Chapter 1: Introduction - Padis - Sapienza

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Dec 12, 2013 (3 years and 10 months ago)

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“S
APIENZA


-

U
NIVERSITA


DI
R
OMA

F
ACOLTA


DI
E
CONOMIA



D
IPARTIMENTO

DI

MANAGEMENT



D
OTTORATO DI
R
ICERCA IN


“ECONOMIA

E

FINANZA

NEL

GOVERNO

DELL’IMPRESA”





T
ESI DI
D
OTTORATO

XXIII

CICLO



M
OBILE
R
EMOTE
P
AYMENT
:

A
N
E
XPLORATORY
S
TUDY OF
M
ERCHANT
A
DOPTION




M
ASSIMILIANO
S
ILENZI



Tutor: Maria Vernuccio

Mobile Remote Payment: An Exploratory
Study

of Merchant Adoption


2





A
BSTRACT


There are more than
5
.
6

billion mobile phone users worldwide, making mobile
phones more com
mon than PCs. Mobile technology

is a modern phenomenon with a
great impact on industries and our society. Mobile phones began as very limited devices
that

provided only voice services. Today, these devices also provide a myriad of data
services that allow us to browse the Internet, send text messages, check emails, watch
movies, listen to music, take pictures, record videos, play video games and read
docume
nts.

Mobile can also be used

for payments, thus adopted by merchants in such a way to
provide a new way for their customers to make their purchases.


Different systems and business models have been developed for enabling Mobile
Payments such as "Proximity
" systems based on NFC technology and "Remote" systems
that use the Mobile Operator's network and mostly widely adopted technologies such as
SMS, WAP and Mobile Internet. Mobile remote payment systems are one of the
most
popular

technologies for transactio
ns today, especially across the media and online
industries.


Prior research mostly focuses on technology innovation or consumer
-
centric view
while there is still less
knowledge

related to supply
-
side perspective and merchant
attitude towards adoption of M
obile Payments. Literature is even more scarce when it
comes to understanding the merchant adoption of specific Mobile Payment Systems such
as "Remote Payment" systems based on carrier billing technologies.
Typically,

these
Mobile Remote Payment: An Exploratory
Study

of Merchant Adoption


3



systems have been widely adopted

by merchants around the world and for some have
become a

phenomenal

tool of success. There is also scarcity of research describing the
operative factors affecting the deployment and management of Mobile Payments.


This research is an exploratory research of the merchant adoption of Carrier
Billed Mobile Remote Payments. This qualitative study was based on in depth interviews
conducted on executives and managers from 15 international companies that operate
globally i
n the digital space and that have made a successful use of Mobile Remote
Payments.


The results of this research are divided into two parts. In the first one, which is
dedicated to the "Strategic Phase"
,

the research aims to understand what enables, drive
s
and inhibits the adoption of Mobile Remote Payment systems by merchants. In the
second part, the “Operative Phase”
,

the research instead outlines the factors driving or
inhibiting the successful deployment and management of such systems by merchants.
Bo
th parts are organized into descriptive frameworks where the factors identified are
analyzed in great detail and explained also through direct quotes of the interviewees.


What emerges from
the “Strategic” part of this

study is that in order for merchants
to adopt Mobile Remote Payments, they must operate within very strict limitations, such
as offering mainly digital goods and services and within a micro
-
transaction based
business model. Furthermore, these merchants have to bear incredibly high commissions

if compared to credit card or other payment tools. However it emerges that this tool is so
simple
and secure
to use
, and immediately available to anybody with a mobile phone that
it produces key beneficial factors for the merchants that really drive their

adoption. These
Mobile Remote Payment: An Exploratory
Study

of Merchant Adoption


4



factors include addressing unbanked users (Young people, emerging markets), increas
ing

impulse purchases

and the

possibility of developing new business models.


The result of the study of the operative ph
ase shows that 4 macro
factors

clearly
need to be considered when
merchants
deplo
y

and
manage

a Mobile Remote Payment
system.
The
se
are 1)
Purchase Experience;

2) Payment System
R
eputation; 3)

Merchant


Provider Relationship; 4)

Price
Structure and Billing Policies.





Keywords:
Mobile Payment, Mobile Commerce, Mobile Remote
P
ayment, Mobile
Mark
e
ting,

Merchant Adoption, Technology Adoption, Payment Systems







Mobile Remote Payment: An Exploratory
Study

of Merchant Adoption


5



T
ABLE OF
C
ONTENTS

Chapter 1:
Introduction

................................
................................
................................
........

8

1.1.

Purpose of the Study

................................
................................
................................
......

12

1.2.

Theoretical Approaches Used in This Study

................................
................................
..

12

1.3.

Scope of the Study

................................
................................
................................
.........

13

1.3.1. Geographic Scope:

................................
................................
................................
.......

14

1.3.2. Business Model and Technology Scope
................................
................................
.......

14

1.3.3. Managerial Scope

................................
................................
................................
.........

15

1.4.

Description of the chapters

................................
................................
.............................

15

Chapter 2: Literature review

................................
................................
..............................

18

2.1. Theoretical Approach of the Literature Review: Convergence Based Framework

............

