Professional Documents
Culture Documents
January 2012
It was late 2010. Danny Goderis (Vice President Bell Labs Benelux) and Rudi Broos
(Innovation director) wrapped up an exhausting but thrilling day in Alcatel-Lucent’s
Antwerp office. Earlier in the day, they chaired a global committee of high-level Division VPs
and international CTOs to review six innovations from all over Europe that were brought
forward in their annual innovation bootcamp process (see Appendix 1 for more information
on Alcatel-Lucent’s bootcamp process). Such discussion naturally culminated in the
evaluation of the latest developments in a very promising proposal from one of the earliest
innovation bootcamps, a team that branded itself as touchatag.
Launched three years ago, touchatag proposed using a new technology available in cell
phones – Near Field Communication (NFC) – for advertising purposes (see Appendix 2).
After several changes in the application case for this technology, the mobile wallet service
was born in Alcatel-Lucent Antwerp. It had become a venture and was currently taking off.
The idea was simple: consumers carry around their cell phone more often than their wallet, so
why not enable the cell phone as a wallet?
The opportunities for mobile wallet solutions were huge. Mobile operators, like Vodafone or
Telefónica, were in need of new revenue opportunities and any service that made the mobile
even more central in consumers’ life served their interests. Retailers, like Spar grocery stores
or chains such as McDonald’s or Starbucks, suffered high payment charges from debit and
credit transactions on ever tighter margins. They knew that the payment value chain
represented a huge market which could help them grow. The present value chain for such
payments was owned by banks (like ING), transaction acquirers (like First Data) and payment
network operators (like Visa). The major share of transaction fees were charged by
transaction acquirers and banks. They would be under attack as the mobile wallet solutions
forced transaction acquisition to shift toward the mobile operator, at least in part.
1 This case study is the first of two cases on mobile payments. The second case study is M-1286-E, “Rabobank Corporate
Netherlands: Turning the Smartphone Into an Engine of Bottom-line Growth (B)”.
This case was prepared by Nuno Camacho, Professor at the Erasmus School of Economics, Isabel Verniers,
Professor at Ghent University, and Professors Carlos García-Pont and Stefan Stremersch as the basis for class
discussion rather than to illustrate either effective or ineffective handling of an administrative situation.
January 2012.
The authors would like to thank Sharif Jano for writing the case with us and providing invaluable help in data
collection and preparation.
Copyright © 2012 IESE. To order copies contact IESE Publishing via www.iesep.com. Alternatively, write to
iesep@iesep.com, send a fax to +34 932 534 343 or call +34 932 534 200.
No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in
any form or by any means – electronic, mechanical, photocopying, recording, or otherwise – without the permission
of IESE.
The original Belgian touchatag team thought of NFC as an enabling mobile technology for
money transactions. However, NFC in new phones still showed limited penetration and a
large percentage of the population still carried around mobile phones that did not have NFC.
More and more people within Alcatel-Lucent saw the low NFC penetration as a problem for
signing on mobile operators to their mobile wallet solutions. An intermediate solution –
pasting NFC tags on mobile phones without NFC inside – revealed high consumer resistance
in test markets. Alcatel-Lucent was currently researching solutions for this limitation and
already owned multiple patents on alternative enabling technologies which promised to
allow mobile wallet transactions from any phone, whether it was NFC-enabled or not.
Being responsible for innovation (which at Alcatel-Lucent means turning invention into
commercial business), Danny and Rudi were very excited by Alcatel-Lucent’s business
opportunities in this area. However, the repeated presentations they had seen both at
Antwerp and from other sites on alternatives to NFC revealed important challenges they
needed to address. They had learnt that, even though they were in a business-to-business
environment, they needed to understand the full value chain from Alcatel-Lucent to end
consumer. The likely response of the various value chain parties was also still uncertain.
Thus, Alcatel-Lucent’s market approach was still up for debate. There were still unclear
issues, like the identification of the ideal target customer for the solution, partners and
position in the ecosystem, pricing and business model and time of entry in different markets.
Contemplating the various options at hand, they looked back at what they had learnt so far.
Alcatel-Lucent
Headquartered in Paris, France, and with more than 70,000 employees worldwide, Alcatel-
Lucent, is a global provider of telecommunications equipment, services and solutions. It was
formed when Alcatel S.A. merged with Lucent Technologies on December 1, 2006. Alcatel-
Lucent originated from the merger between Alcatel and Lucent Technologies.
