emerging platforms, embracing mobile, and confronting identity

™

2010ePayments: Emerging Platforms, Embracing Mobile, and Confronting Identity

By Tim O’Brien, Dave Sims, and the O’Reilly Radar Team

An O’Reilly Radar Report

Contents

ePayments: Emerging Platforms, Embracing Mobile, and Confronting Identity .. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

The.Rise.of.Payment.Platforms.. . . . . . . . . . . . . . . . . . . . . . 3

PayPal.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Amazon.Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Google.Checkout.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Apple.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Facebook.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Comparing.Established.Payment.Platforms.. . . . . . . 6

New.Regulations:.Greater.Opportunity,.but.Greater.Scrutiny.. . . . . . . . . . . . . . . . . . . . . . . . . . . 7

The.Incumbents.React.. . . . . . . . . . . . . . . . . . . . . . . . . 9

Risk.Assessment:.Big.Data.and.Fraud.Detection.. . . 9

The.Future:.A.Bid.for.Every.Transaction.. . . . . . . . . 10

The.Mobilization.of.Money. . . . . . . . . . . . . . . . . . . . . . . . 12

Direct.Mobile.Billing.. . . . . . . . . . . . . . . . . . . . . . . . . 12

Mobile.Banking.in.the.Developing.World. . . . . . . 13

Contactless.Payments. . . . . . . . . . . . . . . . . . . . . . . . 13

The.Significance.of.Online.Identity. . . . . . . . . . . . . . . . . 17

Distinct.Identities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Identity.Standards.. . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

©2011.O’Reilly.Media,.Inc..O’Reilly.logo.is.a.registered.trademark.of.O’Reilly.Media,.Inc...All.other.trademarks.are.the.property.of.their.respective.owners...10274.1

1.:. ePayments:..Emerging.Platforms,.Embracing.Mobile,.and.Confronting.Identity.

single.click,.buy.audio.books,.rent.movies.and.TV.shows,.

audit.university.classes,.or.purchase.software.for.their.

mobile.devices..What’s.more,.they.don’t.need.to.be.at.

their.laptop.to.do.it,.since.the.iTunes.store.travels.with.

the.iPhone—a.feature.that.makes.it.possible.for.Apple.to.

know.where.consumers.are.when.they’re.buying..Apple.

has.experimented.with.Starbucks.to.sync.purchases.with.

music.playing.in.their.coffee.shops,.and.it.isn’t.much.of.a.

stretch.to.imagine.Apple.extending.the.program.to.

other.retailers.through.similar.point-of-purchase.deals..

With.a.single.online.service,.Apple.has.managed.to.

disrupt.the.recording.industry’s.status.quo,.caused.TV.

networks.to.rethink.the.value.of.their.programming,.and.

taken.sales.away.from.retailers.inside.their.own.stores..

Apple.owes.much.of.this.success.to.a.deeper.level.of.

engagement.that.its.customers.bring.to.transactions..

Increasingly,.its.customers.aren’t.bothered.by.how.much.

Apple.knows.about.them;.in.fact,.they.appreciate.the.

benefits.they.receive.from.that.familiarity..They.share.

information.about.their.musical.preferences.in.exchange.

for.Genius.recommendations.on.new.music.they.might.

like..They.let.Apple.hold.their.credit.card.information.in.

return.for.the.ability.to.buy.media.quickly.and.easily..And.

increasingly.they.extend.this.trust.to.third-party.app.

ePayments: Emerging Platforms, Embracing Mobile, and Confronting Identity by Tim O’Brien, Dave Sims, and the O’Reilly Radar Team

Payment.technology.is.experiencing.a.series.of.

innovations.and.disruptions.that.promise.to.

change.the.way.that.consumers.buy.goods,.

media,.and.services.online;.changes.that.could.

shift.the.landscape.of.leading.players.in.this.industry..A.

billion.new.consumers.are.coming.online.in.developing.

markets.at.the.same.moment.that.mobile.commerce.is.

shifting.from.niche.to.mainstream—all.while.the.finan-

cial.industry.wrestles.with.reforms.in.the.wake.of.the.

economic.crisis..These.changes.are.occurring.on.top.of.

an.already.shifting.landscape.where.online.consumers—

who.only.a.decade.ago.were.skittish.about.entering.their.

credit.card.numbers.on.the.Web—appear.to.have.

crossed.a.threshold.of.trust.with.key.online.brands,.to.

whom.they.will.not.only.give.their.financial.information,.

but.location.data.and.personal.preferences.as.well..

Consider.the.impact.of.some.of.these.changes.on.

one.player:.Apple..In.the.seven.years.since.the.launch.of.

its.iTunes.store,.Apple.has.changed.the.way.that.con-

sumers.purchase.and.consume.music,.shifting.the.unit.of.

measure.from.the.$18.album.to.the.$1.29.single—and.

capturing.28%.of.all.US.music.sales.along.the.way..And.

songs.were.just.the.beginning:.the.iTunes.store.has.

emerged.as.a.common.platform.where.users.can,.with.a.


providers.on.Apple’s.iOS.mobile.platform..For.example,.

they’re.willing.to.let.services.like.Yelp.and.FourSquare.

know.where.they.are,.when.they’re.there,.and.how.often.

they.return,.all.in.exchange.for.simple.rewards.like.mayor.

badges..Once.upon.a.time,.consumers.worried.about.

online.services.knowing.too.much.about.them..We.

appear.to.be.seeing.a.complete.shift.to.a.world.where.

consumers.will.be.frustrated.if.merchants.(online.and.

off).don’t.know.enough.about.them..Why.should.I.have.

to.repeat.my.usual.order.when.I.come.to.my.favorite.

restaurant?.Why.doesn’t.the.sales.person.at.Old.Navy.

know.my.pants.size?.Why.don’t.cafés.compete.for.my.

business.by.sending.me.discount.coupons.when.I’m.in.

their.neighborhood?

This.research.report,.compiled.by.O’Reilly.Media.in.

the.summer.and.fall.of.2010,.aims.to.present.a.clear.

picture.of.the.financial,.technological,.and.cultural.

changes.occurring.in.the.online.payment.industry—and.

to.stimulate.thinking.on.how.players.should.seek.to.

understand.their.impact..The.report.considers.the.key.

players,.technologies,.and.decisions.being.made.within.

the.context.of.three.overriding.trends.in.payment.

technology:.

■■ The Rise of Payment Platforms..As.consumers.

become.more.comfortable.storing.their.financial.

information.online.with.brands.they.trust—brands.

like.Amazon.Payments,.Apple’s.iTunes,.Google.

Checkout,.or.PayPal—the.traditional.checkout.pro-

cess.that.asked.buyers.to.enter.a.credit.card.number.

is.becoming.obsolete..Now,.whether.buying.a.shirt.at.

Patagonia.or.a.ticket.on.American.Airlines,.it’s.increas-

ingly.likely.that.consumers.will.pay.instead.through.a.

payment.platform,.a.process.that.is.simpler.for.the.

buyer.and.easier.for.the.vendor.

■■ The Mobilization of Money..As.every.smartphone.

becomes.a.tool.for.buying.(and,.given.innovations.

like.The.Square,.for.selling.as.well),.mobile.devices.

will.usher.in.an.era.of.more.personal.transaction.

experiences..Instead.of.a.trail.of.impersonal.trans-

actions,.mobile.commerce.will.connect.not.only.a.

consumer’s.purchasing.history,.but.activities.and.

locations.as.well..For.example,.secure.devices.will.

allow.consumers.to.opt.in.to.programs.that.offer.

them.discounts.or.other.opportunities.based.on.their.

proximity.to.brick-and-mortar.stores.

■■ The Significance of Online Identity..Consumers.are.

likely.to.make.purchases.on.the.same.platform.where.

they.have.an.existing.identity.and.are.spending.time.

doing.other.things..A.payment.system.closely.tied.to.

other.aspects.of.online.identity.(for.example,.a.Gmail.

account.or.a.Facebook.page).stands.a.better.chance.

of.becoming.the.user’s.default,.providing.it.can.offer.

the.same.benefits.as.competing.systems..However,.

even.as.users.come.to.expect.online.systems.to.know.

more.about.them.in.order.to.facilitate.transactions.

and.reduce.friction.in.accomplishing.tasks,.they.are.

likely.to.want.to.maintain.control.over.which.online.

services.have.access.to.distinct.aspects.of.their.

identity..


interfaces.(APIs).in.an.ecommerce.operating.system..A.

game.developer,.for.example,.can.design.its.software.to.

a.standard.API.and.then.later.write.(or.find.someone.to.

write).simple.connections.that.make.it.possible.for.the.

game.to.run.on.different.platforms..Similarly,.an.online.

merchant.can.design.its.store.to.work.with.a.single.

payment.platform.(Paypal,.for.example,.or.Amazon.

Payments).and.not.have.to.worry.about.the.details.of.

how.to.receive.payments.from.credit.cards,.banks,.or.

other.payment.systems..For.a.fixed.transaction.fee,.the.

merchant.outsources.those.complications.so.it.can.focus.

on.marketing.and.fulfillment..

The Rise of Payment PlatformsThink.of.a.payment.platform.as.any.service.that.simplifies.

consumer.purchasing.and.merchant.payment.by.acting.

as.an.intermediary.among.buyers,.sellers,.and.financial.

institutions..As.the.intermediary,.a.payment.platform.

provides.a.range.of.benefits.to.the.consumers.(for.exam-

ple,.the.ability.to.purchase.items.at.many.different.sites.

with.just.one.click).and.to.the.merchants.(handling.the.

details.of.payment.processing,.whether.by.credit.card,.

bank.account,.or.other.method)..In.exchange.for.this,.the.

platform.generally.takes.a.share.of.the.transaction.fee.

Because.payment.platforms.can.simplify.the.way.that.

merchants.interact.with.various.forms.of.payment,.we.

can.think.of.them.like.standard.application.programming.

