Wireless E-commerce Payment and Its Development in China

Transcription

1 200 International Conference of Information Science and Management Engineering Wireless E-commerce Payment and Its Development in China Liu Shifeng Zhejiang University, Ningbo Institute of Technology Ningbo, Zhejiang, China Chen Rong Zhejiang University, Ningbo Institute of Technology Ningbo, Zhejiang, China Abstract Wireless payment services are no doubt integrated information services with great market demand. But so far, no wireless payment solution has been adopted by the majority of the domestic market competitors. On the base of the analysis of mainly four operating patterns of wireless payment system in China, this paper describe the mechanism and superiority of independent third-party oriented wireless payment system, and elaborate three problems that must be solved for the development of efficient wireless e-commercial payment. Keywords Wireless payment; operating patterns; security solutions; independent third-party I. INTRODUCTION Wireless payment is the payment behavior and activities of using cell phones, PDAs, notebook computers, and other mobile communication terminals and device to complete the payment process of bank transfer, shopping and other business transitions by SMS, IVA, WAP and other means. Wireless payment is the value-added services of remote wireless payment launched by mobile operators and financial institutions all together, it is not only the outcome of mobile communication technology innovation and extended service of financial institutions, but also a way of turning mobile phones from communication tools into credit payment instruments []. Wireless payment has overcome the time and space limitations of traditional commerce, and is more close to the dealers. According to the latest statistics of CUP, Wireless payment users have been 08 million in China by the end of In 200, the total number of Chinese wireless payment users will reach 50 million people and the market scale will be billion Yuan (RMB). By 202, Chinese wireless payment users will reach 286 million, which provide a solid and huge market demand of wireless payment services. TABLE NUMBERS OF WIRELESS PAYMENT USERS IN CHINA Year users (million) growth rate (%) With the increasing of global consumers using QWERTY keyboard phones, 3G smart phones and other wireless terminals with capabilities of mobile Internet and instant messaging tools, the market of wireless payment business will make a blooming growth [2]. This new payment revolution will significantly change people's payment behaviors, and create amounts of new business opportunities and business models. In the next few years, the wireless payment markets will rapidly increase as an alternative to cash or credit / debit cards. In 20, there will be at least 36 billion U.S. dollars in transactions through the wireless non-contact way to pay. II. MAIN FORMS OF WIRELESS PAYMENT AND CHARACTERISTICS There are mainly the following four operating patterns so far. [3]. A. Mobile operator oriented wireless payment system By now, mobile operators are actively developing new technologies to solve obstacles in wireless payment process, currently can provide three main wireless payment ways: small payment, radio frequency identification technology (RFID) and credit card binding. Refer to the research report of Strategy Analytics consulting co., ltd. Market Forecast of Global Mobile Information, Update Jun /0 $ IEEE DOI 0.09/ISME

2 Mobile operators could ran small payment business independently without bank, take China Mobile as an example, in 2006, China Mobile launched small payment service with phone bill, by which users can directly use the phone bill to pay for software, mail-box, virtual game currency, only to log on WAP sites, and access to relevant product information system. Meanwhile, some domestic e-commerce platform began to use mobile phone bills as small payment means, take Sale8.com as example, it is the first wireless e-commerce platform in China established in 2006, customers can pay with phone bills for anything in the mall and it has run the business in Beijing, Hunan, and other cities. In addition to small payment for goods in malls, mobile operators can also provide wireless payment services for main portals like Sina, Sohu, etc., and share the profit of business data traffic. Radio Frequency Identification (RFID) is a non-contact automatic identification technology, which help to recognize the targets with radio frequency signals and get the relevant data automatically. In 2007, China Mobile, together with the original Information Office of the State Council, developed 2.4GHz card technology successfully, users can pay for shopping, air recharge, and other functions, only need to replace the traditional SIM card with a RFID-SIM card instead of replacing the handset. 2.4GHz card technology is similar to Alipay, users need to deposit to a specific account or bound the account with a credit card before they pay for shopping. Besides China Mobile, China Unicom and China Telecom are also trying to apply non-contact communication (NFC) technology in their own wireless payment businesses. In 2009, China Unicom and China Telecom's mobile e-payment services are all put into commercial uses. Compared to 2.4G all card payment, NFC technology has a relatively high threshold, if users want to use this service, they will either custom new cell phones embedded with NFC chip cards, or paste NFC cards outside the ordinary cell phones. China Telecom's wireless e-commerce business also needs users to buy new mobile phones supporting SD cards. Although some wireless payment systems are oriented on mobile operators, the mobile operators still need the help of banks, in these systems, users can operate on the binding credit card accounts, with SMS, IVR, WAP and other means, to pay for shopping. In 2005, China Mobile, together with China Union Pay, launched "Cell phone wallet" service to the domestic market, which provides users a mobile electronic payment channel service, customers need to bind their bank accounts with GSM phone numbers, operate the binding accounts with phones, to pay for shopping, transfer, inquiry account balances, etc., they can also obtain notifications of trading results and account changes by means of SMS. B. Bank-oriented wireless payment system The advantages of financial institutions in wireless payment system are the experiences of efficient financial operation and management, maturely payment system, and highly customers trust. In the bank-oriented wireless payment system, banks manage to make bindings between the users cell phone numbers and their bank accounts, and provide completely and flexible security systems to ensure the safety of the payment process. At present, many domestic banks have launched cell phone bank services, using their experience of account management and the large number of existing customers with highly trust, to share the new service market of wireless payments, with lower cost. As a combination of e-currency and mobile communications, cell phone banking services not only make financial services available to customers at any time, any place, but also greatly enrich the banking services content. With the cell phone banking service system, banks can provide traditional and innovative services at a more efficient and more secure way. Mobile terminals are unique to the personal characteristics, which make it a powerful tool after ATM, Internet, and POS operations, by now, phone banking services have got more and more attentions from the international bankers. After an early warming up, wireless banking services have gradually entered a growth period in China, more and more concerns are put onto the ways to break through the development bottleneck, to enhance customer awareness and usage of the wireless banking. Many domestic banks even offered a lots of incentive methods to attract customers to use wireless banking services. 555

