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The Future of Mobile Payments - An Assessment of NFC and Other Technologies

The Future of Mobile Payments - An Assessment of NFC and Other Technologies

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An essay for the 2011 Undergraduate Awards Competition by Rebekah Northey. Originally submitted for Future and Emerging Technologies at University of Ulster, with lecturer Dr. George Moore in the category of Computer Sciences & Information Studies
An essay for the 2011 Undergraduate Awards Competition by Rebekah Northey. Originally submitted for Future and Emerging Technologies at University of Ulster, with lecturer Dr. George Moore in the category of Computer Sciences & Information Studies

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Published by: Undergraduate Awards on Aug 29, 2012
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10/27/2013

 
1
The Future of Mobile Payments
 An Assessment of NFC and Other Technologies
Table of Contents
Abstract........................................................1
 
1. Introduction.............................................1
 
2. The Technologies....................................2
 
2a. Short Message Service (SMS)...........2
 
2b. Unstructured Supplementary ServiceData (USSD)..............................................2
 
2c. Wireless Application Protocol (WAP)3
 
2d. Bluetooth...........................................3
 
2e. Infrared..............................................3
 
2c. Near Field Communication (NFC)....4
 
3. Conceptual Testing.................................5
 
4. The Comparison......................................5
 
4a. NFC Strengths....................................5
 
4b. NFC Weaknesses...............................5
 
5. Technology Advancements....................6
 
6. Multimedia Application..........................6
 
7. Final Evaluation.......................................7
 
References...................................................8
 
Abstract 
This report gives a comprehensive insightinto the future of mobile payments, focusingon Near Field Communication as atechnology to introduce contactlesstransactions for day-to-day purchases.Looking at other technologies available, andevaluating the options, this report examinesthe pros and cons of NFC in comparison tothe others. It then explores what is newabout this technology, and how it canimprove upon existing products, and enablemultimedia developers to create newapplications.This report ends with an evaluation of thefindings, and what to expect from NFC inrelation to mobile payments in the future.
1. Introduction
In the not-so-distant future, the use of cash,cheques and cards for payment of goodsand services is expected to see a sharpdecrease. Instead, mobile phones will beused to handle our regular transactions(Peachey, 2010).Following the move to Chip and PIN in 2006(Card Technology Today, 2006), it is clearthat consumers and retailers are searchingfor faster and more secure ways to completemonetary transactions. With an array of wireless technologies available to implementthe mobile payment concept, I will begin byexploring the possibilities.
 
2
2. The Technologies
Ondrus and Pigneur (2008) outlined thestandard payment methods that arecurrently in use. These include cash,magnetic cards, smartcards, contactlesscards (with an embedded RFID chip), mobilephones via a remote network (e.g. SMS,USSD, WAP), and mobile phones via aproximity network (e.g. Bluetooth, Infrared).They also highlighted the potential use of mobile phones equipped with Near FieldCommunication (NFC) technology for mobiletransactions.As this paper focuses on the
future 
of mobilepayments, it will concentrate on NFC. I will,however, give an overview of the othermobile payment technologies that werementioned in the list above.
2a. Short Message Service (SMS)
According to Shen (2010) as cited by Tanner(2010), SMS transactions are currently theleading choice for mobile payments. Shestates the two main reasons for itspopularity: SMS is a standard feature onevery mobile phone, and it is easy to use.Ezz, Farahat and Harb (2008) defined themost popular use of this technology as thepayment for mobile content. This is wherethe consumer pays a premium to eithersend (Figure 2.1) or receive (Figure 2.2) anSMS message in exchange for media such asring tones or games. The payment is thencharged to their mobile bill.Figure 2.1Figure 2.2This is a suitable application for thetechnology, but it would not meet therequirements for general-purpose paymentof goods and services.
2b. Unstructured SupplementaryService Data (USSD)
USSD is an extension of the SMS technology.The main feature is the creation of a sessionfor real-time communication via a GSM(Global System for Mobile Communications)network (Raju, Gajwani, Gonsalves, Srinivas,2008). This makes the transaction time muchfaster than the SMS service.Toorani and Shirazi (2008) outline anotheradvantage: no data is stored on either themobile phone or the network. However, themessages sent and received are notencrypted and so they are open tointerception.To make a payment by USSD, a consumerwould have a payment application on theirmobile phone in order to communicate withboth the bank, and the vendor (Figure 2.3).The consumer would start a USSD session bysending an SMS message to a banking
Send SMS requestReceive mediaPayment added to billReceive SMSClick download linkPayment added to bill
> > > > 
 
3operator, who would in turn give permissionto the vendor to obtain the money from theconsumer’s account (Pattern MatchedTechnologies, 2010).Figure 2.3
2c. Wireless ApplicationProtocol (WAP)
WAP is used to allow a mobile phone tocommunicate with a computer application(Gong, Pei and Yi, 2010). This means that atransaction can be done online byconnecting the mobile phone to a bank’sgateway. As highlighted by Thomas (2006) ascited by Soni (2010), the main disadvantageof this method is that the mobile mustremain connected while the transaction isbeing processed, which could result in a highcost for the consumer.Figure. 2.4
2d. Bluetooth
In more recent years, Bluetooth technologyhas come as standard in most new mobilephones and other portable devices. Asdescribed in an article at Veecom (2010),Bluetooth transmits its data over radiowaves and is typically used to transfer databetween two mobile devices.With regards to proximity payments, theBluetooth wireless technology can be usedto pay for goods and services over longerdistances.Zolfaghar and Mohammadi (2009) explainthat a Bluetooth-enabled reader wouldreside at a vendors’ point of sale and themobile phone would need to be paired withthe reader to allow the transaction to takeplace.Figure 2.5
2e. Infrared
Infrared works in a similar way to Bluetooth,but it has certain restrictions (Southern,2010). Two infrared-enabled devices need tobe directly facing each other in order tocommunicate, and they also need to bewithin close range.Figure 2.6Southern (2010) also states that an infraredconnection will only allow two devices tocommunicate, reducing the risk of interception.
Start USSD sessionSend SMS requestProvide permissionClose USSD session
> > > 
Connect to WAPAccess bank gatewayProcess paymentDisconnect from WAP
> > > 
Enable BluetoothPair phone with readerAuthorise transaction
> > 
Enable InfraredConnect phone with readerAuthorise transaction
> > 

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