Typical Online Payment1. AcustomerchoosestopaywithPayPal.Themerchant

directsthecustomertoPayPaltoauthorizethetransaction.

2. ThecustomerlogsintoanexistingPayPalaccountandsecurelyauthorizesthetransactionwithoutsendingfundingsourceinformation(suchasacreditcardnumber)tothemerchant.

3. PayPalprocessesthepaymentusingaPayPalbalanceorbydrawingfundsfromthecustomer’sbankorcreditcard,perpreviousagreementwiththecustomer.

4. Themerchantreceivesamessageaboutthesuccessorfailureofthetransactionalongwithinformationaboutthecustomertoconcludethetransaction.

Paymentplatform

Credit/debitaccounts

Bankaccounts

Mobilepayment

Other(bill me later)

Transactiondatabase

Customerdatabase

Customer

Merchant

1

23

4

Figure1.Paymentplatformsactastheintermediarybetweenmerchantsandpaymentoptions,simplifyingthetransactionforboththecustomerandtheseller


Google CheckoutWhile.Google.insists.it.is.not.competing.in.the.same.

space.as.other.payment.providers—CEO.Eric.Schmidt.

said.at.the.recent.Web.2.0.Summit.that.Google.is.merely.

a.“technology.provider”.and.does.not.aspire.to.be.a.

payment.platform—its.dominating.presence.online.and.

in.the.mobile.operating.system.space.inevitably.make.it.

a.key.player..Google.Checkout.is.available.at.several.

hundred.thousand.merchant.sites,.and.the.system.

boasts.“tens.of.millions.of.buyers.”.It.seems.most.likely.

that.Google’s.real.play.in.this.space.will.be.via.the.

Android.operating.system,.the.fastest.growing.smart-

phone.OS..Google.Checkout.is.increasingly.integrated.

with.Android,.and.at.the.Web.2.0.Summit.Schmidt.

demonstrated.technology.that.allows.an.Android.device.

to.tap.a.payment.point.and.make.a.purchase.via.the.

phone..Schmidt.said.this.contactless.payment.option.

will.be.incorporated.in.the.next.Android.update.(code.

named.Gingerbread).and.will.be.incorporated.by.hand-

set.manufacturers.in.coming.months..

AppleApple’s.iTunes.platform.has.amassed.150.million.custom-

ers.in.seven.years,.and.while.Apple.does.not.operate.a.

traditional.payment.platform.that.can.be.compared.

directly.with.PayPal,.Amazon,.or.Google,.it.has.estab-

lished.a.platform.that.has.captured.large.segments.of.

the.entertainment.and.application.market..As.with.

Google’s.access.to.Android.phones,.Apple’s.control.over.

the.iOS.and.the.iPhone.hardware.offer.it.a.great.deal.of.

control.over.the.future.of.mobile.commerce..As.noted.

later.in.this.report,.several.patents.indicate.that.Apple.is.

looking.at.the.use.of.the.iPhone.as.a.purchasing.device.

in.real-world.stores,.a.concept.that.could.shake.up.retail.

to.the.same.degree.that.the.iTunes.Store.has.shaken.the.

recording.industry.

PayPalPayPal.is.the.most.visible.player.in.the.payment.platform.

space..It.offers.services.to.buyers.and.sellers.in.24.

currencies.and.190.markets.around.the.world..In.2009,.it.

processed.$71.billion.in.payments.(a.19%.increase.over.

2008).for.81.million.active.users..Although.eBay.bought.

PayPal.in.2002,.it.has.maintained.the.service.as.a.sepa-

rate.brand,.with.ambitions.far.beyond.a.simple.payment.

service.for.eBay’s.auctions..PayPal.offers.a.suite.of.pay-

ment.services.to.individuals.and.merchants,.from.simple.

payment.services.to.full.ecommerce.services.with.authen-

tication,.fraud.detection,.and.other.risk-management.

services..

Amazon PaymentsAmazon.had.an.early.lead.in.the.payments.arena,.but.it.

squandered.that.competitive.advantage.by.reserving.its.

technology.for.use.on.its.own.site..Only.in.the.past.few.

years.has.it.begun.to.deploy.its.system.across.the.

Internet.as.the.Amazon.Flexible.Payment.System,.part.of.

its.broader.offering.of.cloud-based.web.services...

Still,.with.data.on.118.million.customers,.their.shop-

ping.and.buying.behaviors,.consumer.reviews,.and.access.

to.media,.Amazon.remains.a.key.player.in.the.payments.

arena..As.commerce.moves.onto.mobile.platforms,.

Amazon.may.appear.to.be.in.a.weaker.position.than.

Apple.and.Google.with.their.iOS.and.Android.phones..But.

it.has.successfully.used.its.Kindle.as.a.hardware.front-end.

for.its.media.sales,.and.its.Kindle.apps.give.it.a.hook.into.

the.Apple.and.Google.platforms.as.well.

It.remains.to.be.seen.whether.Amazon’s.suite.of.

cloud.services.will.be.a.boon.to.its.payment.platform..Its.

storage,.security,.and.payments.services.are.affordably.

priced.compared.to.similar.services.from.traditional.

software.vendors,.but.Amazon.still.struggles.to.gain.

credibility.among.business.customers.who.are.hesitant.

to.adopt.these.cloud.services.unless.Amazon.can.offer.

service-level.guarantees.that.match.those.of.traditional.

vendors.


Credits.have.been.primarily.for.buying.virtual.objects.

(for.example,.gifts.that.are.pictures.of.items.you.can.send.

to.someone.else.on.Facebook).or.for.use.within.online.

gaming..But.that.could.change:.Facebook.is.beginning.

to.allow.users.to.set.up.store.fronts,.and.given.the.time.

and.dedication.that.users.afford.to.the.site,.the.commer-

cial.opportunities.within.could.be.transformative..

FacebookFacebook.is.a.recent.entry.to.the.payment.platform.

space,.but.given.its.huge.audience.and.its.members’.

devotion.to.the.space,.it.could.pose.a.serious.challenge..

Facebook.has.hired.an.experienced.payments.team.and.

launched.Facebook.Credits,.a.system.that.rests.on.PayPal.

and.lets.members.load.and.store.value.on.their.accounts.

for.purchasing.things.on.Facebook..To.date,.Facebook.

Payment HistoryVisaandMasterCardwerethefirstorganizationstotrytodevelopabroad,secureplatformforInternetcommerce.Inthemid-1990stheyworkedwithotherfinancialinstitu-tionstodefineastandard:SecureElectronicTransactions(SET).Butthesolutiontheyproposed,targetedprimarilyattheneedsofcreditcardproviders,wasunworkableformostoftheWeb’ssmallcommercesitesgivenitsimple-mentationcostsofmorethan$30,000pervendor.

BythetimeSETfailedin1999,Internetcommercepio-neerslikeeBay,Amazon,andYahoo!werealreadyhack-ingtogethertheirproprietarysystemsbasedondirectcreditcardbillingbackedbySSL(securesocketslayer,aformofencryption).Amazonhadamillioncustomersby1997andhadalreadybeguntoestablishitselfastheleadingretailerontheWebusingablendofhome-brewedpayment-processingandfraud-detectionsystems.Toinsiders,itwasclearthatthemomentumofinnovationhadshiftedfromtheoldguardtothestart-ups.RenePelegero,whowasatAmazonin2000,wasquotedinthejournalAustralian Banking & Finance:“We’realwayswill-ingtoworkwithfinancialinstitutions,butIthinktheyhavetobecarefulwheretheircompetitioniscomingfrom.[It’s]comingfromcompaniesthatareabletomoveinInternettime.”

MerchantsontheWeb,largeandsmall,werelookingfortheirownsolutionforpaymentprocessing,andmanyfounditinPayPal,thefirstwidelyacceptedservicefortransferringmoneybetweenindividuals(includingbuy-ersandsellers).PayPal,whichgrewoutoftwoSiliconValleystartupswithcomplementarycapabilities(pay-ments,encryption,andfinancialservices),beganlicens-ingitspaymentsystemtoeBay,whichprovideditasapaymentoptiontoauctionwinners.eBayeventually

acquiredPayPalin2002for$1.5billion,buttheservicecontinuedtodevelopbeyondauctions,growingintoafull-spectrumpaymentssystemforindividualsandmer-chantsalike.

Meanwhile,Amazonwasalsodevelopingplatformstoofferpaymentandothercommercesystemstomer-chants.In1999,itlauncheditszShopswhich,likeeBay’sauctions,offeredavirtualstorefrontformerchantsalongwithapaymentsystem.AmazonPayments,whichgrewoutofzShops,hasevolvedintoafull-fledgedcompetitortoPayPal,offeringasuiteofservicestomerchantsofallsizes.

Anotherkeyplayer,Apple,launcheditsiTunesStorein2003,notonlyrevolutionizingthewaythatconsumersbuymusic(and,eventually,TVshows,movies,andmaga-zines)but,perhapsasimportantly,demonstratingasuc-cessfulmodelforsmallerpurchases—99centsinmostcases.PayPalandAmazonfollowedsuit,loweringtheirtransactionfeefrom30centsto5centsonsmallertrans-actions.Apple’splatformdiffersfromPayPalandAmazonPaymentsinthatitstilldeliversservicesforasinglevenue,theiTunesStore—though,aswe’llsee,thepossi-bilitycertainlyexistsforAppletoextenditsplatformviatheiPhoneandiPad.

Akeyinnovationinrecentyearshasbeentheintroduc-tionofopenAPIsforAmazonandPayPal’splatforms,allowingthirdpartiestocreatenewcapabilitiesontopofthesepaymentsystems.Developershave,forexample,createdsystemsthatpaymultiplepeopleatonce,collectfrommultiplepeopletowardsacommongoal(WePay),oractasaproxy,takingpaymentfromonepartyandpass-ingitalongtoanotherwithacutforthebrokerinthemiddle.


