Mobile Payments

Business Context
Numerous studies project that e-Commerce will grow to approximately 30 percent of all retail sales over the next 10 years which is significant enough to change the base of competition in the retail industry. Plastic cards are still the most widely adopted payment instruments, yet they were never meant for remote transactions (internet, telephone and mail orders). Last year US e-Commerce retailers reported an average revenue loss of 1.4% due to payment fraud. Total dollar losses from online payment fraud in the U.S. and Canada steadily increase as e-Commerce continues to grow. In 2008 alone, $4 billion in online revenues were lost to payment fraud.

Most merchants accept credit card payments from remote consumers in non face-to-face transactions (Card-Not-Present: CNP) which only require a card number and an online authorization from the card issuer. Fraud is a widespread problem with Card Not Present transactions. The major areas of fraud include, the cloning of cards, skimming, phishing, the duplication of transactions and/or the increase in the value of the transactions performed. These security breaches have resulted in the slow adoption of CNP transactions by both the consumers and the financial institutions alike. Thus, payment alternatives perceived as more secure are gaining market share (Paypal, Amazon, Google, etc). The payment industry is seeking innovative solutions to improve revenues, profitability and consumer’s trust in e-Commerce. There is no doubt however that being able to simply pick up the phone to securely pay for goods or services is probably the simplest method of payment available and would be of great benefit to the 4 billion+ mobile phone users worldwide.

System Description
Net1 has developed an innovative payment engine that enables secure e-Commerce with the least possible disruption to existing merchant infrastructures, and significant incentives for all stakeholders. Net1’s Mobile Virtual Card (MVC) solution is “riding the rails” of traditional payment methods, only replacing plastic card data with a one-time-use virtual credit card, hence eliminating the risk of theft, phishing, skimming, spoofing, etc. MVC enables a mobile phone to securely generate a unique data string of 23 decimal digits each time a consumer makes a remote transaction (Card-Not-Present). The virtual card data replaces digit-for-digit the credit (or debit) card number, the expiration date and the Card Verification Value (CVV). Only the Issuer Bank Identification Number (first 6 digits) remains constant.

Mobile virtual cards are used like traditional plastic credit cards, but as soon as the transaction is authorized, the generated card number expires immediately. The Net1 solution uses the mobile phone as it is the most available, cost-effective, secure and portable platform for generating virtual cards for remote payments (online, phone and catalogue orders). Following a simple registration process, the virtual card application is activated over-the-air, linking the consumer phone to a card issuer. The generation of the virtual card is PIN protected. The PIN generation takes place on the phone itself in offline mode which guarantees non-repudiation (strong authentication) and will prevent the fraudulent use of the application in case of theft or loss. Consumers can generate a new card on their mobile in a couple of clicks to shop on the internet, to fill- up a catalogue order, or to place a telephone order. Also virtual cards are safe and can be sent in a single click to family, friends, and service providers.

Weblink: www.net1virtual.com

Benefits

Consumers

• Peace of mind (personal information protection)
• Convenience,  Ease-of-use, Mobile Freedom

Merchants

• Non-repudiation (eliminate charge-backs)
• Cheaper than alternative payments (Paypal, etc.)
• No change to existing shopping carts and processing infrastructure

Issuers

• Reduce fraud & risk: Enhance Brand Equity
• Generate new customer segments at a very low cost of acquisition
• Leverage current infrastructures and business model

Mobile Operators

• Incremental revenues (Fee per transaction)
• Churn reduction