19

2.2. Literature Review Methodology

................................
................................
.........................

21

2.3. Literature Review

................................
................................
................................
................

24

2.3.1. Definition and Conceptualization of Mobile Payment

................................
.................

25

2.3.2. The Technological View: Review of Mobile Remote Payment Systems and
Technologies

................................
................................
................................
..........................

31

2.3.3. The Competition Perspective: Review of the Mobile Remote Payment Value Network
and Competitive Environment

................................
................................
...............................

39

2.3.4. The Consumer Perspective: Review on Consumer Adoption and Attitude Toward
Mobile Remote Payments

................................
................................
................................
......

43

2.3.5. Mobile Payment Merchant Adoption

................................
................................
...........

51

2.4. Identifying Research Gaps

................................
................................
................................
..

54

Chapter 3: Research Questions and Methods

................................
................................
....

57

3.1. Research Questions

................................
................................
................................
.............

57

3.2 Rationale for Research Methodology

................................
................................
...................

60

3.3 In Depth Interviews Methodology

................................
................................
.......................

61

3.4 Data Collection

................................
................................
................................
....................

62

3.5 Data analysis and Research Framework Developmnt

................................
..........................

64

Chapter 4: Findings: “Pre
-
requisites, Drivers and Barriers to Successful Adoption of
Mobile Payments”

................................
................................
................................
..............

67

4.1. Merchant Adoption Pre
-
requisites

................................
................................
......................

69

4.1.1. Proliferation of Mobile Technologies (St. 1):

................................
.............................

70

Mobile Remote Payment: An Exploratory
Study

of Merchant Adoption


6



4.1.2. Viable Payment Infrastructure (St. 2)

................................
................................
.........

71

4.1.3. Sustainable MP Business Model (St. 3)

................................
................................
.......

72

4.1.4. Need for a New Payment System (St. 4)

................................
................................
......

75

4.1.5. Knowledge of the Payment Systems (St. 5)

................................
................................
.

76

4.2. Merchant Adoption Drivers

................................
................................
................................

77

4.2.1. New Business Models, New Products and Services (St. 6)

................................
.........

77

4.2.2. New Customers (St. 7)

................................
................................
................................
.

79

4.2.3. Improved Purchase Experience and Security (St. 8)

................................
....................

80

4.2.4. Increased Impulse Purchases (St. 9)

................................
................................
.............

81

4.2.5. Increased Product and Service Availability (St. 10)

................................
....................

82

4.2.6. Low Implementation Costs (St.11)

................................
................................
..............

83

4.3. Merchant Adoption Barriers

................................
................................
...............................

84

4.3.1. High Commissions (St.12)

................................
................................
...........................

84

4.3.2. Limited Pricing Options (St.13)

................................
................................
...................

87

4.3.3. C
omplexity of Local Regulations and Operator Policies (St.14)

................................
.

88

4.3.4. Operator / Provider Payment Terms (St.15)

................................
................................
.

90

Chapter 5: Findings: “Enablers, Contributors and Inhibitors of Successful Mobile
Payment System Deployments”

................................
................................
.........................

91

5.1 End User Purchase Experience Optimization (Op.1)

................................
...........................

94

5.1.1. Discovery (Op. 1.a.)

................................
................................
................................
.....

95

5.1.2. Purchase Flow (Op. 1.b.)

................................
................................
..............................

96

5.2. Payment System Reputation (Op. 2)

................................
................................
.................

105

5.2.1. Payment Provider Brand (Op. 2.a.)

................................
................................
............

106

5.2.2. Quality of Service Testing (Op. 2.b.)

................................
................................
.........

108

5.2.3. End User Support (Op. 2.c.)

................................
................................
.......................

113

5.3. Merchant and MRP Provider relationship (Op. 3)

................................
............................

115

5.3.1. Economic Conditions (Op. 3.a.)

................................
................................
.................

117

5.3.2. Product and Service Quality (Op. 3.b.)

................................
................................
......

126

5.4 Optimization of Price Structures and Billing Policies (Op.4)

................................
............

135

5.4.1. Price S
tructures (Op. 4.a.)

................................
................................
..........................

136

5.4.1. Billing Policies (Op. 4.b.)

................................
................................
..........................

145

Chapter 6: Discussion and Conclusions
................................
................................
...........

150

Mobile Remote Payment: An Exploratory
Study

of Merchant Adoption


7



6.1. Summary and Discussion of Main Findings

................................
................................
.....

151

6.2. Theoretical Implications
................................
................................
................................
....

158

6.3. Managerial Implications
................................
................................
................................
....

159

6.4. Limitations of the study

................................
................................
................................
....

160

6.5. Direction for future research

................................
................................
.............................

161

References

................................
................................
................................
........................

164

Research Methodology

................................
................................
................................
............

164

Convergence Theory

................................
................................
................................
................

165

Technology Acceptance Theory

................................
................................
..............................

166

Mobile, Payments & Mobile Payments

................................
................................
...................

168

Market Research & Analysts

................................
................................
................................
...

174

Appendix 1: Glossary

................................
................................
................................
......

176


T
ABLE OF
F
IGURES

Figure 1: Example of Operator Billed Mobile Remote Payment flow

..............................

