and performance

• Additional shopping features

• Ability to leverage key device capabilities

• Offline browsing

A retailer who relies on applicationsthe content required to create the customer experience can be preloaded with application and even refreshed periodicallyconnection is detected). The retailercustomer can have a more engaging experience without waiting for pages to refresh and content to download. Relying on appas video, large zoomable images, or virtual catalogs freely.

The additional shopping featuressuch as search auto complete, search refinements, sorting, and social networking

32

Forrester Research.




: Typical Mobile Web High-Level Architecture32

Based m-commerce

Much of the excitement about m-commerce currently centers on the use of mapplications. Such applications have both advantages and disadvantages in comparison to

ommerce.

applications offers some key benefits over mobile Web

experience and performance

Additional shopping features

to leverage key device capabilities

applications can enhance the customer’s experience. Much of the content required to create the customer experience can be preloaded with application and even refreshed periodically (for example, when the presence of a Wi

. The retailer-customer interaction can be enrichecustomer can have a more engaging experience without waiting for pages to refresh and

download. Relying on applications enables a retailer to use rich contentas video, large zoomable images, or virtual catalogs freely.

dditional shopping features available through applications can include elements such as search auto complete, search refinements, sorting, and social networking


ommerce currently centers on the use of m-commerce comparison to

applications offers some key benefits over mobile Web-based m-

customer’s experience. Much of the content required to create the customer experience can be preloaded with the

when the presence of a Wi-Fi riched, and the

customer can have a more engaging experience without waiting for pages to refresh and retailer to use rich content, such

s can include elements such as search auto complete, search refinements, sorting, and social networking. These




features are bandwidth intensive and difficult to implement on the mobile Web but can be executed seamlessly within an application.

Because applications can leverage key device capabilities, retailers can use them to provide location-aware content, such as store locators or promotional offers, map integrations, and push notifications that inform a customer of changes and offers. Cameras in mobile devices can play a key role in mobile applications, scanning bar codes and QR codes and taking pictures of products to share socially. Applications can include features such as integration with a list of contacts or an address book, giving consumers easy access to address information while shopping.

Offline browsing is key for users of devices that do not have cellular access, such as the iPod Touch, or users who may want to interact while not on a network. Being independent of a network for key portions of the customer experience allows the customer to shop and interact and then place an order when connected to the network.

4.3.2 Disadvantages

Some retailers are reporting very strong growth from mobile applications. eBay, for example, expects to generate $1.5 billion in sales using mobile applications in 2010.33 However, as exciting as mobile applications are to retailers, there are potential disadvantages:

• Platform selection can be complicated

• Maintenance in a shifting environment can be an issue

• Content- and commerce-services integration introduce additional considerations

• SOA and cloud computing are required

4.3.2.1 Platform Selection

Platform choices depend on the retail market and the customer demographics, and choosing to support multiple platforms may costly and require extra support. Currently, for example, choosing a platform may involve any or all of the following considerations:

• Apple’s iPhone OS is now on version 3.2, with 4.0 to be available in the near future.

• Google’s Android OS is less than 3 years old.

• Multiple versions of the Research In Motion (RIM) OS are in distribution, powering a diverse assortment of devices.

• Symbian, while powering the largest number of devices in the world, lacks an effective software development kit and marketplace for distribution.

• Windows Mobile 6.5.1/Windows Phone 7.0.0/Windows 7 appears to be taking the same approach as Apple, building a closely controlled ecosystem.

33

“We clearly see that people want to shop on the go – last year we saw $600 million in eBay merchandise volume come through mobile devices and we expect to more than double that this year with $1.5 billion.” Steve Yankovich, vice president of mobile at eBay, San Francisco, CA. http://www.mobilecommercedaily.com/ebay-expects-to-generate-15b-in-merchandise-via-its-mobile-platform-in-2010/




Table 16 summarizes the current situation with regard to applications running on the most common platforms.

Table 16: Mobile Application Stores Market Shares

Store or catalog

iPhone Android Blackberry Windows Palm Nokia Samsung

Launched 7/2008 11/2008 4/2009 11/2009 6/2009 11/2009 1/2009

No. apps > 185K >30K >3K < 1K <1K <1K <.5K

No. apps downloaded

> 3B > 100M N/A N/A >1M n/a

Approx. device mkt. share

18% 3.5% 21% 9% (WM) 2% 46% (Symbian)

n/a

Source: Gizmodo, Distimo, jkontherun.com, Morgan Stanley Research, GetElastic.com, Forrester Research

4.3.2.2 Maintenance

Maintaining applications in a shifting environment can be a challenge. The device landscape and overall ecosystem will continue to evolve over the next few years. While Apple currently has a considerable advantage, Google is gaining market share, and RIM seeks to solidify their market position in the business segment.

By delivering applications, retailers in essence become software companies, even though they are shipping simple and (in many ways) standardized software. Keeping up with the evolution of devices and the quality assurance requirements associated with keeping up may prove problematic and costly.

4.3.2.3 Integration

Integrating content and commerce services is also an issue. Many applications have been developed quickly, by leveraging the feeds from on-line retailers to affiliate providers and marketplaces (such as eBay and Amazon Marketplace).

While using existing feeds is an effective shortcut, this form of integration can lack the real-time content provision, refresh, and management controls required by a retailer to serve consumers effectively. Interactive functions such as in-store inventory lookup are impossible. Integration that effectively supports order management, customer service, price, and promotion consistency will also prove problematic and the experience desired by customers may not be achievable.

4.3.2.4 SOA and the Cloud

Service-oriented architecture (SOA) in a variety of styles (such as SOAP, REST, JSON, and POX) that exposes e-commerce functions is required to support effective m-commerce applications and represents an additional investment (Figure 37). Ideally, the




services should expose the business logic and data entities used by the traditional ecommerce system to avoid building new information silos in the retailer’s environment.

Figure 37: Mobile Applications High

4.3.3 Future Considerations

The distinction between the mobile Web and downloadable native mobile applications is expected to blur as mobile browsers hardware, standards such as HTML5 and OMTP mature and are adopted, and the performance of browser-based applications improves. Persistent storage specifications and access to development of platform-specific retailers’ ability to support mobile

4.4 Case Studies

The examples of m-commerce mobile applications.

4.4.1 Mobile Ticketing

DSB, the national Danish Railroad, is lauapplication that allows customers to purchase tickets for regional trains and make seat reservations.

Figure 38 provides an overview of the customer experience:

34

Source: Forrester Research.




services should expose the business logic and data entities used by the traditional eommerce system to avoid building new information silos in the retailer’s environment.

: Mobile Applications High-Level Architecture34

Future Considerations

The distinction between the mobile Web and downloadable native mobile applications is expected to blur as mobile browsers achieve direct access to contemporary mobile device

, standards such as HTML5 and OMTP mature and are adopted, and the based applications improves. Persistent storage using

specifications and access to user interface functions may further reduce the need for the specific native applications. These changes will improve

’ ability to support mobile-based shoppers on mobile Web browser-based sites.

ommerce described here are supported by browser-based

DSB, the national Danish Railroad, is launching an iPhone-based mobile ticketing application that allows customers to purchase tickets for regional trains and make seat

provides an overview of the customer experience:


services should expose the business logic and data entities used by the traditional e-ommerce system to avoid building new information silos in the retailer’s environment.

The distinction between the mobile Web and downloadable native mobile applications is direct access to contemporary mobile device

, standards such as HTML5 and OMTP mature and are adopted, and the using HTML5

functions may further reduce the need for the . These changes will improve

based sites.

based and other

based mobile ticketing application that allows customers to purchase tickets for regional trains and make seat




Figure 38: Purchasing a DSB Ticket By Using an iPhone Application

The application is designed to require minimal user input, providing intelligent defaults for most choices. For example, the application uses the iPhone’s GPS feature to determine the customer’s current location. Tickets can then be purchased by specifying only the destination and authenticating the purchase with a user-defined password.

The application is fully integrated with DSB’s back office, ensuring that purchases are registered correctly in all relevant back-office systems. Payment is handled through PCI-compliant payment software that allows the consumer to pay with a payment card. Cards can be stored for future use. Access to stored cards is based on two-factor authentication to provide an appropriate level of security. Tickets are delivered both as an image and as UIC-918-3 compliant 2-D bar codes in AZTEC format.

To access the necessary data and comply with standard certifications such as PCI, the application is integrated with several systems through HTTP(S). Figure 39 is an architectural overview of the data exchange between the different systems.




Figure 39: Simplified Architecture for DSB Ticketing Application

By using a mobile payment platform integrated with their e-commerce payment service provider (PSP), DSB ensures that PCI compliance is pushed to the PSP while maintaining an optimal user experience during the payment process. Strong integration between the mobile payment platform and relevant back-office systems ensures that all transactions are completely transparent.

Payment is handled using a card or stored card scheme that enables spontaneous use of the ticketing application but ensures the lowest available transaction cost and provides the traveler with the ability to sign up for the service using a mobile device. This service enables tourist access to the payment application.

4.4.2 Other m-commerce Applications

Table 17 shows selected portions of the interface with the consumer (screens) and indicates the functionality provided by other current m-commerce applications.




Table 17: Examples of Other m-commerce Applications

Application Type/Retailer

Sample Screen Key Functionality

Browser-based Nordstrom

Mobile optimized Web-based e-commerce site






Browser-based Columbia Sportswear


Browser-based American Eagle Outfitters


Browser-based and WAP Moosejaw

WAP site versioned from an e-commerce site, accessible on mobile phones






Downloaded application Tommy Hilfiger

• Search and browse the product assortment

• Check out

• Persistent cart with Web-site based e-commerce site

• Account integration with Web-based e-commerce site

Downloaded application

eBay

• Pay with PayPal

• Share items on a social network

• Set alerts to notify users when they are outbid, an auction is ending, or they are making offers on an item

• View sold and unsold completed listings

• See eBay messages

• Call a customer support agent

• Leave feedback for a seller





Sample Screen

Downloaded application Amazon

Hybrid native and browser-based Target





• Access to a customer’saccount, wish lists, payments, shipping settings, order history, 1-click and Prime services

• Entire Amazon product catalog

• Full product catalog search

• Product information, content, and pricing

• Full-sized browser site handletransactions

• Daily timed promotions

• Entire product catalog for onbrick and mortar assortments

• Full catalog search

• Access to gift registries

• Ability to check balance, manageand purchase stored value cards

• Review local promotions on products

• Product UPC bar code locate deep product informa

• Store locator


Functionality

a customer’s Amazon cart, ccount, wish lists, payments,

shipping settings, order history, and e services

Entire Amazon product catalog

Full product catalog search

, content, and

browser site handles

Daily timed promotions

Entire product catalog for on-line and mortar assortments

Access to gift registries and lists

Ability to check balance, manage, and purchase stored value cards

Review local promotions on products

ode scanning to deep product information





Sample Screen

Native application Best Buy

Hybrid native and browser-based Home Depot





• Access to product search, browse, cart, account, and checkout

• Weekly deals

• Both on-line and brick assortments

• Advanced search

• Store locator

• Full-sized browser site handletransactions

• Weekly ads

• Do-it-yourself videos

• Deep product content


• Advanced search

• Store locator

• Shopping list


Functionality

ccess to product search, browse, and checkout

line and brick and mortar

browser site handles






Sample Screen

Native application JCPenney

Native application Macy’s


At present, a wide variety of applications implement their own unique interfacesmobile device. The use of standardized successful, cost-effective mobile implementation. Many standards currently exist, each covering a different aspect of the mobile ecosystem

• Web standards such as HTML, Java Script, and CSSbased applications

• ARTS XML POSLog

• ARTS XML Payments

• ARTS XML Digital Receipt

• ARTS XML Item Description and maintenance information

• ARTS XML Customer

• ARTS XML Price





• Promotional information

• Weekly ads

• Store locator

• Favorites list from promotional ads

• SMS promotions and c

• Access to product search, browse, cart, account, and checkout

• Promotion codes/coupons


• Advanced search

• Find it in store with product availability

• Store locator

Standards Employed

wide variety of applications implement their own unique interfaces. The use of standardized application–device interfaces is mandatory

effective mobile implementation. Many standards currently exist, each covering a different aspect of the mobile ecosystem:

Web standards such as HTML, Java Script, and CSS, which apply to

ARTS XML POSLog, for managing data captured at the POS

ARTS XML Payments

ARTS XML Digital Receipt

Description and maintenance information

ARTS XML Customer


Functionality

romotional information

ist from promotional ads

coupons

ccess to product search, browse, and checkout

oupons


in store with product

wide variety of applications implement their own unique interfaces for the interfaces is mandatory for a

effective mobile implementation. Many standards currently exist, each

apply to browser-




• ARTS XML Product Content Managemen, for managing images

• ARTS UnifiedPOS, for interfacing devices to POS terminals

• ARTS Data Model, for complete relational data design, data names, and descriptions


m-commerce is emerging as a channel similar to e-commerce that could achieve significant sales. But deciding whether to support m-commerce often depends on the type of retail business. For now, retailers should experiment to see whether their customers really need m-commerce solutions.

Cost efficiency is critical to launching and supporting an m-commerce solution. While the ROI associated with m-commerce for a multichannel retailer is increasing, it is still relatively small. And although consumer adoption rates are increasing rapidly, the volume of direct mobile transactions is also likely to be small. There may be an intuitive justification that m-commerce capability will be of benefit to the multichannel customer experience, but the benefits may be difficult to measure. The average m-commerce project has a small budget, often in the range of $15,000–$40,000, and that amount does not buy a lot of unique and custom features.

4.5 Implementation Considerations

Table 18 lists considerations applicable to implementing m-commerce applications.

Table 18: m-commerce Application Implementation Considerations


Security n/a

Privacy Promotions delivered over mobile phones almost always involve participation in a loyalty program, and all personal information must be protected.

Loss prevention In some cases, digital coupons are easier to counterfeit, so care must be taken to ensure that coupons are redeemed as the program intended.

SOA SOA enablement is an efficient approach for utilizing only the services one needs.

Cloud computing Because of elastic scaling and virtualization, cloud computing becomes a very cost-effective deployment strategy.

Data source The m-commerce site must contain up-to-date inventory, price, and promotional data, but it must also contain fresh product data, assortment taxonomy, and brand assets such as Web content. Inability to provide such content can be one of the prime limitations of an agency approach, due in part to the requirement to work through a third party to keep the site up to date (a key opportunity in working with your platform provider). Many





agencies and specialty firms are taking advantage of a retailer’s affiliate or marketplace feeds to power mobile sites, but such feeds represent a limitation, as they typically offer only a subset of a retailer’s total inventory and lack catalog management features.

Store operations By allowing the customer to select and purchase items using a mobile device, m-commerce can have a significant impact on store operations.

Hardware costs n/a


Application integration A number of different standards will be necessary to make m-commerce cost effective.



Customer support Normal customer support activities are required to manage m-commerce (such as keeping the site up, making sure connectivity is maintained).

PLC management In part because m-commerce makes a small revenue contribution, and because most e-commerce teams are already running very lean, management of the m-commerce site must be tied to a retailer’s current site merchandising and management tools. Management needs are among the most important reasons to consider using a platform solution provider as opposed to a specialty mobile commerce firm. To be sustainable, content management, category management, product content, site content, and order management need to be supported through current Web channel tools.


Payment options Either mobile remote or mobile contactless or both will be necessary to pay for the items purchased.

Application type Retailers must consider whether to adopt the mobile browser-based or mobile application-based approach to implementing m-commerce. Retailers are naturally drawn to the user experience and branding capabilities inherent in mobile applications. For the foreseeable future, however, the prime customer use case for mobile interaction will probably rely on the browser-based approach: using the browser on a smartphone to interact with a retailer’s Web site.

Supporting a site optimized for mobile must be the primary m-commerce consideration today. The retailer’s Web site is going to





be most cost efficient and easiest to support through the retailer’s e-commerce platform environment. Downloaded applications are important; however, they are not the low hanging fruit on the m-commerce tree. A loyal customer may love your application but is very unlikely to download it on the way to the mall or store.

4.6 Other Key Considerations

Other key items to consider before selecting an approach to m-commerce are the following:

• Availability of easy payment solutions

• Integration of order management and customer care

• Phone platform support

4.6.1 Easy Payment Solutions

Among the most effective tools for enabling m-commerce can be integration with a quick-order system, customer account, or software wallet that enables the consumer to perform transactions quickly and easily using secure and PCI-compliant Web services. Such tools are one of the reasons Apple has had so much success with the iPhone and iPod Touch, and these tools make it easier for Amazon’s customers to complete transactions using Amazon’s applications on smartphones or Kindle.

Significant innovations in mobile payments are anticipated from Apple, Amazon, and PayPal and new solutions are emerging from the banking and telecom industries. (For more information about payment, see Sections 4.9-4.14.)

4.6.2 Integrated Order Management and Customer Care

The m-commerce solution should be integrated with the retailer’s e-commerce and direct channel order management and customer care capabilities. Otherwise, costs will increase and customer satisfaction will be significantly affected. Enabling a persistent and “portable” cart that allows a consumer to shop not only over the Web or on a mobile device (and, in the future, through other interfaces) but also over other channels simplifies the customer experience and provides benefits for the consumer. Such a capability also helps retailers measure the multichannel effect of m-commerce. This capability requires a consistent customer authentication capability.

4.7 The Virtual Store

One of the goals of this Blueprint is to suggest how things can be done in a mobile world. Virtual reality is one area that will lend itself to use of mobile devices, extending the way teenagers shop.

Teenagers shop by first going to a store with their friends. There they spend hours trying on clothes, looking at items, and getting their peers’ approval. They then return with their parents, find the items they chose previously, and get their parents to purchase the




items. The virtual world extends this shopping experience beyond the physical store to wherever teenagers are.

Virtual goods represent an over-$2-billion global market. Currently, virtual worlds such as Farmville, YoVille, WeeWorld, and Imeez, are destination sites where people congregate, meet new friends, dress their avatars, and buy virtual goods using virtual currency. These worlds are built around social elements. A game like Farmville (for example) allows players to post their achievements to their Facebook profiles and compete against friends, creating a massive loop.

Companies acting as aggregators bring high-value copyrighted materials into these virtual worlds and social networks to sell. Virtual goods may include clothing, celebrity likenesses, consumer products, jewelry, or fashion items. The presence of these virtual goods, which are available throughout over 80 virtual worlds (some of which reach over 10 million individual visitors each month), may constitute an argument for retailers with recognized brands to license their properties to the virtual worlds. In other words, virtual worlds present a unique marketing opportunity for targeting a highly desirable demographic.

Imagine a player in one of these virtual worlds being able to use a mobile device to “enter” a real store (such as Abercrombie and Fitch) to buy virtual clothing items for an avatar. Or imagine a denizen of Farmville, where over 11 million players congregate each day to manage a virtual farm, entering a Home Depot storefront on the site to buy products for the farm. These virtual products could represent real opportunities, presenting registered consumers with special offers or discounts at stores chosen on the basis of the consumer’s location.

The return from virtual goods is primarily based on a revenue share model. For each virtual good sold, a certain percentage goes to the copyright holder, a certain percentage goes to the distribution platform (for example, Farmville), and a certain percentage goes to an aggregator, if one is involved. (Depending on how expensive the products are, there may also be cases where dollar advances are involved.) This space is a relatively low margin, high volume space, but one that involves a large population, which in turn may create a unique distribution and promotional outlet alongside incremental revenue streams.

To pay for virtual goods, consumers register their credit cards, use their profiles, or use mobile payments, which is a relatively new method that is implemented by placing a “pay by mobile” button next to the virtual goods. Buyers indicate how many credits they want to purchase, type in their mobile number, press send, and receive a message requesting purchase validation; if they reply to the message in the affirmative, the purchase is added to their mobile phone bill (for more information on mobile payments, particularly payments added to the carrier bill, see Section 4.10.7). Those credits are then applied to a user’s profile, making the purchase of virtual goods safe, easier to accomplish than with a credit card, and much faster.




4.8 Parental Approval

Another interesting potential for mobile retail is to allow a parent to manage a teenager’s purchases. For example, a teenager arrives at the checkout stand with a shopping basket. The associate scans the items. The teenager needs parental approval before being allowed to use a mobile device for payment. The teenager therefore sends a request to a parent with the items and amount. The parent responds with an approval of the purchase.

4.9 Mobile Payment Overview

When payment for goods or services is initiated from a mobile phone or similar device (such as a personal digital assistant, smartphone, or tablet), it is referred to as mobile

payment. Juniper Research has estimated that the “total value of mobile payments for digital and physical goods, money transfers and NFC (Near Field Communications) transactions will reach almost $630 billion by 2014, up from $170 billion in 2010, representing the gross value of all purchases or the value of money being transferred.”35 Juniper further forecasts that by 2014, the mobile payments market for physical goods will be $100 billion.

4.9.1 Advantages of Mobile Payment

Mobile payment has several potential advantages for the retail industry:

• Increased convenience. In the past, people did not leave home without their wallets, but today’s consumers are more attached to their mobile phones. Having one device capable of many functions, including payment, simplifies the shopping experience.

• Improved security. Leveraging the powerful processor in a mobile phone to perform better authentication and authorization decreases the chance for theft.

• Greater value from payments transactions. Mobile payments programs can enhance the value proposition for retailers in two primary ways:

� Innovative approaches to processing payments can reduce costs.

� Mobile coupons, loyalty, and the like can enhance marketing effectiveness.

Use of a mobile phone can also enhance the payment process itself; the phone’s computing power and flexibility can support applications that are coupled with payment (e.g., loyalty programs, coupons, reward programs) and provide the consumer with additional payment choices through the use of mobile wallet software. A mobile wallet on the phone or a connection through the phone to an online wallet allows a consumer to pay for purchases using a wide variety of payment types and currencies, including coupons and loyalty points.

35

Juniper Research, ”Mobile Payments Markets: Strategies & Forecasts 2010-2014.”