PayPal’s.focus.on.payments.only—avoiding.the.

grander.platform.struggles.that.Amazon,.Google,.and.

Facebook.are.involved.in—may.give.it.a.competitive.

edge.in.its.quest.for.universality..Although.all.three.of.

the.latter.platforms.also.offer.a.payments.platform,.they.

appear.to.view.PayPal.as.a.different.kind.of.competitor..

Consider.Facebook.Credits:.you.can.purchase.them.with.

a.credit.card,.a.mobile.phone,.or.PayPal,.but.there’s.no.

way.to.buy.them.with.Amazon.or.Google’s.payment.

options..One.explanation.for.this.is.that.Facebook.

doesn’t.view.PayPal.as.a.direct.competitor,.unlike.

Amazon.and.Google.who.vie.with.it.for.attention.and.

traffic.

Another.key.differentiator.is.likely.to.be.the.ecosys-

tems.around.each.platform.and.the.ease.or.difficulty.that.

third-party.developers.have.in.creating.applications.that..

tap.or.ride.on.top.of.an.existing.payment.platform..

Apple.has.maintained.a.robust.developer.program.for.

years.and.has.now.extended.that.to.its.mobile.iOS.plat-

form;.approved.apps.are.distributed.(sold.or.given.away.

through.the.App.Store)..PayPal.launched.a.series.of.APIs.

last.fall.that.enabled.developers.to.create.applications.

that.used.the.PayPal.network.but.did.not.require.users.to.

check.out.at.PayPal.com..To.give.its.developer.program.

an.even.bigger.boost,.PayPal.sponsored.contests.offer-

ing.prizes.up.to.$100,000.for.the.best.applications..At.its.

most.recent.developer.event.in.October,.PayPal.reported.

more.than.50,000.developers.in.its.program.who.are.

working.on.more.than.1,000.applications.that.rely.on.its.

platform..

Comparing Established Payment PlatformsAlthough.PayPal.and.Amazon.have.achieved.a.certain.

level.of.feature-for-feature.parity.in.the.payments.space,.

PayPal.also.offers.traditional.payment.gateway.options..

that.neither.Amazon.nor.Google.offer..Both.Amazon.and.

PayPal.offer.sophisticated.APIs.and.an.array.of.

approaches.to.integration.that.target.merchants.of.

differing.scale.and.sophistication..Google’s.offering.

seems.limited.in.comparison.to.both.PayPal.and.

Amazon’s.product.offering..

Merchants.may.be.wary.of.offering.too.many.options.

at.checkout,.and.this.plays.to.the.advantage.of.estab-

lished.platforms.like.PayPal..PayPal’s.primary.association.

is.with.payments,.and.this.could.continue.to.give.it.an.

advantage.over.Amazon,.whose.brand.is.connected.with.

moving.product.(especially.media),.and.Google,.which.is.

primarily.thought.of.as.a.search.engine.and.a.handful.of.

interesting.online.and.offline.experiments..Other.pay-

ment.platforms.are.further.from.the.action,.offering.their.

platform.primarily.within.their.walled.garden.(see.the.

sidebar.on.the.next.page)..

Figure2.Facebookoffersseveraloptionsforbuyingcredits,butGoogleCheckoutandAmazonPaymentsarenotamongthem


The Return of Walled GardensTheriseoftheopenWebinthemid1990susheredoutaneraofwalledgardenswherecompaniessuchasCompuServe,Prodigy,andAmericaOnlineexertedpro-prietarycontroloverprivateonlineservices.Whilesomeconsumersappreciatedtheorganizationandcontrolofferedbytheseenvironments,theadvantagesoftheopenWebprevailed—especiallyastheadventofgoodsearchtoolsmadeiteasiertofindwhatyouwerelookingfor.

Morethanadecadelater,walledgardensappeartobemakingacomeback.Facebook,forexample,isonesuchgardenwhereeveryonewhoplayswithinit—members,merchants,anddevelopers—playsbytherulessetforthbyasinglecompany.Apple’siOSapplicationsconstituteanothertypeofwalledgarden:appsformagazinesandnewspaperspresentthecontentinaformatdesignedforaspecificpieceofhardwareanddisplay.Someconsumersandusabilityadvocatesapplaudthecleanandelegantuserexperience,butthetrade-offisthatmerchantsandpublishersmustagainplaybytherulesofasingleintermediary—inthiscase,Apple.

Foralltheirbenefits,walledgardenslimitcompetitionandchoice.InarecentcommentaryforScientific American,TimBerners-Lee,theinventoroftheWorldWideWeb,warnedagainsttheriseofthese“closedworlds”becausetheygivecontrolofcontenttoindividualcompanies,ratherthankeepingitopenanduniversallyavailable,aswebaddressesare.1

1 “Berners-Lee: Facebook ‘threatens’ web future,” The Register, Nov. 20, 2010, http://www.theregister.co.uk/2010/11/20/berners_lee_says_facebook_a_thret_to_web/.

Fromapaymentsperspective,thereareotherdrawbackstothesewalledgardens:

■■ From a merchant perspective,ifanapplicationorproductcompeteswithApple’sapplicationsorprod-ucts,don’texpecttobeabletosellitontheirplatform.Platformoperatorscandecidetoexcludecompetingcontentfromtheinfrastructuretheycontrol.

■■ From a consumer perspective,acustomercan’texpecttouseherAmazoncredentialstopayfordigitalmusicontheiTunesplatformwhenAmazoncompetesdirectlywithApple.

■■ From a platform perspective,twosocialnetworksmaynotbeabletocommunicateiftheycan’tagreeonterms.Forexample,ApplehadoriginallyhopedtoallowitsPingservicetoworksmoothlywithFacebook.ButwhenitlaunchedPinginSeptember2010,thetwocompanieshadn’tagreedtotermsandFacebookConnectwassubsequentlyremovedfromPing’sinter-face.Atpresstime,thetwocompaniesstillhaven’tresolvedtheirdifferences,despiteareporteddinnermeetingbetweenSteveJobsandMarkZuckerberg.


Dodd-Frank.also.increases.the.regulatory.scrutiny.on.

payment.platforms,.which.are.likely.to.be.regulated.

under.the.new.Bureau.of.Consumer.Financial.

Protection.1.It.remains.to.be.seen.how.the.bureau.will.

regulate.players.like.PayPal,.Google,.and.Amazon,.but.it’s.

sure.to.place.a.new.burden.on.companies.that.have.little.

experience.working.under.financial.regulation.in.the.US.

1 Title X, Section 1002 gives the bureau power to regulate entities that provide “payments or other financial data processing products or services to a consumer by any technological means, including processing or storing financial or banking data for any payment instrument, or through any payments systems or network used for processing payments data, including payments made through an online banking system or mobile telecommunications network.”

New Regulations: Greater Opportunity, but Greater ScrutinyNew.laws.aimed.at.regulating.financial.institutions.and.

protecting.consumers,.passed.in.2010.in.the.wake.of.the.

financial.crisis,.aim.to.limit.the.power.of.incumbents.like.

Visa.and.MasterCard..The.centerpiece.of.this.reform,.the.

Dodd-Frank.Act,.prohibits.credit.card.companies.from.

dictating.restrictive.terms.to.merchants,.such.as.whether.

they.can.discount.noncredit.transactions,.whether.they.

can.enter.into.other.financial.relationships,.and.whether.

they.can.set.minimum.and.maximum.limits.on.cards..

American Airlines Integrates a Payment PlatformMosttransactionsonAmericanAirlines’websitearehan-dledbycreditcard,buttheairlinewantedtoacceptmoreformsofonlinepayment.LanceSleeper,anoperationsmanagerwiththeairline,explainedthegoal:“AmericanAirlineswantstohaveeveryconceivablewaythatevery-onewantstopayusavailable.Fromanoperationalper-spectiveIdon’thaveanyopinionaboutwhatformofpaymentacustomeruses,Ijustwantthemtohaveasuc-cessfultransaction.”

ButintroducingnewoptionslikeelectronicchecksandWesternUnionimposedadditionalburdens,particularlyintheairline’sexposuretofraud.“Thecreditcardindustryandelectronicpaymentsnetworkshaveexperienceiden-tifyinganddealingwithfraud,”Sleepersaid,“butthetechnologiesfordealingwithfraudonanythingotherthancreditcardjusthaven’tmaturedinthesameway.”

AmericanturnedtoPayPalbecauseitofferedthemasecurewaytohandlearangeoftransactionswhilehand-ingoverthecomplexityofdealingwiththoseoptions.“FromanoperationalperspectivePayPalisprobablythe

mostsecuretransactionthatwehave,”Sleepersaid.“Themostimportantpartofmyjobismakingsurethatpeo-ple’sprivatedatastaysprivate. WhenthecustomerpayswithPayPal,Idon’thavetoworryaboutstoringacreditcardnumber.”

PayPalalsobringsawholebucketofpaymentmethodstoAA.comwithouttheairlinehavingtoinvestintheinfra-structuretosupportthoseformsofpayment.Amongthemostimportantoftheseareinternationalcreditcards.Sincerulesvaryfromonemarkettoanother,theairlinecanoffloadtheburdenofdealingwithdozensofplat-formswithvariousregulationstoPayPal.

AsidebenefitwasPayPal’sbrandrecognitionandinstalledbaseofusers.“Wedidn’tdoalotofmarketingwhenweaddedsupportforPayPal.Weturneditonat1p.m.,andIwasmonitoringthevariousfrequentflyerdis-cussionboards.Wehadourfirsttransactionat1:15andat1:30someonehadstartedadiscussionaboutthenewsitechange.”


predictive.technology.to.encourage.greater.sales..In.

April.2010.it.launched.an.online.mall,.MasterCard.

Marketplace,.which.makes.use.of.algorithms.from.Next.