Alcatel has a long history in the telecommunications industry. In 1898 CGE – Compagnie
Générale Électrique – was created as a result of the merger of two electricity companies and a
bulb manufacturer in France. In the 1970s, CGE acquired French company Alcatel, forming
CIT Alcatel. In 1982, François Mitterrand nationalized CGE and merged it with Alsthom, the
large telecommunications subsidiary of Thomson-Brandt. 2 Later, in 1986, after re- privatization
under Jacques Chirac’s government, CGE acquired the European telephone equipment operations
division of the American ITT Corp.3 The merger of CGE's CIT with Alcatel resulted in Alcatel
N.V., the world's second-largest telecommunications company at that time ($27.6 billion
revenues in 1990). In 1991, the company rebranded as Alcatel Alsthom Compagnie Générale,
more commonly known simply as Alcatel-Alsthom. In 1998, the company decided to focus on
the telecommunications industry and spun off its Alsthom activities, becoming simply Alcatel. By
2005 the group had three divisions: (i) fixed communications, (ii) mobile communications and (iii)
private communications, reaching a global turnover of almost $16 billion.
2 http://www.sjsu.edu/faculty/watkins/socFrance.htm .
3 http://www.alcatel-lucent.com/aboutus/companyoverview.html .
4 http://www.corp.att.com/history/milestones.html .
5 Robert V. Bruce, Bell: Alexander Bell and the Conquest of Solitude, (New York: Cornell University Press, 1990).
6 http://www.alcatel-lucent.com/wps/portal/BellLabs/AwardsandRecognition#tabAnchor2 .
7 Idem.
8 http://www.alcatel-lucent.com/aboutus/companyoverview.html .
9 http://www.nytimes.com/2008/07/30/business/worldbusiness/30alcatel.html?_r=1 &dbk.
10 http://connectedplanetonline.com/wireless/news/ALU-RFID-contactless-0612/ .
Anthony Belpaire and Toon Coppens incubated the idea within Alcatel-Lucent. They decided
to leverage on the interaction of mobile phones with various objects using fast-growing
communication technologies like Radio-Frequency Identification (RFID) and Near Field
Communication (NFC). The team designed the new platform with less than $10 million in
corporate funds.11 It was supported by Alcatel Lucent Ventures, a corporate incubator that
invests in home-grown ideas coming from Alcatel-Lucent’s internal research and helps
developing such ideas into commercial success.
The team’s idea was to bridge the digital and the real worlds by offering a technology that
allows physical electronic tags to trigger digital actions in hardware devices, like cell phones.
The actions may include opening a webpage, sending text messages or running a custom
application. Hence, the technology had the potential to allow mobile operators and
companies (e.g., retailers) to offer interactive advertising and loyalty services to consumers. Later,
the team came up with the idea of also offering wallet 2.0 services to consumers, i.e., services like
mobile payment and cash transfer between mobile phones.
Between 2007 and 2010 the idea evolved considerably both in terms of positioning and
branding (see Appendix 3). The first launch of the service occurred in October 2008 under
the brand name Tikitag. Given that no major technological or cost barriers stood in the way
of an NFC launch, the team reasoned that most cell phones would soon be NFC-enabled,
bringing mass-market aspirations to Tikitag. In fact, at that time, NTT DoCoMo, the
predominant mobile operator in Japan, was already including a contactless payment
technology similar to NFC in about 80 of the phones sold. 12 Research conducted by Gartner
also bolstered the team’s optimism. Gartner’s research indicated that mobile payment users
would reach 43 million worldwide in 2008 and that number should increase more than 70 in
2009, reaching 74 million.13 In February 2009, Alcatel-Lucent changed the brand name of
Tikitag to touchatag, which brought a sensorial touch to the brand. However, in 2010, apart
from the case of Japan, the number of NFC-enabled smart phones sold was still small.
11 http://gigaom.com/2008/09/08/demo-meet-alcatel-lucents-services-play/ .