4.9.2 Types of Mobile Payment

Retail mobile payments can be generally classified as one of two types. How the payment accounts are provisioned for consumer use and how the consumer accesses the accounts will depend on the mobile payment type and technology:

• Mobile remote payments, which are payments made to a retailer who is remote from the consumer.

• Mobile proximity payments, which are payments made to a retailer at the retailer’s physical location by a consumer at the POS. Mobile proximity payments include mobile contactless payments made using NFC technology.

Mobile payments can be further characterized by the mobile access technology used to initiate the payment and the account used for funding and settlement (Figure 40, contributed by Morris Advisors). The focus is on payments made by a consumer to a retailer. The use of person-to-person payments, an emerging mobile payment area, is beyond the scope of this document.

Figure 40: Mobile Payment Access Technologies and Funding Options

4.10 Mobile Remote Payment

Mobile remote payment marries traditional and innovative online payment methods with the 21st century consumer’s favorite gadget: the mobile phone. Most mobile phones

Mobile Payment Type and Access Technology Funding and Settlement Option*

MobileRemotePayments

• Messaging

o Short Message Service (SMS)

o Multimedia Messaging Service (MMS)

• Browsing

o Many browser types, e.g. Safari, Android, Blackberry, Internet Explorer Mobile

• Apps

o Many operating systems, e.g. Apple iOS, Android, Blackberry, Windows Mobile

• Bank Payment Accounts

o Credit network, e.g. Visa, MasterCard

o Debit network, e.g. STAR, NYCE

o General Purpose Reloadable (GPR)

o Automated Clearinghouse (ACH)

• Retailer Payment Accounts

o Private Label Credit

o Private Label Prepaid / Gift

• Wireless Carrier Payment Accounts

o Direct-to-carrier billing

o Premium SMS

o Isis™ mobile commerce network

• Alternative Payment Providers

o Bank-centric,e.g. Secure Vault Payments™

o Non-banks, e.g. PayPal, Bill Me Later

• Co-Branded Payment Accounts

MobileProximityPayments

• Near-Field Communications (NFC)

o Contactless sticker

o Memory card

o NFC-enabled handset

• Bar Codes

o Display bar code on handset

o Scan using handset camera

• Numeric Authorization Codes

* Retailers may find some funding account types more suitable for either remote or proximity payments, but all of the above are generally available for both online mobile payments and those at a physical point of sale.




deployed over the last 5 years are equipped with the functionality to enable remote mobile payment.

Mobile remote payment offers retailers the opportunity to sell goods to consumers who are not physically present in a store and delivers the capability to communicate directly with the consumer, providing an up-sell mechanism. Mobile remote payments are ideal for use in markets that use person-to-person payments, for underbanked consumers, and for retailers who are not part of the normal POS acquirer payment process, such as flea market vendors and seasonal outside vendors.

Practical use cases for mobile remote payment include making purchases from a Web retailer over a mobile phone, paying a retailer who does not have traditional acceptance capabilities for physical goods, paying a retailer for digital goods, or paying at a vending machine. Mobile remote payments can be implemented using either the existing financial payments infrastructure (e.g., for payment to a Web retailer) or a closed-loop mobile payments system.

Because retailers cannot release goods until payment has been made, mobile remote payment sits at the foundation of successful m-commerce. The mobile remote payment solution must optimize the payment experience for the mobile phone and protect the data involved. Optimization entails automatically recognizing the consumer and storing the consumer’s payment methods securely to provide a “one-click” experience similar to what is available from Amazon or Apple iTunes. The implications for data security differ, depending on whether payment credentials are stored in the mobile device or in a remote secure server.

4.10.1 Enabling Remote Payment

Mobile remote payment is enabled through one of the three technologies, or subchannels:

• Messaging technology

• Browser-based technology

• Application-based technology, including native applications (clients)

Consumers can switch seamlessly between the three subchannels when required by a specific scenario. For example, a consumer can use messaging to order an item displayed on a billboard and a browser to surf to the retailer’s mobile Internet site. Application-based options are required for certain demographics, such as iPhone users. (Native applications generally provide a better user experience than browser-based solutions but reach a smaller audience.) Mobile remote payment supports spontaneous remote sign up and top up and can be integrated with any funding and settlement account shown in

Figure 40, including prepaid/stored value accounts, ACH/bank accounts, credit/debit cards, and a carrier’s bill.

Mobile remote payment involves three separate systems: the payment (database) schema, the mobile payment infrastructure, and the consumer front end. The payment schema can be owned by the retailer, provided by an ACH provider, or based on current card or operator infrastructures. The mobile payment infrastructure provides the business logic required to link the front end with the payment schema and allows the consumer to choose a specific method of payment.




Mobile remote payments cantransaction.36 For this reason, retailers must consider the characteristics of the channels when selecting a mobile remote payment approach. flow for a mobile remote payment storedschema can be delivered through any of the subchannels, thus reducing the need to prinphysical receipt.

Figure 41: Mobile Remote Payment (Stored Value) Payment Flow

Mobile remote payment applications typically accounts using one of three approaches:

• Messages

• A mobile browser to access a mobile Web site

• An Internet-based alternative payment provider

These payment channels and funding accounts are described in more detail in the following sections.

4.10.2 Message-Based Remote

SMS is the technology used most often ubiquity and ease of use. A consumer sends a payment request to a or CSC (a telephone number),bill or mobile wallet. Severalrequired to complete a transaction. The

36

Candidate data channels use SMS, WAP




can use a variety of mobile phone data channels to initiate a For this reason, retailers must consider the characteristics of the channels

when selecting a mobile remote payment approach. Figure 41 shows the typical process flow for a mobile remote payment stored-value transaction. ARTS Digital Receipt schema can be delivered through any of the subchannels, thus reducing the need to prin

: Mobile Remote Payment (Stored Value) Payment Flow

emote payment applications typically enable underlying funding and settlement one of three approaches:

browser to access a mobile Web site

based alternative payment provider

These payment channels and funding accounts are described in more detail in the

Remote Payment

used most often for mobile payment, mainly because of its ubiquity and ease of use. A consumer sends a payment request to a common or CSC (a telephone number), and a premium charge is applied to the consumer’s phone bill or mobile wallet. Several SMS or MMS exchanges with the retailerrequired to complete a transaction. The retailer is informed that the payment

SMS, WAP, or USSD protocols.


ile phone data channels to initiate a For this reason, retailers must consider the characteristics of the channels

shows the typical process value transaction. ARTS Digital Receipt

schema can be delivered through any of the subchannels, thus reducing the need to print a

: Mobile Remote Payment (Stored Value) Payment Flow

enable underlying funding and settlement

These payment channels and funding accounts are described in more detail in the

mainly because of its common short code,

and a premium charge is applied to the consumer’s phone retailer are usually

the payment has




succeeded and then releases the item purchased to the consumer. Ordering and confirmation use SMS; delivery of rich content uses MMS or a link through which content is downloaded. MMS can also deliver bar codes to the consumer, which can then be scanned to confirm payment and match the consumer to the item purchased.

The advantages of an SMS implementation are that it requires no investment in a mobile network or user devices and can be accomplished within a short time. The disadvantage is that consumers need to memorize a command and a short code (which can vary by transaction), and the level of encryption is defined by the mobile network and therefore is usually minimal.

Typically, the items purchased using SMS implementations are digital items such as music, ringtones, and wallpapers, because no trusted delivery address is given.

Message-based payment methods were popular in the early stages of mobile payment. However, they may not provide the best long-term option, for the following reasons:

1. Poor reliability. Payment can easily fail if messages are lost.

2. Slowness. Sending messages can be slow, and it can take hours for a retailer to receive payment. Consumers typically do not want to wait more than a few seconds.

3. Lack of security. SMS encryption ends at the radio interface, so the message is in plain text.

4. High costs. Many high costs are associated with this payment method, including the costs of setting up short codes and paying for the delivery of media, and the customer support required to account for messages that are lost or delayed.

5. Low payout rates. The high costs to operators of running and supporting transactional payments result in payout rates to retailers as low as 30 percent.

6. Low follow-on sales. Once the payment message has been sent and the goods received, there is little additional action the consumer can take. In addition, messages do not help consumers remember where something was purchased or how to buy it again, which also makes it difficult for them to tell a friend.

7. Poor risk management. Operators provide no risk management for purchases made using a mobile billing system, and retailers are not guaranteed to receive their money, despite confirmation from the operator billing system that the charge has been applied.

8. No protection for consumers or retailers. Consumers receive no purchase protection and must contact the mobile operator to dispute any charge. Merchant settlement typically takes place after the consumer pays the mobile bill, which can delay payment for 30–90 days.

Even with these shortcomings, it is predicted that SMS will maintain its position as the most popular technology for delivering mobile payments through 2012.37

37

Gartner, “Dataquest Insight: Mobile Payment 2007-2012,” April 27, 2009, G00168197.




4.10.3 Browser-Based Remote Payment

Browser-based payment relies on the consumer using the mobile phone's browser to access a Web page to make a payment. Sensitive data can be communicated securely using secure socket layer (SSL) protocols. The mobile experience is very similar to the computer-based experience, with the following benefits:

• Follow-on sales. Mobile browser-based payments can lead the consumer back to the retailer's URL, making future access or sharing with friends easier.

• Familiar user interface. Consumers appreciate the quickness and predictability of the payment pages. In addition, a mobile payment is easy to make, because the Web pages and processes are familiar.

Browser-based payment involves several implementation challenges:

• Low use rates. Gartner estimated in 2008 that mobile Web users account for only 16 percent of mobile users in North America and 28 percent of mobile users in Western Europe.38 In addition, small devices make entering payment information tedious.

• Perceived expense. Consumers perceive mobile Internet to be expensive. In research conducted by Nielsen Mobile in April 2008, 23 percent of respondents cited air-time charges as a reason for not engaging in mobile commerce.39

4.10.4 App-Based Remote Payment

Mobile commerce applications can include payment capabilities. Client applications often include the same features as the browser-based versions but are more convenient to use. They may leverage SSL for security or use their own proprietary encryption approach. Because mobile commerce applications usually rely on a payment method that is already registered with the retailer, the consumer is not required to key in data using the mobile phone.

4.10.5 Funding and Settlement Accounts

In addition to the enabling mobile channels, a mobile payment implementation must consider the underlying funding and settlement account. An increasing number of payment types are available to consumers and retailers, especially for online payments, including credit and debit cards, ACH-based online payments, and payments from various third-party providers.

The list of alternative payments available for mobile remote payment is even longer, since the wireless carrier’s bill represents a potential funding account. Although it is likely that retailers will be encouraged by consumer demand to accept many different payment types, such acceptance is not always a requirement. Each funding account approach involves different payment processing costs, settlement risks, security, and ease of use.

38

Ibid. 39

Ibid.




4.10.5.1 Credit and Debit Cards

One funding option for mobile remote payments is credit and debit cards. Credit and debit cards are fairly ubiquitous, at least among banked consumers, and bank payment cards remain the most prevalent funding account for e-commerce purchases made from the desktop. Credit and debit cards may not be the best option, however, for m-commerce.

4.10.5.2 Prepaid Accounts

Prepaid accounts represent one of the fastest growing payment types and can be an effective funding source for mobile remote payments. There are two major types of prepaid accounts:

• General-purpose reloadable prepaid debit cards

• Private label gift or prepaid accounts

General-purpose reloadable (GPR) prepaid debit cards are network-branded cards that can be used at any merchant accepting the network brand. These cards are typically issued by a bank and are sometimes managed by a prepaid program manager, such as Green Dot or NetSpend. GPR cards are widely used by consumers who either do not qualify for a traditional checking account or have found the GPR card to be a more attractive alternative. GPR cards provide ATM access to cash and can be used for direct payroll deposit, reloaded with value online or at retail reload locations, and used for purchases online or in retail stores. Since those in the underbanked demographic often depend on their wireless phones for telecommunications and access to the Internet, it is a natural fit to consider mobile payment options for GPR cards.

Private label gift or prepaid accounts are closed-loop payment accounts that can only be used for purchases at a particular retailer. They can either be intended to be used up and discarded (many gift cards), or they can be reloadable (many stored value accounts). The Starbucks Card program is an example of a widely used private label reloadable prepaid account.

If the mobile phone is used as the form factor, private label prepaid accounts need not be tied to a plastic card. Retailers can set up a prepaid funding and settlement account into which the customer can load value and use for mobile payments. Since retailers control the POS environment in their stores, private label payment accounts (including prepaid and private label credit accounts) give retailers greater flexibility in establishing mobile access. Provided that the mobile access technology for the private label payment account is enabled at that particular retailer’s mobile checkout or physical POS, the retailer can be assured that consumers will be able to make mobile payments successfully. In a closed-loop environment, there are fewer dependencies on payment networks, wireless carriers, or other stakeholders in the payments ecosystem. Private label payment accounts also typically offer the lowest payment processing costs. In addition, because the consumer is enrolled with the retailer instead of a bank or other third-party for payment, these accounts provide the best integration with the retailer’s loyalty programs.




4.10.5.3 ACH Network and Secure Vault Payments™

Retailers should consider alternative payment options that leverage the ACH network to connect the retailer directly to the consumer’s checking account for debit processing. The ACH network is a cost-effective option for funding both mobile remote payments and mobile proximity payments. NACHA provides support in the form of rules and governance, including transaction codes specifically designed for mobile transactions, for two types of ACH payments:

• Direct ACH debit

• ACH credit

A mobile direct ACH debit transaction is one in which a consumer uses a mobile device to make one or more purchases over the Internet or a wireless network, and the retailer sends an ACH debit to the consumer’s account for each authorized purchase. In most instances, the consumer will have already registered with the retailer and identified Internet ACH as a preferred payment method. The consumer must also have registered with a payment provider (the merchant or a third party) and provided account and routing numbers for a bank demand deposit account (DDA). The transaction is then processed through the ACH network using a Standard Entry Class (SEC) code, such as WEB (this code is assigned to consumer debit transactions in which the consumer’s authorization is provided over the Internet or a wireless network). The consumer’s DDA, typically a checking account, is directly debited by the merchant.

Consumers can also register with a retailer for SMS alerts, which prompt the consumer to purchase items based on payment instructions received in an SMS or text message that the consumer authorizes when the consumer registers with the retailer. When a consumer then chooses to purchase something from the retailer, the retailer must authenticate the consumer as the retailer would in a traditional on-line environment and must also capture an authorization from the consumer. NACHA’s operating rules for Internet consumer debits impose additional obligations on retailers to help prevent fraud and mitigate risk. Consumer payment preference and checkout can also be integrated with retailer mobile applications, and mobile browser-supported Web sites can include various solutions that support loyalty cards, coupons, and the like.

Direct ACH debit payment is a low cost method that provides merchants with direct access for payment, and settlement of funds usually occurs within 24-48 hr. In most cases, direct ACH debit payment solutions are accompanied by a commercially reasonable form of risk mitigation that ensures consumer identity, funds availability, and account status.

Figure 42 is an overview of the direct ACH debit payment process.




Figure 42: ACH Debit Purchase Transaction Process

An ACH credit is a second type of payment supported by NACHA to fund mobile payment transactions. Financial institutions supporting remote mobile applications can facilitate an ACH credit payment to the merchant or biller. One example of this form of payment is NACHA’s Secure Vault Payments™. Consumer enrollment is not required to use Secure Vault Payments; the only requirement is that the consumer’s bank be a participant. Unlike an ACH debit payment, the use of an ACH credit does not require the merchant or biller to obtain, store, or protect any consumer financial information. The ACH credit payment solution works as follows:

1. The consumer shops in whatever manner is supported by the merchant (for example, using a mobile Web browser or a specific remote mobile application).

2. At checkout, the consumer is offered Secure Vault Payments as a payment choice.

3. The consumer is then securely redirected to the consumer’s financial institution’s mobile site, where the consumer is asked to provide authentication and authorize the financial institution to send an ACH credit in the amount of the payment to the merchant or biller.

4. The consumer is then securely redirected to the merchant’s mobile Web site or application for payment receipt.

5. The merchant receives instant verification from the financial institution and payment is guaranteed. Settlement of funds occurs within 24–48 hr.

Figure 43 is an overview of the direct ACH credit payment process.

Merchant

ACH File

Authorized ACH Debit Network Settlement Funds

Merchant FI (ODFI)

Consumer FI (RDFI)

Consumer Mobile Payment Checkout

Consumer Merchant Mobile Site




Figure 43: ACH Credit Payment Transaction Process

4.10.6 Third-Party Providers of Alternative Payments

Alternative payment providers such as PayPal, BillMeLater, Amazon, and Secure Vault Payments were originally created to facilitate Internet purchases and bill payment. The leading alternative payment providers already include mobile purchase capabilities, and it is likely that all providers will support mobile payments in the near future. Adoption rates for alternative payment methods have continued to increase, and industry analysts project an even higher market share in the next 3 years. As an example, according to The

New York Times, PayPal is expected to handle more than $700 million in mobile transactions in 2010.40

The traditional business arguments for Internet retailers to offer multiple payment types include lower shopping cart abandonment rates, additional sales, and lower transaction costs. These same arguments apply to mobile purchases. The consumer with an Internet-capable phone can browse the Web and shop at Web sites that provide navigation for the mobile device, or in some cases, retailers can push product information using SMS. The consumer can select a link that leads to a checkout screen. The payment provider commonly offers a convenient form of authorization, usually taking the form of a short pass code or account identifier, which is issued to the consumer on request.

Using these payment types for POS purchases can require a consumer to perform several actions to complete a payment request. As a result, one of the critical success factors is a

40

http://www.nytimes.com/2010/11/29/technology/29paypal.html

Merchant

ACH File

ACH Network Settlement Funds

Merchant FI (RDFI)

Consumer FI (ODFI)

Consumer Mobile Payment Checkout

Authentication and Payment Authorization

Consumer

From: Bank of Trust Please enter your mobile payments

Merchant Mobile

Site

Consumer Bank

Website




simple, convenient user experience. This may require that the retailer integrate with the payment provider to create a more seamless mobile checkout experience. Figure 44 illustrates how Buy.com has implemented this approach.

Figure 44: Using Alternative Payment at Buy.com

Retailers who have a Web site for commerce transactions generally build customer profiles to simplify the checkout process. For the customer to log in to this site for the payment portion of a transaction is ideal, allowing the retailer to retain customer history, use an existing payment infrastructure, and create a flexible mobile checkout process. This approach can also alleviate the retailer’s security concerns, because it uses an existing system.

As the use of mobile payments grows, the need to consolidate Internet-based payment systems with mobile payment systems will increase. Consolidation will be driven by the need to reduce processing and support costs for retailers and providers while simplifying the payment process for consumers.

4.10.7 Wireless Carrier Billing

The use of alternate payment systems for mobile remote payments raises a number of issues, since such use requires merchant adoption, consumer adoption, and user

1. Mobile commerce web site

4. Login to retailer mobile web site or third-party payment provider to make payment

2. Select item for purchase 3. Select mobile checkout

- OR -




registration. The registration process often includes downloading plug-in software and establishing a user ID and password.

An alternative funding source for mobile remote payments is wireless carrier billing. Carrier billing has one major advantage over alternative payment approaches: there is already a billing relationship with most of the adult population in the U.S. and most of the developed countries in the world.

In late 2010 three of the largest wireless carriers in the U.S., AT&T Mobility, T-Mobile USA, and Verizon Wireless, united to form a nationwide mobile commerce network in the U.S. This is the first instance of carriers working together to standardize wireless carrier billing. According to their Web site, http://www.paywithisis.com:

“The Isis™ mobile wallet will eliminate the need to carry cash, credit and debit cards, reward cards, coupons, tickets and transit passes, fundamentally changing how you shop, pay and save. All with your phone.”

The carriers intend to use NFC, but no other details have been released.

There are two options for backend implementation of carrier billing:

1. Premium SMS

2. Direct mobile billing

Both options are described below.

4.10.7.1 Premium SMS

Premium SMS (PSMS), also known as MNO billing, is probably the most successful implementation of mobile payment. It provides content owners and certain merchants with the ability to offer mobile payment without requiring the consumer to preregister (other than by owning a mobile device with almost any kind of wireless carrier plan).

PSMS offers three different billing options: SMS, MMS, and WAP billing. All three use a mechanism that creates a billing action on the subscriber’s phone bill.

The process flow is simple. Typically, a consumer sees a request for action and sends a keyword to the specified number, most often a short (4- or 5-digit) number (a CSC). The merchant then initiates the billing action. This simple mechanism enables spontaneous purchases and provides the mobile phone number to the merchant in the process.

This type of billing has been used mostly to sell entertainment products, such as digital content or codes to access gaming sites. However, certain more business-oriented cases have been launched quite successfully. Among those are activation codes for wireless access points, ticketing (bus and subway), and access to digital media such as newspaper articles.

Figure 45 illustrates the PSMS ticketing flow at Danish Rail, which in less than 5 months converted 29 percent of single-trip tickets for which travelers paid cash to PSMS paid tickets. Danish Rail negotiated a deal with the local MNOs for a transaction fee of 5 percent, which is low for PSMS (typical PSMS fees range from 25-50 percent, depending on the country and MNO).




Figure 45: Example of PSMS Ticketing Flow

An agreement in place across the EU allows merchants to sell physical goods using PSMS, and SMS can be used to provide the consumer with a legal receipt. The maximum amount allowed per single transaction is €30.

Several issues prevent PSMS from achieving widespread use by traditional retailers:

• The cost per transaction, which is typically 25–50 percent

• The settlement time, which is typically 30–90 days

• Acquiring risk, often assumed by the merchants

• Limits on transaction value, which in the U.S. are $10, and in Europe, €30

Some MNOs are investigating improving the usefulness of PSMS. If they succeed in resolving the cost, settlement, and risk issues, even with the limits on transaction value, PSMS could be very useful for low value payments.

4.10.7.2 Direct Mobile Billing

As discussed in the section above, PSMS has several shortcomings.

Direct mobile billing (DMB) addresses these challenges by using real-time carrier billing integration and two-factor authentication.