Jump.that.analyze.consumer.behavior.across.multiple.

sites.to.deliver.recommendations.more.likely.to.drive.

purchases.5

American.Express.recently.hired.a.team.of.senior.

executives.from.Sprint.Nextel’s.Virgin.Mobile.USA.to.

guide.its.mobile.payments.efforts..Last.autumn,.AmEx.

bought.Revolution.Money,.a.small.Internet.payment.

network,.for.$300.million..AmEx.has.rebranded.the.

service.as.Serve.Enterprise.and.plans.to.build.its.digital.

and.mobile.payment.initiatives.around.it.6

Risk Assessment: Big Data and Fraud DetectionPayment.platforms.have.a.tremendous.challenge.com-

bating.fraud,.greater.in.complexity.than.that.faced.by.

traditional.payment.processors..But.the.solutions.they.

have.devised.to.deal.with.it.have.created.some.enor-

mous.new.opportunities..

First,.the.problem:.payment.platforms.have.to.pro-

cess.orders.from.many.more.sources.than.do.credit.card.

companies..“Traditional.processors.have.to.deal.with.

tens.of.thousands.of.sources.of.fraud.at.each.individual.

point-of-sale.or.merchant.site,”.said.Matthew.Mengerink,.

VP.of.customer.quality.and.engineering.services.at.

PayPal..“PayPal.has.to.be.able.to.identify.potential.

sources.of.fraud.from.the.almost.90.million.browsers.and.

mobile.phones.that.are.constantly.connecting.to.our.

payment.processing.services..We’re.dealing.with.a.much.

larger.challenge,.and.we’ve.designed.systems.to.identify.

and.manage.fraudulent.activity.often.before.it.has.

started.”.

5 “MasterCard partners with Next Jump to rebuild online strategy,” Bank Systems & Technology, April 9, 2010, http://www.banktech.com/showArticle.jhtml?articleID=224202457.

6 “In Mobile Payments, Amex Steps Up, But It’s Playing Catch-Up,” AmericanBanker.com, October 28, 2010, http://www.americanbanker.com/issues/175_207/mobile-payments-amex-1027739-1.html.

The Incumbents ReactSpurred.by.a.number.of.factors,.including.reduced.

consumer.spending,.new.rules.protecting.cardholders.

and.merchants,.and.the.rapid.growth.of.web-based.

payment.platforms,.the.old.guard.are.scrambling.to.get.

back.into.the.game..In.case.anyone.wondered.whether.

the.traditional.credit.card.payment.networks.would.be.

satisfied.with.a.place.behind.the.scenes—one.level.down.

the.stack,.as.it.were,.serving.PayPal,.Amazon,.and.Google.

Payments—Visa’s.CEO.Joseph.Saunders.recently.clarified.

their.ambitions,.saying,.“We.are.going.to.compete.not.

just.with.PayPal,.but.other.emerging.payment.schemes.”2

Visa’s.most.ambitious.recent.move.in.this.direction.

has.been.its.$2-billion.acquisition.of.CyberSource,.a.

provider.of.electronic.payment,.risk.analysis,.and.security.

solutions.for.ecommerce.3.CyberSource’s.existing.mer-

chant.relations.with.companies.like.Facebook.and.

Google.will.help.Visa.expand.its.role.with.these.online.

platforms..Meanwhile,.it.continues.to.develop.its.

approach.to.mobile.payments.working.with.

DeviceFidelity.on.a.range.of.solutions,.including.a.

microSD.card.that.consumers.can.install.in.their.phones.

and.a.protective.sleeve.with.hardware.to.enable.pur-

chases.with.an.iPhone.4

MasterCard.has.responded.by.purchasing.DataCash,.

a.London-based.company.that.offers.online.payment.

services.similar.to.CyberSource..Although.the.company.

is.considerably.smaller.than.CyberSource.($58.million.in.

revenue.in.2009.compared.to.CyberSource’s.$256.mil-

lion),.it.has.stronger.relationships.with.merchants.in.

Europe,.which.should.help.MasterCard.establish.market.

share.there..Mastercard.is.also.experimenting.with.

2 “Visa Meeting Threat from Alternative Payments,” AmericanBanker.com, Oct. 29, 2010, http://www.americanbanker.com/issues/175_208/visa-threat-from-alt-payments-1027803-1.html.

3 “Visa Picks Up CyberSource For $2 Billion,” TechCrunch.com, Apr. 21, 2010, http://techcrunch.com/2010/04/21/visa-cybersource/.

4 “Visa and DeviceFidelity working to bring mobile payments to iPhone,” Engadget.com, May 6, 2010, http://www.engadget.com/2010/05/06/visa-and-devicefidelity-working-to-bring-mobile-payment-function/.


Hadoop.allow.us.to.do.things.that.were.previously.

impossible.”

Mitigating.risk.is.just.one.use.for.all.this.data..With.

everything.that.payment.platforms.know.about.their.

customers—transactions,.searches,.messages,.likes,.and.

dislikes—they.can.increasingly.use.this.information.to.

devise.sophisticated.advertising.models.or.predictive.

analytics.for.selling.products.and.services..Privacy.advo-

cates.might.be.alarmed,.but.the.payment.providers.are.

just.continuing.a.model.pioneered.by.financial.institu-

tions.decades.ago.for.identifying.consumer.preferences.

and.identifying.fraud.risks..The.emergence.of.tools.for.

processing.Big.Data.creates.new.opportunities.for.pay-

ment.platforms.and.vendors.to.get.better.at.what.they.

already.do...

The Future: A Bid for Every TransactionA.payment.system.built.on.top.of.systems.that.facilitate.

real-time.analytics.creates.interesting.possibilities.for.

consumers.and.merchants.alike..Consider.the.architec-

ture.of.a.modern.advertising.network.like.Google’s.

DoubleClick.(see.Figure.3)..DoubleClick.and.other.ad.

networks.have.perfected.real-time.auctions.that.deliver.

targeted.ads.to.users.in.milliseconds..When.a.request.for.

an.ad.comes.in.from.a.browser,.it’s.quickly.passed.to.one.

or.more.advertisers,.each.of.whom.has.10–20.milliseconds.

to.match.that.user.to.a.profile.and.assign.a.potential.

value.to.its.bid..The.high.bidder.gets.to.place.its.ad—and.

it.all.happens.in.under.a.second..These.interactions.are.

happening.with.every.click,.generating.a.massive.

amount.of.real-time.modeling.and.calculations.that.

drive.an.efficient.market.for.advertising.

Now,.the.opportunity:.to.confront.that.risk,.PayPal,.

Amazon,.and.Google.have.all.developed.sophisticated.

analytical.tools.and.infrastructure.to.identify.patterns.of.

fraudulent.activity..PayPal.has.even.spun.out.some.of.its.

fraud-detection.tools.as.Palantir.Technology,.which.the.

United.States.federal.government.uses.for.a.range.of.

activities,.including.analysis.of.geographical.information.

and.activity.in.Afghanistan..PayPal.and.Amazon.have.had.

years.to.amass.databases.of.the.transaction.details.for.

hundreds.of.millions.of.customers.across.thousands.of.

merchants..These.massive.datasets.contain.not.only.

financial.details.for.transactions,.but.IP.addresses,.

browser.information,.and.other.technical.data.that.will.

help.these.companies.refine.models.to.predict,.indentify,.

and.prevent.fraudulent.activity..

These.tools.vastly.improve.on.the.periodic,.offline.

analysis.that.has.been.the.norm..Institutions.traditionally.

sampled.existing.data.and.ran.nightly.or.weekly.analysis.

using.fraud-detection.models..The.newer.approaches.

perform.continuous,.real-time.analysis.on.large.datasets,.

applying.some.of.the.lessons.that.Google.has.learned.for.

indexing.the.Web.to.the.problem.of.calculating.the.risk.

of.fraud.for.individual.consumers.or.merchants..We.see.a.

swarm.of.activity.around.a.new.crop.of.“Big.Data”.tools.

like.Hadoop,.MapReduce,.and.BigTable—tools.that.can.

deal.with.huge.amounts.of.data..The.fraud.question.is.a.

large.driver.of.all.this.activity.

“Sampling.is.dead,”.said.Abhishek.Mehta,.a.Big.Data.

lead.at.a.large.financial.institution...“When.banks.stored.

petabytes.of.information.on.magnetic.tape,.it.was.impos-

sible.for.them.to.develop.appropriate.models.to.measure.

risk.without.resorting.to.sampling.techniques..Today.we.

can.run.analysis.on.upwards.of.50.petabytes.of.data.to.

more.accurately.calculate.risk..Technologies.such.as.


site.could.automatically.select.the.credit.source.offering.

the.best.terms..From.your.perspective,.your.funding.

sources.and.credit.card.don’t.have.a.fixed.APR;.the.rate.is.

variable.and.can.change.depending.on.your.evolving.

real-time.risk.and.the.risk.of.the.merchant.

Real-time.analysis.like.this.was,.until.recently,.an.

impossible.idea..But.the.innovations.of.ad.networks.like.

DoubleClick.and.Google.AdSense.have.shown.their.

potential.and.created.an.efficient.market.for.advertising..

A.real-time.approach.to.analytics.in.payment.will.

undoubtedly.lead.to.a.wave.of.innovation.among.mer-

chants.and.banks.at.the.point.of.sale...