12 Businesswire, January 2008.
13 ComputerWorld, May 2009.
promotion of the service next to end consumers. Thus, it was a business model which relied
heavily on relationships with retailers and on a deep understanding of the needs, attitudes and
preferences of the end consumer regarding payment methods. Toon Coppens, one of the
enthusiastic managers within touchatag, feared those competencies were not sufficiently strong
within Alcatel-Lucent. Consequently, with alternative mobile payment solutions looming in
the horizon, Toon feared that it could take too long for the company to build the required
network and infrastructure to make mobile payment an attractive source of revenue for Alcatel-
Lucent. The challenge Toon Coppens and Rudi Broos faced was to build on Alcatel-Lucent’s
strengths and core competences but at the same time guarantee sufficiently quick uptake in
order to gain a first-mover advantage in the mobile payment ecosystem.
Unbeknownst to the consumer, the quick transaction performed after swiping a card triggers
a complex series of operations which need to be carried out by different parties which
constitute the payment value chain. In order to accurately charge the consumer for the
transaction and pay the merchant for the goods or services provided, these different entities
are responsible for different tasks. The payment value chain includes banks (who can be card
issuers for consumers or merchants’ banks), merchant acquirers, third-party transaction
processors and payment card networks like Visa or MasterCard, as summarized in Exhibit 3.
Card issuers, i.e., retail banks, provide credit and debit cards to consumers and connect such
cards with consumers’ accounts, also providing the credit needed in the case of credit card
transactions. On the other side of the transaction, in order to accept card payments, the
merchant has to sign a contract with a transaction acquirer, like First Data. Merchant acquirers
offer the front-end processing of the transaction. In other words, they route the transaction
from the merchant’s point-of-sale to the payment card network (e.g., Visa). Large merchant
acquirers typically execute all the necessary steps to electronically process and authorize the
transaction. Smaller merchant acquirers, however, often use the services of a third-party
processor for carefully routing the transaction in such a way that the payment network
communicates with the card issuer and guarantees that the right customer is billed. Only
financial institutions are allowed to join payment networks like Visa, so it is also common for
merchant acquirers to partner with a bank.
14 http://education.cardhub.com/statistics/market-share-by-credit-card-network/ .
At Alcatel-Lucent, management also typically distinguished between banked (i.e., North
America, Europe and Asia-Pacific) and unbanked (large part of Latin America and the rest of
the world, i.e., Middle East, Africa and Russia, for example) markets. Consumers in different
markets may also have different needs and preferences for alternative payment methods.
Exhibit 7 plots different countries in terms of their consumers’ preferences for (i) cash
versus cards for points-of-sale (POS) transactions and (ii) check versus electronic payments
for bill payments. Large variation in consumer payment preferences was seen as a challenge
for new payment methods like online payment services (e.g. PayPal and Google) and mobile
payment services (like Alcatel-Lucent’s Mobile Wallet).
Outside Japan, where mobile payment was already popular, mobile payment transactions were
related to e-commerce, in particular games, music, ringtones and software for phones, a market of
approximately €16 billion in Europe and $10 billion in the United States. 15 Yet research by
McKinsey16 showed that the potential for mobile payment in bricks-and-mortar retail was much
larger, easily reaching €185 billion in Europe and $200 billion in the United States for
micropayments alone (i.e., payment of small amounts like parking, transit fares and fast food
meals). The medium-value transaction segment (groceries, retail shopping, restaurants), should be
able to yield even greater returns, according to the same study. The opportunity of each specific
market would depend on the type of transaction and the player launching or branding the mobile
payment service (i.e., banks, payment networks, merchant acquirer). Exhibit 8 depicts the
distribution of payment methods across different transaction types in the United States.
Besides being a replacement for cash or cards, mobile payment offered a new possible
solution for unbanked customers (i.e., customers without access to banking and financial
services) willing to make money transfers (see Exhibit 9). In some markets this was a very
attractive value proposition, as it would represent a quick transaction method that would
allow consumers to avoid sending money through insecure, sometimes even corrupt, channels.
Moreover, mobile payment was a major opportunity not only for traditional entities in the
value chain network (banks, payment card networks, merchant acquirers) but also for new
players like Google, PayPal, mobile phone operators and providers of telecommunication
solutions like Alcatel-Lucent.
15 Monica Adractas, Yran Dias, Yves Enkels, Diogo Rau and Hiroko Sasaki, “Mobile Payments: Ringing Louder”. McKinsey on
Payments, April 2009.
16 Idem.
17 http://www.gartner.com/it/page.jsp?id=1455314 .
