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23 September 2011

Reaping optimal results by marrying consumers’ banking and payment info with a mobile device

IN-DEPTH: It is highlighted that implementing proximity mobile payment is complicated by its various stakeholders. That said, only two years ago, there were almost no commercially viable options to pursue for NFC payments. The landscape is expected to be remarkably different in 12 months, according to Dominic Venturo, Chief Innovation Officer, U.S. Bank Payment Systems.

By Ritesh Gupta
U.S. Bank has been diligently expanding its mobile capabilities over the past few years and now it has equipped itself with a broad suite of mobile banking and payment features. The company acknowledges that consumers have been increasingly relying on their mobile device now more than ever to move and manage their money.

Quite often, it is emphasised that mobile innovation is a priority for U.S. Bank. And its efforts have been path-breaking, too. To its credit, the company launched a full-suite mobile banking solution with bill pay capabilities for prepaid cardholders - the first of its kind in the prepaid marketplace. It was also the first large American bank to test the Visa Money Transfer person-to-person mobile payment service, and has partnered with Visa to give cardholders on-the go access to account alerts, offers and a locator service with the Visa Mobile application. In addition, U.S. Bank was one of the first banks to test the Visa Micro Tag, an early contactless mobile payment device.

Late last year the entity partnered with Visa, DeviceFidelity, FIS and Monitise to pilot mobile contactless payment technology that allowed customers to pay for purchases by waving their phone in front of a Visa payWave contactless payment terminal.

U.S. Bank was one of the first major card issuers in the US to pilot this technology, which its employees tested in multiple states.

The ability to link an existing payment account to a mobile phone is transforming how consumers pay and how merchants get paid. The industry has been looking at ways to bring the speed, interactivity and security of mobile contactless payments to a user’s preferred device.

U.S. Bank clearly states that its customers want to make payments with their mobile device.

Assessing the current status of the mobile payments segment, Dominic Venturo, Chief Innovation Officer, U.S. Bank Payment Systems, says, “To date, there have been few commercially available mobile devices that support NFC and payment personalization. As a result, much of the mobile payments growth and innovation has occurred outside the contactless payment space and has been mostly within applications that enable payment (in app or via mobile optimized solutions).”

“This growth has been very strong and the announcements from many mobile carriers and manufacturers that they will support NFC and payment personalization have opened the door to significant potential in the next 12 to 24 months,” shared Venturo, who is scheduled to speak at the forthcoming NFC Payments USA conference, to be held in Miami (November 2-3) this year.

Venturo, who was promoted to his current role in February this year, spoke to NFC Insight’s Correspondent Ritesh Gupta about the company’s initiatives and the latest trends. Excerpts:

U.S. Bank has been testing an NFC-enabled mobile payments service in 20 different markets, spanning several U.S. states. How do you assess the current sentiments when it comes to mobile banking and mobile payments making it really big in banking services? What is the level of market participation?

Dominic Venturo:

To clarify, our pilot was with contactless payments technology (PayWave) embedded in a MicroSD card in conjunction with a fully functional mobile banking application. This pilot showed us that consumers continue to find the marrying of their banking and payment information with a mobile device has potential for increased convenience and ease of use. However, contactless payment acceptance in the United States remains fairly low and that becomes a barrier. If a consumer can only use their mobile device for payments some of the time, it lowers the convenience factor significantly because they have to assess, each time they shop, how to pay. That said, consumers continue to rely on their mobile device for everyday tasks and banking is a logical extension of this as consumers look to stay on top of the finances and improve how they do their banking and make payments.

Can you elaborate on the trials done across a number of technologies, including NFC, contactless stickers, and micro SD enabled devices?

Dominic Venturo:

At U.S. Bank, we tested NFC with over the air personalization in Spokane, Washington with consumers. This pilot was a joint effort with MasterCard, Nokia, and other partners and was with a Nokia 6131 NFC mobile phone.

In addition to piloting over the air personalization, we demonstrated other NFC capabilities to show the future potential of the technology. These included -- pairing a mobile with speakers to play music, reading an NFC tag to link to a website, pairing a device with a picture frame to upload a picture from the phone, and more. The consumers that saw the future potential were very impressed and they did enjoy the convenience and wow factor of being able to make payments with their mobile phone. We also learned that contactless acceptance was pretty immature at this point and perhaps more importantly, we learned consumers had very specific preferences about their mobile device and carrier. As a result, we quickly decided that a solution that was dependant on one type of phone, or carrier was going to have limited potential.

We later tested contactless stickers with Visa and other partners. This solved the issue with consumers have a preference for their mobile device, but created a new concern. Because the stickers were branded with the bank and payment brand, consumers felt that was broadcasting that they had something special that might present a security or privacy concern.

Lastly, we recently completed a test with Visa, Device Fidelity, Monitise Americas, and others to trial a MicroSD card with payment information and a full service banking application. This solved a number of the challenges we learned earlier because it could be inserted into the phone the consumer already owned, or a special case for the iPhone.

Various stakeholders in the industry are attempting to make payments by mobile phone available to the mass market over the next couple of years. How do you assess the current maturity level of this offering in the marketplace today? Can you elaborate on the areas which your organization is currently focusing on?

Dominic Venturo:

The market is still fairly immature, but that should change rapidly as mobile device manufacturers provide devices with the capability and carriers begin to support the technology and provide a viable means to personalize and manage the devices. We are focused on the entire value chain and making sure that we are in a position to help our customers move to this technology when it makes the most sense to do so. That will require broader acceptance and support across multiple carriers and devices.

It is highlighted that implementing proximity mobile payment is complicated by the number of stakeholders. How according to you the industry has collectively made progress? What according to you are the critical factors that can make or break the whole effort?

Dominic Venturo:

It is complicated, to be sure. Most new technologies are complicated, and when you add in the high security requirements of banking and payments, it is increasingly complicated. That said, only two years ago, there were almost no commercially viable options to pursue for NFC payments. The landscape is very different today and I expect that will be remarkably different in 12 months.

The carriers in the U.S. have been working towards various solutions that appear to have potential and the handset manufacturers are as well. However, a few important elements remain to fall into place:

First, acceptance. Merchants must have a compelling value proposition to change their point of sale systems to support contactless or mobile payments. Payments alone are rarely the answer, with the exception being retailers with fast transaction speed requirements (such as quick service restaurants). We need to see more innovation in the ecosystem in terms of offers, loyalty, and other value added services that leverage NFC in order to have a basket of opportunities that in total would make it compelling for retailers to adopt the technology in a ubiquitous way. Security is also a factor and there are some very good reasons why contactless could be a part of that as well. Without broad acceptance, mobile payments will grow more slowly, though I expect they will continue to grow and be an important part of the intermediate future.

What would you suggest as do’s and don’ts when it comes to mobile contactless payments?

Dominic Venturo:

Do: Learn as much as you can and make sure the teams that support you are doing so as well.
Don't: Assume that any one solution will work across a large base of consumers. Consumers have strong preferences and what is very interesting to one is a total barrier to another.


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