Adnetwork Advertiser

Trafficprofile50 msLoad page

500 ms

Get ad120 ms

Network bid20 ms Profile

data

Impressiondata

Figure3.Witheveryclick,adnetworksauctiontheavailableimpressionstoadvertisers,whobidonplacingtheiradbasedonthebrowserprofile,allinunderasecond

Imagine.a.similar.system.for.electronic.payments.in.

which.a.payment.platform.offers.potential.transactions.

to.competing.credit.issuers..As.you.browse.an.ecommerce.

site,.your.browsing.history.and.the.item.you’re.consider-

ing.come.together.to.create.a.risk.profile..The.site.or.

payment.platform.may.offer.that.profile.and.the.details.

of.the.transaction.to.a.handful.of.competing.lenders.so.

that.at.checkout.you.receive.several.offers.for.financing.

from.different.banks..If.you.have.previously.chosen.to.

pay.automatically.with.the.most.advantageous.offer,.the.


for.secure.transactions,.including.financial.data.on.the.

buyer.and.an.ability.to.confirm.someone.is.who.they.say.

there.are.by.sending.them.a.secure.token..Other.

enhancements.coming.online,.including.wireless.sys-

tems.for.contactless.payment.and.the.ability.to.confirm.

identity.through.biometrics,.are.sure.to.increase.the.

mobile.phone’s.viability.as.a.tool.for.commerce..

In.this.section.we.look.at.some.of.the.interesting.

experiments.using.mobile.phones.for.payments.in.

developing.markets.and.in.virtual.environments..We.also.

consider.some.of.the.technology.innovations.that.will.

make.the.phone.a.more.robust.tool.for.transactions...

Direct Mobile BillingDirect.mobile.billing.is.an.emerging.platform.for.paying.

for.goods.or.services.online.by.adding.them.to.a.mobile.

phone.account..The.process.is.straightforward:.a.user.

supplies.his.or.her.mobile.phone.number.to.one.of.the.

players.in.this.space,.which.sends.a.text.message.to.the.

phone.and.waits.for.a.response.text.authorizing.the.trans-

action..Once.the.transaction.has.been.authorized,.a.

direct.mobile.billing.service.will.charge.the.user’s.mobile.

phone.account.when.prompted,.and.all.charges.will.

show.up.in.the.next.billing.statement..These.services.

work.with.most.major.wireless.providers,.and.they.can.

also.be.used.with.prepaid.phones.

Boku.and.Zong.are.two.early.leaders.in.this.space..

Their.focus.on.online.games.and.services.allows.users.

(some.of.whom.are.too.young.for.traditional.bank.ser-

vices).to.pay.quickly.and.easily.for.credits.in.online.

environments,.relying.upon.already.established.relation-

ships.between.wireless.phone.subscribers.and.wireless.

carriers..The.service.is.ideal.for.the.14-year-old.who.

needs.to.buy.a.virtual.tractor.in.Farmville.but.doesn’t.

have.a.checking.account..As.long.as.he.has.a.mobile.

phone,.he.can.place.the.charge.on.his.phone.bill—at.

least.until.his.parents.cut.him.off..

Wireless.carriers.charge.significantly.higher.fees.for.

this.convenience.than.do.traditional.payment.services:.

as.much.as.35–40%.of.the.transaction.value..One.reason.

The Mobilization of MoneyAs.impressive.as.the.growth.of.online.commerce.has.

been.over.the.past.ten.years,.its.extension.into.the.

mobile.realm.promises.to.dwarf.the.previous.curve..

Mobile.commerce.will.not.only.increase.the.volume.of.

electronic.transactions,.it.will.also.change.their.nature..

The.trail.of.transaction.and.location.data.will.empower.

merchants.and.financial.service.companies.to.learn.more.

about.buyers,.both.as.a.whole.and.as.individuals..Mining.

this.data.will.allow.them.to.present.offers.in.real.time.

(and.in.specific.locations).tailored.to.buyers’.preferences..

Combined,.these.changes.are.likely.to.bring.about.the.

greatest.revolution.in.electronic.commerce.since.it.

moved.onto.the.Web..

Based.on.the.way.that.online.users.have.embraced.a.

new.generation.of.social.media.and.shared.hitherto.

unimagined.detail.on.their.lives,.we.expect.that.buyers.

will.continue.to.embrace.these.changes,.willingly.shar-

ing.details.about.their.purchases,.habits,.and.preferences.

in.exchange.for.relatively.small.benefits..Far.from.being.

offended.by.invasions.of.privacy,.younger.buyers.who.

have.come.of.age.with.Facebook,.Flickr,.and.YouTube.

may.expect.a.level.of.service.and.personalization.that’s.

only.possible.with.this.level.of.familiarity..

The.mobile.device.is.central.to.this.shift..Smartphones,.

which.currently.make.up.about.one-fifth.of.the.installed.

subscriber.base.in.the.US,.are.expected.to.make.up.

nearly.half.of.new.sales.by.2012.(Source:.Nielsen)..

Smartphone.subscribers.are.already.comfortable.buying.

media.through.these.devices,.including.ring.tones,.

songs,.and.in.some.cases.TV.programming.and.books..

But.to.date,.despite.promises.of.the.mobile.phone.acting.

as.a.digital.wallet,.experiments.in.using.mobile.to.pay.for.

goods.in.the.physical.world—at.least.in.developed.

markets—have.been.sporadic..

We.expect.that.to.change.rapidly.in.coming.years..As.

smartphones.become.more.ubiquitous,.users.may.come.

to.expect.that.they.can.use.these.devices.to.purchase.

goods.and.services.in.the.real.world..Phones.are.already.

capable.of.providing.some.of.the.key.factors.necessary.


poverty.rate12.and.a.GDP.1/52.the.size.of.the.US.is.pro-

viding.a.model.for.the.future.of.the.mobile.wallet..The.

population.of.“unbanked”.in.the.US—that.is,.people.with.

no.checking.or.savings.account—is.certainly.high.

enough.to.warrant.a.similar.model.

Vodafone.is.now.partnering.with.Safaricom.to.extend.

the.model.to.other.developing.countries,.including.

Afghanistan,13.Tanzania,.Fiji,14.South.Africa,.and.others..

The.potential.for.platforms.like.this.to.change.the.lives.of.

millions.of.unbanked.consumers.in.developing.markets.

is.obviously.significant,.but.there’s.an.opportunity.in.

developed.markets.as.well..The.economic.downturn.has.

contributed.to.the.growth.of.the.unbanked.population.

in.the.United.States.and.Europe,.where.immigrant.and.

expat.communities.often.want.to.make.remittances.to.

family.and.friends.in.other.countries..Merchants.could.

begin.to.see.M-PESA.and.services.like.it.as.an.opportu-

nity.to.reach.a.massive,.global.audience.that.was.once.

virtually.unreachable..

Contactless PaymentsContactless.payment—the.ability.for.a.consumer.to.

wave.her.phone.or.tap.it.against.a.receiver.in.order.to.

make.a.purchase—promises.to.change.the.game.and.

help.make.mobile.commerce.ubiquitous..Visa.and.

MasterCard.have.been.experimenting.with.contactless.

payments.with.their.payWave.and.PayPass.systems.for.

several.years..But.these.systems.have.yet.to.hit.the.

mainstream..One.reason.is.that.the.benefits.to.mer-

chants.have.been.somewhat.limited.in.exchange.for.the.

expense.and.hassle.of.having.to.host.the.hardware.to.

read.them..

12 https://www.cia.gov/library/publications/the-world-factbook/geos/ke.html.

13 “Vodafone money transfer in Afghanistan,” Total Telecom Online, Terrapinn Holdings Ltd., Feb. 11, 2008, http://www.highbeam.com/doc/1G1-174620194.html.

14 http://www.fijitimes.com/story.aspx?id=155107.

they.can.do.so.is.that.online.merchants’.capital.costs.are.

so.much.lower.than.those.that.sell.real.goods..It.costs.

Zynga.nothing.to.crank.out.a.million.more.poker.chips..

But.unless.wireless.carriers.dramatically.reduce.their.cut,.

don’t.expect.to.see.these.services.showing.up.as.pay-

ment.options.for.merchants.selling.real.goods..

Mobile Banking in the Developing WorldIn.developing.markets,.wireless.carriers.have.gone.

beyond.games.to.provide.something.closer.to.real.

banking.services.for.the.many.people.who.have.mobile.

phones.but.no.bank.account.7.In.Kenya,.for.example,.

Safaricom’s.M-PESA.service.is.the.country’s.largest.finan-

cial.service,.handling.more.than.2.million.transactions.

each.day8,9.for.the.service’s.9.5.million.customers..

Customers.can.send.and.receive.payments.to.or.from.

other.mobile.phones.and.purchase.goods.or.services.at.

a.network.of.participating.merchants..You.can.pay.for.a.

taxi.ride,.buy.a.beer,.or.access.cash.at.an.ATM.by.getting.

a.code.from.M-PESA..Safaricom.also.lets.subscribers.use.

their.prepaid.minutes.as.a.form.of.currency,.which.can.

be.transferred.from.one.user.to.another.via.text.

message.

M-PESA.advertisements.appeal,.for.example,.to.a.

younger.generation.of.office.workers.in.Nairobi.who.may.

need.to.wire.Kenyan.shillings.to.parents.working.on.a.

rural.farm.10.Ads.aimed.at.the.Kenyan.expat.community.

in.the.UK.tout.the.ease.with.which.you.can.use.M-PESA.

to.transfer.money.to.relatives.back.in.Kenya.11.Consumers.

can.now.side.step.the.banking.infrastructure.and.

engage.in.commerce.without.having.to.carry.around.

currency..It’s.worth.noting.that.a.country.with.a.50%.

7 http://www.youtube.com/watch?v=tarvxihFd8c&NR=1.8 “Kenya’s M-Pesa Customers Secure Greater ATMs Access,” ATM &

Debit News, SourceMedia, Inc., July 1, 2010, http://www.highbeam.com/doc/1G1-230285111.html.

9 http://www.mobilemarketingmagazine.co.uk/content/rackspace-powers-kenyan-mobile-money-solution.