Authentication is performed by the carrier in real time. The customer’s standing is checked (e.g., the customer is not delinquent, the account is not a corporate or government account), and fraud rates have been reduced to the levels achieved by credit card companies.




Using a one-time-password, the aggregator is able to confirm that the phone number entered by the customer is in fact the phone that the customer is carrying. DMB represents a payment system that is as effective as the credit card payment network.

Currently, DMB is used mostly to purchase apps for mobile phones and game subscriptions on the Web. This situation is expected to change quickly, as more and more vendors are coming out with low value digital content such as songs, videos, e-books, newspaper articles, and reviews.

4.11 Mobile Proximity Payment

Mobile is unique: it not only offers retailers many new access channels (e.g., voice, text messaging, mobile browser, apps), it is also a cross-channel enabler. Mobile brings the features of other channels into the store aisles. Consumers enter retail stores every day with their mobile phones in hand: it is natural to consider that the phone could be used to initiate payment at the physical POS. This type of mobile payment, when the consumer and the mobile phone are together in the physical store, is referred to as a mobile proximity payment.

One technology that is critical to any discussion of mobile proximity payment is NFC, which is useful for mobile contactless payments. NFC is a rich technology that, once widely deployed, has great potential for mobile retail, but it is not without challenges. NFC requires special hardware both in the mobile phone and at the retailer’s POS. Although it appears that NFC-enabled phones will soon be widely available, it will be years before the majority of consumers have them. In addition, not all retailers have the required contactless readers as a part of their POS infrastructure, and the business case for installing new POS hardware can be challenging.

As a result, approaches that leverage a mobile phone’s access channels, use existing POS hardware, and do not require NFC can be attractive alternatives. Such mobile proximity payment options for retailers include the use of barcodes, Internet-based alternative payments for payments in a physical store, and numeric authorization codes.

4.11.1 Mobile Contactless Payment

Mobile contactless payment leverages the financial industry’s contactless payment infrastructure and NFC technology. An NFC-enabled phone is provisioned with a version of the contactless payment application and the account offered by the consumer’s payment account issuer. The payment process is the same as that used by the contactless credit and debit cards currently being deployed. To pay, the consumer simply brings the phone to within a few inches of the POS system. The payment account information is sent from the phone to the POS over a radio frequency, and the transaction occurs.

Mobile contactless payments can be made at both attended POS locations (such as stores) and unattended locations (such as vending machines) and uses the existing payments processing infrastructure. There is no need to set up payment processes or accounts with a third party, and the mobile contactless payment data is linked directly to a consumer payment account from a trusted issuer. Payment processing is unchanged: payment data is sent though existing networks and processes follow existing arrangements for the




payment type. Table 19 lists four current commercial deployments of mobile contactless payments.

Table 19: NFC Mobile Contactless Payments: Commercial Deployments

Location Participants Description

Ireland Zapa, Irish retailers (Insomnia, Munchies, Eddie Rockets, Londis)

Subscribers use NFC stickers to download/redeem coupons, collect/use loyalty points, pay with prepaid cards. Zapa also offers a mobile phone application for checking account balances. http://www.zapatechnology.com

Malaysia Maxis, Visa, Maybank

This was the first commercial launch using the NFC phone with an embedded secure element. http://www.maxis.com.my/mmc/index.asp?fuseaction=press.view&recID=373

France Orange-France, SFR, Bouyges Telecom, NRJ Mobile, BNP Paribas, Credit Mutuel, Veolia, Samsung, Gemalto, Oberthur

Nice-based commercial service announced in May 2010 with four mobile operators and multiple banks offering NFC mobile contactless payments for both transit and retail purchases. http://www.nfctimes.com/news/french-make-it-official-nice-nfc-launch

China China Unicom, Beijing Municipal Administration and Communications Card Co (BMAC), Watchdata

Commercial service, launched in June 2010, for payment for retail and transit services. http://www.nearfieldcommunicationsworld.com/2010/06/09/33896/china-unicom-launches-nfc-payments-service-in-beijing/

4.11.1.1 Payment Options and Enhancements

Implementing mobile contactless payment by leveraging NFC-enabled phones offers the potential for new payment options.

To encourage widespread use of the NFC phone as a payment device, the phone can be equipped with a mobile wallet. A mobile wallet allows a consumer to download, organize, and use multiple payment accounts and cards—either bank- or merchant-branded—from the mobile phone. Consumers carry their payment choices on the phone and choose a payment option from the mobile wallet at the time of purchase, just as they do using a physical wallet or purse. Mobile wallet software can be preloaded on the phone or downloaded from an application store or an authorized Web site. Figure 46 illustrates a mobile wallet.




Figure 46: Mobile Phone with Wallet Software

The payment accounts and cards on an NFC phone can be thought of as “soft cards." The images of the soft cards displayed by the wallet software can incorporate the card issuer’s branded look and feel, as on a plastic card. The images can be displayed at the time of purchase, to help consumers select which payment account or card to use.

A mobile wallet gives consumers flexibility in choosing a payment option and can support a variety of use cases. For example:

• The wallet can be set up with a consumer-defined default payment card that is used unless the consumer selects a different card. To use the default card to complete a transaction, all the consumer has to do is hold the mobile phone close to a contactless POS terminal.

• The wallet can be set up to support issuer-defined rules for when to require additional consumer authentication (e.g., a pass code). The requirement for additional consumer authentication can be determined at the time of each transaction, using the two-way communication capability between the POS and the mobile phone.

• The wallet can be set up to allow the POS terminal to prompt the wallet to use a specific payment card in the wallet (e.g., a store-branded card). The consumer would still have to confirm that selection.

The payment application, issuer’s secret key, and consumer's financial information, such as an account number and expiration date, are stored in the NFC phone's secure element (which provides hardware-based cryptography for data security41). Depending on the implementation, the secure element can be:

41

While the secure element may vary by mobile network, in most cases it will be implemented as a smart card chip. Smart or "chip" cards are used globally in payments, identity, security, and telecommunications applications. The subscriber identity module in a GSM phone is a smart card, and the EMV ("chip and PIN") credit and debit cards being issued in Europe, Asia, Latin America, and Canada are smart cards. Smart cards have built-in tamper resistance and the unique ability to store large amounts of data securely,




• A secure smart card chip (similar to the one used for contactless payment cards or EMV contact smart cards)

• The memory of the phone’s subscriber identity module (SIM), enhanced with further security to meet payment industry requirements

• An add-on accessory, such as a sticker, microSD card, or phone sleeve

Location of the secure element in a phone is still being debated by the financial industry and may vary by mobile network type (SIM-based as opposed to non-SIM based).42 Regardless, the secure element is certified by the payment brands and ensures that the consumer's payment account information and issuer data are stored securely and can only be used for authorized applications. Vendors are starting to offer SIMs with additional cryptographic capability that allow for secure storage of not only the consumer's payment account information but also the branded contactless payment applications being supported by the financial industry (such as MasterCard PayPass or Visa payWave).

Figure 47 is an example of an NFC-enabled mobile phone provisioned with wallet software and a secure element.

Figure 47: Example of NFC-Enabled Mobile Phone Provisioned with Wallet and

Secure Element

Consumers can request soft cards by clicking a few buttons on their NFC-enabled phones and identifying themselves to the issuers. The soft cards can then be downloaded over the mobile network from the card issuer, facilitated by a TSM, and stored in the mobile

carry out their own on-card functions (e.g., encryption and digital signature), and interact intelligently with a smart card reader.

42 "Alternatives for Banks to Offer Secure Mobile Payments," Mobey Forum white paper, March 2010, http://www.mobeyforum.org/?page=white-paper-alternatives-for-banks

Mobile Wallet • Branding • Payment and card information • Selection of card • Configuration and protection • Other services (loyalty, coupons, ID)

NetworkSecure

Element • Storage of

multiple payment applications and payment cards from different

ManagerNFC

Chip • Communicatio

n with contactless




phone's secure element. Enhanced OTA management capabilities could enable issuers to activate cards or cancel lost, stolen, or overdetails on the mobile contactless payment flow and the participants in a payment transaction.)

Pilot programs implementing mobile credit and debit card paymentinfrastructure. However, minfrastructure. For example, an NFC pilot conducted in the San Francisco Bay area in January–May 2008 by Sprint, First Dataloaded with a BART transit card and the wallet and could be used to ride BART trains and pay for mealrestaurants. Figure 48 illustrates the wallet used i

Figure 48: NFC Phone Wallet Used in BART/Jack in the Box Pilot Program

4.11.1.2 Retailer Advantages

NFC solves one of the most critical problems face today: wallet share. Once a branded card to their NFC phonephone. Based on early NFC field trials of all mobile subscribers own paymentmobile phones to pay for purchases more often than phones can offer consumers more choice and convenience in selecting different payment methods than other payment technologies.

In addition, NFC-enabled phones work with the existing contactless and transactions are treated in the same waydebit cards. However, greater oppotechnology is added to the contactless interaction, allowing the POS terminal to sendRetailers can use this information for a vor redeem coupons, update loyalty point

43

Impress, "K-tai White Paper 2010




Enhanced OTA management capabilities could enable issuers to s or cancel lost, stolen, or over-limit cards. (Section 4.13 provides additional

details on the mobile contactless payment flow and the participants in a payment

s implementing mobile contactless payment have focused on implementing credit and debit card payments that leverage the current contactless payment acceptance

mobile contactless payment is not limited to relying on . For example, an NFC pilot conducted in the San Francisco Bay area in

May 2008 by Sprint, First Data, and ViVOtech tested an NFC phoneBART transit card and a Jack in the Box prepaid card. Both coexisted in

the wallet and could be used to ride BART trains and pay for meals at Jack in the Box illustrates the wallet used in this trial.

: NFC Phone Wallet Used in BART/Jack in the Box Pilot Program

Retailer Advantages

NFC solves one of the most critical problems with magnetic-stripe cards face today: wallet share. Once a retailer motivates its customers to downloadbranded card to their NFC phones, customers will always carry that card with

ased on early NFC field trials and multiyear data from Japan (where 67of all mobile subscribers own payment-capable phones43), customers tend to use their mobile phones to pay for purchases more often than a physical wallet. Moreover, NFC phones can offer consumers more choice and convenience in selecting different payment

ethods than other payment technologies.

enabled phones work with the existing contactless POS infrastructure, and transactions are treated in the same way as transactions that use contactless credit and

greater opportunities are available to the retailer when NFCis added to the contactless POS reader. NFC enables true twoallowing the POS terminal to send information back to the mobile handset.

information for a variety of new applications (for example,or redeem coupons, update loyalty point totals that can then be displayed on the phone,

tai White Paper 2010."


Enhanced OTA management capabilities could enable issuers to provides additional

details on the mobile contactless payment flow and the participants in a payment

payment have focused on implementing contactless payment acceptance

relying on this . For example, an NFC pilot conducted in the San Francisco Bay area in

and ViVOtech tested an NFC phone wallet aid card. Both coexisted in

at Jack in the Box

: NFC Phone Wallet Used in BART/Jack in the Box Pilot Program

that retailers download a retailer-

carry that card with their (where 67 percent

customers tend to use their Moreover, NFC

phones can offer consumers more choice and convenience in selecting different payment

infrastructure, as transactions that use contactless credit and

rtunities are available to the retailer when NFC enables true two-way

back to the mobile handset. ariety of new applications (for example, to return

be displayed on the phone,




target promotions to individual consumer tastes, and send receipts). The business case for eliminating or reducing paper versions of coupons and receipts may be enough to justify any additional costs attributable to the reader hardware. The retailer will also see value from the perceived eco-friendly practice of avoiding paper-based solutions.

4.11.2 EMV and Mobile Payments

The Europay MasterCard Visa (EMV) specification44 defines technical requirements for bank cards with embedded microchips and for the accompanying POS infrastructure. With few exceptions (primarily in the United States), financial institutions worldwide issue EMV bank cards to businesses and consumers. Over 1 billion EMV cards and 15.4 million EMV POS terminals are active globally.45 The primary purposes for including a chip in a bank card are to store cardholder data securely, protect the data stored on the chip against unauthorized modification, and reduce the number of fraudulent transactions resulting from counterfeit, lost, and stolen cards.

The United States did not choose to implement EMV at the same time as Europe, Canada, Latin America, and Asia. The U.S. has historically had relatively low fraud rates, due to 100 percent online authorization and sophisticated real-time fraud detection by the issuer authorization systems. In addition, substantial costs are associated with the deployment of an EMV infrastructure. Chip cards are more expensive than magnetic stripe cards, POS terminals require additional features to read the card, and legacy back-office systems must be upgraded. Without a perceived fraud problem and given the cost of implementation, U.S. financial institutions and merchants were reluctant to make the investment required to convert the legacy bank card infrastructure to the EMV standard.

Today, however, several factors are driving the U.S. payments industry to reconsider implementation and deployment of EMV for payments. Most important are increasing rates of card-related fraud and the cost of enhancing security features incrementally. In addition, the investment being made by merchants to comply with the Payment Card Industry Data Security Standard (PCI DSS) and by the industry to implement new capabilities for contactless and NFC mobile payment transactions provides an opportunity to move to EMV in the U.S. Moreover, U.S. travelers abroad are discovering that their magnetic stripe bank cards are sometimes rejected.

4.11.2.1 What is EMV?

EMV is an open-standard set of specifications for smart card payments and acceptance devices. EMVCo, owned by American Express, JCB, MasterCard, and Visa, manages, maintains, and enhances the EMV specifications to ensure global interoperability of chip-based payment cards with acceptance devices, including POS terminals and ATMs.46 The specifications apply to both contact and contactless credit and debit cards (both are being issued).

44

The original founders of the EMVCo standards body were Europay, MasterCard, and Visa—hence the acronym “EMV.” Information on the specifications is available at http://www.emvco.com.

45 "EMVCo: More than 1 billion EMV cards in circulation," SecureID News, October 7, 2010, http://www.secureidnews.com/2010/10/07/emvco-more-than-1-billion-emv-cards-in-circulation

46 http://www.emvco.com/about_emvco.aspx




The EMV specifications improve the security of EMV payments in several ways: by storing payment information in a secure chip rather than on a magnetic stripe, and by defining new functionality in three areas:47

• Card authentication, which protects against counterfeit cards. Cards can either be authenticated online, with an authentication cryptogram, or offline, with static or dynamic data authentication and an authentication cryptogram.

• Cardholder verification, which authenticates the cardholder and protects against lost and stolen cards. EMV supports offline and online PINs and signatures, and no cardholder verification. An EMV transaction that requires no cardholder verification is typically a low value contactless transaction or a transaction at an unattended POS location.

• Transaction authorization. Transaction authorization uses issuer-defined rules to authorize transactions and can be performed on line (as is current practice in the U.S. with magnetic stripe cards) or off line.

Migration to EMV has not been mandated for the U.S. market; however, industry stakeholders are starting to explore which implementation options in the EMV specification will meet U.S. market needs in the most cost effective manner. The implementation of EMV requires changes to the payment infrastructure for issuers, merchants, and acquirers/processors, with the scope of the implementation dependent on which EMV features are supported (e.g., contact or contactless interface, cardholder verification method required, online or offline card authentication).

4.11.2.2 EMV and Mobile Contactless (NFC) Payments

Contactless payment for EMV transactions can be implemented in an NFC-enabled mobile phone that adheres to the EMV contactless communications standard; pilot programs are underway internationally.48 A contactless payment application is downloaded into the NFC-enabled mobile phone's secure element and wallet and used at the installed base of EMV contactless POS terminals.

4.11.2.3 Implications for Retailers

If the U.S. payments infrastructure moves to EMV, merchants will need to install EMV-compliant POS systems that support contact or contactless EMV transactions (or both). Contactless EMV POS terminals can accept EMV mobile contactless payments from NFC-enabled mobile phones.

47

In addition to payment application security features, an EMV card includes a secure smart card chip, which is tamper-resistant and includes a variety of hardware and software capabilities that immediately detect and react to tampering attempts, countering possible attacks.

48 Two examples are an NFC EMV trial in Kuwait, with the National Bank of Kuwait, Visa, Zain, and ViVOtech (http://www.vivotech.com/newsroom/press_releases/NBK_Visa_Zain_Middle%20East.asp) and an NFC trial at the 2010 Mobile World Congress that included GSMA, Telefonica, Visa, Samsung, Giesecke & Devrient, Ingenico, ITN International, and La Caixa (http://www.nearfieldcommunicationsworld.com/2010/02/15/32738/nfc-trial-begins-at-mobile-world-congress/)




Retailers should consider the possible mandate of chip and pin by Visa and MasterCard in making changes to their POS and payment processes for mobile. An ideal solution would be sufficient security within mobile payments to eliminate the need for EMVco.

4.11.3 Bar Code Payments

The largest commercial deployments of mobile proximity payments in the U.S. market use bar codes to initiate the payment transaction. There are two primary approaches:

1. Smartphone applications display a bar code on the phone’s display that can be read by an optical scanner at the retailer POS.

2. Smartphone applications use the phone’s camera as an optical scanner to read a bar code displayed on the POS terminal.

In both cases, mobile payment software must be integrated with the retailer’s POS system. 2-D bar codes are generally used, since they can be read more easily by an optical scanner (or a smartphone enabled as an optical scanner). No special hardware is required at the retailer’s POS if the phone is used as the optical scanner. Although it is preferable for the POS terminal to have a display capable of rendering a dynamic bar code, the bar code can also be displayed on signage that simply identifies the store and checkout lane.

With some variations, the process flow for bar code payments is as follows:

1. Upon registration for a mobile payment account, the consumer specifies funding account options, which are stored in a secure server by either the retailer or a third-party payment provider. The consumer can also specify a default payment account. This server-side mobile wallet can be accessed by the consumer through secure signon to the smartphone’s mobile payment application (for example, requiring a user ID and password or PIN).

2. After the items to be purchased are scanned at checkout, a billing transaction is created by the retailer’s POS software and added to a virtual queue, pending a matching payment transaction from the consumer.

3. A payment transaction is sent to the queue when the 2-D bar code is scanned, either OTA using the consumer’s smartphone application or using the POS software.

4. The two transactions are then matched based on information passed using the 2-D bar code or other mobile channels (e.g., GPS) or both.

5. Once the matching transactions have been identified, the smartphone or the POS application prompts the consumer to confirm the payment account of choice and provide final authorization.

Table 20 provides a more detailed summary of each bar code payment approach.




Table 20: Bar Code Payment Approaches to Mobile Proximity Transactions

Approach Considerations

Display 2-D bar code on phone, read at POS with optical scanner

Optical scanner hardware required at POS.

Mobile payments software required at POS.

Not feasible for e-commerce or other venues.

Not necessary to store payment credentials either in the phone or at the POS.

Payment transaction could potentially be completed even if smartphone app did not have OTA connectivity.

Display 2-D bar code on POS terminal, read with smartphone

No new hardware required at POS (terminal capable of rendering a dynamic bar code preferred but not required).

Mobile payments software required at POS.

Can be used to facilitate payments in multiple venues, including physical POS, and e-commerce.

Not necessary to store payment credentials either in the phone or at the POS.

OTA connectivity required for smartphone app to initiate and authorize the payment transaction.

4.11.3.1 Commercial Deployments

Currently, the two largest commercial mobile proximity payment implementations in the U.S. market, the Starbucks Mobile Card and the Target mobile app, use bar codes to initiate the payment transaction.

The Starbucks Mobile Card is a smartphone app that allows consumers to register a Starbucks Card, check card balances, and enjoy rewards. The program includes the ability to pay at the POS. The app allows the consumer to enter the card number, and the phone displays a barcode that can be used to pay at the POS (Figure 49). As of December 2010, mobile payments are accepted nationwide at over 1,000 Starbucks locations, including those in Target stores as well as a wide network of Starbucks stores in New York City.




Source: www.starbucks.com

Figure 49: Mobile Proximity Payment at Starbucks

Target’s smartphone application allows users to “mobilize” Target gift cards. Similar to the Starbucks program, a bar code is rendered on the smartphone screen, which is read with an optical scanner at the POS to facilitate payment against the prepaid account (Figure 50).

Source: www.target.com

Figure 50: Mobile Proximity Payment at Target

Step 1 Step 2

Step 3 Step 4




4.11.4 Numeric Code Payments

Although the rapid adoption rates for smartphones have been impressive, and the proliferation of NFC-enabled phones seems imminent, most consumers still carry feature phones with SMS and voice as the primary channels. Such phones are even more common with teenagers, a key demographic for many retailers. For this reason, it would currently be unwise to deploy mobile payment solutions that depend exclusively on smartphones (or NFC).

In addition, the cost of incremental POS hardware can be a significant barrier to implementing mobile proximity payments. POS devices and accessories, such as PIN pads, NFC-capable contactless terminals, and barcode scanners, constitute the largest technology cost for most retailers. Even inexpensive devices represent a significant cost when more than one must be purchased and installed. For this reason, mobile payment approaches that require only new software at each POS can represent a lower cost approach to implementation.

One strategy for retailers is to develop a plan that addresses all short-term requirements for completing mobile transactions while positioning retailers to take advantage of more capable devices as such devices become more common. One approach is to use a third-party mobile payments solution that leverages a numeric “authorization code” to initiate the mobile payment transaction. To complete the sale, this code is entered by the consumer into a PIN pad or by a cashier into the POS.

4.11.4.1 Benefits

There are a number of reasons for adopting the numeric code payment approach:

• To expand the reach of the mobile payments offering. Numeric codes work on any mobile device

• To bring a mobile payments solution to market immediately.

Retailers may need an immediate solution to achieve a competitive advantage or respond to a competitive threat. Immediate access to all consumer devices is a compelling argument.

• To mobilize a retailer’s private label payment programs.

Retailers may find that providing a mobile payment option will propel the adoption and use of their proprietary payment programs, including private label credit and private label prepaid/gift cards. While open-loop payments, such as bank cards, require many different retailers to deploy a similar mobile payment technology (such as NFC) to be successful, closed-loop proprietary retailer payment products are uniquely suited for mobile payments deployment in advance of NFC, since they require only that the mobile payment approach be viable in a single retailer’s locations.