Europe, mobile operators were increasingly focused on customer retention rather than
customer acquisition, and on new business opportunities that could extend their profits.
Three types of players characterize the mobile operator space: (1) large national or
multinational mobile network operators, (2) smaller regional, local or niche-focused mobile
network operators and (3) mobile virtual network operators. Large national or multinational
mobile network operators include AT &T Wireless, T-Mobile, Vodafone and Telefónica. With
market maturity looming and large national players entering each other’s markets, competition
had been intensifying among these large players.
Regional, local or niche-focused mobile network operators included firms such as Bouygues
Telecom, the third largest operator in France (serving about 10 million mobile customers, a
market share of about 20 of the French market) 18 as well as smaller niche-players. Bouygues
Telecom gained this market share by using aggressive pricing and offering bundled packages
clearly targeted at the consumer market. 19 Across Europe, there were several regional players
which, in some cases, gained a significant share of the market, for example Max.mobil in
Austria (18 ), E-plus (14 ) in Germany, Wind (13 ) in Italy, Optimus (21 ) in Portugal,
Amena (16 ) in Spain, Europolitan (15 ) in Sweden and One2One (21 ) in the
U.K.20 There were also many smaller players like Cosmo (4 ) in Bulgaria, Viag Interkom (7 )
in Germany, Meteor (1 ) in Ireland, Blu (2 ) in Italy and Telfort (9 ) and Ben (6 ) in The
Netherlands. In the United States there are also many regional and local operators (e.g., the
former Baby Bells, such as Cincinnati Bell, the leading operator in the city of Cincinnati,
Ohio, and in its suburbs, which extend to the neighboring states of Indiana and Kentucky).
More recently, a number of mobile virtual network operators (MVNO) have also appeared in
different countries, some of which gained quite some popularity (e.g., Lebara Mobile, which
operates in about 10 countries with large ethnic and immigrant populations, their primary
target customer). An MVNO is a company that typically does not own a spectrum license or
the necessary infrastructure, which they in-source from a mobile network operator.
Even though mobile payment represented a huge opportunity in the coming years, it was not
clear whether mobile operators – either large ones or the smaller niche players and MVNOs –
would be actively looking for a position in this new value chain. The discussion was being
closely followed by large mobile operators, which needed to find solutions for growth given their
maturing voice and SMS businesses. But many operators were afraid that adding such a service
to their portfolio would make consumers perceive such transactions as part of their “wallet
share” for communications and, consequently, lead consumers to compensate the increased
expenditure on mobile payment with a decrease in their consumption of higher-margin voice and
SMS services. Some smaller players seemed to be less worried with such threats of
cannibalization. French operator Bouygues Telecom, for instance, was actively searching for a
space in the mobile-payment market and had actually held its first NFC trials, in France, back in
2006, in a collaborative experiment with the Paris Metro operator, RATP.21
18 Claudia Imhoff, “Bouygues Telecom: The Intelligent Telecommunications Company,” Intelligent Solutions Report, March 2011.
19 IDC 2001, European Telecommunications Services Monitoring European Telecoms Operators: Final Report.
20 Idem. Shares represent the market share, in terms of subscribers, in the year 2001.
21 http://nfctimes.com/company/bouygues-telecom.
Coppens and Belpaire were however still hesitant about partnering with small players. Would
they inspire enough trust in consumers to be able to handle their financial transactions? If
Alcatel-Lucent’s customers, which were typically large mobile operators, didn’t start to
move proactively into this market, could Alcatel-Lucent consider partnering with a financial
institution?
When brainstorming about what business model to implement, Toon Coppens and
Anthony Belpaire scanned the market and noted that besides these two options (called
mobile- operator-centric or financial-institution-centric models), Alcatel-Lucent could also
consider
(i) forming an independent joint venture with partners that were not active players either in
the mobile operator or the financial services spaces or (ii) going to market alone by
positioning the mobile wallet service as an independent and trustworthy service to customers
(a model typically called trusted-services-management). All models have their pros and cons
and this was a major strategic decision for the success of mobile wallet.