10 http://www.youtube.com/watch?v=nEZ30K5dBWU.11 http://www.youtube.com/watch?v=xozpEcTFtew.

https://www.cia.gov/library/publications/the-world-factbook/geos/ke.html

https://www.cia.gov/library/publications/the-world-factbook/geos/ke.html

http://www.fijitimes.com/story.aspx?id=155107

http://www.youtube.com/watch?v=tarvxihFd8c&NR=1

http://www.mobilemarketingmagazine.co.uk/content/rackspace-powers-kenyan-mobile-money-solution

http://www.mobilemarketingmagazine.co.uk/content/rackspace-powers-kenyan-mobile-money-solution

http://www.youtube.com/watch?v=nEZ30K5dBWU

http://www.youtube.com/watch?v=xozpEcTFtew


Apple’s.summer.2010.hiring.of.Benjamin.Vigier,.a.

prominent.expert.in.near-field.communications,.as.

mobile.commerce.product.manager.further.fueled.

speculation.about.the.prospect.for.contactless.payment.

in.the.near.future.17

Google.has.also.shown.innovations.coming.in.its.

Android.mobile.operating.system.to.facilitate.contact-

less.payment..At.the.Web.2.0.Summit.in.San.Francisco.in.

November,.CEO.Eric.Schmidt.demonstrated.a.tap-and-

pay.system.on.an.unspecified.hardware.device.running.

the.upcoming.Gingerbread.release.of.Android.that.

combined.purchasing.capability.with.geolocation.

possibilities..

Paypal.is.working.with.Bump.Technologies.to.enable.

contactless.payment.through.its.network..Bump’s.system.

allows.two.mobile.phones.(iPhone,.Android,.or.

BlackBerry).to.exchange.data.when.tapped.together..

That.data,.which.travels.through.the.network.rather.than.

via.radio.waves.between.the.two.devices,.could.be.

photos,.contact.information,.or.payments..PayPal’s.Send.

Money.application,.which.allows.users.to.pay.each.other.

(or.merchants).or.to.split.a.bill,.is.built.on.top.of.Bump’s.

technology..The.company.also.holds.several.patents.that.

define.ways.to.transfer.money.from.one.user.to.another.

A case study of contactless payment: Bling Nation

Bling.Nation.provides.a.low-cost.contactless.payment.

solution.that.relies.on.near-field.communication.tech-

nology.and.RFID.tags,.called.Bling.Tags..Subscribers.

attach.the.tag.to.their.mobile.phone,.and.they.can.then.

use.it.to.pay.for.goods.and.services.at.participating.

merchants.by.tapping.the.tag.on.a.piece.of.hardware.(a.

Blinger).at.the.point.of.sale..Bling.subtracts.the.purchase.

amount.from.a.prepaid.account.or.bills.it.to.the.user’s.

PayPal.account..Bling.then.texts.a.receipt.and.any.rel-

evant.balance.information.to.the.user’s.phone..

17 “Apple hires NFC expert as mobile commerce product manager,” Near Field Communications World, Aug. 13, 2010, http://www.nearfieldcommunicationsworld.com/2010/08/13/34302/apple-hires-nfc-expert-as-mobile-commerce-product-manager/.

Embedding.this.technology.in.mobile.phones.prom-

ises.to.change.this,.for.several.reasons..Foremost.among.

these.is.that.connecting.payment.to.the.mobile.phone.

offers.merchants.more.incentives,.including.the.possibility.

to.send.messages.back.to.consumers.who.have.opted.in.

for.such.a.program..For.example,.weaving.the.geolocation.

factor.into.the.equation,.it.could.be.possible.to.text.a.

coupon.to.a.consumer.when.they.are.again.within.range.

of.the.store,.or.at.a.certain.follow-up.date.of.the.original.

purchase..

For.this.and.other.reasons,.the.widespread.adoption.

of.smartphones.promises.to.drive.contactless.payments..

However,.most.consumers.don’t.own.a.smart.phone.yet.

despite.all.the.excitement.among.early.adopters.for.

iPhones.and.Android-based.phones.15.In.anticipation.of.

this,.industry.observers.have.been.watching.patent.and.

alliance.announcements.in.recent.months.as.key.players.

position.themselves.to.cash.in..

Apple’s.patent.applications.in.2010.have.fueled.

speculation.that.it.is.preparing.to.add.near-field.commu-

nications.capabilities.to.the.iPhone.that.could.enable.

contactless.payments..These.patents.cover.topics.

including:.

■■ phone-based.purchase.of.concert.tickets.(and.pre-

paying.for.drinks.at.the.concert).

■■ a.smart.shopping.basket.that.works.with.the.iPhone.

to.track.items.placed.in.it

■■ a.fingerprint.reader

■■ a.point-of-purchase.(POP).application.that.allows.

payment.from.various.funding.sources,.along.with.

offers.for.rewards.and.financing16

15 comScore reports smart phones had only 17% market penetration in 2009.

16 “Apple Gearing up for the Coming NFC iPhone Revolution,” Patently Apple, April 8, 2010, http://www.patentlyapple.com/patently-apple/2010/04/apple-gearing-up-for-the-coming-nfc--iphone-revolution.html.


supply.a.PIN..In.this.way,.Bling.Nation.adapts.from.sin-

gle-factor.to.multifactor.authentication.based.on.a.series.

of.real-time.risk-analysis.algorithms.

Bling.Nation.is.currently.running.a.trial.with.approxi-

mately.150.vendors.in.Palo.Alto,.California,.and.plans.to.

expand.this.trial.to.San.Francisco.in.the.near.future..

7,000.customers.signed.up.during.a.four-week.trial.

period.in.September.2010,.indicating.that.interest.and.

demand.are.high..Bling.has.made.several.significant.

deals.in.recent.months,.including.an.agreement.with.

Verifone.to.allow.Bling.payments.through.several.of.

Verifone’s.point-of-sale.terminals,.and.a.partnership.with.

PayPal.to.use.its.platform.as.a.payment.option..

Bling.also.works.with.merchants.to.follow.up.on.

future.offers.(for.example,.coupons.on.subsequent.

purchases)..Bling.says.these.rewards.programs.account.

for.about.15%.of.the.transactions.on.Bling..

To.protect.against.fraud,.the.Bling.Tag.technology.

contains.the.equivalent.of.a.one-time.password,.which.is.

updated.after.each.tap.transaction.to.prevent.replay.

attacks..Bling.Nation.also.provides.real-time.risk.analysis.

that.can.trigger.a.request.for.a.PIN.for.a.transaction.that.

falls.outside.of.normal.parameters..If.the.customer.

exceeds.a.predetermined.rate.of.transactions.or.pur-

chases.an.expensive.item,.or.if.Bling.Nation.notices.a.lot.

of.geographic.variability.over.a.short.period.of.time,.

when.a.consumer.taps.a.BlingTag,.she.will.be.asked.to.

Key Technologies for Payment by Phones■■ Bluetooth. Mostmobilephonesalreadyhave

Bluetoothantennas.Butthesystemisslowcomparedtoalternatives—anywherefrom1to6secondstoestablishaconnection.Thislagmakesitlessdesirableforcommercialtransactions.

■■ Radio-frequency identification. RFIDtagsalreadypowersomemobilepaymentsolutions,liketheelec-tronictoll-collectiondevicesmountedonyourcar’swindshield.Visa’spayWave1andMasterCard’sPayPass2offermobilecontactlesspaymentfortradi-tionalcreditcardsusingapassiveRFIDtagembeddedinatraditionalcreditcard.Buttherangeofthesesys-temsissogreat(10meters,insomecases)thatitleavesthemsusceptibletoeavesdropping.

■■ Near-field communicationsisapromisingwirelesstechnologyforcontactlesspayment.ItcombinesRFIDtechnologywithaprotocolforlimitedrangecommu-nicationsbetween4and8inches(soit’sdifficultforeavesdropperstoconnectto).Thedatarateisquick

1 http://www.visa.com/visapaywave/.2 http://www.paypass.com/.

(between100and800kbits/s),thetechnologyencryptswhatit’ssending,anditmakesconnectionsinabout1/10ofasecond.NokiasaysitwillintroduceNFCinsomeofitsmobilephonesin2011.NFCreaderscanalsoreadpassiveRFIDtags,makingitpossibleforplatformproviderstodeployinexpensivesolutionsthatalsomeettheneedsofcustomerswhomaynotbeabletoaffordmoreexpensiveNFC-capabledevices.

■■ The network.Bumpisonetechnologythattakesadif-ferentapproachtocontactlesspayment,usingthemobilenetworktotransferdatabetweenmobiledevices.WhentwophoneswiththeBumpapptap,theappcantransferanyselecteddata—contactinfo,pho-tos,or(withtheassistofathird-partyapplikePayPal)payments—fromonephonetotheother.Itdoesn’tuseBluetoothoralocalradiotechnologytodothis.Instead,theappidentifiesthetwophonesbytheirproximityandroutesthedata(orpayment)throughthenetworkanditsservers.

http://www.visa.com/visapaywave/

http://www.paypass.com/


New Approaches to PaymentGroup paymentsSeveralstartupsareworkingtoprovidesolutionsinwhichahandfulofuserscancontributetoacommongoal—forexample,collegestudentssplittingrentoragroupoffamiliessharingtheweek’sfoodatarentedbeachcottage.WePayallowsyoutosetupasystemforrequestingpaymentfromgroupmembersandshowingwhooweswhattowhom.ItholdsmoneyinFDICpro-tectedaccounts,acceptingcreditcardsanddirectbanktransfers.PayItSquareoffersasimilarservice,andacceptscreditcardsandPayPal.Bothserviceschargeapercentage—between0.5%and3.5%dependingonthepaymentmethod—andbothintegratewithFacebook,illustratinganotherimportanttrend:paymentsontopofthesocialgraph.

