A Beginner’s Guide to Mobile Payments

• What is a “mobile payment”?

  A mobile payment is when you use dedicated hardware or software on your mobile phone or device to pay for certain goods or services. This means that, strictly speaking, when you use your phone’s web browser to pay for something in an online store it doesn’t count as a mobile payment.

• What are the main types of mobile payments?

  Mobile payments can essentially be divided into two main categories: proximity and remote.
  
  Proximity solutions generally utilize so-called Near Field Communication (NFC) technology. A well- known example of NFC in action is used on the London public transport system - you tap your card against a dedicated machine and, after deducting the appropriate amount from your balance, the entrance gate lets you through. The ease and speed of the solution has led the majority of mobile payments specialists to focus on NFC. However, NFC has very limited usability and the customer still needs to be physically present. In other words, waiting to tap or wave your phone still requires waiting…
  
  The other main category is remote payments, which, as the name indicates, do not require physical presence from the user at the point of sale. Remote payments can be further divided into two subgroups: carrier billing services and cloud-based wallets. Carrier billing is provided through your mobile network operator, and means that the transaction is charged to your phone balance. Cloud- based wallets are phone apps that require an Internet connection to access a range of cloud-based services, usually including payment and customer loyalty programs. There are efforts being made to extend these wallets beyond payments, to include ID cards and similar capabilities.

• What is a “mobile wallet”?

  A mobile wallet is an application that serves to partially or completely replace your physical wallet. Theidea for mobile wallets sprung from the desire to not have to carry around a thick, heavy wallet full of cash, multiple credit and debit cards and personal documents such as an ID or a driver’s license. How and when they will achieve this remains to be seen, but cloud-based wallet solutions generally have a higher chance of doing so, thanks to their richer set of functions.

• Why am I not already using my phone to pay for things everywhere?

  There are two main reasons why the option for mobile payments is still very limited. On the one hand,the payment industry is obsessed with NFC, which does offer a certain level of convenience, but at the expense of infrastructure requirements so costly that some prominent mobile phone manufacturers have decided not to include NFC chips in its newest models. And the phone is just one half of the infrastructure, with merchants also needing to invest heavily into the purchasing and operating of NFC-enabled payment terminals. The widespread adoption of NFC is so burdened with obstacles that many experts are questioning whether it will ever happen.
  
  Meanwhile, security remains a major issue, which cannot be over-emphasized. The greatest asset a mobile payment firm can have is the trust of its customers. That is why Cellum pays special attention to this matter.

• What is a “use case”?

  In simple terms, a use case is a typical situation that a given technology or application is designed to handle. In other words, it’s what an app or gadget can be used for. NFC-based solutions are usually limited to just a couple of use cases, all of which require physical presence, whereas mobile wallets offer a broader set of functions, such as sending money to another user or handling loyalty points, and can be used independent of location. Cellum’s system supports far more use cases than the average, and the number is growing.

• What is “carrier billing”?

  Carrier billing is a payment method in which a transaction is charged to your phone account. Thissolution is best for relatively small amounts of money, therefore it is sometimes referred to asmicropayment. Examples for carrier billing services include ringtone downloads and SMS-basedparking payment services.

• What is a Stored Value Account?

  A Stored Value Account (SVA) is a prepaid account that users can top up and then use to pay forvarious things. What you can buy with it and where it is accepted varies greatly. The most common type of SVA service is debit cards, which use money deposited in an associated bank account.
  
  Stored Value Accounts can often be manifested physically as special cards, e.g. customer loyalty card. They are, however, not to be confused with Stored Value Cards, which physically store credits instead of just linking to an account. The latter cannot be used for mobile payments.

• What is a QR code?

  The Quick Response Code is a type of barcode that was developed by the Japanese company DensoWave in the 1990s for use in manufacturing, and which offers enhanced data storage capacity with a super-short read time. To put it crudely, it’s a bunch of black and white dots surrounded by three fixed square elements.
  
  With the advent of modern smartphones featuring optical scanning capability, QR codes becamea popular way for consumers to connect with products and advertising campaigns. Because they can store a relatively large amount of data in an impressively small space, QR codes are found on the packages of most mass-market products, as well as on posters and flyers and similar printed announcements.
  
  Cellum’s purchasing and payment solutions generally use QR codes to retrieve and automatically fillin transaction data. The benefit is that they can be placed everywhere, and therefore can be used to make transactions everywhere – even when the user is at home. For security reasons, Cellum uses a special method of encrypting these codes so that they cannot be interpreted by standard scanning apps.

• What is the common security standard for mobile payments?

  At present, there isn’t one unfortunately, but PCI DSS, a standard developed jointly by the world’sleading payment card companies, has the most chance of becoming it, having been developed for companies that handle payment data. PCI DSS provides external verification of whether a solution is actually secure.

• What is an “mPIN”?

  mPIN stands for “mobile Personal Identification Number” and is essentially a password. Just likebank cards are often protected by a PIN, which is used to authorize individual transactions, many mobile payment solutions require the user to enter his or her mPIN during the payment process. This enhances transaction security and reduces the risk of fraud.

• Is storing all payment information on my phone safe?

  Well, is keeping all your money in one pocket safe? We don’t think so. Even if your personal data is encrypted, you probably wouldn’t sleep well at night if, say, your phone got stolen or hacked. So how do we prevent data fraud?
  
  Cellum has a patented solution for ensuring that no sensitive data is stored in usable format either onthe phone, or on the server side. The mPIN, which is required for every transaction, is the key, without which user data simply cannot be read. Also, when adding a bank card to the mobile wallet, we ask users to verify themselves, to ensure that only the rightful owner can use that payment instrument.