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Table of Contents
Table of Contents... 3
Overview ... 4
1. Mobile payment history ... 5
1.1 RF-SIM...5 1.2 SIMpass ...5 2. NFC implementation options ... 6 2.1 Mainstream options ...6 2.2 Watchdata ...6 2.3 GO-Trust...6 3. NFC initiatives ... 7 3.1 China Mobile ...7
3.1.1 With Shanghai Pudong Development Bank ...7
3.1.2 With China UnionPay in Chengdu ...7
3.1.3 With China UnionPay...8
3.2 China Unicom ...8
3.3 China UnionPay...8
3.3.1 QuickPass ...9
3.3.2 Standardization / Certification activities ...9
3.3.3 With China Mobile... 10
3.3.4 With GO-Trust Technology in Sichuan ... 10
3.3.5 With HTC, Lenovo and TCL ... 11
3.4 People’s Bank of China... 11
4. Hong Kong...11
4.1 Taiwan ROC ... 12
4.1.1 Mobile Network Operators Association... 12
4.1.2 Chungwa Telecom... 12
4.1.3 HTC and Cathay United Bank ... 13
4.1.4 Taiwanese technology suppliers ... 13
5. Mobile money...14
One could believe China to be the best place for mobile payment development. The country has the largest mobile phone subscriber base in the world, with over one billion users, it also has a highly bancarized population with over 2.86 billion banking cards in circulation, and its has been established that more than 440 of the approximately 600 cities in China, or 73%, have set up systems to allow people to swipe smart cards on public transportation. In addition, China is home to many majors companies including handset manufacturers, telecom network equipment developers, POS terminal manufacturers, etc.
At the same time, China has not yet implemented a wide scale nationwide mobile payment scheme, but the country abounds with mobile payment pilots and experiments. Regulatory authorities are currently in the process of finalizing standards and regulations for future rollouts of mobile payment. It has been experienced in the past that China is not the always the first to implement new technologies, but once a consensus is found between all players (technology suppliers, service operators, government, regulatory bodies, …), the rollout is fast and efficient.
By the end of 2011, there were 180 million smartphones and 430 million users of mobile internet, according to EnfoDesk. The number of mobile internet users passed the number of classical internet users in 2012.
However, there are huge hopes for future mobile payment developments. Analysys International, a consultancy based in Beijing, China, estimates mobile payments in China in 2011 accounted for CNY 74.2 billion (EUR 8.9 billion) up 67.8% compared vs. 2010. The number of mobile payers in 2011 was estimated at 187 million up 26.4% compared with 2010. According to the same consultancy, mobile payment market will keep a rapid growth in the coming 3 years and by 2014, mobile payments will account for CNY 38.50 billion (EUR 4.6 billion) and the number of users will be 387 million.
Mobile payment history
The Chinese decision makers, both on government side and on business side are often tempted to develop and implement homegrown technologies, and to introduce alternatives to world standards. This can be seen in mobile communication standards for instance, where 3G in China follows the Chinese TD-SCDMA standard. In the field of mobile payment, a few years ago, China has attempted to develop and implement its technology called RF-SIM, positioned as an alternative to NFC. The rationale behind the RF-SIM was to propose a solution that would allow to be integrated on existing handsets at the expense of adapting payment terminals. On the contrary, the NFC standard is based on 13.56 MHz, which is already present in many systems such as public transport, payment terminals, etc.
The RF-SIM has been developed by Chinese industrialists with financial support from China Mobile. The mobile network operator placed an order for 3 million RF-SIMs early 2010, in order to kick-start the development. The RF-SIM experience came to an end in 2012 when CIITA (China Information Industry Trade Association) and the China Financial Certification Authority (CFCA) announced that China adopts 13.56 MHz NFC as the national standard for contactless payment.
Another alternative solution for mobile payment was Watchdata’s SIMpass.
At a time when there was not enough choice in terms of available handsets, and very few subscribers were equipped with NFC-enabled handsets, Watchdata developed SIMpass, a SIM card which when inserted into a handset, brought NFC features.
SIMpass brought the advantage of ease of deployment, as each user just need a new SIMpass to start using NFC services with his existing handset. However, integration does create difficulties in many handsets, as the antenna flap may either be too large, too small, behind the battery, etc. Watchdata announced in March 2011, it has already delivered more than 3 million SIMpass.