• To deploy mobile payments in retail venues and for use cases where NFC is not suitable.

For example, a diner may not feel comfortable allowing the server in a restaurant to take the diner’s phone to an NFC contactless terminal or barcode reader.




Mobile POS devices that resolve this issue represent an additional hardware expense for the retailer.

• To minimize incremental infrastructure.

Retailers taking a long-term view of mobile will want to design and implement loosely coupled architectures. Such architectures allow them to start supporting mobile payments immediately, with low technology consumer devices, while positioning themselves to leverage emerging technology. Minimizing the amount of throwaway infrastructure lowers the total investment required.

4.11.4.2 Process Overview

The numeric code payment process begins when the consumer is convinced to enroll in the program by providing personal details. Consumer opt-in typically involves collecting the consumer’s name, phone number, e-mail address, and method of payment and storing the data using a Web application. After the consumer is registered, the consumer can download an application or store a short code for SMS transactions.

The next step occurs when, as part of a mobile transaction, the consumer elects to pay for something from the consumer’s account. This payment decision reserves funds in the selected funding account, and the consumer is provided with an authorization code. The consumer then gives the authorization code to the cashier at the retail location. The cashier selects “mobile” as the transaction type and enters the authorization code provided by the consumer. The POS validates the code (similar to validating a credit card), and the consumer receives the goods or services.

Settlement is accomplished as follows. As part of a setup process, the retailer provides the payment merchant with ACH bank information for each location where mobile transactions will take place. The payment merchant settles all consumer cash transactions daily to the appropriate ACH account. For non-cash transactions (e.g., coupons or loyalty points), the payment merchant reconciles the consumer’s and retailer’s accounts without involving the ACH accounts.

The payment merchant provides the retailer with detailed monthly statements for both non-cash and cash transactions. An invoice for the agreed transaction fees is also generated monthly. Note that these fees are in addition to any ACH fees.

4.11.4.3 Retailer Actions

Retailers will be required to take the following actions to deploy this type of mobile payment:

• Decide how to settle transactions.

The settlement process should minimize the extra steps required of in-store or accounting personnel. Retailers should consider using a third-party firm that can provide seamless integration.

• Create a plan to market the new payment type to consumers.




Incremental marketing is required to convince consumers to provide personal and payment information to a third party. The plan will vary by retailer but could include offering private label gift cards, discounts, or other value-added offers.

• Ensure that the POS can handle the selected authorization methods.

The POS system will probably require updated software to handle the mobile authorization code. Third-party firms recognize this as a challenge and are actively seeking partnerships with major POS vendors.

• Develop a marketing and training plan for employees.

As with any new program, a training plan for employees is essential to success. Consumers will quickly lose interest in using mobile technology if poorly trained employees are slow to complete transactions.

4.12 Implementation Considerations

Retailers who are planning to implement mobile payment must consider certain fundamental issues. The mobile payment approach should fit into the retailer's overall mobile strategy and support the retailer’s key business drivers. In addition, the approach should be forward-looking, to allow for expansion of mobile programs as mobile payment becomes mainstream.

4.12.1 Mobile Proximity Payment Considerations

Primary business drivers for accepting mobile payment at the physical POS using NFC technology include the following:

• Enable and drive acceptance of alternative payment types.

• Provide better customer experience and convenience in making payments.

• Move lines faster.

• Deliver enhanced customer service by providing (for example) personalized coupons, loyalty points, and receipts to the consumer’s phone.

Non-NFC approaches, such as bar codes and numeric authorization codes, should be considered in the following situations:

• The retailer does not currently accept contactless payments or is concerned about mobile payment approaches requiring large investments in POS hardware.

• The retailer’s merchant acquirer processor does not offer NFC-compatible contactless POS terminals or cannot provide assistance in implementing mobile contactless payments. In this case, the retailer might want to consider finding a merchant acquirer that can better support the retailer’s mobile payment requirements both today and into the future.

• The retailer wishes to deploy mobile payment approaches that work on any mobile device, regardless of whether the device is enabled with the appropriate NFC chip.




• The retailer has closed-loop, private label payment programs that could be enabled for mobile payment using the access technology chosen by the retailer, regardless of how the infrastructure for open-loop payments may evolve using NFC.

Developing partnerships that propel the retailer’s private label payment programs can allow retailers to realize early benefits from mobile proximity payment, regardless of access technology, by influencing consumers to use this payment type. For example, retailers can “mobilize” gift cards with bar code payment applications or consider offering their private label payment cards in the form of NFC-compatible contactless stickers (Section 4.12.3.1) and begin enabling mobile contactless transactions for consumers before NFC-enabled mobile phones are commercially available.

4.12.2 Store Requirements

Store requirements depend in part on which mobile proximity payment approach the retailer adopts.

To accept mobile proximity payments using NFC technology, one basic requirement is installation of a contactless payment acceptance infrastructure that, at a minimum, accepts branded (e.g., American Express, Discover, MasterCard, Visa) contactless credit/debit/prepaid cards. Retailers should also be sure that the contactless payment solution they select can accept the retailers’ own branded or other closed-loop credit, prepaid, gift, and loyalty cards and support PIN-enabled ATM/check/debit cards, coupons, vouchers, digital receipts, and club/membership validations. Even if support for these applications is not currently required, the contactless POS solution should be capable of accepting new software downloads to support them in the future.

For non-NFC approaches, store requirements may vary. For example, some mobile payment approaches using numeric authorization codes require no new POS hardware but may require a software download. Bar code approaches may require an optical scanner at the POS. Regardless of approach, the hardware and software required to enable mobile proximity payments are an important consideration.

Retailers should also consider several additional implications of supporting consumers who use a mobile phone as their payment device:

• Most people generally can access their phones more quickly than they can access a wallet.

• Consumers typically have to juggle less material at the POS to complete payment using a phone (i.e., physical wallet, separate payment and loyalty cards sometimes attached to a keychain, multiple coupons, split tender transactions requiring multiple payment cards).

• Paper receipts can easily be replaced with digital receipts (see Section 5.2).

• Combining payment, loyalty, and coupon redemption in one transaction may require additional software at the POS and additional interaction with the mobile device. (This additional interaction will cease to be an issue as the consumer




becomes more familiar with mobile payment and applications become more streamlined.)

4.12.3 Roadblocks to NFC Mobile Payments

NFC is a mobile payment technology with great promise, particularly for enabling open-loop mobile payments on a broad scale, but there remain two major roadblocks to its adoption:

1. The cost of implementing a contactless POS acceptance solution

2. Lack of NFC-enabled mobile phones

Two types of costs are involved in implementing a contactless POS acceptance solution: the cost of the hardware and software, and the cost of deployment, disruption, and training. Combining the contactless enablement project with another planned POS project (for example, implementation of PCI-approved pads or end-to-end encryption) can cut the cost of implementing the contactless POS solution almost in half. It is also important for the retailer to consider how compatible the contactless payment infrastructure will be with any desired future mobile contactless capabilities.

The limited number of NFC phones has led to the deployment of “bridge” technologies to add on NFC capability. In addition, new payment alternatives have been implemented that use existing bar code equipment to process mobile payments.

4.12.3.1 NFC-Compatible Contactless Stickers

One way to add NFC capabilities to a phone is by using NFC-compatible contactless stickers. A retailer-branded sticker can be fixe to the back of any phone and can also be linked to optional thick-client wallet software. Figure 51 illustrates a sample sticker.

Figure 51: NFC Compatible Contactless Sticker

These stickers offer the following advantages:

• They represent a flexible, low-cost method for implementing closed-loop payment, couponing, and loyalty program support.

• When married to a mobile application through the cloud, they emulate some NFC-related features.

• A single sticker can enable loyalty or prepaid programs for multiple retailers.

• Retailers can brand the sticker.




Sticker use also involves certain challenges:

• The stickers have limited capabilities in comparison to NFC-enabled mobile phones.

• There is limited ability to interface directly with a mobile application running on the phone.

• Multiple stickers (from different issuers) may compete for physical space on the phone.

• Stickers do not have the ability to support EMV off-line authorized transactions in markets where merchant acceptance environments have limited connectivity.

• There is the potential for invalidating the customer's mobile phone warranty.

4.12.3.2 NFC MicroSD Card or NFC-enabled iPhone Sleeve

NFC microSD cards or an iPhone sleeve can also add NFC functionality to a phone. The microSD card can easily be plugged into a smartphone. Figure 52 illustrates this approach.

Figure 52: NFC MicroSD Card

These solutions offer the following benefits:

• Direct interaction with a related mobile phone application

• Capability to be configured, locked/unlocked, and accessed through the phone’s keypad and display

• Can store multiple credit/debit/prepaid/closed loop cards

• Can be provisioned and managed OTA

This approach also involves certain challenges:

• The phone must have a microSD card slot.

• The costs are higher than sticker costs.

• These solutions are only possible for certain mobile phones.




4.12.4 Security

A broad range of security concerns must be addressed when determining whether to accept payment from mobile devices. The best approach is for retailers to review the applications and payment technologies being implemented against the PCI DSS standards that apply to the retailer’s current payment technologies.49 Unfortunately, PCI DSS-certified retailers have been and continue to be vulnerable to hackers, and as a result, consumer account information has been used in fraudulent transactions. While continued investment in improving data security and compliance with best practices has reduced this exposure, these measures alone cannot stop data theft and fraudulent transactions.

A number of factors can affect whether mobile payment is adopted. New mobile payment systems require certain amplitude to get started, and they struggle to grow incrementally. This is due to three factors:

1. Network effect. When it comes to new payment systems, the value of joining a network is directly proportional to the number of people already on it.

2. Chicken-and-egg trap. In order to grow, these systems must attract customers and retailers in tandem. Otherwise, retailers will not offer the service due to low transaction revenue, and customers will not join the system because they cannot access a convenient retail location.

3. Trust issue. Customers have to be comfortable using their mobile phones as replacements for their credit cards. Until a deployment serves a large number of customers, people will not trust the new system, because they know few people who can vouch for it.

However, without adequate levels of security, these factors are moot.

For any implementation, significant consideration needs to be given to the authentication process. This area is expected to change considerably over the next few years and involve a number of technology changes, such as the use of chip and PIN for credit and debit, a two-factor authentication process, ergonomic capture of movements of the mobile device, and fingerprint identification.

Retailers considering an NFC implementation that follows the traditional payment network should check the payment brand Web sites for a list of approved devices. Many of the devices available in the market have been tested and approved by American Express, Discover, JCB, MasterCard, and Visa, or other networks and industry groups. However, because some of the payment brands have security concerns, devices that also include a third-party application may not be listed. Mobile devices have not gone through the same hardening standards as most payment terminals, so the retailer will typically have to assess the application or pay a qualified security assessor (QSA) to assess the application.

If the implementation includes a mobile payment application that uses the consumer’s mobile device, consider carefully the risks associated with user-controlled and mobile-vendor-controlled security settings. If the implementation includes a mobile payment

49

http://www.nrf-arts.org/MembersOnly/PCIBestPractices/PCI_Best_Practices.zip




application that uses a device provided by the retailer, it is important to ensure that all existing protocols are followed, with special consideration given to the additional resources required to apply patches and maintain network segmentation. In addition, review any new systems that may become involved because of the multi-use of mobile devices, and consider the possibility of key rotation if encryption is in use in current end points.

4.13 Mobile Payments Ecosystem

Mobile contactless transactions require collaboration among payment account issuers, the MNO, and other stakeholders in the mobile payments ecosystem, including a trusted third party who manages the deployment of mobile applications (the TSM).

Figure 53 illustrates the information flow when an issuer provisions a consumer’s payment account information to an NFC-enabled phone and the consumer uses the phone to make a mobile contactless payment. The solid arrows indicate payment-related actions; the hollow arrows indicate actions related to consumer personalization. A consumer can choose to download wallet software to create a better interface with which to manage and use payment options.




Figure 53: Mobile Contactless Transactions: Provisioning and Purchase

As the figure shows, the payment account issuer prepares the account data and sends the payment account information to a TSM. The TSM delivers the consumer's payment account information OTA through the mobile network to the secure element in the mobile phone. Once the payment account data is stored in the phone, the consumer uses the phone for payment to any retailer who accepts contactless payments. Payments are processed over established payment networks, with credits and debits to the appropriate accounts.

Each party to the transaction has specific responsibilities, described here generically. Payment types can include a variety of payment methods, including network-branded

Mobile

Trusted

Service

Payment Account

Issuer

Merchant

POS

Consumer’s

NFC Device

Deliver account

information

to secure element

Select account

and pay

Deliver account

information

through mobile

network

One-time payment

account download

Authorization and

settlement




credit and debit cards, private label credit cards, prepaid cards, gift cards, loyalty points, coupons, and ACH/electronic checks.

4.13.1 Payment Account Issuer

The payment account issuer provides a consumer's payment account information to a TSM for provisioning in the consumer's phone. The issuer determines what procedure is used to activate the account by the consumer.

4.13.2 Trusted Service Manager

A TSM can offer a single point of contact with one or more mobile operators for issuers and retailers who want to provide a payment or other application to customers with NFC-enabled mobile phones. TSMs can provide life-cycle management services (provisioning and deprovisioning) for NFC applications managed OTA to the mobile phone and also aggregate, send, and load personal consumer data OTA. (This role parallels the role played by card personalization service providers for credit and debit payment cards.) The TSM can be a trusted third party, financial institution, MNO, or some combination. Because the TSM does not participate in processing the payment transaction, existing payment processing business models can be maintained.

For branded credit and debit transactions, both MasterCard and Visa have strict requirements for entities that wish to act as TSMs. All TSMs are subject to security audits before being authorized to process the delivery of payment card data to a mobile device. An important TSM responsibility is to communicate payment information from the financial institution to the consumer's mobile device securely. Without proper key management and security, the entire system can be exposed to attack and systemic fraud.

4.13.3 Mobile Network Operator

The MNO can assume multiple functions and responsibilities in the mobile payment ecosystem. One of these functions is to make approved NFC-enabled handsets available to the MNO’s subscriber base. The MNO assumes the role of secure element issuer, in the case of the UICC secure element, and can also assume the role of secure element issuer for other secure element form factors.

As the secure element issuer, the MNO assumes the responsibility for ensuring the security of the secure element, a function it can delegate to the TSM assigned to manage the secure element. This security responsibility also involves the communications channel between the TSM and the secure element. If the MNO has chosen to fulfill the role of the TSM, it also implements the TSM functions.

4.13.4 Retailers

Consumers pay with their NFC-enabled mobile phones at a retailer's contactless POS. The information is communicated over a radio frequency from the phone to the POS, using ISO/IEC Standard 14443, and then processed through the appropriate payments processing network for the type of payment chosen (e.g., credit, debit, gift card, ACH).




4.14 Alternative and Mobile Payment Providers and Approaches

Table 21summarizes the types of providers and approaches available in the marketplace. The table is by no means a complete list of providers.

Table 21: Alternative Payment Types and Example Providers

Payment Description Example Providers

Online payment Alternative to credit and debit cards for remote payment for electronic commerce, mobile commerce, or electronic bill. This approach is being adapted to the physical POS using mobile technology.

PayPal BillMeLater Amazon Payments Secure Vault Payments Google Checkout

Decoupled debit Uses either a plastic card or mobile phone as the token that allows access to the cardholder’s DDA (checking) account for debit payment transactions.

Tempo Payments National Payment Card First Data ConnectPay

Credit card innovations

New technology that enhances the functionality of a traditional credit card or the manner in which payment transactions are processed.

American Express Revolution Money Citi 2G Card

General purpose reloadable (GPR) prepaid

Network-branded prepaid debit account that has become the core component of alternative financial services for underbanked consumers. Provides functionality similar to a traditional checking account but is more readily available to consumers who do not do business with a bank. Typically card-based but could be adapted for mobile payments.

NetSpend, Green Dot Walmart Money Card (powered by Green Dot) MiCash

Mobile proximity payment (NFC)

Providers listed are providers of software and hardware to facilitate mobile proximity payments that use NFC technology, including wallet applications, approaches for enabling the mobile phone with NFC capability, and reader technology.

ViVOtech Firethorn Holdings Blaze Mobile Bling Nation Tyfone

Mobile proximity payment (non-NFC)

Providers listed are providers of software and hardware to facilitate mobile proximity payments that use approaches other than NFC, including bar codes, numeric codes, and other technologies

mFoundry Cimbal Mocapay MOBIbucks FaceCash Margento

Wireless carrier billing

Carrier billing has traditionally been used as a payment method for purchase of digital goods in mobile commerce but is being adapted for purchase of physical goods and purchases at a physical POS.

Boku Danal BilltoMobile Mobillians Zong

Social media Alternative payment systems that are integrated Twitpay




Payment Description Example Providers

into social media Web sites such as Facebook and Twitter. Typically Internet based but are being adapted for payments at the physical POS.

Facebook Credits Bling Nation FanConnect

Mobile checkout and POS

Providers listed are providers of software and hardware that enables a mobile phone to accept credit and debit card payments using mag stripe, contactless, or key entry approaches. Also includes providers of consumer-facing mobile checkout applications

Square Intuit GoPayment VeriFone PAYware Mobile Ingenico ROAM Data AisleBuyer PayPal with Titanium Commerce Global Bay Mobile Technologies

The rapid growth of mobile phones has fueled many innovative ways to exchange payment, which in turn will increase competition and drive fees down. These developments will benefit both consumers and retailers. It is important for retailers to stay informed regarding payment developments to determine which approaches best fit their business model, which methods are gaining traction with consumers, and which technologies require additional investment.




5. MOBILE OPERATIONS

Mobile devices used by associates can have a significant positive impact on the efficiency of retail operations. Wireless devices have already been in use for over 20 years in retail stores and distribution centers, increasing productivity, maintaining inventory accuracy, and reducing expenses. This section focuses on the currently implemented mobile operational functions—POS, workforce management, and internal communications—and describes how to use mobile devices to improve operations in those areas.

It is anticipated that the use of smartphones for internal operations will expand greatly, as future phones are enhanced with new features (such as RFID readers) and manufactured to a high level of strength, reducing breakage and malfunctions. As functionality increases, it is expected that retailers will move beyond their current top priorities—mobile marketing, commerce, and payment—to incorporate the use of mobile devices into additional operational processes.50

5.1 Mobile Point of Sale

The traditional POS has evolved over the years from a simple means of storing cash into a platform for calculating taxes, applying promotions, tracking consumer loyalty, providing product information, and more. (In fact, the term “POS” may be a bit outdated, but it is a well-accepted industry term.) This section defines a mobile POS (mPOS) as a handheld, untethered device (for example, a battery powered device that uses a wireless network) capable at a minimum of calculating a total amount due, processing a tender, and recording a sale transaction. Most mPOS devices will do much more.

There are three distinct approaches to providing an mPOS solution to perform checkout:

• Extend the POS to employee-operated mobile devices.

This approach involves moving the user interface to a handheld device but still relying on the store server for the product catalog, pricing, and tender and recording transactions. This approach is traditionally used for line busting and providing special shopping assistance to select customers (clienteling). In the past, it was popular to use hardened devices made specifically for this purpose, but more recent options use consumer devices (iPods, smartphones) with additional hardware.

• Allow self-service on the consumer’s mobile device.

Consumers who have registered with a retailer can install an application on their smartphones that allows them to scan items in a cart and then check out. Consumers avoid checkout lines, and retailers reduce cashier payroll. This approach often requires a physical modification to the retail store layout to provide consumers with access to bags, security tag deactivators, and cash

50

The use of mobile devices in additional operational processes will be explored in future releases of this blueprint.




changers, and to provide observation stations for an employee to monitor self-checkouts.

• Move the POS entirely to the mobile device.

Smaller retailers may want to consider POS applications that are available for smartphones that focus on accepting payment. Since these applications are not integrated to a backend POS system, they may not support every typical POS function (such as customer lookup, coupon processing, and multiple tenders).

5.1.1 Mobile POS Examples

The following examples illustrate how mPOS can enhance business scenarios for both retail and hospitality. They involve the use of Apple devices, but most of these solutions are being ported to additional platforms.

5.1.1.1 Apple, Disney Stores, Urban Outfitters

Apple51 was first retailer to make mPOS the primary method for checkout. Sales associates use an iPod Touch, coupled with a third-party “sled” that houses a barcode reader, magnetic stripe reader, and additional battery. The device is only used inside the store and relies on Wi-Fi, eliminating the need to use an iPhone. The iPod Touch runs a native application (Figure 54) that communicates with the store’s back office to ring transactions. This allows fixed POS and mPOS transactions to be merged into a single transaction log. These transactions also share the same product catalog, pricing, and promotions processing.

Figure 54: mPOS Checkout at Apple

51

http://www.appleinsider.com/articles/09/11/03/ exclusive_look_at_apples_new_ipod_touch_based_easypay_checkout.html




This solution is limited to credit card tender and cannot support checks, cash, or debit cards. A signature is captured on the Touch screen. Receipts are e-mailed or can be printed in the store.

Disney Stores and Urban Outfitters are implementing similar solutions. The solution is especially interesting for smaller stores that do not have space for additional checkout lanes.

5.1.1.2 Magic Beans

Magic Beans52, a children’s retailer located in Boston, was the first retailer to allow consumers to check themselves out using their smartphones. The entire retail transaction can take place without the need for store associate assistance until the customer leaves the store. Figure 55 illustrates the scan, review, and checkout steps for the iPhone application.

Figure 55: Using an iPhone to Check Out at Magic Beans

Consumers must register with the retailer and download the application before shopping. The application allows the user to enter bar codes or use the smartphone’s camera to scan bar codes when adding items to a cart. The application offers customers the opportunity to access extended product information, reviews, and offers.

5252

http://www.boston.com/business/technology/innoeco/2010/08/aislebuyer.html




Consumers who are finished shopping check out using registered tender (typically a credit card). The application then displays a verification code that must be shown to an associate on the way out of the store.