11

Figure 2: Description of the Chapters

................................
................................
................

16

Figure 3: Organization of Literature Review

................................
................................
.....

24

Figure 4: Mobile Payment
-

Remote vs. Proximity

................................
..........................

28

Figure 5: Mobile Remote Payment: Credit Card / Bank Billing vs
. Remote Operator
Billing

................................
................................
................................
................................

30

Figure 6: Merchant Adoption of Mobile Payment (by Mallat and Tuunainen 2008)

........

52

Figure 7: Differences in scope between Mallat and Tuunainen’s study and this research

59

Figure 8: Merchant Adoption Framework of Operator Billing Mobile Remote Payments

................................
................................
................................
................................
...........

69

Figure 9: Operative factors and sub factors affecting deployment and management of
Operator Billing Mobile Remote Payment Systems

................................
..........................

92

Figure 10: End User Purchase Experience Optimization

................................
..................

94

Figure 11: Factors Affecting Payment System Reputation

................................
.............

105

Figure 12: Operator Billing Mobile Remote Payment Merchant Provider relationship

..

116

Figure 13: Optim
ization of Price Structures and Billing Policies

................................
...

136

Figure 14: Merchant Adoption Framework of Operator Billing Mobile Remote
Payments

................................
................................
................................
................................
.........

152



Mobile Remote Payment: An Exploratory
Study

of Merchant Adoption


8




Chapter 1:
Introduction


The escalation and convergence of distributed networks and wireless
telecommunications, together with the evolution of

handset technologies, has created a
tremendous potential platform for providing
payment and transaction

services.
Mobile
Phone adoption has seen exceptional growth globally, reaching
today
5.3

billion

mobile
subscribers

(
ITU
, November

2011)
,

that is 77% of the world’s population
. The increase
in adoption was accompanied by an extraordinary evolution of
Operator

network
technologies
and of

handset
s


c
apabilities
, leading current Mobile technology to be an
interactive and multimedia pla
tform (l
eung &

Wei, 2004) or medium (Sinisa
l
o et al.
,

200
7
).

In fact, it is limiting to think of Mobile Phones just as a means for communicating
“on the go”. Mobile Technology enables users not only to
perform calls and send text
messages.
Today’s handsets

are equ
ipped with functionalities which surpass telephony
needs, and which inspire the development of value
-
added mobile services.
People

can
today use their Mobile devices to browse the web, download applications, play games,
interact on their favorite social ne
tworks, stake and share pictures, watch films

and

listen
to music.


The number of mobile phones
is by far higher than

other techn
ological device
s

such as television or computers,
that could be used to market, sell, produce, or deliver
products and services

to consumers. Th
is has

open
ed

lucrative
and interesting
opportunities
for merchants,

service providers

and Mobile
operator
s
. Mobile phones can
be used as access devices, and mobile commerce in general. Thus,
Mobile technology
Mobile Remote Payment: An Exploratory
Study

of Merchant Adoption


9



has also gained relevance w
ithin
different industries including
the banking and financial
services industry.
Mobile Payments is the possibility to purchase goods, services and to
pay for bills with the use of a mobile phone or other personal device and with the use of
mobile and other wireless technologies.

Several studies have identified Mobile Payment key adop
tion drivers by users and
have indicated there is a substantial willingness to
use their handsets for making
purchases
.

In 2011 it is estimated that the global Gross Transaction Value of
Mobile
Payments was of
240

bln
U
SD (Juniper Research
,

2011)

and forecasted to grow very
strongly in the next years
1
.

However
,

Mobile Payment Industry, purchasing methods, transaction flows and
technological

standards are still fragmented.

Mobile Payments can utilize proximity
technologies such as Bluetooth, UWB, N
FC

(Balaban, 2005; Mallat et al., 2004)
or
“R
emote


techno
logies
such as
SMS, USSD

and
Mobile data traffic connections

like
WAP

(Dhalberg et al
., 2007
)
.

According to
Gartner (2011)

NFC is being overhyped and
will not be mainstream for at least four years
. SMS and USSD will continue to dominate
payments in developing markets and WAP payments will dominate in developed world
.

Mobile payments can be performed by charging the transaction on to the user’s
mobile phone bill (or prepaid credit
) or
by associatin
g his device to a credit card or bank
account

(Mallat
,

2004;
Dewan and Chen
,

2005
)
.




1

Juniper Research (2011) forecasts total end user spending via mobile for
digital and physical goods,
money transfers and NFC
to reach 670 billon USD by 2015. Portio Research (2011) estimates end user
spending for mobile payments
including in
-
app payments, mob
ile ticketing and mobile coupons to reach
663 billion USD by 2014.Yankee Group (2011) predicts that global mobile transact
ion value estimated to
be 241 billion USD in 2011 will reach 1 trillion USD by 2015.


Mobile Remote Payment: An Exploratory
Study

of Merchant Adoption


10



Today
Operator

Billed
Mobile Remote
Payments are

one of the most successful
s
ystems

in use
.
This type of Mobile Payment

is based on “Remote” technology (that is
uses the mobile operator’s network) and the cost of the transaction is charged directly to
the phone bill or pre
-
paid credit of the mobile user

(Fig
ure

1).