Figure4.PayItSquare’sinterfaceshowswhooweswhattowhom

SubscriptionsThemostsuccessfulmodelforsubscription-basedpay-mentshasbeenonlinegaming;companieslikeBlizzardhavemademillionsofdollarsfrommonthlyandannualsubscriptionstogameslikeWorldofWarcraft.Nowthemodelisbroadeningtobusinessuses.Zuoraisawell-financedstartupbackedbyMarcBenioff,CEOofSalesforce.com.Itspecializesinsubscriptionsandrecur-ringpaymentsforsoftware-as-a-service(SaaS),offeringarangeofsolutions,includingmeteringbasedonusageandpaymentsforspecialcharges.Aimingtobe“theSalesforceofonlinebilling,”1it’soneofthefirstthird-partypaymentsolutionstotakeadvantageofPayPal’sAdaptivePaymentsAPI.

1 http://www.zuora.com/company/index.html.

Virtual, in-game paymentsFacebookranksfourthinthetotalnumberofregisteredusersonline(behindGoogle,Yahoo!,andMicrosoft),butcomScoreranksitfirstintheamountoftimeitsusersspendonline.ManyofthoseminutesarespentinsocialgameslikeFarmvilleandZyngaPokeronplatformsthatletusersbuyandtradevirtualgoodsusingcreditstheypayrealmoneyfor.InSeptember2010,FacebookandZyngaagreedtoconsolidateallin-gamepurchasesasFacebookCredits,whichcanbepurchasedonlineoratbrick-and-mortarretailerslikeTarget.2FacebookCreditscanbepurchasedusingacreditcard,severalmobilepay-mentsystems,andPayPal(but,worthnoting,notAmazonPayments).

Social storefrontsSocialstorefrontsallowmerchantstosellgoodsandser-viceswithinsocialnetworkslikeFacebook.OnecompanyofferingsocialstorefrontsisPayvment,whichallowsauserwithaPayPalbusinessaccounttosellproductsthroughFacebook.

Storefronts-as-a-serviceServiceslikeBigCommerceandShopifyofferecommercestorefrontsforafractionofwhattheywouldhavecostjustafewyearsago.Forafewhundreddollarsamonth,theyoffercatalogmanagementtools,marketingfeatures,returnmanagement,inventorycontrol,integrationwithFacebook,andmobile-friendlyversionsofthesite.ShopifyoffersasmallersetoffeaturesthanBigCommerce,butitallowshooksthatmakeiteasierfordeveloperstointegratestoreactivitywithotherapplica-tions.ShopifyintegrateswithPayPal,GoogleCheckout,andAmazonPayments.BigCommerceintegrateswithPayPal,GoogleCheckout,andAmazonSimplePay.

Crowdsourcing micropaymentsFlattrisaninnovativeservicethatattemptstodelivermicropaymentstopublishersbytrackingthenumberoftimesusersclickaFlattrbuttonontheirsite.Thesystemreliesonthegoodwillofuserswhoagreetopayamonthlyfeetosupportthewebcontenttheylike.Astheyconsumeblogs,music,andothermediaontheWeb,theycanclickonaFlattrbuttontosignaltheysupportthatcontent—providingthemediaproviderhasaddedonetotheirsite.Attheendofthemonth,Flattrdistributestheuser’smonthlypaymenttothenumberofsitesthey’veclickedon.Themodelisinteresting,butunlessitpairswithalargerdistributionchannel,it’slikelytoremainacuriosity.

2 http://www.reuters.com/article/idUSTRE6803HU20100901.

http://www.zuora.com/company/index.html

http://www.reuters.com/article/idUSTRE6803HU20100901


Compare.this.to.the.way.ad.networks.manage.your.

identity.as.you.move.from.one.site.to.another..Search.

DIY.sites.for.information.on.fixing.a.printer.problem.and.

when.you.later.visit.Facebook.you’ll.see.ads.for.ink.

cartridges..How.is.it.that.sites.like.Facebook.have.grown.

so.sophisticated.that.they.know.what’s.wrong.with.your.

printer—in.fact,.they.can.even.predict.future.romantic.

interests.based.on.historical.browsing.patterns18—but.

we.still.have.to.reenter.our.financial.and.identity.infor-

mation.at.every.ecommerce.site.we.buy.from?..

Perhaps.the.main.reason.is.that.users.are.less.chary.

about.sharing.their.browsing.history.than.they.are.about.

sharing.their.credit.card.numbers..But.they.do.appear.to.

be.increasingly.comfortable.giving.billing,.shipping,.and.

identity.information.to.one.or.two.trusted.sources.and.

then.referring.purchases.to.them.

Something.like.this.has.already.begun.to.happen.

with.PayPal.and.Google.Checkout..Users.place.their.

financial.information.with.these.trusted.sources.and.

then.reference.other.sites.to.that.account.when.they.

make.a.purchase..Merchants.who.use.platforms.like.

PayPal.or.Amazon.Payments.can.identify.you.without.

asking.the.same.series.of.questions..This.secure,.central-

ized.financial.identity.is.the.current.realization.of.the.

long-sought-after.digital.wallet..Like.a.physical.wallet,.

your.identity.with.a.payment.platform.carries.data.that.

proves.at.least.three.things:.your.identity,.your.ability.to.

pay.(debit.and.credit.cards,.cash),.and.the.history.of.your.

payments.(the.receipts.you’ve.stuffed.in.your.pocket.

after.purchases.or.ATM.withdrawals)..

18 http://www.salon.com/life/broadsheet/2010/05/18/facebook_relationship_predictions.

The Significance of Online IdentityOnline.identity.is.central.to.the.payment.issue..Payment.

providers.obviously.need.to.determine.who.someone.is,.

not.only.to.manage.the.risk.of.doing.business.with.them,.

but.also.to.understand.their.broader.interests.and.pref-

erences.so.they.can.deliver.an.online.experience.that.

suggests.content,.merchandise,.and.other.opportunities.

But.the.significance.of.identity.goes.far.beyond.that..

A.platform.that.keeps.someone’s.online.identity.is.the.

easiest.place.for.that.person.to.do.business..Consider.the.

rise.of.Google’s.Android.platform:.some.people.who.

were.comfortable.on.the.iPhone.are.now.shifting.to.

Android.phones.because.they.work.better.with.Gmail.

and.Google.calendar,.where.they.have.been.doing.

business.for.years..With.an.Android.phone.in.their.

pocket,.it’s.likely.those.users.will.use.mobile.commerce.

solutions.on.that.platform.rather.than.one.from.Apple.

Payment.platforms.today.confirm.identity.primarily.

through.credit.card.or.banking.information..Privacy.

concerns.dictate.that.sites.generally.get.this.information.

from.you.before.your.first.transaction.and—barring.any.

security.breaches—they.keep.it.to.themselves..Because.

you’ve.already.given.Amazon.your.billing.information.at.

some.point.in.the.past,.you.can.buy.a.Kindle.edition.of.a.

new.bestseller.today.with.one.click..But.wander.off.

Amazon.to.a.site.that.specializes.in,.for.example,.ironic.

T-shirts,.and.you’ll.find.yourself.having.to.reenter.all.of.

your.shipping.and.billing.information—unless.that.site.

offers.Amazon.Payments.


Levels of AssuranceAnyoneprovidingfinancialorcommercialtransactionsonlineneedstoknowyouarewhoyousayyouaresothattheycaneithergiveyouaccesstoyourpaymenttoolsor(ifsellingtoyou)beassuredthey’llreceivepayment.Buthowsecureissecure?TheNationalInstituteofStandardsandTechnologypublishedasetofguidelinesinApril2006thatarewidelyusedasbenchmarkswhendiscuss-ingidentityandauthorization.Theydefinefourlevelsofassurance(seeFigure5)andrelyonthreetypesofinformation:

■■ Somethingtheuserknows(likeaPINorapassword)

■■ Somethingtheuserhas(likeaphoneoracard)

■■ Somethingtheuseris(likeafingerprintoraretinascan)

Mostcommercesitesstillaskforasimplepassword.Financialsitestendtowantabitmore,acookiethatthesitehaspreviouslystoredonyourmachineandoftenathirdpieceofrecognition,likeacatchphrase.

Butastheonlinepaymentsindustrymaturesandmovestoclaimalargershareoftheelectronictransactionsthattranspireeveryday,it’slikelythattheywilltrytomoveuptoLevel3authentication,whichreliesnotonlyonapasswordandacookie,butalsosomeotherformofidentification—forexample,athumbprintorretinascan,oranumbergener-atedbyanRSAsecurityfob.

Level 1 Level 2 Level 3 Level 4

Little Very high

Single-factor Multifactor

HighSomeConfidence

Auth factor

CredentialsPIN,

PasswordPIN,

Password,Soft token

PIN,Password,Soft token (password, biometric)

None ExtremeModerateLightIdentityproofing

PIN,Password,

Hard token(password, biometric)

What is a hard token? A hardware device that contains a protected cryptographic key. Authentication is accomplished by proving possession of the device and control of the key by: • Requiring the entry of a password or a biometric to activate the authentication key • Not allowing the export of authentication keys

ApplicationsTwitter National

securityHealthcare,

Onlinebanking

Payment, Education,

Gmail

Hard token of the future? A mobile device (like an iPhone 5 or Android phone) with: • Location-based verification • Biometric sensors (face, voice, and fingerprint) • Cryptographic keys

Figure5.NIST’sfourlevelsofsecurityofferbenchmarksthattheindustryandthepublicsectorcanusetoagreeonmethodsofidentityauthentication


OpenID.like.paying.with.PayPal..If.you.want.to.buy.con-

cert.tickets.but.would.prefer.not.to.give.your.credit.card.

number.to.the.ticket.broker,.you.can.choose.to.pay.with.

PayPal.(which.you.may.trust.more),.which.mediates.the.

purchase.from.your.credit.card.or.bank.account..

Similarly,.if.you’re.hesitant.about.giving.a.site.your.

identity—maybe.it’s.a.medical.information.site.that.

you’d.prefer.to.remain.anonymous.on—you.could.log.in.

via.your.OpenID.provider,.who.would.in.turn.arrange.

login.privileges.at.the.medical.site..You.can.then.decide.

how.much.profile.or.other.identity.information.you.want.

to.provide.the.site..