3 C. E-commerce platform oriented payment system E-commerce platform is a kind of the Internet content provider (ICP), which provide online trading platform for businesses or individuals to negotiate on, E-commerce platform companies establish virtual network space for the business activities and guarantee the security of business process. Whatever home or abroad, all successful e-commerce platform companies have payment system and payment brands of their own, on the one hand, payment system and payment brands can effectively share the original resources, reduce operating costs, on the other hand, payment system itself could also become profitable sources for the companies. Wireless e-commerce is an emerging industry. Many domestic E-commerce enterprises have already begun to develop their main business battlefield from the traditional online electronic payment system to the wireless payment system. In 2004, Alibaba Group and Intel co. found China's first wireless e-commerce platform. Then, wireless version of Taobao and Alipay has been put into commercial use. In addition, the subsidiary of Tencent co., ltd. named Paipai.net, relying on the large amount of QQ user resources, takes wireless payment system as one of the company s development strategies. D. Independent third-party oriented wireless payment system Independent third-party wireless payment services providers can integrate mobile operators, banks and other various resources into the wireless payment system, and coordinate all aspects in the payment processes. They can provide more security and professional payment services for the cell phone users. Mobile operators Banks Independent third-party Payment services providers asking for payment 2request for confirmation 3request confirmation 4payment Complete inform 5clearing 6service application Customers Goods and information flows Merchants 7deposit for customers Figure Mechanism of independent third-party oriented wireless payment system [2] A third-party wireless payment services accomplish the payment authentication and payment confirmation of transactions by integrate mobile operators network resources, and financial organizations payment management resources. The domestic wireless payment market is still in the early development stage of the industry, much more business services are still in exploration and trial stage, various companies are trying to promote the development of the industry relying on their own strengths [4]. The following figure is the mechanism of independent third-party oriented wireless payment system. 99pay is the leading independent third-party payment companies in China, which supports the internet, cell phones, telephone and POS and other payment terminals. Since it was founded in 2005, 99pay has got a reputation of high security and strictly risk control capability, it s electronic payment system applied the most advanced application server and database systems of the world, and the transmission of payment information is under the 28-bit SSL encryption algorithms, many American network security companies provide security services for 99pay. Besides 99pay, many third-party payment systems integration and service providers have got a rapid grows in this few years, like Shanghai Huanxun e-business Co., Ltd., SmartPay Co., Ltd., Beijing Taikang Asia Technology Co., Ltd. and Guangzhou Jin Zhonghua communications companies etc., they provide wireless payment services for the market by integrating the advantages and resources of financial institutions and mobile operators, and their profits mainly come from 556