If the user of the service described in
Figure 1
is in Ita
ly, and the service was sold
at 2,00 euros + VAT excluded, then the following would be a likely revenue model and
commissions structure
2
:

1.

End User pays: 2.00 euros + VAT to Mobile Network Operator

2.

Mobile Network Operator pays keeps approximately 40% of the

value and
thus pays the Mobile Remote Payment Provider 1.20 euro + VAT.

3.

Mobile remote Payment provider applies a small transaction processing
and operator connectivity aggregation commission of 10% and thus pays
the Merchant 1.08 euros + VAT.



In the a
bove example it becomes clear that this type of system has incredibly high
commissions, that are not comparable to other payment tools such as credit card. These
commissions are very high all over the world and besides a few exceptions range from
31% to 68
% depending on the geographic market
3
.

As this study will further clarify, Mobile Remote Payment systems have even
other limitations when utilizing operator billing. Besides the high commissions on the



2

This revenue model and commission structure is an estimation based on information collected during the
empirical research presented later in this study.

3

This informa
tion was collected during the interview process and represents
10
th

and 90
th

percentile of the
commissions applied by a provider across 69 countries. More information is presented later in the study.

Mobile Remote Payment: An Exploratory
Study

of Merchant Adoption


11



transactions there are, for example many limitations c
oncerning the maximum price that
goods and services can be sold for, and complicated local regulations and operator
policies the merchants must comply with.



Figure
1
: Example of Operator Billed Mobile Remote Payment flow



Despi
te all
these difficulties
,

there has been a strong proliferation of this type of
Mobile Remote Payments, with a growing adoption by merchants and strong growth of
end
user spending through this tool
4
5
.




4

According to Strategy Analytics (2011) both US and Eur
opean Users see Operator billing today as their
preferred way for purchasing mobile content.

5

Global operator billing was 37 billion USD in 2008 (Morgan Stanley 2009) and has grown considerably
in the last years.

Mobile Remote Payment: An Exploratory
Study

of Merchant Adoption


12



So w
hat
are the key
Mobile Remote Payment

Services ad
opted today? What is
driving the adoption of these

systems

by
m
erchants
?

H
ow do
they

and the other players in
the industry operate to grow and make mobile
remote

a successful payment system?
These are some of the questions that this study will try to answer.


1.1.
Purpose of the
S
tudy

Prior research focuses
mostly
on technology innovation or consumer
-
centric view
,

while there is still less
knowledge

related to supply
-
side perspective and merchant
attitude towards adoption of Mobile Payments. Literature is even more scarce when it
comes to understanding the merchant adoption of specific Mobile Payment Systems such
as "Remote Payment" systems based on
operator

billing te
chnologies. However these
systems have been widely adopted by merchants around the world and for some have
become an incredible tool of success. There is also scarcity of research describing the
operative factors affecting the deployment and management of
Mobile Payments.

This study aims

to explore through an empirical qualitative research

the adoption
of
Operator

Billed Mobile Remote Payments
.

M
ore specifically to define and
describ
e
:
1) The factors enabling, driving and inhibiting the adoption of such p
ayment systems; 2)
The operative factors to be considered when deploying
and managing such systems.


1.2.

Theoretical Approaches
U
sed in
T
his Study

The term

Mobile Paym
ents

, can bring

to mind academic research on
Convergence
,
that
in this case
can be applied

to the integration of the

“Mobile” and
Mobile Remote Payment: An Exploratory
Study

of Merchant Adoption


13



“Payments” domains
.

This study will utilize the three approaches utiliz
ed for studying
convergence as the

framework for reviewing literature on Mobile Payments.


For the research of
m
erchant adoption this study will utilize
the framework
proposed
in 2008
by Mallat and Tunnainen in their study of merchant adoption of Mobile
Payments. This Framework classifies factors determining merchant adoption into three
groups: Pre
-
requisites, Drive
rs and Barriers.
T
his model is also useful for comparing the
outcome of this research that will be conducted at a global scale and on different
merchants segments with the
results

of Mallat and Tunnainen’s research on Finnish
merchants
.





1.3.
Scope of the
S
t
udy

This study of merchant adoption on Mobile Payments
is characterized by the
following three factors:

1)

The research is not limited to any geographic territory or area
;


2)

The research is
primarily
focused on

Mobile Remote Payments
where user
s

are

charged di
rectly to
their

phone bill or to
their

pre
-
paid credit
6
;

3)

The research covers both the strategic phase of the adoption, that is the
decision making process of adopting the mobile payment system, but also the
operative aspects of the deployment and managemen
t of the system.






6

Later on we will define this as Carrie
r Billing Mobile Remote Payments.

Mobile Remote Payment: An Exploratory
Study

of Merchant Adoption


14



1.3.1.
Geographic Scope:

The research is conducted at
a global level. The qualitative research was
conducted on multinational companies located in
seven

different markets throughout
Western Europe, North America and East Asia. The aggreg
ated
Operator

Billing Mobile
Remote Payment coverage of these companies is of well over 70 countries throughout all
continents.