NFC implementation options
The Chinese mobile payment ecosystem has developed a variety of solutions for NFC implementation.
Many handset vendors propose NFC-enabled handsets. These handsets come with a choice of options for the secure element support:
• UICC (SIM)-based secure element, to be connected through the international standard SWP (Single Wire Protocol),
• MicroSD based secure element, to be connected though an adaptation of the SWP, supported by China UnionPay,
• Embedded secure element.
A secure element (SE) is a tamper-resistant platform (typically a one chip secure microcontroller) capable of securely hosting applications and their confidential and cryptographic data (e.g. key management) in accordance with the rules and security requirements set forth by a set of well-identified trusted authorities.
In addition, several vendors including Watchdata have proposed solutions allowing to add NFC functions to existing handsets, such as SIMpass or SIMpass-SC.
SIMpass-SC instantly transforms any handset into an NFC device. It uses an integrated antenna, avoiding the need for external attachments and allowing it to fit into the same space as a normal SIM card. SIMpass-SC technology embeds a secure element, an active front end and an antenna into a single dual-interface SIM card form factor, allowing to add NFC technology to existing mobile phone handsets.
GO-Trust Technology has announced its NFC-enabled microSD secure element. According to GO-Trust, banks see the MicroSD secure element as a way of controlling better mobile banking. HTC, a Taiwan-based handset vendor, is the first to deliver the dual standard NFC phone and several other major China-based manufacturers announce product road maps that include dual SWP standard phones available within
six months. This independent secure element could possibly be an option for built-in NFC phones.
Headquartered in Taichung, Taiwan, GO-Trust specializes in the design, production and application of secure microSDs that have one or more security chips embedded in the microSD form factor.
Chinese mobile network operators have announced multiple initiatives for the deployment of NFC. So far, no nationwide large-scale initiative has been announced.
China Mobile is the world largest mobile network operator by the number of subscribers, with over 700 million customers.
With Shanghai Pudong Development Bank
China Mobile and Shanghai Pudong Development Bank announced as early as spring 2011, their intention to jointly launch a mobile phone payment platform. The payment platform will adopt China UnionPay’s 13.56
MHz NFC standard. Customers may have their mobile phones installed with the platform by China Mobile free of charge. The platform will offer remittance services through mobile phones and connect the customer's ID information, mobile number, and bank account numbers. The service will be implemented directly in all areas under China Mobile’s network coverage. In 2010, China Mobile invested CNY 39.8 billion (EUR 4.3 billion) in Shanghai Pudong Development Bank.
With China UnionPay in Chengdu
China Mobile is involved in an m-commerce pilot in Chengdu, Sichuan, in partnership with China UnionPay. The objective of Chengdu municipal government is to become a model city for mobile e-commerce. China Mobile will promote its mobile phone wallet business and deploy NFC terminals in Chengdu. Meanwhile, China UnionPay will cooperate with China Mobile to improve mobile payment in the city. Chengdu is already home to various national e-commerce industry players, such as telecom operators, financial organizations and content providers. Announced in December 2012, the project is to be developed in 2013.
With China UnionPay
China Mobile announced it would launch its NFC service in February 2013 in 12 provinces, although this could be more of a large scale trial than a full commercial launch which will start later in 2013. The operator has joined forces with China UnionPay as its partner on its NFC launch which will use the latter’s contactless technology. The companies plan to build 100 demonstration points in 50 cities, while China Unionpay has ambitious plans for enabling point-of-sale terminals with NFC. China Mobile expects to sell 10 million TD-SCDMA (Chinese 3G standard) phones with NFC in 2013, and has already qualified a list of six handset brands which support NFC devices for China Mobile's trial and service: Samsung, HTC, Huawei, ZTE, Lenovo and Coolpad.
In November 2012, China Unicom, the second MNO in China by the number of subscribers, announced it has set up a partnership with China Merchants Bank to launch a mobile wallet service in Shanghai for NFC-enabled phones.
China Unicom subscribers can link their China Merchants Bank account to their SIM cards to turn their phones into a mobile wallet. Consumers will need to register for the service at designated China Unicom branches before they can start using their phones to pay at outlets that have installed China UnionPay's Quick Pass point-of-sale (POS) systems. Participating merchants include Starbucks, Dairy Queen and Watsons.