4 charging for the equipment and technology and the wireless payment service commissions. III. THE MAIN PROBLEMS OF THE EXISTING WIRELESS PAYMENT SYSTEMS Currently, There is no unified standard in the industry, a variety of mobile means of payment were running independently, even though, the entire wireless payments market still seems in a mood of inadequate supplication, every mode of wireless payment system is on it s developing stage, and each has its own deficiencies. A. The policy restrictions to mobile operators and convenience problems of their services. Mobile operators providing the wireless payment services independently are the most direct way for themselves, but if there is no involvement of financial institutions, the services can only stay in the small payment market. Mobile operators will conflict with the national monetary laws if they operate independently with large financial transactions; In addition, they can not issue invoices for the transactions paid with cell phone, the tax treatment procedures will also be much more complicated. Even more, the security problems have not been effectively resolved by now, anti-virus software, firewall, Trojans and other malicious code interception and killing tools for cell phones are very rare. B. Large cost for both the mobile operators and customers brought by RFID-SIM cards By now, the prospective of RFID-SIM cards markets was still uncertain, credit card spending has become a habit for most of the customers, which has made very high barriers for the new payment system to entry the markets, In addition, the high costs also limit the development of RFID-SIM cards services [5]. To establish a payment system of RFID-SIM cards with million users, the mobile operators have to spend hundreds of million RMB Yuan on the project, including the construction of the infrastructure, the cost of POS machines, the services system behind, and the original system reformation, etc., not to mention the cost about 00 Yuan per card paid by customers, because before users use these services, they have to replace the SIM card firstly. C. Vicious competition of banks wireless payment service markets and the uncertain ways of profits distribution. The wireless payment services provided by financial institutions are more like place extensions of banks traditional businesses, which have happened several times before, firstly from the traditional method to the internet, and now from the internet to the wireless network, the vicious competition between the banks and the uncertain ways of interests distribution make the wireless payment system led by financial institutions have little developing space, the scope of its payment services will also be concentrated in the traditional banking business. Wireless payment services oriented on e-commerce platform also confront with the same questions, the competitions between e-commerce platforms bring a bad result, that all companies will only use their own payment system, no e-commerce platform company want to use others payment system. While the consumer is concerned, application for various means of payment for multiple platforms is clearly too cumbersome, and unnecessary. IV. BARRIERS TO THE DEVELOPMENT OF WIRELESS E-COMMERCIAL PAYMENT Wireless e-commerce market is confronting with broad prospective, but before which, the following barriers must be solved. A. High mobile internet access charges. According to the survey conducted by many professional mobile websites and third-party investigation agencies, the most worried thing of mobile Internet users is the tariff charging. In China, most mobile Internet users would choose a fixed monthly fee packages with a limited flow rates, which is much enough to read news, visit information pages, send and receive instant messages and s, but if the users want to download some pictures or songs, play games, or to see video online, which cost large amount of flows, then the limited flows are far from enough. Consequently, there comes another problem: when monthly limited flows is exhausted, the users will be charged much more for the extra flows [6]. The high charge rate will be the key obstacle for its development. Since the main users, young people group, are much more 557

5 price-sensitive. A prerequisite for wireless payment development is to reduce the cost of mobile Internet charges, and to expand the consumer groups, which is not in conflict with the development strategy of mobile operators. To cultivate the mobile Internet users is the major strategy of the operators in 3G networks times, after all, the certain scale of user groups is the key factor to successful development of a new market. B. Security innovation and application for wireless payment. The security problem is not in the wireless payment system but in the payment terminals. Cell phones computing power is limited by the low memory chips, low calculating capability, together with the small bandwidth of mobile internet, many complex encryption algorithm can not be run, so the data confidentiality can not be guaranteed, large amounts of data can not be transferred either. Meanwhile, the cell phone messages and credit card data in the air can be intercepted very easily when using the wireless payment systems, either GSM or CDMA. When wireless e-commerce and wireless payment market rapidly expanding, the phenomenon of stealing users information illegally will be more common. The security design of wireless payment systems and the signal encryption solutions are only one side of the problems, how to increase the data processing capability of mobile terminals and the security of mobile network interface at all levels is the other side of the problem, which need to be considered by all the numbers of the industry chain. C. The foundation of industrial alliance and the formation of cooperation mechanism. The development of a new industry requires large amount of capital investment and market exploiting actions. By now the industrial alliance is the best way of cooperation among enterprises, which is not only good for business pattern innovation and resources sharing, but also can effectively reduce the difficulty and risk of innovation and its application. Various participants in the industrial alliance are complementary in function. Moreover, all the members, including cell phone manufacturers, NFC system providers, the express transportation companies, not only share the system risk of the new market, at the same time, but also promote the market exploring and development. For example, Motorola once embedded security chip in the phones to provide wireless payment wallet service, though it can not replace the role of credit cards, can be a useful complement. V. CONCLUSION How to increase the penetration rate of wireless payment services and convert the large group of phone users from potential customers to the end-users has been the most important thing for the mobile operators and wireless payment services providers. In this process, the orderly competition and cooperation of the main participants is the necessary for the development of the industry and also the best way to avoid resources waste. With wireless payment technology applied in the financial, logistics, manufacturing, public information and other service industries widely, the independent third-party wireless payment services will be the best pattern for wireless payment development, by now the development of this new business model depends on the resolves of many obstacles it confronts with, such as the low market awareness, difficulties of resources integration, activity of chain members to participate in and the benefit distribution ways, etc.. References [] He Peiyuan, The prospective analysis on mobile payment market, E-Business Journal, 2008(0), pp [2] Shi Qunchang, Shuai Qinghong, Wreless payment and its development in China, E-Business Journal, 2009(02), pp [3] Tang Qiwei, Patterns of wireless payment, Digital Communication World, 2005(2), pp [4] He Liang, Wang Chun, Design of third-party mobile payment platform based on SOA, Journal of Beijing Technology and Business University(Natural Science Edition), 2009 (02), pp [5] Nuoda Consultant Company, Obstacles to the development of NFC Wireless payment, China Anti-Counterfeiting Report, 2009(0), pp [6] Liu Nan, Three bottlenecks of wireless payment in China, Communications World Weekly, 2009(28), pp.b