1.3.2.
Business Model and Technology Scope

Merchants today
can
select from a plethora of mobile payment systems
,

each one
with very distinct characteristics.

The
re are many factors that characterize the Mobile
Payment solution or solution type
s
. These
factors
include the differences in the
technologies utilized, the value chain of players involved in providing the s
ervice, the
business models, the
implementation
costs, the
commissions
, the purchase flows
, the time
it takes to complete the transaction, the context in which the transaction takes place, the
types of goods and services that can be purchased
.
Even though
their application in
enabling wireless commerce is comparable, they do have specific differences and
advantages that suggest use of one over the other.

(Dewan and Chen
,

2005)
.


Therefore by limiting the study to one
well defined category

of
Mobile Payment

solutions, with similar characteristics,

it is possible to understand the
specific factors
affecting the adoption of this type of solution by merchants and not risk making
generalizations that could apply to one type of solution and not to the other.

This study is limited to the adoption by merchants of “
Operator

Billing” Mobile
“Remote” Payment solutions (from now on referred to

also

as
OBMRP
), that is solutions
Mobile Remote Payment: An Exploratory
Study

of Merchant Adoption


15



that make use of the
Operator
’s Mobile Network and Services such as SMS and Mobile
Interne
t connections to perform transactions that are then charged directly to the users
phone bill or pre
-
paid air
-
time credit.


1.3.3.
Managerial Scope

This study goes

beyond the pure understanding of the adoption
decision
of M
R
P
by merchants.
Another goal

of

this research

is to provide
also
an understanding of

where
and

how merchants operate their
OBMRP

systems. Thus the scope of the study includes
what are referred to from now on as the “Strategic Phase” and the “Operative Phase” of
adoption. These can be described in the following way:

1)

The strategic phase describes
the factors affecting decision making

process
that leads to the successful choice of adopting Mobile Payment
;

2)

The operative phase describes

the factors affecting the optimal configuration
of deployment and management of Mobile Payment
.


1.4.

Description of the chapters

Following the introduction,

the second chapter is dedicated to the literature
review. The review identifies the key findings on Mobile Payments and on Mobile
Remote Payments
. The review
provides insights into current knowledge on Mobile
Remote Payments

by utilizing
“Convergent Busin
esses” or “Convergence” Theory

and

thus analyzes

the literature according to the convergence
between Mobile and Payment in
terms of technology, consumer and competition perspectives
.
The review continues by
outlining
current knowledge on merchant adoption
of Mobile Payments and focuses on
Mobile Remote Payment: An Exploratory
Study

of Merchant Adoption


16



the results of a previous study on merchant adoption published by Mallat and Tuunainen
in 2008
,

setting it as a reference model for the rest of the research.

Lastly

the main gaps
in
current research are identified
,

proposi
ng

new studies
on Merchant
Adoption
as a way
to contribute significant knowledge on
Operator

Billing
Mobile Remote Payments.



Figure
2
:
Description of the Chapters




Chapter Three is dedicated to defining the research question and the qualitative
methodology utilized in this study. More specifically, in the
third chapter
the
re is a
description of the

approach utilized for collecting the data (Qualitative Constructionis
t
A
pproach through in depth interviews),
the sample of companies and qualified staff
interview
ed
,
and
the content analysis and ex
-
post categorization

technique

utilized
.

Mobile Remote Payment: An Exploratory
Study

of Merchant Adoption


17



Chapters Four and Five are dedicated
to the findings of the research.

T
he first
illust
rates

findings in the “Strategic Phase” and the latter
explains

the findings in the
“Operat
ive Phase”. Both chapters start

by

proposing a model that outline
s

the factors that
emerged from
the interviews and then proceed
s

into explaining in detail each fact
or
,

also
through direct quotes of the interviewees
.

Finally in the conclusions, a strategic and operative complete model is presented
as a framework for analyzing merchant adoption of
Operator

Billing Mobile Remote
Payments
. The conclusions discuss the lim
itations, the academic and managerial
implications of th
is study and ultimately propose

future lines of research.





Mobile Remote Payment: An Exploratory
Study

of Merchant Adoption


18




Chapter

2:
L
iterature review


Mobile P
ayments have

attracted the attention of scholars and
have
produced
a
significant amount of
research. The two most studied factors in contemporary research
are mobile payment technologies and consumer perspective of mobile payments.
However
,

Mobile Payment technology research is still fragmented and missing a
high
-
level

organization. Merchant or
Supply Side adoption of Mobile Payments has been less
studied
,

and t
here is no evidence of significant
academic research

dedicated to
Operator

Billing Mobile Remote Payment adoption by merchants.

T
he literature review aims to outline current knowledge rel
ated to Mobile
Payments with an emphasis on findings related to
merchant
adoption and on Mobile
Remote Payments, especially those that make use of
operator

billing.

By
framing the literature review in terms of

Convergence

theory,

it is possible to
overcom
e the scarcity of

Operator

Billing Mobile Remote Payment
l
iterature
by

tapping
into “Mobile” and into “Payment Systems”
domains
, thus
extending range of disciplines
that can be studied. Convergence also

provides

a
well
-
organized
framework
for
describing th
e key findings that are relevant

to specific
Mobile Payment Systems such as
"Remote Payment" based on

Operator

B
illing

.