5.1.1.3 Square, PAYware Mobile

Square and Verifone both offer hardware that allows an iPhone to be used to accept credit card payments. Square provides a magnetic stripe reader that connects to the iPhone’s headphone jack and allows credit cards to be read (Figure 56). The application obtains approval for the tender and can e-mail a receipt to the consumer. Verifone’s solution uses hardware similar to that used in Apple Stores. It is important for any solution to meet PCI DSS requirements.

Figure 56: Magnetic Stripe Reader for an iPhone

Other solutions, especially in the restaurant industry, use a tablet computer to display menus and process orders. The restaurant in one hotel in Australia53 uses iPads as menus, and the South Gate restaurant in New York has replaced their wine menu with iPads.


The above examples rely on a number of cooperative tasks that have only recently become possible and that require adherence to industry standards. A rich set of hardware and software solutions that offer the consumer an enhanced user experience and create customer loyalty depends on standards. Some of the standards organizations are listed below; the standards themselves are discussed in Section 7:

• Association of Retail Technology Standards (ARTS), which defines software application-to-application interoperability, hardware connectivity, and a data model that allows disparate systems to communicate

• GS1 US (formerly the Uniform Code Council)

• NFC Forum

• Smart Card Alliance (SCA)

• National Automated Clearing House Association (NACHA)

• Global Platform

53

http://travel.usatoday.com/hotels/post/2010/06/ipad-replaces-menu-in-hotel-restaurant/95656/1




In addition to the standards defined by these organizations, mobile initiatives that include a mobile payment component must adhere to the PCI DSS.


Allowing customers to use their mobile phones to obtain accurate product information and pay quickly, with no checkout-line delay, improves the user experience, resulting in more satisfied customers. Satisfied customers shop more often at stores that offer an enhanced user experience, increasing sales and margins. In addition, the retailer’s payroll is reduced or allocated more effectively, since the requirement for associates to interact with customers to provide product information and process sales at the POS is reduced.

5.1.4 Implementation Considerations for Mobile Point of Sale

The backbone of the mPOS system is a highly reliable, responsive network. A secure, seamless wireless connection must be available throughout the store to ensure that mobile devices can connect and interoperate. In addition, cell phone repeaters and GPS triangulation nodes must be installed to ensure that mPOS devices and customer devices can be located. Cost savings and increased levels of service will not be realized if store associates or customers have trouble connecting mobile devices to the store’s infrastructure.

One critical implementation consideration is the need to provide an infrastructure that protects data. The data that the customer provides and the processing of sensitive information during the payment process must always be completely secure.

ARTS has undertaken an initiative to create an end-to-end encryption standard that could provide a high degree of transaction security. Any customer-sensitive data (credit card numbers, authorization numbers) are encrypted at the customer data-entry point and delivered through the network to the final point of decryption at a payment authorization facility.

In addition, communication processing must use well established, secure data transmission technologies to protect against data extraction and spoofing (a situation in which a person or program successfully masquerades as another person or program to obtain information) during transfer. For example, the wireless links must use robust transport security to prevent possible data compromise through data sniffing (monitoring of data passing over a network).

Consumer data must be protected. The retailer must never allow unprotected customer data to be transmitted. The best practice is never to store customer sensitive data. If storage cannot be avoided, make sure the data is encrypted.

5.2 Digital Receipts

Although the use of digital receipts is not limited to transactions involving mobile devices, digital receipts are a key enabler for mobile commerce. Three digital receipt delivery techniques are emerging as leaders for mobile retail:

• Digital receipt using e-mail




This approach involves capturing a consumer’s e-mail address and using either the store’s servers or a third party to generate and send electronic receipts to that e-mail address.

• Retailer-hosted digital receipts (including online retailers)

Retailers and merchants develop functionality on their Web sites to display internally captured and Web-formatted receipt information. Consumers are given access to their receipts by creating a unique account on the retailer’s Web site that includes any associated loyalty programs or other identifier information.

• Aggregated digital receipts

Consumers provide unique identifiers at any cooperating retailer’s POS. The receipt information is sent to a partner cooperative Web site; the consumer accesses that Web site to manage receipts from multiple retailers.

5.2.1 Digital Receipt Examples

The following examples illustrate how digital receipts are used in practical business:

5.2.1.1 Digital Receipt via E-mail (Apple, Pro Hockey Life)

Apple54 was the first major retailer to implement e-mail receipt delivery, but many other retailers are actively following in their footsteps. This solution, in conjunction with an mPOS implementation, allows a mobile plus paper-free solution to send a single receipt using e-mail.

5.2.1.2 Retailer Hosted Digital Receipts (Wegmans, Amazon, Walmart)

Some retailers are starting to offer customers access to receipts on their company’s consumer-facing Web sites. This solution brings consumers back to the retailer’s Web site (there are different Web site destinations for different retailers’ receipts).

5.2.1.3 Aggregated Digital Receipts (Quick Receipts, Afterbot, MyReceipts™)

Several companies are currently testing the aggregation of receipts on line by means of software and hardware integration with various POS systems. The aggregator connects directly to the POS transaction and securely gathers and stores receipts for consumers to access on a destination Web site, where receipts from multiple retailers are available.


Like mobile POS, the above examples require adherence to industry standards. The standards organizations involved are listed in Section 5.1.2. The standards are described in Section 7.


Allowing consumers to have electronic access to their receipts provides a secure purchasing history for both consumers and retailers and represents additional receipt data opportunities for retailers. Electronic access also generates customer loyalty and

54

http://www.appleinsider.com/articles/09/11/03/ exclusive_look_at_apples_new_ipod_touch_based_easypay_checkout.html




customer satisfaction for customers who use such services. By reducing paper consumption, electronic access also promotes eco-friendly and sustainability objectives for the retail organization and generates the goodwill associated with those efforts.

5.2.4 Implementation Considerations for Digital Receipts

Retailers must consider the following when deciding whether to implement digital receipts:

• Reliability

• Security

• Consumer confidence

• Value to consumers

• Potential revenue opportunities

• Time to delivery

Data security and protection must be a critical part of any scenario. Receipt data must be maintained, supported, and protected in adherence to legal privacy requirements. ARTS has undertaken an initiative to create an end-to-end encryption standard that could provide the high degree of transaction security required.

In addition, communication processing must use well established, secure technologies to protect against data extraction and spoofing during transfer. For example, data transmission should use robust transport security to prevent possible data compromise through data sniffing. Leveled consumer data protection should be in place to protect customer data.

5.3 Workforce Management

The current economic climate has forced retailers to look for ways to cut costs and improve the bottom line without cutting customer service. Payroll is one of the largest controllable expenses. By incorporating and integrating mobile technology into the overall workforce management application, retailers can achieve better control and visibility of their workforce. To optimize staffing and associated payroll, however, workforce management applications need timely and accurate data.

Figure 57 illustrates a workforce management model in which the workforce management solution is hosted and delivered to the store using the software-as-a-service (SaaS) model. The model provides access through a common portal to store managers and store associates using in-store mobile devices. The portal is managed and supported by a central management platform, which acts as a gateway between the store and the corporate headquarters, where all service requests, mobile device management, and monitoring services are managed and delivered. This model minimizes the infrastructure footprint at the store, reduces the overall capital expenditure investment (the SaaS provider invests in the hardware, software, and project costs), and simplifies the IT systems management process.




Figure 57: Workforce Management Model

5.3.1 Workforce Management Examples

As shown in Figure 57 and described in the following examples, mobile devices can support three key workforce management functions:

• Communication and planning

• Labor budgeting, forecasting, and scheduling

• Time and attendance tracking

5.3.1.1 Communication and Planning

Mobile devices can support the use of a single, streamlined channel that delivers important up-to-date information to store managers and store associates. For example, a store manager’s mobile device can be configured so that all communication channels (e-mail, voice, SMS) converge and all operations tools are consolidated. A manager can access everything needed through an intuitive interface with the touch of a button.

From this interactive interface, the manager can send store associates shift assignments, task assignments, or communication updates (such as a change in store or corporate policy) in real time. Associates can then use their mobile devices to view or request changes to their shift and task assignments, report the status of their assigned tasks, and acknowledge receipt of corporate directives and policies directly to the store manager. The store manager can approve or reject responses and requests from store associates immediately. This information can be synchronized seamlessly and sent back to corporate planners for workforce prioritization and planning purposes.

Corporate

The Store

Workforce Manage-

ment Planning

& Directives

Hosted Workforce Manage-

ment Solution

Communi- cation and

Planning

Labor Budgeting,

Forecasting, Scheduling

Time and

Attendance

Central Management

Platform Mobile Devices

(cell phones, two-way radios, biometric readers, NFC devices, & location- based GPS devices)

Store Managers

Store Associates

Workforce Management Portal

Core Operations (Buy, Sell, Move, Corp




5.3.1.2 Labor Budgeting, Forecasting, and Scheduling

Appropriate labor forecasting, labor scheduling and labor management and budgeting capabilities optimize both daily internal operations and corporate-driven tasks at a store.

For example, based on a defined set of actions that are triggered by the latest sales and operations results, a corporate office can send instant alerts to a store manager’s mobile device, instructing the manager to take an action, such as executing a new directive, initiate a corrective action, or follow an updated schedule that is based on the latest labor forecasts and budget. Store managers can in turn instruct store associates in real time to follow these directives and actions, interacting directly with the associates over their mobile devices. These directives and actions can then be executed immediately.

Store managers can instantly request a certain number of associates to end their shifts early or work overtime, sending the requests directly to the associates’ mobile devices. These requests can be tracked, monitored, and sent to a corporate office in real time. This capability gives the corporate office tighter control over the labor budgeting, forecasting, and scheduling process, thus providing the ability to react quickly to changes in market conditions.

5.3.1.3 Time and Attendance Tracking

Automated and self-service tools available over mobile and wireless networks enable associates to perform schedule-related and administrative activities using in-store mobile devices without supervision.

For example, associates can immediately access time and attendance tools loaded on in-store mobile devices simply by logging in with their assigned associate numbers. They can then clock in and out for shifts and breaks, change shift assignments, or check hour balances. These actions and requests can then be forwarded to and updated on a store manager’s mobile device for immediate review and approval. Having access to this information in real time allows store managers to respond appropriately and in a timely manner and to address discrepancies in store associates’ time and attendance records and information. Associates with NFC-enabled devices can also tap readers to access secure areas, track time spent in a specific area, and perform security checks.


The technology and standards used by a mobile workforce management solution can vary, based on the solution vendor of choice; regardless of the vendor, the following key areas merit consideration:

• Central management platform

• Technology used to connect to the workforce management solution

• Data integrity and accuracy

The central management platform serves as the central management system and connects all clients (typically mobile devices and thin clients) to the workforce management solution hosted at a central location (i.e., a corporate office or a third-party solution provider). The central management platform is therefore the connection between the store and the headquarters. It is typically set up and delivered through a SaaS model.




This platform typically provides a single Web-based portal for all service requests, mobile device management, and monitoring services (see Figure 57, above).

People should be able to authenticate, connect, and interact with the workforce management solution using several media supported by different technologies, such as mobile devices (cell phones, two-way radios), biometric readers, NFC-enabled devices, and location-based GPS devices. The services may also be available through downloadable applications (iPhone, Blackberry, Droid), SMS messages, interactive voice recorders, and e-mail. Appropriate security measures should be put in place to ensure that communication between mobile devices cannot be compromised and that the data exchanged is accurate and protected.

Two ARTS standards are applicable to this area: the Workforce Management XML Schema and the Time Punches XML Schema (for more information about these standards, see Section 7.3.5).


Using the appropriate mobile technology solutions in conjunction with an existing corporate workforce management platform can help retailers obtain better control of and optimize their workforces across the entire enterprise.

The appropriate use of mobile technology can streamline communications and coordinate planning. Store managers can have direct and frequent contact with corporate headquarters and be involved in specific workforce planning functions (such as labor forecasting, scheduling, and management). Managers can also ensure that their workforces and tasks are aligned and prioritized appropriately without being tethered to their desks. Store associates can communicate, collaborate, and coordinate with each other and with store managers from multiple locations within the store. Having an integrated communication channel and clear visibility into the entire workforce allows store managers and associates to make their daily workforce management operations more efficient. They can collaborate more effectively and make better decisions, which in turn will improve customer service.

The use of mobile devices can also optimize labor scheduling. Assignments and schedules based on local labor laws, store patterns, corporate directives, and associate availability, skills, and work preferences can be delivered directly to both store managers and associates. In addition, store managers using mobile devices can monitor key performance indicators (KPIs), payrolls (i.e., timesheet approval), and overtime in real time. By utilizing mobile workforce management devices and tools to optimize labor scheduling, retailers can ensure that they have the right mixture of labor to complete both corporate-driven tasks and daily operational tasks while achieving target customer service levels. Store managers can interact in real time with associates from multiple locations within a store (for example, to approve requests for time off).

When time and attendance tracking is closely integrated with labor schedule solutions, retailers have tighter control of associates’ schedules and can ensure compliance with rules and regulations. Providing associates with access to mobile self-service workforce management tools that integrate labor scheduling and time and attendance solutions enable them to perform activities that are normally performed by store managers (i.e.,




work-hour tracking, punch-in/punch-out, vacation lookup, shift switching) from multiple locations within the store, while ensuring that the associates comply with local labor laws (i.e., work hours and overtime).

5.3.4 Implementation Considerations for Workforce Management

Retailers should consider the following when implementing a workforce management solution:

• Establish a workforce management process that is sustainable and focused on execution and operational excellence across the entire retail enterprise.

• Ensure that the mobile workforce management solution can interface and integrate with other information sources and solutions within the store (i.e., POS, inventory system) and at headquarters (i.e., CRM, ERP, SCM).

• Select a solution that conforms to standards (i.e., ARTS, GS1) and incorporates both SOA and a cloud-based architecture. Such a solution minimizes the integration effort and maximizes interoperability with other solutions across the entire enterprise.

• Evaluate ROI in terms of time to deploy and total cost of ownership.

5.4 Internal Communication

The essence of mobile technology’s success is the ease with which the technology allows people to communicate. Applying mobile technology to an enterprise’s internal communication is an obvious and simple step. Integration with key enterprise systems allows associates and partners to receive relevant information automatically on their mobile devices.

5.4.1 Internal Communication Examples

There are a multitude of scenarios in which mobile technology can be used to improve internal communication within an enterprise. For example, integrating mobile devices with calendar applications such as Microsoft Exchange or Lotus Notes can automatically remind meeting participants of upcoming meetings. Store personnel can be notified of important events in real time throughout the day (for example, store personnel can be alerted when a known shop lifter or important customer enters the store). Additional notifications can be sent to store associates with information allowing them to identify customers who are looking for assistance.

Information and metrics can also be pushed to store managers, allowing them to spend more time on the floor interacting with customers or staff and less time sitting at their desks.


Creating a workflow to improve internal communications in a retail operation can be as simple as creating an extension to an existing application that allows the application to push messages to appropriate recipients. Retailers can also launch advanced applications that integrate with the company’s security and HR systems and must be downloaded to a phone.




Common to both of these implementations is the use of a messaging technology such as SMS, Apple Push Notification, IMAP Push, MS ActiveSync Push, or BlackBerry Messenger. Notifications must be pushed from an IT system at a central location to the relevant mobile devices. The push can be (for example) a simple SMS message with an embedded link or a binary message that triggers the local application.

5.4.2.1 Message-Based Applications

Message-based applications provide the simplest implementation with the fewest number of features. Recipients would receive notifications in the form of short messages describing an event and using standard technology, such as SMS or an e-mail technology (MS Active Sync, IMAP Push).

Message-based applications can be combined with more advanced application approaches, either based on browser technology or as smart clients that must be downloaded to the device. This approach would allow the retailer to combine the best of two worlds: the simplicity of messages and access to additional information through a richer user interface.

5.4.2.2 Browser-Based Applications

Browser-based applications capable of providing additional information or offering more advanced features employ the following standard technologies:

• HTTP

• XHTML

• CSS

5.4.2.3 Downloaded Applications

Applications downloaded to a mobile device employ the following standard technologies:

• SMS or Apple Push Notification

• Objective C/C#/Java (depending on the device type)

• HTTP, SOAP, or a similar protocol


By improving the workflow for internal communications, a retailer can become more agile and flexible, as associates are always aware of relevant information. Improved internal communication leads to a number of benefits:

• Increased sales through improved customer interaction

• Increased customer satisfaction through personalized interaction with staff

• Improved efficiency, as information is more readily available

• Less time wasted waiting for the last person to arrive at meetings

The first two benefits in particular allow retailers to set themselves apart from the competition and engage customers in a truly personal dialogue.




5.4.4 Implementation Considerations for Internal Communications

Probably the most important consideration when selecting a system to mobilize internal communications is interoperability with the existing infrastructure. For example, when selecting a solution for mobilizing meeting reminders, the selected vendor should have extensive successful experience working with the retailer’s calendar system.

Another important consideration is how best to control the flow of information that will be pushed around the organization. For example, only the people invited to a meeting should receive the meeting reminder. Similarly, only appropriate store associates should be notified of a customer’s inquiry, thereby ensuring that key customers always receive assistance from a knowledgeable store associate.

The choice between a down-loaded and a browser-based application is also important. The choice depends on the company’s infrastructure, the complexity of integration with back-office systems, and the level of detail possible on the mobile device. If the back office already includes a central Web-based portal, a browser-based application optimized for the mobile devices deployed in the organization is likely to be the simplest and cheapest approach. However, if a large quantity of information is involved, a downloaded application is probably a better, although also more costly, approach.

5.5 Mobile Approvals

Decision-makers in most industries rarely sit in front of their computers. As a result, approval processes take longer, leading to frustration and increased operational costs. Mobile retailing allows managers to be on the store floor and, wherever they are, to react quickly to both customer and associate operational needs.

Mobile approvals cover a wide range of scenarios across a number of industries. All of the scenarios share the following characteristics:

• An order/bill/transfer/purchase must be authorized by a busy individual who is rarely at a desk.

• The authorizing individual possesses a mobile phone.

• The order/bill/transfer/purchase can be summarized adequately and the summary is legible on a small screen.

Mobile approvals allow a store to improve response times for urgent requests and critical store issues requiring immediate resolution. For example, a mobile approval can handle any of the following typical situations:

• A manager must authorize a purchase order created by an associate.

• A manager must authorize leaves of absence due to illness or vacation. Such authorization would probably take place outside of the store, while the manager is travelling to or from work.

• A financial controller must authorize the payment of a bill.

• A CFO must authorize a funds transfer between internal company accounts.




• A manager must approve a price override, refund approval, or similar request made by a store associate interacting with a customer.


Creating a workflow to support mobile approvals may require changes ranging from a simple extension to a purchase portal that is already optimized for the mobile devices deployed across the organization to installing a complex application that integrates with the company’s security and finance systems and must be downloaded to a phone.

Common to both of these implementations is the use of a messaging technology such as SMS, Apple Push Notification, IMAP Push, MS ActiveSync Push, or BlackBerry Messenger. The request for approval must be pushed from an IT system at a central location to the authorizer’s mobile device. The push can be (for example) a simple SMS message with an embedded link or a binary message that triggers the local application.

5.5.1.1 Browser-Based Application

Browser-based applications capable of supporting mobile approvals employ the following standard technologies:

• SMS

• E-mail (MS Active Sync, IMAP Push)

• HTTP

• XHTML

• CSS

5.5.1.2 Downloaded Application

Applications downloaded to a mobile device employ the following standard technologies:

• SMS or Apple Push Notification

• Objective-C/C#/Java (depending on the device type)

• HTTP, SOAP, or a similar protocol


By implementing a workflow for mobile approval, a company can become a more agile and flexible organization, as key individuals are no longer bottlenecks. Mobile approval leads to a number of benefits:

• Greater associate satisfaction through streamlining of internal processes

• Improved efficiency; key personnel can approve important tasks or “sign” important documents

• Improved customer service by not having to wait for manager authorization

• Enhanced cash management capabilities through cooperation with external partners, such as banks

The last benefit in particular allows international companies to enhance their cash flow, as funds can be transferred between accounts when the exchange rate is favorable or




differences between accounts can be settled to prevent paying high interest rates for overdrafts.

Figure 58 illustrates a simplified process for supporting mobile approvals:

Figure

The process includes the following steps:

1. An event occurs in the central IT system, caused by an external party such as authorizer’s colleague or the company’s bank, which pushes a notification to the authorizer.

2. The authorizer fetches the details for the event and authorizes the order/ bill/transfer/ purchase

3. The central IT system sends a confirmation to the originator of the event


Implementation should authenticate not only the device from which the approval originates, but also the individumay be authenticated through its MSISDN by proper integration with the mobile network operator.

A number of additional standard solutions capable of securely authorizing are also available. These include solutions for encryption certificates or twoaccessed through a downloaded application. In addition, all data transfer should be secured adequately using industry standard

The choice between a downloaded and a browsercompany’s infrastructure, the complexity of integration with backlevel of detail presented on tcentral Web-based portal, a browserdeployed in the organization is likelyif a large quantity of information better, although more costly, approach.




differences between accounts can be settled to prevent paying high interest rates for

illustrates a simplified process for supporting mobile approvals:

Figure 58: Simplified Mobile Approval Flow

The process includes the following steps:

An event occurs in the central IT system, caused by an external party such as authorizer’s colleague or the company’s bank, which pushes a notification to the

The authorizer fetches the details for the event and authorizes the order/ ansfer/ purchase.

The central IT system sends a confirmation to the originator of the event

Implementation Considerations for Mobile Approvals

mplementation should authenticate not only the device from which the approval originates, but also the individual who authorized the approval. In general, the device may be authenticated through its MSISDN by proper integration with the mobile network

A number of additional standard solutions capable of securely authorizing le. These include solutions for wireless authentication through standard

two-factor authentication based on proprietary security schemes accessed through a downloaded application. In addition, all data transfer should be

industry standard methods such as SSL.