Alcatel-Lucent also collected data on credit card penetration across OECD countries (see
Exhibit 12) and carefully looked at the diffusion pattern for online and mobile banking
(see Exhibit 13). This analysis left the team with the impression that diffusion of financial
services is slower than in most of the categories within high-technology markets. One
reason for this could be the added concerns consumers have with security. Moreover,
differences across countries also seemed more extreme than for other categories. For
example, data from wireless intelligence for 2010 indicated that mobile penetration was
slowing down but that growth rates were still high, especially in developing economies. In
some regions like Asia Pacific, Middle East and Africa, for example, growth rates were
even above 30 (see Exhibit 14). All this meant that, to reduce the risk of failure, a
careful plan for the international launch of the mobile wallet needed to be carefully
prepared. Where should Alcatel-Lucent launch the service first? What would be the roll-
out plan?
The Challenges Ahead
As the mobile wallet initiative was scaling up, Danny Goderis and Rudi Broos were
considering all challenges lying ahead. Especially worrying was how financial value chain
participants, such as banks, transaction acquirers and card issuers would react to the new
technology in the value chain. How big of a threat could any of these reactions pose to
mobile wallet’s market penetration? Could Alcatel-Lucent ally with any of these financial
players to foster a more beneficial ecology for the mobile wallet solution to take off?
Also the go-to-market strategy in this space is complex. Several challenges lied ahead. How
should the business model work? Who should charge how much to whom in the value chain
and how much of the value could be extracted by Alcatel-Lucent itself? Who should be
Alcatel-Lucent’s customer? Should it be the mobile operator or also retailers, as they would
have to install the sensing equipment? And then, within these customer segments, who
should they primarily target? And for which type of transactions – micro payments or any
type of payment consumers could currently make with cash, debit or credit? In what region
of the world would such a service become popular the fastest? Some within Alcatel-Lucent
speak of huge potential in developing countries in Africa (e.g., Nigeria) or Latin America
(e.g., Brazil). Others mostly see this technology taking off in Europe (e.g., Germany). How
quickly would the new payment solution take off? And finally, who should brand the service,
Alcatel-Lucent, the mobile operator or a card issuer such as VISA?
Alcatel-Lucent: Marketing the Cell Phone as a Mobile Wallet (A) M-1279-E
Exhibit 1
Touchatag’s Business Solutions
Proximity payment Allows fast and convenient payment at the point-of-sale. Consumers simply
use their phone’s NFC or camera to get pricing information. Mobile operators
can then offer this service to their customers and to enterprise customers and
receive a transaction fee, as well as added loyalty.
Mobile money transfer Consumers can send money to other consumers or to firms using their mobile
phone. Mobile operators can charge a fee for this service. Their vast network
of distribution points should allow them to be significantly more cost-effective
than traditional money transfer options. This service can be used using a web
application or even a SMS or USSD message.
Remote ticketing Allows consumers to buy tickets (e.g., parking or transportation tickets) using
their mobile phone. This service can be used using a web application or even
a SMS or USSD message.
Mobile wallet Consumers can manage their payment and loyalty accounts, view their
transaction history and transfer money to other people using their mobile
wallet. This wallet can be topped up in multiple ways, e.g., by credit card or
debit card. The Mobile Wallet Service relies on a Stored Value Account
component, which allows the management of cash and virtual cash, and does
not rely on the prepaid billing and rating account of the telecom operator.
Instead, a money license is required for which Alcatel-Lucent and
Clear2Pay™ can support the operator with a variety of solution options.
Loyalty and coupon Consumers can have their loyalty card and coupons always available in their
services mobile NFC phone (or in a contactless card or even a key fob). Retailers can
then offer coupons while consumers are shopping based on their profile.
Auxiliary contactless Touchatag technology can be used for a wide range of applications beyond
applications payment and loyalty services, like interactive advertising, information retrieval
(e.g., for tourists or consumers from urban ads), time registration and mobile
workforce…
’02 ’02’07’12
’07 ’12
proj.
proj.
5 55
4
4
Transaction Acquirer (e.g. First Data ; typically associated with a Bank )
Transaction Acquirer
Card Issuer 2aPayment
2a Card Network
Payment Card2b(e.g. Visa)
Network 2a
Card Issuer 2c (e.g. First Data ; Bank
Merchant’s Bank
( e.g. ING Bank 2b (e.g. Visa) 2c
( e.g. ING) Bank ) typically associated with 2 aa
a Bank )
6 2a2d
2a 2d Third -party Processor
Processor
Merchant 2
Consumer
Consumer 1 Merchant (e.g. Carrefour ) 2 aa
1 (e.g. Carrefour
)
3
3
Source: Federal Reserve Bank of Atlanta (2006), “Merchant Acquirers and Payment Card Processors: A Look Inside the Black Box,”
Economic Review, First Quarter, 27-42, and http://blog.unibulmerchantservices.com/credit-card-transaction-processing-basics/.