The first part of the review starts with the main definitions of Mobile Payments,
outlining the key conceptualizations in order to p
rovide a clear definition of “Mobile
Remote Payments” and “
Operator

Billed Mobile Remote Payments”.

Mobile Remote Payment: An Exploratory
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19



Then the review
, organized on a “Convergence” based
framework,
provides

insights into the current knowledge
of
Operator

Billing Mobile Remote Payments

from
a
technological, competition and consumer perspective.

Further on
,

the review focuses on current knowledge on Merchant adoption
,

outlining the model provided by Mallat and Tuunainen in 2008 and other relevant
insights. The chapter ends by identifying gaps in current knowledge and identifying a line
of possible research.


2.1. Theoretical
Approach
of the Literature Review: Convergen
ce Based Framework

The competitive scenarios and business boundaries of many industries have
significantly changed (Prahalad
& Hamel, 1994; Hamel &

Prahalad, 1996; Bettis
&

Hitt,
1995)
. As a result of different factors including advances in Technologies (V
aldani,
1991) and the effect of Privatizations and Liberalizations (Hamel, 1996; Dematté 1998)
,
many

businesses don’t even have a reference market or sector and are competing (or find
themselves competing) against unexpected players, some of which not imme
diately
identifiable as competitors. Such
a
phenomenon has been theorized as “Convergence”. As
a consequence of Convergence, most of the successful models utilized to define the
market and competitive scenarios
,

such as
Value Chains,
Five Forces (Porter,
1
980
,
1985
) and
Product


Market Framework

(Abel, 19
80
)
,

are difficult to be applied

(Ancarani
&
Costabile
,

2005
)
.




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It is possible to identify in the academic literature three different approaches to the
study of Convergence:

1)

The Technological Approach.
Convergence is based on the new opportunities
arising by the integration of different technologies, and as such has been
widely studied
,
among others

by Harvard s
cholars such as
Bradley, Hausman
and

Nolan (1993),
Collins, Bane and

Bradley (1997)
and

Yoffie (1997)
. For
example
,

ICT is the convergence between Information and Communication
technologies.

2)

The Competition Approach.
Convergence is based on the integration between
different
product and service offers, business sectors and industries.
Competi
tion
is not limited to the digital sector. An entire range of new
markets and sectors are on the rise or have even gained maturity.
Infotainment
(
the
convergence between information and ent
ertainment)
and

e
-
banking are
just
a few

neologisms that identify t
hese new and converging sectors. The
competition approach sees the increasing intensity of direct competition as the
key driver to convergence, pushing players to reconfigure their business
models to compete in adjacent business sectors or in new business
sectors that
can be approached thanks to their underlying assets and resources (Prahalad
&
Hamel, 1994; Hamel, 1996; Chakravarty, 1997; Wirtz, 2001).

3)

The Consumer Approach
. T
echnological and competition or industry
approach are not sufficient to explai
n the dynamics of Convergence.
Especially the more recent studies

on Convergence

have focused on
d
emand
and consumer attitude. It is important to shift from the technological
Mobile Remote Payment: An Exploratory
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21



excitement, where many new products and services are possible, to focus on
consum
ers, with their
emotions and functional and symbolic needs (Wind
&

Mahajan, 2002).

Interestingly, Shankar, O’Driscoll and Reibstein in 2003

use
as a key example in their work the

incapacity of

customer value creation
is the
main reason of failure of many
companies in the M
-
Commerce sector.


Th
e literature review utilizes Convergence to study current
“Mobile
Remote
Payment”
knowledge integrating

findings from “Mobile” and “Payment”

literature
under

a technological, competition/industry and consumer perspective.


2.2.
Literature Revie
w Methodology

To determine the current state of
Operator

Billing
Mobile Remote Payments an
extensive review was conducted. The first phase of the review was to determi
ne the
review scope and relevant source material. Since mobile payments are an
interdisciplinary and “convergent” topic
,
similar to e
-
commerce and mobile marketing,
relevant articles are published in a wide variety of journals. Furthermore, mobile payment
research is still an emerging research area and most of the contemporary research is
published in conference proceedings.
Since the review aims to understand

Operator

Billing
Mobile Remote Payments
,

which
are a sub segment of Mobile Payment
s
, there is
ev
en less material.

Following the convergence approach the research was not only
specific to
Operator

Billing Mobile Remote Payments but

articles that could provide
specific insights into Mobile and the Payment domain were utilized in such a way to
integrate

the findings from these disciplines.

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22



Therefore, both academic journal papers from various disciplines and also
conference proceedings
were included in the

search. Despite a potentially lower quality
of the conference proceedings,
these

are informative f
or charting the current topics in this
rapidly progressing area of research, and for identifying gaps to be covered by future
research.
It is also

expect
ed

that the best conference papers will
probably
evolve to
journal articles and thus serve as leading

indicators for the focus of future publications.


The research started with a wide and systematic
research
of materials in the
leading databases for online journals and conference materials: EBSCO Host, Science
Direct, IEEE Explore and Google Scholar.
The analysis
also went

“backwards”, by
identifying other works of the authors and citations to be reviewed in addition to the
articles downloaded from the database.