The choice between a downloaded and a browser-based application depends on the company’s infrastructure, the complexity of integration with back-office systems, and the level of detail presented on the mobile phone. If the back office already includes

based portal, a browser-based application optimized for the mobile devices deployed in the organization is likely to be the simplest and cheapest approach. However,

information is involved, a downloaded application is probably a better, although more costly, approach.


differences between accounts can be settled to prevent paying high interest rates for

An event occurs in the central IT system, caused by an external party such as an authorizer’s colleague or the company’s bank, which pushes a notification to the

The authorizer fetches the details for the event and authorizes the order/

The central IT system sends a confirmation to the originator of the event.

mplementation should authenticate not only the device from which the approval al who authorized the approval. In general, the device

may be authenticated through its MSISDN by proper integration with the mobile network

A number of additional standard solutions capable of securely authorizing an individual authentication through standard

based on proprietary security schemes accessed through a downloaded application. In addition, all data transfer should be

based application depends on the office systems, and the

the back office already includes a based application optimized for the mobile devices

the simplest and cheapest approach. However, , a downloaded application is probably a




6. MOBILE IMPLEMENTATION STRATEGY

Mobile is more than simply a new device or technology for conducting the business of retail. Mobile will change business rules and processes.

Before beginning to implement mobile support, retailers should therefore develop 3- to 5-year strategic and tactical plans. It is extremely important that the plans identify which business processes can be enhanced with mobile processing and the technology infrastructure required to support these changes. The plans must be flexible—mobile is a rapidly evolving technology—and be fully compatible with the direction that both e-commerce and IT will take within the company.55

This section discusses the key considerations for retailers who are planning a mobile retail implementation that apply to all categories of mobile retail. (Specific implementation considerations are included with the specific scenarios described in previous sections.) Table 22 summarizes which of the mobile subchannels are considered applicable to each of the business scenarios described in the previous sections.

Table 22: Technologies Appropriate for Mobile Retail Business Scenarios

Technology

Business Scenario Browser-

Based

Downloaded

Application

SMS

MMS

Voice Wi-Fi

Bluetooth

NFC Imaging

Bar

Code

GPS

Advertising &

Marketing

X X X X X X X

Customer Service X X X X X

Shopping Tools X X X X X X X X

Product

Information

X X X X

Loyalty X X X X

Promotions &

Coupons

X X X X X

Mobile Store X X X X X X

Mobile Remote

Payment

X X X X X

Mobile Contactless

Payment

X X X X X

Mobile Point of

Service

X X X X

Warehouse X X X X X

55

To accomplish these goals, retailers can take advantage of new ARTS initiatives, such as the Retail Process Model. The Retail Process Model, one of many initiatives on which ARTS is currently working, describes important retail processes that are the foundation for a successful business model.




Technology

Business Scenario Browser-

Based

Downloaded

Application

SMS

MMS

Voice Wi-Fi

Bluetooth

NFC Imaging

Bar

Code

GPS

Management

Workforce

Management

X X X

Shelf Stocking X X X X

Internal

Communication

X X X

Inventory Control X X X X

Price Verification X X X X X

Mobile Approvals X X X X

6.1 Mobile Key Performance Indicators

What constitute key performance indicators (KPIs) for mobile retail may vary greatly depending on the type of mobile service. For customer-facing services, more “traditional” KPIs are applicable; for mobile services whose target audience is either staff or partners, traditional KPIs are irrelevant, and different KPIs must be identified.

6.1.1 KPIs for Customer-Facing Mobile Services

Traditional KPIs can identify whether a customer-facing mobile service is a success. Like Web KPIs, customer-facing mobile service KPIs can be grouped into five categories:

• Number of visitors

• Number of recurrent users

• Reviews or ratings

• Number of purchases

• Number of transactions moved

The metrics in the category number of visitors depend on the type of mobile service. Mobile Web-based services can count the number of visitors directly; number of downloads represents a similar statistic for mobile app-based services. For SMS-based mobile services, the number of transactions constitutes the appropriate metric.

The number of recurrent users can be counted for all three subchannels (mobile Web, mobile app, and messaging) to provide a strong indication of whether the mobile service is deemed useful by the user base.

For mobile apps in particular, a good indicator of the service’s usefulness is the reviews the app has received at the different app stores (iTunes, Android Market, Windows Marketplace). For mobile services based on either mobile Web or SMS, however, no such immediate feedback mechanism is available, and this type of data must therefore be




found using other channels. A company’s social networking initiatives, such as Facebook and Twitter, can usually provide review data.

For mobile services that include an m-commerce component, the number of purchases made through the service is a very relevant metric. Depending on the type of goods being offered through the mobile service, the value of this number should be derived by calculating the cost of performing the same number of transactions through another channel. For example, for transportation companies, tickets purchased through a mobile service are either additional sales or sales moved from a high cost channel, such as a ticketing office, or a medium cost channel, such as a vending machine. In either case, the savings associated with moving the transaction to the mobile channel are substantial.

For mobile services that provide cost savings by moving transactions to the mobile channel from high cost channels, such as call centers, a good KPI is the number of

transactions moved from the high cost channel.

6.1.2 KPIs for Staff-Facing Mobile Services

Staff-facing mobile service KPIs fall into four categories:

• Reduction in number of transactions

• Increased productivity

• Improved satisfaction

• High availability

KPIs for staff-facing mobile services (like customer-facing KPIs) can be derived from the reduction in the number of transactions performed using other channels.

A very important KPI for mobile services intended to optimize current workflow is increased productivity: the estimated time saved per user per shift per day/month/year. For example, several large European train operators have introduced mobile services to their staff, saving over 20 min. per shift and millions of euros each year, leading to more streamlined operations.

Staff-facing mobile services can provide employees with tools or processes that allow them to better help the customer, improving employee and customer satisfaction. Customer satisfaction is improved by improving employee job satisfaction; customers are happier when they deal with knowledgeable employees capable of answering (or at least finding answers to) their questions.

Mobile services by their very nature should have high availability, as both customers and employees are likely to access them anytime from anywhere. It is therefore important to track metrics such as uptime and average response time to ensure that the mobile service meets the availability requirements.

6.2 Summary of Implementation Considerations

Table 23 summarizes the implementation considerations described in each business scenario in Section 3, “Mobile Marketing,” and Section 4, “Mobile Commerce.”




Table 23: Implementation Considerations for Mobile Marketing/Mobile Commerce

Business Scenarios

Consideration Summary

Security Security is a key consideration for mobile implementation. All customer data requires a high level of protection. The implementation must ensure compliance with regulatory requirements (such as the PCI DSS). Many implementations may require authentication using one or more standards such as Twitter, Facebook, or OpenID. Since mobile devices can be lost or stolen, consideration should be given to deactivating or invalidating data such as customer loyalty account data.

Privacy Privacy is an extremely important consideration for mobile implementation. Customers should not believe that their personal data is collected or used in any unauthorized manner. In most cases, consent is required to collect certain types of customer data and to communicate with customers using their mobile devices. All personal information must be protected.

Loss prevention Since mobile phones can use digital media (such as digital coupons and receipts) that may be easy to counterfeit, careful consideration must be given to ensuring that only authentic digital media participate in transactions. Retailers must also keep in mind that it is easy to obtain temporary control of a mobile device. It is especially important to prevent fraud if mobile devices are used to control store operations.

SOA A SOA-based approach is often warranted so that channels can share the same functionality. This approach also facilitates application integration and the use of industry standards.

Cloud computing Mobile devices have limited computing and storage capacity. Services deployed in the cloud can extend device capabilities.

Data source Various data sources can be leveraged for mobile implementation. Data must be kept current through regular updates. High quality price, availability, and product information data (for example) is an important component of overall customer satisfaction.

Store operations Mobile implementation can have a significant impact on store operations and business processes. For example, digital media can reduce the cost of managing coupons and receipts. Many management functions, such as certain types of authorization operations, can be performed remotely.

Hardware costs Depending on the technology used and solutions to be implemented, mobile implementation may require new hardware, such as NFC readers (special scanners that can read bar codes directly from the screen of a mobile device). Retailers may have to implement or improve wireless networks to facilitate mobile communications.




Consideration Summary


Application integration In many cases, mobile applications can be integrated with existing systems using ARTS XML standards and UnifiedPOS.

Ease of use on mobile devices To achieve mainstream use, applications must be both useful and very easy to use. No documentation should be required. It is important that the user experience be simple and informative. Mobile devices have limited UI capabilities: typing can be cumbersome, and the screen is small. Ease in navigating the application and providing customers with simple choices are factors of paramount importance.


Customer support Mobile offers are a great way to interact with customers to improve customer support. Interfacing with a retailer’s CRM program can significantly increase customer satisfaction.


6.3 Development Considerations

When developing a new mobile application, the retailer will generally have to choose between using a browser-based application or a downloaded application; it is rarely cost effective to create an application for each subchannel. If the choice is to use a downloaded-application, the retailer must make additional choices with regard to platform support (i.e., iPhone, Android, BlackBerry, Windows Mobile); developing downloaded applications for a large range of platforms is extremely expensive and maintenance intensive. In essence, the retailer is forced to choose between different technologies.

The choice of which approach to take will depend on numerous factors, including:

• Can the retailer control what devices the consumer uses to access the application and also anticipate what devices will be on the market and require support in 12 months?

• Who is the target audience for the application? Is it consumers, employees, partners—or perhaps all three?

• Is the target audience sensitive to application cost or concerned about the use of data by the application?

• What information must be visible on the mobile device?

The retailer may benefit from the lessons learned by certain European banks who spent millions of dollars trying to squeeze their online banking applications onto the limited screen of a mobile phone, with disastrous results.




• Should an application be available off line as well as on line?

• Is advanced functionality such as GPS, NFC, or camera access required?

6.3.1 Browser-Based Applications

For most retailers, developing a browser-based mobile application will at first appear to be the simplest solution. Development teams can reuse knowledge and experience gained from the retailer’s e-commerce initiatives. Browser-based mobile applications rely on technologies such as HTML5, XHTML, CSS, and HTTP, which are familiar to most Web developers.

However, mobile development must take into account additional considerations, including:

• How to ensure compatibility across the thousands of available mobile handsets

• How to optimize the user interface for the consumer’s specific handset

• How to offer the user convenient access to the mobile site

6.3.1.1 Handset Compatibility

The compatibility challenge is already familiar to developers from e-commerce initiatives. Customers can use different browsers, each with different capabilities, to access a retailer’s e-commerce application. Browser-based mobile applications take this paradigm to the extreme, as there are hundreds of different mobile browsers, all with vastly different capabilities, as opposed to the three or four different browsers that are generally used to access e-commerce applications. An additional complication is that different vendors currently offer an array of browsers for most smartphones.

Technical differences between the different browsers customers can use can be addressed by adhering strictly to mobile standards such as XHTML MP 1.0/1.1 and Wireless CSS. Both standards are composed of a subset of their Web counterparts. Tools (such as Validome) are available that can validate HTML documents and are extremely useful. Additionally, the retailer should adopt a conservative design that is compatible with low resolution screens.

6.3.1.2 User Interface Optimization

Even if the retailer’s browser-based application is compatible with the consumer’s specific handset, there is no guarantee that the user experience is going to be a good one. Once broad compatibility has been achieved, ambitious retailers should look further into optimizing the application based on each device’s specific capabilities.

To address this issue, the retailer will have to determine what specific handset a customer is using. For example, the iPhone, with a resolution of 320x480, has much more available screen space than older handsets, such as the Sony Ericsson K790i, with a resolution of 240x320 (Figure 59). Therefore, the retailer could present more information on the iPhone than on the K790i without degrading the user experience.




Figure 59: iPhone and Sony Ericsson K790i Display Areas

Another consideration is that some modern smartphones, such as the iPhone, do not support common mobile standards but do support newer standards, such as HTML5. Retailers should consider engaging consultants with mobile experience to assist in selecting the “right” technologies for their businesses as part of developing a mobile strategy. Multiple options should be considered, including in-house development, purchase and installation of an integrated mobile platform, and use of the cloud computing platform as a service (see Section 6.5.2).

6.3.1.3 Web-Site Access

Retailers must also consider the issue of accessing a mobile Web site. Starting the phone’s browser and navigating to a specific URL can be difficult, especially on older phone models. The browser may be hidden, and entering a URL is often frustrating.

Messaging technologies such as SMS allow retailers to resolve this issue. Customers can send a simple SMS message requesting a link to the retailer’s mobile site. However, to offer this approach properly, the retailer must take into account both the customer’s wireless carrier and the customer’s mobile phone. For example, some large U.S. carriers, such as Sprint, and some modern smartphones, such as the iPhone, do not support standard SMS WAP push, which generally allows someone to access a URL by simply clicking “OK.” To avoid this obstacle, the retailer must embed the URL in the response message, allowing native software on the phone to detect the URL and make it accessible to the customer.

6.3.2 Downloaded Applications

Developing a mobile application to be downloaded means making some difficult decisions and weighing development costs and time against number of customers reached. In general, it is very unlikely that a retailer will be able to develop downloaded




applications for all available mobile platforms, which means that the retailer will generally be forced to choose between the mobile operating systems shown in Table 24.

Table 24: Phone Operating Systems and Associated Programming Languages

Operating System Programming Language

iPhone OS Objective-C

Android (several versions)

Java

Symbian C

Windows Mobile (v6.0, v6.5, or v6.5.1)

C++

Windows Phone (v7.0)

C# Silverlight

BlackBerry (several versions)

Java

Application development for each of these operating systems requires not only knowledge of different programming languages but also a strong understanding of the underlying environment. For instance, BlackBerry devices are known to run a number of different versions of the BlackBerry operating system, not all of which are compatible with each other. Similarly, Android’s operating system can include different vendor-specific extensions that cause additional fragmentation. This fragmentation is expected to increase as new iterations of the hardware and software platforms introduce features that are not backwardly compatible across all devices. A good example is the multitasking capabilities of the iPhone OS 4.0, which will be supported by the iPhone 4G and the iPhone 3GS but not the older iPhone 3G.

Including support for low-end mobile phones capable of running applications written in J2ME and Brew will lead to even further fragmentation, due to the vastly different device profiles and packages. In the J2ME world, a device can be CLDC 1.0-, CLDC 1.1-, or CLDC 1.2-compliant, as well as MDIP 2.0- and MIDP 2.1-compliant. The first profile describes the device connection capabilities, and the second profile describes its multimedia capabilities. In addition, each vendor has been free to include an arbitrary number of Java specification requests and, in some cases, even their own proprietary extensions to the J2ME environment. For example, mobile gaming companies (who must support a large variety of mobile phones) estimate that they spend 20 percent of their




research and development budget creating the mobile game and 80 percent porting the game to different mobile platforms. 56

Not only will retailers have to deal with fragmentation of the software platform, the capabilities of different mobile hardware devices can vary greatly. For example, most smartphones are equipped with GPS and high resolution cameras, whereas lower end feature phones tend not to have GPS functionality and only a low resolution camera. So if a retailer decides to use these features, there are additional restrictions.

Device fragmentation also means that a retailer choosing to use downloaded applications will require advanced life-cycle management capabilities for each application. In addition, the retailer must maintain multiple versions of the APIs to provide access to the back-office infrastructure. To address the challenges of device fragmentation, a retailer will be forced to choose between the different mobile operating systems. A good approach to making this decision is to identify which handsets generate the most traffic on the retailer’s mobile site. The retailer should also create and maintain a detailed database that links the specific version of a specific application to a specific mobile platform for each user. These types of device management capabilities will provide retailers with enough information to determine when a new version of a specific mobile application has reached a sufficient adoption level that support for other older versions can be dropped.

6.3.3 Mobile Payment

Retailers considering implementing mobile payment have additional decisions to make, as discussed in Sections 4.9-4.14. Mobile remote payments can be processed by browser-based, downloaded app-based, and SMS technologies and are offered by a variety of service providers.

6.3.3.1 Mobile Contactless Payment

Implementing NFC-enabled mobile contactless payment involves unique considerations. Mobile wallet software interacts with a payment application that is stored in a secure element on the phone. The mobile wallet software can be a native application that is supplied with the mobile phone, or it can be a downloaded application. In the future, the secure element will be available as part of an NFC-enabled mobile phone (embedded within the phone itself by the manufacturer, supplied by the mobile network operator in the form of a UICC or by another entity in the form of a removable memory card), or in the cloud.

6.3.3.2 Mobile Contactless Payment Requirements

For a retailer to support mobile contactless payment requires the following:

• Enable the POS with the contactless reader infrastructure.

• Support limited data capture at the POS using the contactless readers.

• Support processing that uses the captured data.

56

This data is for “smart” game developers who have outsourced their porting to Eastern European software developers specializing in porting mobile applications.




If the retailer opts to roll out NFC-based payment solutions before NFC capabilities are available in a majority of mobile handsets (Gartner predicts that 20 percent of all consumers will have an NFC-enabled handset in 2012), the retailer may choose to supplement non-NFC equipped phones with stickers or microSD cards. Such hardware can be issued or distributed by other parties, or it can be bought, issued, and controlled by the retailer. In the latter case, the retailer must also provision the hardware, manage the device lifecycle, and integrate capabilities with back-end systems. Retailer-controlled enablement hardware also gives retailers the ability to resell other capabilities that use the same hardware.

6.3.3.3 Development Required

What development work is required by the retailer will depend on what types of mobile contactless payments are to be implemented.

If the retailer is most interested in accepting network-branded credit and debit cards for mobile contactless payment, little development work is likely to be required. The mobile wallet and secure element are supplied by the mobile network operator, and the payment application and account information are provisioned OTA to the secure element. Retailers can accept mobile contactless credit and debit payment using current contactless POS readers. As mobile contactless payment becomes more ubiquitous, alternative payment types (e.g., an electronic check or ACH service) can also be supported in this way.

Retailers who are most interested in accepting their own branded credit cards or stored value (gift) cards have two choices: they can either create their own mobile application that is capable of communicating with the POS using NFC, or they will need to partner with one or more TSMs to provide OTA provisioning of the payment type to consumers after the secure element is embedded in the mobile phone.

6.3.4 Other Application Types

The world of mobility includes a range of technologies in addition to browser-based or downloaded applications, and for very simple or very specialized applications, one of these technologies may be a better choice. For instance, SMS is a viable approach to providing simple notification services or for allowing consumers to opt in to more advanced services. Additionally, SMS, being a push technology, may provide the communication backbone for either a browser-based or a downloaded mobile application. Other messaging technologies, such as MMS or e-mail, should be considered for messages that may include rich content.

6.4 The Path to Mobile

Before starting to mobilize the retail organization, retailers should carefully evaluate the organizational impact of implementing a mobile strategy.

The retailer’s IT governance policy should be expanded to include rules and regulations governing communication through the mobile channel. Taking advantage of work such as the U.S. Consumer Best Practices Guidelines for Cross-Carrier Mobile Content




Programs57 can help retailers comply with standard mobile practices. IT systems and

processes should ensure that auditing requirements are met satisfactorily, the level of availability is appropriate, and transactions are as visible and transparent as necessary. Finally, a retailer must ensure that security and privacy measures are appropriate for meeting industry security requirements, including end-to-end encryption and strong authentication.

6.4.1 Mobile Governance

When a retailer initially begins implementing mobile services, it is important for the entire organization to understand and have a set of practices that govern communication in the mobile channel. The mobile channel is the most personal way for a retailer to communicate with customers. Great care should be taken to ensure that all communication is relevant and that every message is appropriately personalized and targeted to the individual customer.

By expanding the general IT governance policy to include a section describing mobile governance, the retailer will be in a good position to ensure that all mobile initiatives are in compliance with corporate values. The mobile governance section should at the very least specify the following:

• How outbound messages are aligned, to ensure that different parts of the organization are able to coordinate their communication initiatives

It is very important to ensure that messages sent to customers are not considered unsolicited messages.

• Which integration points must be covered to ensure an appropriate level of transparency for transactions in the mobile channel

One current challenge, especially with messaging-based communication, is the absence of transaction transparency and the limited visibility afforded by wireless carriers and mobile aggregators. A retailer should address this challenge by ensuring adequate integration with key systems.

• The level of detail required to establish an appropriate audit and billing trail for mobile services

The appropriate level of detail required for audit and billing records may be determined by the types of mobile services. For example, a mobile service that includes a mobile payment component will require much greater detail than a notification service.

• The measures required to deal with the delivery uncertainty that is inherent in the mobile channel

The mobile channel is by nature prone to interference from outside sources, which will inevitably lead to performance degradation. This issue is even more critical for asynchronous communication such as messaging; messages can be lost or delayed in transmission. The retailer should therefore consider technical or

57

Mobile Marketing Association, U.S. Consumer Best Practices Guidelines for Cross-Carrier Mobile Content Programs , version 5.1( May 2010), http://www.mmaglobal.com/bestpractices.pdf.




procedural safeguards to ensure a satisfactory level of service. These safeguards should be customized on the basis of the customer’s profile. That is, a different procedure should be invoked for a “gold” level customer than for a customer with an unknown track record.

Mobile initiatives today are often launched either by marketing or sales units without coordination with other parts of an organization, such as IT. The mobile application for a particular initiative is generally developed and hosted by a specialized third-party software developer, who may understand mobility but may not be as conversant with enterprise software. While this approach can allow a retailer to launch mobile services quickly, it can also lead to “siloed” applications that do not communicate or share data appropriately. Data for the same customer can be present in multiple applications that do not reference each other properly.

This situation leads to an increased total cost of ownership (TCO) for each application and degradation of the user experience. The increased TCO often results in a poor service level agreement (SLA) between the business unit and the IT unit for mobile services, because the service is not properly integrated with core IT systems such as surveillance and monitoring. In addition, mobile applications rarely comply with established change-management procedures, thereby limiting IT control, increasing coordination requirements, and resulting in higher maintenance costs.

As part of a mobile governance policy, retailers should seek to evaluate the organizational impact of launching mobile services and ensure that all relevant parts of the organization are adequately informed and involved in planning. Guidelines should also be established for working with third-party mobile specialists. These guidelines should include integration and hosting requirements to ensure compliance with the retailer’s operational procedures, such as change management controls.