Some.platforms.(Google,.Facebook,.Yahoo!).offer.

OpenID.as.one.authentication.method.for.users..A.

related.standard,.OAuth,.lets.users.specify.how.much.

access.sites.and.services.have.to.your.personal.informa-

tion.stored.online..Twitter.has.recently.adopted.OAuth.

so.that.if.users.want.to.use.a.third-party.piece.of.soft-

ware.to.receive.their.twitter.feed,.they.can.now.do.so.by.

authenticating.that.access.through.Twitter.rather.than.

by.giving.their.Twitter.login.details.to.the.third.party.20

While.OpenID.and.OAuth.spell.out.ways.to.authenti-

cate.a.user.or.rules.on.how.to.share.that.user’s.informa-

tion,.they.don’t.lay.out.rules.describing.who.can.be.a.

provider..The.Open.Identity.Exchange.(OIX).was.devel-

oped.to.fill.this.function..It.looks.at.organizations.that.

want.to.become.identity.providers.and.confirms.that.

they.meet.the.necessary.criteria.to.be.considered.trust-

worthy...The.first.of.OIX’s.trust.frameworks.has.approved.

only.a.handful.of.identity.providers.thus.far,.including.

Google,.Equifax,.PayPal,.and.VeriSign.

Still,.it.remains.to.be.seen.whether.users.will.embrace.

this.form.of.identity.authentication..If.open-standard.

advocates.want.to.convince.consumers.that.switching.

over.to.a.central.identification.is.a.good.idea,.they’ll.

need.a.strong.incentive.that.appeals.to.users,.either.by.

improving.ease.of.use.or.reducing.the.friction.of.transac-

tions.on.sites..

20 http://wiki.openid.net/OpenID-and-OAuth-Hybrid-Extension.

Distinct IdentitiesCurrently,.each.payment.platform.(indeed,.every.ecom-

merce.site.you.do.business.with).maintains.a.separate.

version.of.your.identity.data..While.this.constrains.their.

ability.to.simplify.payment.by.collaborating.across.sites,.it.

does.achieve.an.important.goal.for.many.users,.which.is.

segmenting.identity..A.person.may.be.comfortable.with.

Facebook.knowing.who.her.friends.are,.Foursquare.know-

ing.her.favorite.coffee.spot,.iTunes.knowing.her.favorite.

performers,.and.Amazon.knowing.her.credit.card.number..

But.she.may.be.less.comfortable.with.the.idea.of.each.of.

those.sites.knowing.all.those.things.about.her..

Thus,.one.of.the.goals.of.emerging.online.identity.

standards.should.be.to.ensure.that.users.have.control.

over.which.aspects.of.their.identity.get.shared.with.

whom..Facebook’s.recent.embarrassments.involving.

third-party.apps.(such.as.Zynga’s.Farmville).leaking.

personal,.identifiable.information.about.users.highlights.

the.risks.that.platforms.face..Users.who.were.comfort-

able.sharing.that.information.with.Facebook.balked.at.

Zynga.redistributing.it.19

Efforts.to.standardize.the.rules.of.online.identity.(see.

the.sidebar.on.the.next.page).seek.to.clarify.the.ways.

that.individuals.manage.elements.of.their.identity.online...

And.while.in.practice.the.rules.of.identity.are.likely.to.be.

defined.and.enforced.by.private.organizations.with.

dominant.platforms.online—players.like.PayPal,.Google,.

Amazon,.and.Apple—they.will.probably.draw.on.efforts.

to.develop.industry.standards.for.the.definition.of.online.

identity.and.parameters.for.how.it.is.controlled..

Identity StandardsOpenID.is.one.such.attempt.to.define.an.identity.stan-

dard..It.works.much.the.same.way.as.a.payment.platform,.

though.with.identity.rather.than.payment..OpenID.sets.

up.a.process.for.confirming.someone’s.identity.through.

a.third-party.site..You.can.think.about.logging.on.using.

19 “’Farmville’ creator Zynga facing class-action lawsuit,” USAToday.com, Oct. 20, 2010, http://content.usatoday.com/communities/gamehunters/post/2010/10/farmville-creator-zynga-facing-class-action-lawsuit/1.


Government as Identity ProviderGovernmentshavelongbeenthedefactoidentityauthorityformostpeople.IntheUS,passports,driver’slicenses,andsocialsecuritynumbers—allissuedbyvari-ousstateandfederalagencies—aretheprimarywaystoestablishsomeone’sidentityoffline.NowtherearesignsthattheUSmaylooktoprivatelydefinedsolutionsasawaytoverifysomeone’sidentityonline.Thisisincontrasttoeffortsinmanyothercountries,includingIndiaandseveralEuropeancountries,wherethegovernmentisplayinganactiveroleindefiningalevelplayingfieldforanewidentitystandardthatwouldsynconlineandofflineidentities.

Consideroneexample:Estonia,whichisprovingtobealeaderintheGov2.0principlesofaccessandtranspar-ency,issueseverycitizenanidentitysmartcardwithaPINcode.EstonianscanalsogetaSIMcardfortheirmobilephonethatallowsthemtousethephoneasanauthenticationdevice.Theseidentitycardsallowthemtoaccessgovernmentandotherpublicwebsites,onlinebanks,andecommercesites.Thecardscanalsobeusedasidentificationforvoting.SinceotherEuropeanUnion

countriesareinvestinginsimilarprograms,anEU-wideprogramknownasSTORK—SecureIdentityAcrossBordersLinked—aimstoensureinteroperabilityamongelectronicidentificationcards(eIDs).

Inanother,broaderexample,India’sgovernmenthaslaunchedtheworld’slargestelectronicidentityinitiative,calledAadhaar,anefforttocreateadatabasetosupportdeliveryofgovernmentservicestoits1.2billioncitizens.TheprogramismanagedbytheUniqueIdentificationAuthorityofIndia,whosechairman,NandanNilekani,iswellknownastheformerCEOofInfosysTechnologiesandtheauthorofImaginingIndia.Aadhaarwantstocol-lectthefingerprintsandirisscansofIndia’scitizensandlinkthisbiometricdatatoasecuritycardthatcanprovidesecureidentityauthenticationonlineandoff.AswithEstonia’sprogram,theplanisforthatsameidentitycardtobeusedforgovernmentalandprivatesectorpurposes.Forexample,thegovernmenthopesthatbybearingthecostofobtainingthebiometricidentityinformation,itcanspareIndianbankssomeoftheexpenseofenrollingandauthenticatingcustomers.


■■ Mobile.commerce,.still.in.its.infancy,.promises.to.

become.a.larger.share.of.the.payment.platform.

business..Apple’s.and.Google’s.mobile.operating.

systems.may.give.them.a.lead.in.this.arena..Other.

players.are.making.moves.to.place.themselves.onto.

the.mobile.platform.through.application.develop-

ment.and.hardware.partnerships..The.financial.ser-

vices.offered.to.mobile.users.in.some.developing.

countries.will.help.shape.the.model.in.developed.

markets.as.well,.as.will.early.efforts.in.buying.and.

selling.virtual.goods.with.mobile.phones..

■■ New.mobile.technologies,.including.contactless.

payment.and.biometric.recognition,.are.coming.

online.quickly.and.will.make.mobile.phones.a.power-

ful.tool.for.payments.over.the.next.few.years..

■■ Online.identity.will.play.a.role.in.shaping.the.pros-

pects.for.payment.platforms,.as.consumers.will.likely.

choose.to.make.payments.from.platforms.where.they.

are.already.spending.time.or.doing.business..

■■ Private.industry.and.governments.both.have.an.

interest.in.authenticating.identity.online..In.some.

regions,.governments.may.take.the.lead.in.creating.

secure.identity.systems.that.validate.an.individual.

online.and.off..In.the.United.States,.although.the.

government.has.been.the.arbiter.of.offline.identity,.it.

appears.to.be.letting.private.enterprise.take.the.lead.

in.hashing.out.the.details.of.digital.identity.

Conclusions

■■ The.online.payment.industry.is.moving.quickly,.

acquiring.new.customers.and.developing.new.tech-

nologies..While.some.players.like.PayPal.may.have.a.

lead.in.name.recognition.and.universality,.newer.

players.like.Google.and.Facebook.have.extensive.

relationships.with.hundreds.of.millions.of.users.and.

cannot.be.overlooked..Traditional.credit.card.issuers.

are.also.trying.to.reestablish.their.position.at.the.

front.line.of.consumer.relationships,.but.they.have.a.

fair.amount.of.catching.up.to.do..Competitors.should.

continue.to.work.collaboratively.in.the.interests.of.

growing.the.market,.while.innovating.solutions.that.

give.them.a.competitive.edge..

■■ Development.platforms.will.rise.around.each.of.the.

payment.platforms,.and.each.player.will.seek.to.

create.a.strong.ecosystem.of.third-party.develop-

ment.to.support.and.encourage.activity.on.its.plat-

form..Developers.will.have.to.choose.which.platforms.

they.want.to.invest.resources.in.and,.as.with.the.

desktop.operating.system.and.web-browser.plat-

forms,.these.developer.decisions.will.help.decide.

which.platforms.become.most.popular..

■■ Just.as.real-time.data.analytics.dramatically.changed.

the.way.advertising.is.sold,.so.too.is.it.likely.to.

change.transactions..Risk.analysis.is.a.key.focus.of.

research.in.this.area,.and.the.work.there.is.likely.to.

deliver.innovations.that.open.up.new.opportunities,.

like.instant.competitive.bidding.on.transaction.

financing.

■■ Payment.platforms.are.likely.to.find.themselves.more.

heavily.regulated.than.in.the.past,.due.in.part.to.

stricter.consumer.protections..Credit.card.issuers.are.

also.likely.to.find.themselves.more.regulated.in.ways.

that.could.create.new.opportunities.for.other.players.

emerging platforms, embracing mobile, and confronting identity

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