China Unicom says Shanghai is the first city to adopt the mobile payment system before it is introduced to the rest of the country.
Established in March 2002, UnionPay is China National bankcard association established under the approval of the State Council and the People’s Bank of China. At present, the Shanghai-headquartered UnionPay has about 400 domestic and overseas associate members. China UnionPay operates an inter-bank transaction settlement system through which the connection and switch between banking systems and the inter-bank, cross-region and cross-border usages of bankcards issued by associate banks could be realized.
In 2012, China UnionPay says 640 million new UnionPay cards have been issued. An independent source, IMS Research, estimates 2.86 billion banking cards were in circulation in China at the end of 2011, and there was 2.5 million POS terminals installed at the end of 2010. China Payment Services, a provider of payment processing services estimated there was 3.33 million POS terminals installed at the end of 2010. Research in China estimates there was 4.83 million networked POS terminals installed in China at the end of 2011.
According to China UnionPay, the proportion of bankcard consumption in the total volume of retail sales of social consumables increased from 2.7% in 2001 to 35% in 2010.
QuickPass is China UnionPay standard for contactless payments. QuickPass can be compared to MasterCard PayPass or Visa payWave. QuickPass logo on cards and POS terminals indicates to cardholders they can complete a contactless transaction. Visa and MasterCard are prohibited to propose clearing in CNY, which has led China UnionPay to a dominant position on the Chinese payment card market. China UnionPay announced during summer 2012, that they had deployed over 620,000 merchant terminals supporting QuickPass.
Standardization / Certification activities
China UnionPay announced its intention to roll out NFC-based mobile payment on microSD cards, with full NFC handsets.
The payment association has already qualified handsets from six vendors, both from Mainland China and from Taiwan, such as HTC. Also it has qualified eight suppliers of NFC MicroSD cards including Wuhan Tianyu Information Industry, from mainland China and Taiwan’s Go-Trust which partners with Eastcompeace. Go-Trust expects to ship over 500,000 microSDs to the market during the next six months.
China UnionPay is now pushing an implementation of the Single Wire Protocol between the SIM card, and a slightly adapted MicroSD card, coming with two additional pins. The antenna, in turn, connects to the MicroSD card; and the Single Wire Protocol is only used between the NFC chip and the SIM. This China UnionPay standard is to be supported in a TCL feature phone and in an Android-base smartphone for K-Touch, among others. At the same time, GlobalPlatform is also working on an adaptation of the Single Wire Protocol for Micro SD cards, already called SWP-SD.
China Union Pay addressed this issue by publishing the SWP-SD standard, designed to allow banks full control of the secure element in newly designed NFC phones. The SWP-SD standard stipulated that NFC phones should work with either a SIM secure element or a microSD secure element for NFC transactions.
With China Mobile
In June 2012, China UnionPay set up a partnership with China Mobile to collaborate on mobile payments services, including integrating banking details into SIM cards and NFC digital wallets. The companies explore the use of mobile handsets for payment services. This include integrating a user's banking details with his SIM card for long-distance mobile payments, such as credit card bills, utilities bills, online shopping.
For NFC payments, the companies hope to integrate China UnionPay's contactless payment, QuickPass, with China Mobile's mobile wallet services. They plan to trial contactless payment services in selected Chinese cities before expanding nationwide. In August 2012, the Samsung Galaxy S III became the first handset to pass the NFC-SIM product certification of China UnionPay Mobile Payment.
The partnership also includes work on standardization of NFC payments, NFC handset testing and a Trusted Service Manager Platform.
With GO-Trust Technology in Sichuan
GO-Trust Technology has announced that its NFC-enabled microSD secure element will be used in China UnionPay’s mobile payments roll
out in China. After trials in the Sichuan province, China UnionPay will deploy GO-Trust’s SWP microSD cards in the new HTC Incredible NFC Android smart phone. According to GO-Trust, this will result in a mass shipment of 500,000 microSD’s to the user market during the next six months. Further phases are estimated to deliver millions of additional units.
The original HTC phone design used an NFC-enabled SIM card provided through the mobile operator that acted as the secure element for contactless transactions. However, China UnionPay is pushing to avoid a mobile payment and banking system controlled by telecoms in favor of direct bank control.