6.4.2 Achieving Control of the Mobile Channel

The technical responses to a mobile governance policy should consider central solutions for mobilizing core business processes that are designed to overcome the challenges listed above and ensure that mobile services comply with defined policies and quality standards based on best practices.

Like other critical IT systems, such as a retailer’s e-commerce platform, mobile services may benefit from being launched on a central piece of infrastructure dedicated to dealing with the mobile channel. This infrastructure component should provide high availability through appropriate redundancy and serve as the central integration point for other core IT systems for general requirements such as providing transaction transparency and creating audit and billing records with the required level of detail. Figure 60 illustrates how mobile applications can use centralized middleware to provide high availability and generalized integration.




Figure 60: Overview of Mobile Applications Built on a Centralized Mobile Platform

As Figure 60 indicates, a retailer can use multiple mobile aggregators to provide redundancy and failover capabilities for messaging-based transactions. The central mobile platform offers automatic integration with other core systems, such as CRM, finance, and statistics. The centralized infrastructure can serve as a specialized communication bus and integrate directly with the retailer’s enterprise service bus (ESB) and with other services exposed by an SOA. Building mobile applications on a central infrastructure component allows applications to reuse general business logic, which leads to a lower TCO and reduced development costs.

If the retailer plans to launch m-commerce applications that include a mobile remote payment component, the central mobile platform should include a PCI DSS-compliant mobile payment system capable of handling a range of payment methods, such as payment cards, stored value accounts, and MNO billing. This approach allows the retailer to minimize the PCI footprint by letting the central platform handle all payment transactions.

6.4.3 Privacy, Authentication, and Security

When launching mobile services, especially services that include a mobile payment component, a retailer must address concerns related to privacy, authentication, and security.

6.4.3.1 Privacy

U.S. Consumer Best Practices Guidelines for Cross-Carrier Mobile Content Programs describes best practices for managing customer privacy within the mobile sphere.58 Even though this document officially concerns itself only with messaging-based mobile

58

Mobile Marketing Association, op. cit.




applications, the best practices described provide an excellent set of privacy guidelines for retailers:

• The customer must actively opt into push services. Push services include notifications, alerts, and other types of subscription-based services.

• The customer should always be provided with a simple way to opt out of a service. An SMS message with the word “STOP” is a good example of a simple approach.

• The retailer should notify the customer in advance before charging the customer for renewing a subscription. The notification should include the cost of renewing the subscription as well as information explaining how to decline the renewal.

Other authorities within the mobile sphere, such as Apple, have adopted a similar approach to approving mobile applications before offering them to users, and the retailer should try to apply the guidelines listed above to all types of mobile applications

6.4.3.2 Authentication

The mobile phone provides a convenient way to enhance authentication processes to use two-factor authentication (2FA). The retailer can automatically determine the customer’s mobile number (MSISDN) through integration with wireless carrier networks or mobile aggregators. The MSISDN provides the first authentication factor: something you have. (Other alternatives are also possible, such as issuing certificates to the customer’s mobile phone.) By using the mobile number to identify the customer and combining it with a second factor, something you know (such as a password), the retailer can offer 2FA.

The following two guidelines are therefore critical to implementing authentication:

• Authenticate the user, not just the device.

• Restrict access to a service to the user’s device.

A number of off-the-shelf solutions are already available from vendors specializing in providing 2FA in the mobile channel. The approaches differ from vendor to vendor. Some base their solutions on wireless public key infrastructure (WPKI), based on the SIM card, while others provide a solution that is implemented in Java, Objective-C, or another programming language and that therefore resides in the phone’s application layer. Each approach has its pros and cons; a retailer should carefully evaluate which approach provides the best solution for the retailer’s needs.

Finally, mobile technology can be applied within the retailer’s own organization to enhance authentication procedures, such as logging on to a virtual private network or accessing data that is considered business sensitive.

6.4.3.3 Security

The different mobile-payment-related organizations have already done a lot of work on security. In general, encryption technologies such as SSL or TLS are considered adequate for securing data during transmission. All transmitted data are further encrypted by standard network technology standards, such as GSM and CDMA. For applications that incorporate mobile contactless payment functionality, the TSM, in cooperation with the MNO and the issuer (who could be a retailer in the case of retail-branded or retail-owned




payment cards), will address concerns related to secure storage of a customer’s payment details on the mobile phone. The mobile contactless payment transaction is processed through the retail POS system in the same way as any other contactless payment transaction, using the currently implemented POS security features.

For other retail-specific applications that contain or transmit sensitive data, the retailer should apply standard security practices, including end-to-end encryption principles based on standard encryption schemes such as PKI, SSL, and TLS.

6.5 Mobile as a Business Driver for SOA and the Cloud

When delivering mobile services to their customers and employees, retailers should seek to provide the same experience, regardless of which channel delivers the service request. The key is to provide a complete and consistent end-to-end experience. The goal is to deploy retail-specific mobile applications and services quickly and efficiently and communicate brand-specific information (discounts, specials, specific product categories) that is personalized for the particular customer. Providing employees with in-store services (such as clock-in/clock-out, holiday and paycheck calendars, benefits information, training, e-mail) may provide substantial benefits.

The use of SOA and cloud computing is one key to a robust and flexible mobile implementation strategy that can support these goals and provide the following benefits:

• Minimal infrastructure footprint is needed to support the business functions.

• The overall capital investment is reduced.

• IT management and business solution integration processes are simplified.

Consequently, mobile services are a key business driver for promoting SOA and cloud computing strategies within a retail enterprise.

To get the most out of SOA and cloud computing, however, standards must be followed to govern, promote, and guide integration and interoperability among different solutions and platforms. There must also be strong and open collaboration among solution vendors as more mobile services are made available to the consumers.

Figure 61 illustrates how SOA and cloud computing can be the business and technology foundation for a retail solution’s ecosystem. The services in this ecosystem are connected and integrated through the use of an ESB, which translates, transforms, and orchestrates all data and messages between the various retail solutions.




Figure 61: SOA and the Cloud as Key Building Blocks for Mobile Services

With proper planning and a good strategy, SOA and cloud computing can be combined to offer many benefits to retailers. It is also important, however, to understand and address the associated risks.59

6.5.1 Creating Services for Reuse

Retailers inherently suffer from “point solution pollution,” as a result of lack of interoperability between different solutions, often from different vendors. As more point solutions are introduced to accomplish specific retail business processes, it becomes more difficult for retailers to innovate, as the solutions are typically tightly integrated, and replacing one solution has a significant downstream effect on other solutions. In the most extreme case, the entire enterprise could cease to function.

With SOA, a set of business services provide the underlying infrastructure and implementation to abstract the complexity. In other words, retail business processes and functions created and delivered using SOA can be reused and recombined, because they are created and maintained by services constructed using a flexible enterprise architecture. Figure 61 illustrates how applications are abstracted and exposed as services to deliver specific business functions to different consumers.

Retail mobile services are complex and dynamic, as a result of rapid advances in technology and ever-changing consumer demand. To be able to innovate and deliver 59

There is a significant amount of information on both SOA and cloud computing in the “ARTS SOA Blueprint for Retail” and “ARTS Cloud Computing for Retail” white papers. See Association for Retail Technology Standards, SOA Blueprint for Retail, version 1.2, http://www.nrf-arts.org, and Association for Retail Technology Standards, Cloud Computing for Retail White Paper, http://www.nrf-arts.org.

Copyright 2010 ARTS, All rights reserved

SOA and Cloud SOA and Cloud SOA and Cloud SOA and Cloud ---- Key building blocks for Mobile ServicesKey building blocks for Mobile ServicesKey building blocks for Mobile ServicesKey building blocks for Mobile Services




services to meet customer expectations, retailers must create mobile services that can be reused and integrated efficiently and cost effectively. SOA can achieve this goal. SOA focuses on services and the ability of the architecture to integrate multiple services flexibly, on the basis of business requirements.

6.5.2 Moving Retail Services into the Cloud

To innovate, retailers must be flexible and agile, experimenting with different services and solutions. Flexibility is particularly important with mobile services; as such services are generally both complex and dynamic. Retailers need a supporting platform that offers availability as needed, automatic scalability of computing capacity, and flexible pay-per-use services. Cloud computing is one solution.

Cloud computing can be a cost-effective way to deliver mobile services, because it allows retailers to consolidate the underlying infrastructure (servers and software), provision the required computing capacity and services on demand, and use a virtual service delivery platform. In other words, cloud computing offers a platform to deliver the services needed as part of SOA.

Figure 62 illustrates how mobile services can be made available and delivered to a store using the cloud. For example, the service could be a workforce management solution that is hosted and delivered to the store using the SaaS model. The functions within this solution can be directly accessed through a common portal to mobile devices used by both store managers and store associates. The portal is managed and supported by a central management platform, which acts as a gateway between the store and the corporate headquarters, where functions such as service requests, mobile device management, and monitoring services are managed and delivered.




Figure 62: Moving Services into the Cloud

In an SOA environment, cloud computing represents another source of IT services that retailers can use to deliver business services and functions. Additionally, SOA computing offers the possibility of combining multiple cloud-based services into one, to provide higher-value-added services.

Numerous critical elements must be considered when migrating services to or leveraging services from the cloud. These elements include service integration, security, reliability, availability, and accountability. ARTS Cloud Computing for Retail

60 includes useful detail on these topics and should be referenced when building a cloud strategy for mobile services.

6.5.3 Delivering and Accessing Mobile Services in the Cloud

Figure 63 shows how different retail services can be made available in the cloud and delivered to service consumers (customers, employees, and business partners) directly, through their mobile devices. This model gives consumers the ability to access retail services both on demand and by opting in.

60

Association for Retail Technology Standards, Cloud Computing for Retail White Paper, op cit.


CloudCloud

VirtualLocations

VirtualLocations

Retailer

VirtualLocations

VirtualLocations

Service

Service

Service

Service

ServiceService




Figure 63: Accessing Services with a Mobile Device

Deploying retail services in the cloud and giving consumers access from their mobile devices can significantly reduce the complexity of the infrastructure needed to support service implementation and delivery. However, retailers should clearly understand the business values as well as the risks associated with delivering these services. It is also important to understand the interrelationship between mobile services, SOA, and cloud computing.

6.6 Wi-Fi and Wireless LAN for Network Reliability

Companies are deriving business value from mobile and wireless solutions. Mobile marketing, mobile payment, and mobile commerce rely on the presence of a robust, wireless LAN. The mobile user requires the same access, security, quality-of-service (QoS), and high availability enjoyed by wired users. Wi-Fi, the infrastructure on which many wireless networks are constructed, is a network technology based on IEEE Standard 802.11 that enables secure, reliable wireless connectivity to a local network and to the Internet. Wi-Fi is supported by the Wi-Fi Alliance, a global nonprofit association; it is widely adopted and is installed on many personal computers and smart phones.

Wireless networks are an essential tool for accessing voice data, real-time information, and critical applications such as e-mail and calendar services, enterprise databases, supply chain management, sales force automation, and customer relationship management tools. The growth of wireless solutions is reflected in the increased research in areas such as deploying wireless solutions and boosting signal strength. For instance, a


CloudCloud

VirtualLocations

VirtualLocations

VirtualLocations

VirtualLocations

Service

Service

Service

Service

ServiceService




study from North Carolina University61 found that heating, ventilating, and air-conditioning (HVAC) ducts may represent a cost-effective approach to boosting Wi-Fi or RFID signals or improving cell tower reception within stores.

6.6.1 Wireless LAN Benefits for Retail Environments

Wireless LANs can provide a number of benefits within the retail environment.

A robust wireless LAN can enhance the in-store customer experience, providing consumers with access to product, promotional, and store information through wireless-enabled tools, Web applications, and integration with location awareness. For example, a retailer can implement targeted consumer marketing, delivering content and rich media to a customer’s dual-mode device when that device is connected to the in-store wireless LAN guest network. Such content could include loyalty information, shopping list information, and targeted promotions. As another example, the customer’s mobile device can act as a mobile personal shopper, providing information such as real-time price checks and product level advertising at the point of choice, or product location information for in-store guidance.

Wireless LANs can also optimize the retail employee experience. Store employees can collaborate with vendors and perform administrative functions such as inventory management while remaining within reach of customers. For example:

• In-store mobile voice can deliver cost-effective wireless phone services, improve customer inquiry response rates, and enable associates to collaborate across multiple stores.

• Secure inventory management can provide employees with the ability to address customer inquiries about inventory availability quickly, provide real time visibility into inventory status, and improve administrative efficiency.

• Secure guest access can provide vendors and suppliers with network access while also supporting in-store hotspots to attract customers.

Wireless LANs have additional advantages for employees. They provide an alternate method of access to Wi-Fi in areas where cellular coverage is unreliable. In addition, they can be a means of communication when other portions of the communications infrastructure are unavailable, either due to an emergency or a lack of local services. Because mobile Wi-Fi handsets can now be integrated with IP-PBX features and numbering plans, employees do not have to return to a desk phone to exercise certain functions.

There are also administrative advantages to installing wireless LANs. Setting up a network that is tailored to the number of participants in a temporary space, such as a meeting room, war room, or brainstorming room, is easier. Wireless LANs can reduce cabling costs by reducing the requirement for contingency cable installation; the network can be employed to fill gaps. Support and maintenance costs can also be lowered; adds, moves, and changes are easier, because it is easier to set up temporary networks, thus

61

http://www.storefrontbacktalk.com/social-networks/want-to-give-your-in-store-cell-reception-a-huge-cheap-boost-use-the-ac-ducts/




minimizing migration issues and avoiding costly last-minute fixes. And business resilience will increase, as the increased mobility of the workforce supports rapid redeployment to other locations with a wireless LAN.

6.6.2 Implementation Recommendations

Wireless LANs run either as an adjunct to an existing wired enterprise network or as a free-standing network within a campus or branch. Properly implemented, a wireless LAN must permit secure, encrypted, authorized communication with access to data, communication, and business services and also fulfill a variety of performance requirements.

The wireless LAN must be able to maintain accessibility to resources. This accessibility enables employees to respond more quickly to business needs, regardless of whether they are meeting in a conference room with a customer, at lunch with coworkers in the company cafeteria, or collaborating with a teammate in the next building.

In addition, the enterprise must be secure from unauthorized, unsecured, or “rogue” wireless LAN access points. IT managers must be able easily and automatically to detect and locate rogue access points (and the switch ports to which they are connected), active participation of both access points, and client devices that are providing continuous scanning and monitoring of the RF environment.

At the same time, the network must be able to extend the full benefits of integrated network services to nomadic users. Voice over IP and IP-video conferencing are supported over a wireless LAN using QoS, which by giving preferential treatment to real-time traffic helps ensure that video and audio information arrives on time. Firewalls and intruder detection capabilities that are part of the enterprise framework must be extended to the wireless user.

The wireless LAN must segment authorized users and block unauthorized users. The services of the wireless network should be safely extensible to guests and vendors. The network should be able to support a separate public network—a guest network.

Visiting employees from other sites should be provided with easy, secure network access. There should not be a need to search for an empty cubicle or an available Ethernet port. Users should securely access the network from any wireless LAN location. Employees are authenticated through IEEE 802.1x and Extensible Authentication Protocol (EAP), and all information sent and received on the wireless LAN should be encrypted.

Network managers should be able to easily deploy, operate, and manage numerous access points within the wireless LAN campus deployments and branch offices or retail, manufacturing, and health care locations. The desired result is one framework that provides medium-sized to large organizations with the same level of security, scalability, reliability, ease of deployment, and management that they have come to expect from their wired LANs.

The wireless LAN should support security, voice, and location services, as well as robust guest access. Enhanced security services include the wireless LAN Intrusion Prevention System (IPS) and Intrusion Detection System (IDS) to contain wireless threats, enforce security policy compliance, and safeguard information. Voice services bring the mobility




and flexibility of wireless networking to voice communications. And location services provide simultaneous tracking of numerous Wi-Fi and active RFID devices from directly within the LAN infrastructure for critical applications such as high-value asset tracking, IT management, location-based security, and business policy enforcement. Robust guest access provides customers, vendors, and partners with easy access to wired and wireless LANs, helps increase productivity, facilitates real-time collaboration, keeps the company competitive, and maintains full wireless LAN security.

6.6.3 Design Considerations for a Reliable Wireless LAN Deployment

There is no "one-size-fits-all" RF template for designing a reliable wireless LAN. Many of the RF-design considerations are interdependent or implementation-dependent.

6.6.3.1 Overlapping Coverage

Wireless networks can be deployed as networks for data only, voice, location management, or a combination. The difference is the pattern of the access points and the amount of RF overlap in the coverage area. How much overlapping coverage is supported by a wireless network should therefore be driven by use, although the design should typically minimize retransmission and data rate shifting. When planning a wireless LAN deployment, consideration should be given to future uses of the network.

Converting a data-only wireless LAN to support additional services is not simply a matter of adding access points; conversion can require a site survey and possibly relocating current access points.

6.6.3.2 Data-Only Deployment

Data-only deployments do not require a large amount of overlap; IEEE 802.11 clients respond to a lower signal from a nearby access point by stepping down their rate and taking a longer time to transmit. For data-only networks, the rule of thumb is to separate access points by 120–130 ft. However, access point separation distances must be calculated to account for objects that affect RF coverage, such as dense walls, machinery, elevators, or even wide-open spaces with steel cages. RRM has been developed for this type of deployment and it is very useful for controlling RF coverage.

6.6.3.3 Voice Deployment

Voice networks locate access points closer together with more overlap than in a data-only network, because voice clients should roam to a better access point before dropping packets. It is also desirable to create smaller cells and ensure that cell edges overlap at or above -67 dBm. This design accomplishes a number of goals, including creating greater homogeneity across a single cell and reducing processor load in the handheld device, which increases link stability and reduces latency. Although only one access point might be required for a particular area, it is recommended that for redundancy and load balancing, two access points be included on nonoverlapping channels with a received signal strength indication (RSSI) above 35 at all times.

Designing for low noise background is as important as relatively high energy density within a cell. A good baseline power setting for access points is in the range 35–50 MW.




Achieving this setting generally requires approximately 15 percent more access points than a coverage model at 100 MW.

Predeployment site surveys are useful for identifying and characterizing certain challenging areas and potential sources of interference, such as competing wireless LANs, rogues, and non-802.11 interference from sources such as microwave ovens and certain cordless telephones. The design should be reviewed and approved by all stakeholders. Postdeployment site surveys are an excellent audit mechanism to ensure that the coverage model complies with the functional requirements defined by the stakeholders.

When calculating access point separation, account for objects that affect RF coverage such as dense walls, machinery, elevators, or even wide open spaces with steel cages. Be sure to include transient influences on RF transmission, such as forklifts, large groups of people, or large objects being moved through the area by crane or similar devices.

6.6.3.4 Location-Based Services Deployments

The third type of deployment is the location-based services deployment, which may be the most complex because it relies on both excellent cell coverage and optimal location of access points. Location management deployments can simultaneously track thousands of devices using the wireless LAN infrastructure. Examples include Wi-Fi tag-type deployments or asset tracking deployments to locate equipment or devices using the wireless network or simply to indicate where wireless clients are located throughout the wireless network. The ability to locate wireless clients can be useful for making the wireless infrastructure more secure by locating a rogue client or access point and can greatly improve client troubleshooting capabilities.

The planning and implementation of a secure, reliable, and high speed mobile infrastructure is the foundation for mobile success. No matter how enticing or innovative the application, consumers will not use if unless it is available on demand with reasonable response times.




7. MOBILE STANDARDS

To achieve universal consumer acceptance, mobile processing must be global. What works in the United States must also work in Asia, the Pacific, and EMEA. The only way to ensure this interoperability is to adopt global standards. Fortunately, many organizations are already working to develop and promote the necessary standards (many of whom are partners in preparing this document).

Some standards organizations define how technology should be enabled. Other organizations define specifications that ensure the security of payment transactions. The entities involved must address challenges that include determining an appropriate method for testing individual mobile phone handsets and secure elements and resolving lifecycle issues.

Numerous standards bodies are involved in mobile contactless payment operations. Figure 64 identifies which standards body is responsible for standards that are applicable to particular pieces of hardware and software.

Figure 64: Contactless Payments Hardware and Software with Associated

Standards

Key to making mobile contactless payments work is the ability to provision the players with the appropriate components. Figure 65 shows which standards bodies are involved in the provisioning effort.




Figure 65: Provisioning

All standards organizations are interested in increasing the ease of access, global interoperability, and security of mobile payment technology for consumers. For example, someone is responsible for certifying the applications on every payment network. Table 25 summarizes the responsibilities of the individual standardization and specification organizations that play a role in current mobile payment implementations.

Table 25: Summary of Standards and Certification Organizations

Organization

Area of Responsibility

Responsibility Mobile

Handset Other

Functions Payment

Applications

PCI SSC x x Maintains, evolves, and promotes standards for payment account security.

EMVCo x

Establishes specifications to ensure interoperability of smart card-based payment systems worldwide. For mobile payments, seeks industry collaboration and coordination of mobile payment standards.

Payment brands (American Express, Discover, MasterCard, Visa)

x

Require that a mobile payment application submit to a security and functionality qualification process for an application to be branded for their network.

GlobalPlatform x

Drives adoption of its technical standards, which provide an open and interoperable infrastructure for transactions performed using smart cards, systems, and devices.




Organization

Area of Responsibility

Responsibility Mobile

Handset Other

Functions Payment

Applications

ETSI x

Produces globally applicable standards for information and communication technologies, including fixed, mobile, radio, converged, broadcast, and Internet technologies.

GSMA x x Engages in technical, commercial, and public policy initiatives to ensure that mobile services are interoperable worldwide.

OMA x x Develops mobile service-enabler specifications to promote interoperability.

NFC Forum x x x

Develops specifications for NFC devices that are based on ISO/IEC standard 18092 for contactless interfaces, ensuring interoperability among devices and services.

3GPP x x Produces globally applicable technical specifications for third-generation GSM.