160 billion transactions
160 billion transactions
Electronic Electronic
140 140Other paper Other paper
120Checks Checks
120
’02 ’02’07’12
’07 ’12
proj.
proj.
Exhibit
Global
6 Payments Revenue (2008)
Source: McKinsey, “The McKinsey Global Payments Map: A Global Eye on Local Opportunities,” October, 2010.
Exhibit 7
Payment Preferences and Market Typology
* Electronic consists of credit transfers and direct (ACH or Automated Clearing House Networks) debits. For this purpose it
excludes card transactions.
** Excluding ePurse and prepaid.
Source: Olivier Denecker, Glen Sarvady and Anna Yip, “Global Perspective on Payments: The McKinsey Global Payments Map,”
Mckinsey, April, 2009.
Distribution of Payment Methods at Points-of-Sale in the United States
(percentage of transactions, 2006)
Exhibit 9
Wireless Penetration Versus Access to Financial Services
180%
180%
160%
) 160%
Wireless penetration (% of population)
on140%
itla
u 120%
140%
p
p
o
of
120%
(% 100%
n
o
ti 80%
a
rt 100%
e
60%
n
pe
s 40%80%
e
s
le
ri
20%
W 60%
0%
40% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Source:0%
Analysys Mason, World Bank (2010). Available in http://www.analysysmason.com/About-
Us/News/Newsletter/Communique1/Mobile- banking--will-the-banks-lead-the-next-wave/.
0%10%20%30%40%50%60%70%80%90%100%
Composite measure of access to financial services (% of population with access)
Exhibit 10
Years from Category Inception until Sales Takeoff (average across 55 countries)
Average Number of
Product Category
Years for Takeoff
CD Player 3.93
Internet 4.39
ISDN 4.38
PC 2.89
Source: Yvonne Van Everdingen, Dennis Fok and Stefan Stremersch, “Modeling global spillovers of new product takeoff,” Journal of
Marketing Research XLVI, October 2009, pp. 637-652.
Years From Category Inception Until Sales Takeoff (average across the categories in
Exhibit 10, in each of the countries)
Exhibit 12
Credit Card Penetration among OECD Countries
Source: Credit Cards: Economist Intelligence Unit, European Marketing Data and Statistics, London: Euromonitor International,
2007; and Visa International, available in: http://corporate.visa.com/_media/ita-credit-card-report.pdf.
Exhibit 13
Mobile Banking and Online Banking Penetration Patterns in the United States
Mobile Banking
Mobile vs. Online
Banking Banking
vs. Online
Actual: 1995-2006, Forecast: 2007-2016
Banking
70.0
70.0
60.0
Online Banking
Online
50.0
50.0 Banking
US Households (Millions)
olds
s)
hn 40.0
40.0
e
so
illi
Hou M 30.0
30.0
(
S
20.0 Mobile Banking
Mobile
20.0 Banking
10.0
10.0
0.0
0.0
95 97 99 01 03 05 07 09 11 13 15
19 19 19 20 20 20 20 20 20 20 20
Exhibit 14
Evolution in Number of Mobile Phone Subscribers in Different Regions
2000 Africa Americas Asia Pacific
2000
1800 80 Africa
Europe: Eastern Europe: Western Middle East North America
1600 70
1800 70
60 Americas
1600 Asia Pacific
)s 1400
50
Subscribers (millions)
n 1200 60
illio 1000 1400 h
w
t
40 Europe: Eastern
Percentage growth
800
1200 5030 Europe: Western
o
gr 20
(m1000
s 600 40 Middle East
r 400 e 10
800
200 ag 30 North America
ibe e
bscr 600 nt 20
c
r
u 400 e
S P 10
200
Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1Q1 Q1Q12000Q12001Q1
2002Q1
2003 Q1 2001
2004 2005 2006 2007 2002
20022003
2008
2001 20032004
20042005
20052006
20062007
20072008
2008
2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: .