With HTC, Lenovo and TCL
HTC from Taiwan, Lenovo and TCL Communication Technology from China, have been developing NFC-compatible handsets through a cooperation with China UnionPay. China UnionPay, along with the Ministry of Industry and Information Technology and People's Bank of China, is supporting 13.56 MHz NFC standard.
People’s Bank of China
People’s Bank of China (PBOC) is China’s Central Bank. As such, it power to control monetary policy and regulate financial institutions in mainland China. PBOC is also in charge of standardization in of payment means in China, and for international exchanges.
As such, PBOC announced in December 2012, that it planned to announce technical standards for mobile payments in the near future.
Hang Seng Bank launched a NFC platform that will let buyers pay for their purchases using smartphones at outlets equipped with contactless readers. Hang Seng is developing the platform in partnership with PCCW mobile, MasterCard Worldwide, Gemalto and Samsung Electronics, and expects to roll out the project in H1/2013. The Hong Kong Monetary Authority (HKMA) has laid out plans for an electronic bill system and promised to explore the creation of an interoperable NFC mobile payment infrastructure. Planned to launch in H2/2013, the eBill system will offer a consolidated platform for the straight-through processing of presentments and payments. It will support both business-to-customer and business-to-business e-billing and related payments as well as charity donations. To ensure support of cross-border transactions, the e-bill system will cover electronic payments using renminbi (CNY) and US dollars (US$) in addition to Hong Kong dollars (HKD).
Monitise and JETCO (Joint Electronic Teller Services), an interbank ATM operator in Hong Kong and Macau, partnered to offer mobile money in Hong Kong with mobile operator PCCW. The tie-up sees PCCW mobile become Monitise Asia Pacific’s first customer in Hong Kong, with the debut mobile top-up service due in the coming months.
Mobile Network Operators Association
Taiwan Fair Trade Commission (FTC) just approved an application for a joint-venture by five domestic telecommunication carriers and EasyCard to jointly run a platform for mobile payment, including a TSM and a mobile wallet software provider. A consortium established by Chunghwa Telecom, Taiwan Mobile, Far EasTone Telecom, Asia Pacific Telecom, VIBO Telecom and EasyCard to jointly run a mobile platform (TSM) has been conditionally approved, according to a statement released by the FTC. The approval means that smartphone users in Taiwan will soon be able to pay their credit card bills, bus and Mass Rapid Transit fares, and even pass through their apartment security gates via their NFC-enabled phones. The consortium also plans to include banks and retailers in the near future. It is said that each stakeholder is to contribute TWD 50 million (EUR 1.25 million) each, bringing the total budget to TWD 300 million (EUR 7.5 million).
Taiwan's five telecom operators (Chunghwa Telecom, Taiwan Mobile, Far EasTone, Asia Pacific Telecom and Vibo Telecom) have decided to adopt the global standard of NFC technology for mobile payments. The carriers have announced their intention to build a standardized mobile payment environment. They have visited the Bankers Association of the Republic of China to exchange opinions about the mechanism of mobile payments, and they are also working on a new business model with EasyCard, which has 26 million EasyCard holders in Taiwan. The MNOs expect the number of NFC phones enabling mobile payments to reach 100,000 units by the end of 2013.
Chungwa, Taiwan's largest mobile network operator, just launched a trial including 500 to 600 subscribers who will be able to pay Taipei's MRT and at local retail stores equipped with electronic wallet services. The project's participants will need to install a customized SIM card in their smartphones. Chunghwa Telecom is partnering with three
handset makers, Taiwan's HTC, South Korea's Samsung Electronics and Japan's Sony Mobile, to introduce NFC phones. Chunghwa Telecom is expected to purchase around 1 million NFC-enabled smartphones in 2013, split between more than 10 models.
HTC and Cathay United Bank
HTC announced a partnership with Cathay United Bank and two card issuers, EasyCard and MasterCard International, to launch a co-branded card, which is Taiwan's first innovation to integrate the functions of a credit card and an EasyCard into a micro-sized memory card. The integrated card enables contactless payments in 12,000 local stores through the EasyCard function and in 350,000 shops worldwide with MasterCard's PayPass electronic wallet service when it is inserted into the HTC Incredible E NFC smartphone. MicroSD cards, which are used as Secure Elements with the HTC Incredible S, are expected to also carry the EasyCard contactless application, which started as a transport card in Taipei, and is now accepted for payments nationwide.