The documents were also combined with proceedings from five of the key
conferences in the
Mobile Remote Payments sector
that

the author attended
7
.

This
process
returned
350

documents
.
These materials were read and archived
with the following criteria
:

1)

Articles perfectly in scope (Total = 0): These are articles that fit perfectly
within all the aspects of the scope of this research, that the article is
exclusively limited to
operator

billing
mobile remote payments and discussing
merchant adoption at a gl
obal level.




7

The Conferences are: Mobile World Congress, Barcelona Feb 2011; Mobile Payment Conference, Milan
Politecnico April 2011; Social Gaming and Virtual Goods Conference, Berlin May 2011; Mobile Payment
Conference, London Sept
ember 2011; M
-
Commerce Conference, Mobile Entertainment Forum, Sep 2011
Sao Paulo.

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23



2)

Articles in scope (Total = 16):
The
topics discussed in the article fit with at
least one of the scope guidelines. For example
,

these are articles that might
discuss specifically mobile remote payments, but focus on the end user
adoption, while

this study focuses on merchant adoption.

3)

Articles out o
f scope but relevant (Total =
71
):
These
are articles that
discuss
Mobile Payments,
or just Mobile or just Payments,
an
d

are
thus

clearly out of
the
precise
scope defined for this study. Yet these art
icles were considered by
the author important for the representation of general

knowledge on Mobile
Payments with some interesting findings that are relevant
. For example
,

articles that describe the general attitude towards Mobile Payment adoption by
end u
sers. Although the
topic
is focused on the user perspective, and
may be
considered
also
too

generic since it does not specify if this is related to

Operator

Billing
Mobile Remote Payments, it provides a
first
useful reference.

4)

Articles out of scope and irr
elevant:
These
are articles that were considered by
the author irrelevant for the purpose of the research and as such were
discarded. For example
,

some of the conference proceedings of the IEEE
Explore were highly technical (for example
,

limited to the und
erstanding of
protocol)
. Others
limited themselves

to NFC and Proximity Payments and also
were discarded.


In the second phase
,

all the papers falling into the first three categories above
were classified into
seven g
roups
,

also according to the “Converge
nce” based
framework, and more specifically: 1) Definitions 2) General 3) Technology
Mobile Remote Payment: An Exploratory
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24



Perspective 4) C
ompetition and Value Chain Perspective

5) Consumer
Perspective 6)
Merchant Adoption

7) Miscellaneous.


2.3.
Literature Review

Literature review is divided into three
main
sections as described in F
ig
3
. The
first section, dedicated to the definition and conceptualizations starts with general
definitions of Mobile payments, then conceptualizes Mobile Payments in the form of
“Remo
te” and “Operator Billing” in order to arrive to a
standard
definition
and
conceptualization
of Operator Billing Mobile Remote Payment that will be utilized for
this study.


Figure
3
:
O
rganization of Literature Review



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The secon
d part of the literature reviews Mobile Payments from a technological,
competition and consumer perspective, starting from a high level knowledge on Mobile
and Payments and drilling down into key topics related to Operator Billing Mobile
Remote Payments. T
he third part of the review instead focuses on Merchant Adoption

of
Mobile Payments in general.


2.3.1.
Definition
and
Conceptualization
of Mobile Payment

Mobile payment services can be considered a special form of the electronic
handling of payments. Look
ing at existing definitions, we find several distinct
commonalities and differences. Following
are

some common definitions used in
literature
:



Krue
ger 2001:

«
Mobile payment can be defined as a payment that is
carried out with a handheld device such as a
mobile phone or a PDA
(personal digital assistant)
»
;



Zmijewska
2004:
«
Payments in which at least one part of the transaction
is conducted using a mobile device (such as a mobile phone, smartphone,
or Personal Digital Assistant) through a mobile teleco
mmunications
network, or via various wireless technologies
»;



Karnouskos
and Fokus,
2004:
«A mobile payment or m
-
payment is any
payment where a mobile device is used to initiate, authorize and confirm
an exchange of financial value in return for goods and
services»;

Mobile Remote Payment: An Exploratory
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Turwoski and Pousttchi
:

2004

«
it is a type of electronic payment
transaction procedure

in which at least the payer employs mobile
communication

techniques in conjunction with mobile devices for

the
initiation, authorization or realization of pay
ment
»;



Au and Kau
f
fman 200
8
: «
as any payment where a mobile device is used to

initiate, authorize and confirm an exchange of financial value

in return for
goods and services
»;



Pousttchi 2008:
«m
-
payments are defined as a type of payment transaction
processing in which the payer uses mobile communication techniques in
conjunction with mobile devices for initiation, authorization, or
completion of payment»
;



Dhalberg et al. 2008:
«Mobile payments are payments for goods, services,
and bills with a mobile

device (such as a mobile phone, smart
-
phone, or
personal digital assistant (PDA)) by taking advantage of wireless and
other communication technologies»
.