M-1279-E Alcatel-Lucent: Marketing the Cell Phone as a Mobile Wallet (A)
Figure 1
Idea
Idea Selection
Selection
Team Selection
Team Selection
Incubation Selection
Incubation Selection
Incubation ofof
Incubation ideas
ideas
The last phase of the bootcamp process consists of a grand jury event. Teams make a final
presentation of their business concepts to a group of investors who join the entire
management team to evaluate the attractiveness of the business cases. After these
presentations, the jury deliberates and decides together which teams may actually start their
project and move to the incubation phase.
M-1279-E Alcatel-Lucent: Marketing the Cell Phone as a Mobile Wallet (A)
Appendix 2
The NFC Technology
RFID uses radio waves to allow a radio frequency transmitting and receiving device (also
known as reader or interrogator) to exchange data with an RFID tag. 22 NFC, which stands for
Near Field Communications, is an extension of proximity-card or short-range RFID
technology, which allows readers to read tags at a distance of up to 4 cm. 23 NFC is a
standard defined by the NFC Forum, a global consortium (headed by Sony and Philips) of
hardware, software/application, credit card companies, banking corporations, network-
providers and others who are interested in the advancement and standardization of this
technology primarily aimed at usage in mobile phones. This short-range wireless
communication technology works like Bluetooth but with a shorter range, reducing the
likelihood of interception.
The ISO 18092 standard defines two communication modes for NFC interface and protocol:
one for communication between an active NFC-enabled device (e.g., a smartphone) and a
passive one (e.g., a tag) and another for dialog between two active devices. NFC-enabled
devices are able to communicate in a short distance via magnetic field induction. In the first
mode, an active NFC-enabled device (normally a smartphone) sends a signal to a passive NFC
element (usually an RFID tag) which transforms the signal by adding the appropriate
information needed by the device to perform a certain operation (e.g., paying for a product
or service) and sending the signal back to the initiator. In the second mode, two active NFC-
enabled devices establish a dialog and interchange the appropriate information such as prices
or personal information cards.
22 http://rfid.net/basics/190-what-is-rfid.
23 http://www.touchatag.com/faq .
Appendix 3
Mobile Wallet Business Concept Evolution (2007-2010)
The idea behind the Mobile Wallet Solution could be traced back to 2007. Since the original
idea emerged in Alcatel Lucent’s annual innovation bootcamp in 2007, the concept that
eventually led to the mobile wallet idea underwent significant changes in positioning.
QTouch
A first predecessor of the Mobile Wallet Solution was an idea submitted by a Belgian team in
Alcatel-Lucent’s bootcamps (late 2007), called QTouch. The idea behind QTouch was to
enable mobile phones to interact with billboard advertisements. First, NFC was thought of as
an enabling cell phone technology increasing in penetration fast. Second, substantial amounts
of money were spent on billboard advertising. But at the same time, the advertising industry
became increasingly aware of the need to build integrated communication strategies (across
multiple media platforms). QTouch was the solution to let billboard advertising integrate
fluently with other forms of digital communication. Big billboard agencies, such as JC
Decaux, could equip their billboards with RFID tags that subsequently could enable digital
content and services to be loaded on an NFC-equipped mobile phone.
24 http://gigaom.com/2008/09/08/demo-meet-alcatel-lucents-services-play/ .
Appendix 3 (Continued)
Touchatag
In February 2009, the brand name was changed to touchatag, which brought a sensorial
touch to the brand. Touchatag applications were based on an extended open Application
Program Interface (API). Anthony Belpaire expected such an open standard, and an
application development toolkit associated with touchatag, to facilitate the development of
applications, attracting developers and final users and speeding up diffusion of the new
technology.25
The new reading application within touchatag also allowed any mobile phone with a camera
to read a 2D barcode tag which would then be used by touchatag’s online system to initiate
the right application. 26 This was an intermediate solution, envisioned by the Mobile Wallet
team, to reduce the dependence of touchatag on the diffusion of NFC, considered the main
hurdle to the widespread adoption of touchatag. Yet, consumers seemed to resist this solution
in test markets, which was worrisome. Some industry analysts were also concerned that if
consumers became underwhelmed by these interim technologies for mobile payment, it could
hurt the adoption of the NFC devices down the line.27