Taiwanese technology suppliers
MStar, a Taiwan-based expert in ASIC development and semi conductor manufacturing, has assisted its customers to support China UnionPay to promote mobile payment system for building up a more convenient consumption environment. MStar specializes in application-specific ICs, or ASIC chips, for various devices, such as LCD monitors, TVs and set-top boxes. MStar became a member of the NFC Forum in 2011.
Toro demonstrated its Akami NFC Wallet Platform, which includes Cross-OS mobile wallet application, wallet server, SDK, and add value plug-ins: web application store for end-users, marketing platform for advertisers. In addition to TSMs, Toro also cooperates with POS providers, advertising/media agencies and NFC device manufacturers for customizing the wallet platform. Headquartered in Taiwan, Toro has been cooperating with world's majors TSMs to provide the NFC wallet platform for deployments worldwide. The platform allows mobile operators and service providers like banks or retailers to deploy local NFC services with a wallet application and monetize the NFC wallet through marketing. Brands or merchants can utilize the platform to create and distribute NFC coupons to their target customers.
MediaTek, a major Taiwan-based fabless semiconductor company for wireless communications and digital multimedia solutions, announced the availability of the MT6605, that the company positions as the world’s 1st dual-SIM plus 1 micro SD card capable NFC solution positioned to expand the adoption in and usefulness of mainstream mobile platforms. Featuring a unique 3-SWP (single-wire protocol) architecture, the MT6605 allows co-existence of multiple applications, such as
information exchange/retrieval, ticketing, access control/authentication, location-based services and device pairing.
Mobile Money is not extremely developed in China, in spite of favorable conditions. There are over 1 billion mobile phone subscribers in the country and around 2.9 billion banking cards, but these figures do not reflect discrepancies between reagions. Bank branch penetration, for instance, is extremely uneven, with a national average of 1.34 bank branch per 10,000 inhabitants, but only 0.34 bank branch per 10,000 inhabitants in rural areas. The World Bank estimates that over 35% of the adult Chinese population is unbanked.
For long, the Chinese government has not been supportive of mobile money, preferring to support an increasing bancarization of the population.
However, in March 2011, the China Banking Regulatory Commission issued a circular that encouraged financial institutions to look at alternative channels such as mobile to improve access to finance in rural locations, in an effort to assist with economic development in those regions.
There has been recent discussions that the People’s Bank of China (PBOC) was keen to commence pilots in rural locations specifically in mobile money, and had issued guidelines that will govern where these pilots will occur, and the participants to deliver the services. The services that need to be provided to customers include airtime top-up, remittance and some payments. The guidelines provide strict requirements for KYC and risk management, and also provide recommendations on the type of agents that should be selected, including convenience stores, mobile phone shops and post offices.
Mobile Money Ventures (MMV), a joint venture between Citi and SK Telecom (from Korea), is to offer mobile banking services in China following similar launches elsewhere in the Asia-Pacific region. Citi Mobile, the first mobile banking service to be offered by a foreign institution in China, allows customers to access and manage their bank account using their mobile phone. Citi Mobile customers can view their account summary, transfer money and browse product information. The service is available in both English and Mandarin. Citi and MMV have also launched mobile banking services in Hong Kong, the US, the Philippines and Singapore, and plan to announce more deployments in the near future.
ASIC Application-specific integrated circuit
ATM Automated Teller Machine
CFCA China Financial Certification Authority CIITA China Information Industry Trade Association
CNY Chinese Yuan
CUP China UnionPay
EAL Evaluation Assurance Level
FTC Taiwan Fair Trade Commission
GSMA GSM Association
HKD Hong Kong Dollar
HKMA Hong Kong Monetary Authority
JETCO Joint Electronic Teller Services
KYC Know Your Customer
MMV Mobile Money Ventures
MNO Mobile Network Operator
MRT Mass Rapid Transit
NIST US National Institute of Standards and Technology
NFC Near-Field Communication
OS Operating System
PBOC People’s Bank of China
POS Point of Sales Terminal
RF-SIM Radio Frequency SIM
SDK Software Development Kit
SE Secure Element
SIM Subscriber Identification Module
SWP Single Wire Protocol
SWP-SD Single Wire Protocol for MicroSD cards
TD-SCDMA Time Division Synchronous Code Division Multiple Access
TSM Trusted Service Manager
TWD Taiwan Dollar
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