Learning, always learning

[Dave Birch] One of the presentations I enjoyed most at NFC World was the one from SK Telecom from Korea. This was because it included a section on what went wrong with mobile payments in the past and I always appreciate the opportunity to learn. Too often at conferences and seminars, organisations will only talk about their successes whereas, as I think we all understand, you can often learn far more from the failures.

SKT have had a long history of experimentation and learning in mobile payments. Back in 2002 they began their “Moneta” brand for mobile payments with the launch of slot phones: mobile phones with an additional smart card slot on the side so that you could insert a chip payment card when you wanted to make an online. I always liked that idea — the telco does the phone, the bank does the card, put them together and party — but no-one else did. SKT put out 300,000 of the phones and a partner bank issued a million Visa cards. The initiative had a “very low return on investment” for the mobile operator but the bank did OK and many of the new credit card customers it gained are still active.

In 2003 they tried again, this time by adding a bank-issued payment card in a SIM form factor to their handsets. In other words, the bank (there were a few in this scheme) send a “SIM” containing the payment application to the consumer and the consumer opened up the phone and inserted the “SIM”. SInce this was in the days before contactless interfaces, the phones used infra-red to communicate with POS terminals and the mobile operator subsidised the installation of some 400,000 infra-red “pods” that were added to retail POS terminals. This was an approximately 20% penetration of the the retail POS estate, which it turned was just not enough to get a critical mass. Personally, I think that the infra-red solution never stood a chance because it simply required too many actions to execute a transaction and the only customers who could participate were customers who had payment cards anyway and those payment cards already worked perfectly well at POS. SKT, however, attribute the failure to a combination of factors: the “low consumer benefit” was one but another major factor was the long and “tedious negotiation process between banks and operators”, which is something that Consult Hyperion has certainly observed at first hand and we have all heard the same complaint repeated around the world.

The emphasis shifted away from mobile payments in 2004 with the launch of mobile banking and mobile ATM services. This time, the banks’ approach was “more reasonable” and the mobile operator was able to conclude a multi-bank deal so that customers could use secure mobile banking services from the handset (including stock purchases and that kind of thing) as well as withdraw cash from ATMs.

While the POS efforts (based on infra-red) remained moribund until the arrival of the first contacless interfaces in 2006, on the mobile banking side the scheme continued to evolve and in 2007 they launched the Mobile Certificate Storage Service whereby any service provider could use the secure chip in the mobile phone to store digital certificates for access to online services. Currently, about 750,000 people use this service to log in to Internet banking (the phone is used in a 2FA process with the key in the certificate signing a log in).

Which brings us to this year and the contactless boom. SKT now have 5.5m contactless phones out there and the newest service, the “T-Money” transit card, already has 200,000 users and they are very happy with the way that is developing. So clearly they have been learning from their pioneering work, some of which wasn’t commercially successful, and so should we.

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