3GPP2 x x Establishes standards for CDMA 2000.

CDG x x Ensures interoperability among systems while expediting the availability of 3G CDMA technology to consumers.

ISO/IEC x Establishes international standards, including standards applicable to financial transactions and contact and contactless smart cards.

7.1 Technology Details

Table 26 summarizes the relevant characteristics of the technologies most commonly used for mobile.

Table 26: Technology Details

Network Type

Range (m)

Frequency Bit rate Set-up time

Bluetooth Point-to-multipoint 10 2.4–2.5 GHz 2.1 Mbit/s 6 s

Wi-Fi Point-to-point 10–100 2.4 GHz 5 GHz

802.11a–54 Mbps 802.11b–11 Mbps 802.11g–54 Mbps 802.11n– 450 Mbps




Network Type

Range (m)

Frequency Bit rate Set-up time

ZigBee Point-to-point Point-to-multipoint Mesh

10–100 2.4–2.5 GHz 900 MHz 868 MHz

250 Kbit/s As low as 16 ms

NFC Point-to-point < 0.2 13.56 MHz 424 kbit/s < 0.1 s

7.1.1 Wi-Fi and ZigBee

Wi-Fi and ZigBee are wireless technologies; Figure 66 illustrates network access points within a store. In addition to communicating between mobile devices, the location of the receiver can be discerned, which can be helpful in targeted marketing and store operations.

Figure 66: Wi-Fi and ZigBee Access Points

7.1.1.1 Wi-Fi

Wi-Fi is a network technology based on IEEE Standard 802.11 that enables secure, reliable wireless connectivity to a local network and to the Internet. Wi-Fi is supported by the Wi-Fi Alliance, which is a global non-profit association.

Wi-Fi is widely adopted and is installed on many personal computers and smartphones. It is the infrastructure on which many wireless networks are based.

7.1.1.2 ZigBee

ZigBee is an open, global-standard wireless networking protocol based on IEEE Standard 802.145.4 for small, lower power digital radios, which also applies to sensors and control devices. ZigBee is a collaborative effort by a global consortium of companies in the ZigBee Alliance.

One of ZigBee’s key features is the ability to locate an object and identify how far away it is. ZigBee is secure, low cost, and quick and easy to deploy. Other key features include:

• A low duty-cycle, which provides long battery life

• Low latency

• Direct sequence spread spectrum (DSSS) modulation

• Support for up to 65,000 nodes per network




• 128-bit AES encryption, for secure data connections

• Collision avoidance, retries, and acknowledgements

7.1.2 Near Field Communication

Near Field Communication (NFC) technology evolved from a combination of contactless identification and interconnection technologies. In June 2006, the NFC Forum unveiled an NFC technology architecture and announced the first Forum-approved specifications.

The NFC Forum supports four initial tag formats based on ISO/IEC Standard 14443 Type A and Type B and on the NFC Standard ISO/IEC 18092. ISO/IEC 18092 defines communication modes for the NFC interface and protocol (NFCIP-1) using inductive coupled devices operating at a center frequency of 13.56 MHz for interconnection of computer peripherals. NFC Forum-compliant devices must support these formats.

As of August 2009, the NFC Forum has released 15 specifications62:

• NFC Data Exchange Format (NDEF)

• NFC Record Type Definition (RTD)

• NFC Uniform Resource Identifier (URI) Service Record Type Description

• NFC Text Record Type Description

• NFC Smart Poster Record Type Description

• NFC Tag Types 1-4

• NFC Generic Control RTD Technical Specification

• NFC Forum Connection Handover Technical Specification

• Digital Protocol Technical Specification (candidate release)

• NFC Logical Link Control Protocol (LLCP) Technical Specification (candidate release)

• NFC Activity Technical Specification (candidate release)

• NFC Signature RTD Definition (candidate release)

7.2 Contactless Smart Card Standards

Two primary standards govern the operation of contactless smart cards: ISO/IEC Standard 14443 and ISO/IEC Standard 7816.

ISO/IEC 14443 is a four-part international standard that defines the interfaces to a “proximity” contactless smart card, including the RF interface, the electrical interface, and the communication and anticollision protocols. ISO/IEC 14443-compliant cards operate at 13.56 MHz and typically have an operational range of 4-10 cm (2-4 in.). ISO/IEC 14443 is the primary contactless smart card standard being used for transit, financial, and access control applications. It is also used in electronic passports and in the FIPS-201 PIV card.

62

http://www.nfc-forum.org.




ISO/IEC 7816 is an international 12 deal with contact smart cardsinterfaces, including the card’s physical dimensions, the electrical interfacecommunications protocols. relevant for all types of smart cards (contact as well as contactless).

Each payment type has its own standards and specifications and its own certification requirements. The NFC Forum and Smart Blueprint, can provide more information.

7.3 Association of Retail Technology Standards

The Association for Retail Technology Standards (ARTS) was established in 1993 to support the rapid implementation of technologystandards to facilitate integration of software applications and hardware devices. ARTS has developed a widely adopted logical data model, 18 XML schemas, 35 device standards, and 8 RFP templates (

7.3.1 Service Oriented Architecture

ARTS provides standard messages for use when integrating applications. messages enable SOA, which that retailer’s business. To help the retail community get the most out of this




international standard with 14 parts. ISO/IEC 7816 Parts 1, 2, 312 deal with contact smart cards only and define various aspects of the card and its interfaces, including the card’s physical dimensions, the electrical interface

ISO/IEC 7816 Parts 4, 5, 6, 7, 8, 9, 11, 13all types of smart cards (contact as well as contactless).

ach payment type has its own standards and specifications and its own certification NFC Forum and Smart Card Alliance, partners in developing

can provide more information.

Association of Retail Technology Standards

The Association for Retail Technology Standards (ARTS) was established in 1993 to support the rapid implementation of technology within the retail industry by developing standards to facilitate integration of software applications and hardware devices. ARTS has developed a widely adopted logical data model, 18 XML schemas, 35 device

RFP templates (Figure 67).

Figure 67: ARTS Standards

Service Oriented Architecture (SOA) Blueprint

ARTS provides standard messages for use when integrating applications. These standard messages enable SOA, which allows a retailer purchase only those services needed to run

To help the retail community get the most out of this


parts. ISO/IEC 7816 Parts 1, 2, 3, and only and define various aspects of the card and its

interfaces, including the card’s physical dimensions, the electrical interface, and the ISO/IEC 7816 Parts 4, 5, 6, 7, 8, 9, 11, 13, and 14 are

ach payment type has its own standards and specifications and its own certification in developing this

The Association for Retail Technology Standards (ARTS) was established in 1993 to within the retail industry by developing

standards to facilitate integration of software applications and hardware devices. ARTS has developed a widely adopted logical data model, 18 XML schemas, 35 device

These standard a retailer purchase only those services needed to run

To help the retail community get the most out of this




architecture, ARTS created an SOA blueprint,63 the goal of which was to provide retail-specific ideas for successful implementation of SOA in the retail segment.

7.3.2 Cloud Computing Blueprint

While SOA identifies the services required to perform specific functions, so-called cloud computing provides the cost effective infrastructure needed to run those services (Figure 68). The consolidation of information required to execute retail planning, acquisition, moving, and selling activities effectively requires significant computing capability. The cloud can provide these services as elastic resources that can be used in current or new applications, in a wide variety of application types, and by all types and sizes of organizations and companies. ARTS created the ARTS Cloud Computing for Retail white paper,64 similar to the SOA blueprint, to explain the technology from a retailer’s perspective.

ARTS provides standardized messages to communicate between the various SOA services located in the cloud computing environment.

Figure 68: SOA Platform and Services on a Cloud Infrastructure

7.3.3 ARTS Data Model

The ARTS Data Model, version 1.0, was released in 1996 to create standard data names and structures to enable master data management and make integration of disparate

63

Association for Retail Technology Standards, SOA Blueprint for Retail, Version 1.1, July 4, 2008. 64

Association for Retail Technology Standards, Cloud Computing for Retail” Version 1.0.0, Dec. 12, 2009.




applications easier. Today, the model contains over 600 tables and 4,500 elements in a relational model that describes retail business functions and the retail process. It serves as a guide for retail IT support, a database design for new applications, and a repository for data storage.

7.3.4 ARTS UnifiedPOS

The ARTS Unified Point of Service (UnifiedPOS) is a standard API specification that is platform independent (language and operating system neutral) for connecting 35 POS devices, such as scanners, magnetic card readers, and printers, to POS terminals. New devices required to connect mobile phones to POS are or will be included in UnifiedPOS.

The API specification is intended to enable interoperability between standard applications and standard devices from multiple providers. The specification defines an architecture for application interfaces to retail devices and a set of retail device behaviors sufficient to support a range of POS solutions.

7.3.5 ARTS XML

The ARTS XML was created in 1999 to develop and maintain standard XML schemas based on the structures and data elements within the ARTS data model to integrate applications within a retail enterprise. There are 18 schemas in the ARTS inventory; the following schemas are relevant to mobile retail:

• POSLog enables rapid integration with POS applications. Retailers planning to implement mobile payment, coupons, and discounts will find that POSlog is a required standard.

• Digital Receipt was recently updated to display receipts on mobile devices and contain additional data.

• Payment defines payment as a service; it can now be removed from the POS application, making it easier to use on mobile devices and still comply with PCI.

• Retail Transaction Interface defines services for ease of integration with POS and allows multiple services/applications to use a common set of business rules.

• Product Content Management (PCM) supports the communication of images (digital assets) between manufactures and retailers or any parties.

• Stored Value is a set of XML messages that support debit/gift cards, purchase, redeem, recharge, and similar functions.

• Time-punch defines data messages to support recording associate work time, log in, change assignments, log out, and similar functions.

• Associate Management identifies employees and records all relevant information, including profiles and employment histories.

• Inventory tracks inventory by item by physical location, with all levels of summary available

• Item Maintenance defines information about products from unique item (EPC) to summary categories (styles and SKUs). Retailers planning to scan a bar code and display product information will want to investigate the Item schema.




More information about ARTS standards is available at www.nrf-arts.org.

7.4 GS1

GS1 US is a not-for-profit global standards organization that assigns and manages standard identification numbers to identify products, cartons, locations, and other entities. These numbers are usually represented as the familiar bar code or electronic tag called an EPC. GS1 standards enable the unique identification of products, services, locations, logistics, and assets in the business-to-business community around the world. ARTS partners with GS1 US to ensure that GS1 standards are included in ARTS business and technical guidelines.65

GS1 has recently launched an initiative to provide the B2C ecosystem of access to trusted product data on entry of a GTIN.

65

For information on GS1 Identification Numbers, see http://barcodes.gs1us.org/dnn_bcec/Standards/IdentificationNumbers/tabid/81/Default.aspx




8. TERMS AND ACRONYMS

Term Definition

1-D bar code Linear (one-dimensional) bar code representation of data as widths (lines) and spacing of parallel lines, such as a product’s universal product code.

2-D bar code Two-dimensional bar code representation of data in a geometric pattern that is easy for mobile cameras to read. QR-Codes, GS-1 2D, and AZTEC are 2-D bar codes.

2FA See two-factor authentication.

ACH Automated Clearing House

aggregator Entity that can aggregate messaging services between mobile network operators and the retailer (for example, Open Market or mBlox).

API application programming interface

application (app) Small, dedicated-purpose software program designed to help a user perform one or more specific tasks.

BI business intelligence

Bluetooth Proprietary open wireless technology standard for exchanging data over short distances (using short length radio waves) from fixed and mobile devices. Bluetooth can connect several devices, overcoming problems of synchronization.

BREW Application development platform created by Qualcomm that can download and run small programs for playing games, sending messages, sharing photos, and the like. Application developers who use BREW can easily port their applications between all Qualcomm devices.

browser-based application

Application that is hosted in a browser-controlled environment (e.g., a Java applet) or coded in a browser-supported language (such as JavaScript, combined with a browser-rendered markup language like HTML) and that relies on a Web browser to render the application executable.

CLDC connected limited device configuration

cell phone See mobile phone.

cloud computing Internet-based computing, whereby shared resources, software, and information are provided to computers and other devices on demand, as is the case with electricity and the electricity grid. These resources are sometimes referred to as the cloud.

common short code (CSC)

A 3-7 digit “phone-number” used by companies to send and receive SMS and MMS messages that enable a simple action across multiple carriers in a given geographic area. Common short codes are also known as short codes and short numbers.

CRM customer relationship management

CSC See common short code.

CSS cascading style sheet

EMEA Europe, the Middle East, and Africa




Term Definition

EMV Standard for interoperation of chip cards (cards with an integrated circuit, or IC) with IC-capable POS terminals and ATMs for authenticating credit and debit card transactions. The EMV standard defines the interaction at the physical, electrical, data, and application levels between IC cards and IC card-processing devices for financial transactions.

ERP enterprise resource planning

ESB enterprise service bus

feature phone A low-end mobile phone that has less computing ability than a smartphone; sometimes referred to as "dumb phones." Feature phones can often run simple applications based on Java or BREW.

geofence Virtual boundary for a real-world geographic area. When a location-aware device (such as a phone equipped with GPS) enters or exits a geofence, the device receives a notification.

gift registry Mechanism for requesting items from others on special occasions, such as weddings, graduations, and similar celebrations. The list compiler does not intend to purchase these items but wants others to do so.

GPS global positioning system

GUI graphical user interface

handset On a telephone, the device the user holds to the ear to hear audio. Modern handsets typically contain a microphone as well; in early telephones the microphone was mounted on the phone itself, which often was attached to a wall at a convenient height for talking. Handsets on such phones were called receivers, a term often applied to modern handsets. On a mobile phone, the entire unit is a radio transceiver that communicates through a remote base station and is referred to as a handset.

high availability A system design protocol and associated implementation that ensures a certain degree of operational continuity during a given measurement period. Availability refers to the ability of the user community to access the system, whether to submit new work, update or alter existing work, or collect the results of previous work.

HTML, HTML5 hypertext markup language, hyper-text markup language version 5

HTTP hypertext transfer protocol

HTTPS hypertext transfer protocol secure

IMAP Internet message access protocol

IVR interactive voice response

Java Programming language that is not operating–system dependent. Java applications can in theory be run anywhere.

JavaScript Object Notation (JSON)

Lightweight, text-based open standard designed for human readable data interchange derived from the JavaScript programming language.

Java specification request (JSR)

Formal document that describes proposed specifications and technologies for adding to the Java platform.

JME, J2ME Java Micro Edition

JSON See JavaScript Object Notation.

JSR See Java specification request.

KPI key performance indicator




Term Definition

LBS See location based services.

location based services (LBS)

Feature that relies on knowing the approximate location of a mobile device.

m-commerce The full shopping experience on a mobile device, including product selection, shopping basket, payment, checkout, and transfer of product or service from retailer to consumer.

MEF mobile enterprise framework

MIDP mobile information device profile

microSD card Small, removable memory card commonly used in mobile phones, portable media players, and other handheld devices. See also SD card.

MNO mobile network operator

MMS See multimedia messaging service.

MO mobile originated

mobile device Handheld wireless, portable device such as a media player, mobile phone, e-reader, or tablet.

mobile marketing Set of practices that enables organizations to communicate and engage interactively with an audience through any mobile device or mobile network.

mobile operations Business process or transaction carried out using a mobile device. The device must be capable of receiving a custom application developed by the retailer.

mobile network operator (MNO)

Telephone company that provides services to mobile phone subscribers. MNOs are also referred to as mobile phone operators and cellular companies, among other synonyms.

mobile payment Payment for goods or services initiated from a mobile phone or similar device, such as a personal digital assistant or smartphone.

mobile phone (cell phone)

Handheld device connected to a mobile network operator that can make and receive calls and send and receive messages. Different mobile phones can have different capabilities. See also smartphone and feature phone.

mobile retail Use of a mobile device for the purpose of performing retail business processes as a customer, an associate, or a business partner.

mobile wallet An electronic wallet that is stored on a phone. A mobile wallet can be thought of as a data repository that holds enough consumer data to facilitate a financial transaction from a mobile handset, and the intelligence required to translate an instruction from a consumer into a message that a financial institution can use to debit or credit bank accounts or other payment instruments.

mobile Web application Web site that has been revamped to accommodate the limited screen size available on a mobile device.

MSISDN Mobile Subscriber Integrated Services Digital Network Number

MT mobile terminated

Multimedia Messaging Service (MMS)

Standard way to exchange multimedia messages with a mobile phone. MMS extends the core ability of SMS and is most often used to send photographs, for example.




Term Definition

native application Application written for a specific operating system that does not run within a browser. Native applications typically contain more features and are able to use a platform’s many capabilities.

NFC Near Field Communication

Objective-C Reflective, object-oriented programming language that adds Smalltalk-style messaging to the C programming language. Used primarily on Apple's Mac OS X and iPhone OS.

operating system (OS) The software on a computer that manages the way different programs use the computer’s hardware and regulates the ways that a user controls the computer. The combination of the operating system, the hardware architecture, and other components (such as the user interface) is often referred to as a platform.

OS See operating system.

OTA over the air

PCI payment card industry

PKI See public key infrastructure.

Plain Old XML (POX) Term used to describe basic XML as opposed to complicated, multilayered XML specifications such as those that define Web services.

platform See operating system.

POS point of sale

POX See Plain Old XML.

PSMS premium billing SMS

PSP payment service provider

public key infrastructure (PKI)

Hardware, software, people, policies, and procedures used to create, manage, distribute, use, store, and revoke digital certificates that address the problem of protecting private information that must be transmitted publically.

QR code Matrix code (or 2-D bar code) created by Japanese corporation Denso-Wave in 1994. The "QR" stands for "quick response," as the creator intended the code to be decoded at high speed.

QR codes are common in Japan, where they are currently the most popular type of two-dimensional codes. Most current Japanese mobile phones can read this code with their cameras.

REST Lightweight request/response architecture that leverages HTTP methods.

RF radio frequency

RFID radio frequency identification

ROI return on investment

SaaS See software-as-a-service.

SD card Non-volatile memory card format developed by Panasonic, SanDisk, and Toshiba for use in portable devices. It is widely used in digital cameras, digital camcorders, handheld computers, netbook computers, PDAs, media players, mobile phones, GPS receivers, and video games.




Term Definition

secure element Storage location in a mobile phone for information that needs robust protection, such as information authenticating the identity of a payer. There is no consensus on where the secure element should reside; candidates include a SIM card, a secure memory card, an embedded smart card chip, or an external device attached to the phone.

service oriented architecture (SOA)

Flexible set of design principles applicable to systems development and integration. A deployed SOA-based architecture provides a loosely-integrated suite of services that can be used within multiple business domains.

shopping list List of items needed to be purchased by a shopper. Shopping lists are typically not shared, but are intended strictly for the shopper’s personal use.

short code See common short code.

Short Message Service (SMS)

Communication service that allows the exchange of short text messages on a mobile device. The term SMS is often used as a synonym for all types of short text messaging.

short number See common short code.

SIM subscriber identity module

SOA See service-oriented architecture.

smart card A pocket-sized card (or other form factor) with an embedded integrated circuit that can be either a secure microcontroller or equivalent intelligence with internal memory or a memory chip alone. The card connects to a reader with direct physical contact or with a remote contactless radio frequency interface.

smartphone Mobile phone that can handle data as well as voice signals. Smartphones offer advanced computing ability and connectivity, allowing the user to install and run more advanced applications based on a specific platform. Smartphones run complete operating system software, providing a platform for application developers.

smart poster Posters, collateral, advertisements, or similar materials that include a small and inexpensive NFC tag that can contain information or a link to a Web site that an NFC-enabled phone can read by touching.

SMS See short message service.

SOAP (Simple Object Access Protocol)

Protocol specification for exchanging structured information in the implementation of Web services in computer networks. SOAP relies on XML as its message format.

social media A group of Internet-based applications that build on the ideological and technological foundations of Web 2.0, and allow the creation and exchange of user-generated content (for example, Facebook).

software-as-a-service (SaaS)

Software that is deployed over the internet and/or is deployed to run behind a firewall in your local area network or on personal computer. With SaaS, a provider licenses an application to customers as a service on demand, through a subscription or a “pay-as-you-go” model.

SSL Secure Socket Layer

tablet Complete computer contained entirely in a flat touch-screen that uses a stylus, digital pen, or fingertip as an input device instead of a keyboard or mouse.




Term Definition

TLS transport layer security

triangulation Process of determining the location of a point by measuring angles to it from known points at either end of a fixed baseline, rather than measuring distances to the point directly.

trusted service manager (TSM)

Entity who securely distributes and manages a service provider’s services to the mobile network operator’s customer base. The trusted service manager provides the single point of contact for service providers to access their customers, and also performs life-cycle management services for NFC applications.

TSM See trusted service manager.

two-factor authentication (2FA)

Use of any two of the three possible methods to authenticate that an individual is who the individual claims to be. The three possible methods are something an individual knows (a secret, such as a PIN), something the individual has (a possession, such as a passport), or something unique to the individual’s physical makeup, such as a fingerprint (referred to as something the individual is ).

UICC universal integrated circuit card

Unstructured Supplementary Service Data (USSD)

Mobile phone capability generally used for mobile banking in developing countries where WAP is unavailable. In most countries, WAP is used for mobile banking and now mobile payment

UPC Universal Product Code

USSD See Unstructured Supplementary Service Data.

WAP wireless application protocol

WCSS wireless application protocol cascading style sheet

WebKit A layout engine designed to allow Web browsers to render Web pages. The engine provides tools to display web content in windows and implements browser features such as following links when clicked by the user, managing a back-forward list, and managing a history of pages recently visited.

Web template Tool used to separate content from presentation in Web design and for the mass production of Web documents. Web templates can be used by any individual or organization to set up a Web site.

Wish list List of items that the list compiler would like to purchase if possible. Wish lists can be shared with others.

WPKI wireless public key infrastructure

XHTML extensible hypertext markup language

Mobile Blueprint

Technology

Transcript of Mobile Blueprint