Most conceptualizations emphasize the mobile device as the key characteristic
distinguishing mobile p
ayments from other forms of payment. Some authors focus on cell
phones (e.g., Henkel
,

2002), while others include all mobile communication devices (e.g.,
Zmijewska
et al.
,

2004
). Regarding the function of mobile payments, all definitions refer
to the trans
fer of monetary value. Differences can be found when it comes to the phases
of the payment process that are considered to be part of the mobile payment. Henkel
Mobile Remote Payment: An Exploratory
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27



(2002), for example, refers to the authorization and initiation of the payment process in
his de
finition, and Dahlberg et al. (2008) also include this realization, i.e. the execution of
the payment, in their definition.


In terms of conceptualization, different studies have proposed a distinction into
two bro
ad
categories

of Mobile Payment, that is

Mobile Remote Payments


and

Mobile
Proximity

Payme
nts”

(Fig.
4.
)
. Not all sc
holars refer to these
two
names

for making this
distinction
. For example
,

Dewan and Chen (2005) refer to such distinction by
diving
Mobile Payments into “Cellular” and “Contactles
s
”.

Au
and

Kauffman

in 20
06
, using

a
pure
technological

approach,
describe two
technology standards, among others,
that
are

helping to achieve device and platform
interoperability, resulting in current projections for high growth
.

The
se

are
Short
Message Service

(SMS) and near field communication (NFC), the first one being a
Mobile remote technology and the second one a wireless proximity standard.


H
owever
,

NFC and SMS are
tod
ay not sufficient to make the distinction between
“Proximity” and “Remot
e” Payments. The rise of new technology standards and the
implications at different levels such at Industry/stakeholder level and consumer must be
considered.

In fact
,

Kim

et
al.

(2010) describe
M
-
payments
as

typically made remotely
via premium rate SMS, W
AP billing, Mobile Web,

Direct
-
to
-
subscribers’ bill and direct
to credit cards
.
Furthermore, b
y adding terms such as
“Direct to Credit Cards” to
SMS
and WAP
,
Kim

et al.
raise from the
tech
nical


standard


distinction to
a
n

“application”
or
“service”
level,
that is
,

the technology
designed to perform a specific function directly for
the user
.

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Figure
4
:
Mobile Payment

-

Remote
vs.

Proximity




Flatraaker

(2008),
distinguishes
mobile payments
as

either
“proximity”

payments

(
ty
pically card payments using the mobile handset
)

or

remote


payments

(
typically made
when buying digital or physical goods/services over the internet
)
.

This

distinction is again
insufficient to make a coherent conceptualization
.

But it
contributes to raisi
ng the
distinction from purely technological to
a more consumer
-
centered definition
,

because it
places

the attention on the need that is being resolved through this solution and the
context in which it is taking place
.


Al
-
Dala In et al.

(2009
)
describe

Mobile Remote payments as


based on a mobile
personal device that is an intermediary between the customer and the other parties
involved in the transaction, instead of
m
erchant being the intermediary as in current e
-
payment systems

.
Such conceptualizatio
n differs from all the previous ones, as it is
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29



based on a “Player” perspective (who does what) as opposed to technological or
consumer approach distinctions.

For the purpose of a better comprehension of the distinction, the following table is
a synthetic
re
-
adaptation of the framework of Dewan and Chen (2005) for distinguishing
“Remote” and “Proximity” payments
:


Table
1
:
Mobile Remote Payments and Mobile Proximity Payments


Mobile Remote

Mobile proximity

Key Use Case

User purchases digital good or
service over the web and pays
for the service with an SMS.

User purchases food at a
physical store and pays for the
purchase with a contactless
Credit Card.

Key Wireless Data Standards

Mobile Data (GPRS, UMTS,
EVDO, LTE, HSxPA)

Wireless Proximity Data NFC,
IR, RFID, Wi
-
Fi, UWB

Key Communication Protocols

SMS, WAP, HTTP, WSDL

HTTP, EDI, XBRL

Charging of purchase

Mostly directly to User’s
Phone Bill (also to credit card
and to other
electronic wallets)

Mostly to user’s credit card or
banking account

Device

Mobile Phone, Smartphone,
Pad (Anything equipped with
a Mobile SIM Card)

Mostly Cards and NFC /RFID
dedicated devices (although
some phones and phone cases
are currently being
dis
tributed)

Reference Point of Sales

Web or Mobile Store / Site /
App

Physical Shop


Mobile Remote Payment: An Exploratory
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Prepaid and telecom operator billing systems provide a built
-
in payment
mechanism for mobile subscribers, who form a vast potential user base for mobile
payments (Zhang et

al
.
,

2002). The possibility to charge such mobile users directly to
their phone bill or pre
-
paid credit through the use of the operator’s systems will be here
defined as “
Operator

Billing”.


Figure
5
: Mobile
Remote
Payment:
Credi
t Card / Bank Billing vs. Remote Operator
Billing



For the purpose of this

study


Operator

Billing
Mobile Remote Payments

(
O
BMRP) is
defined as:

The act of purchasing
goods, services,

and
paying
bills with a mobile device

by
taking advantage
of the
Operator
s’
mobile
network
and services

and charging the
amount directly to the user’s phone bill or pre
-
paid phone credit
.


Mobile Remote Payment: An Exploratory
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For

this definition,
m
obile devices may

include mobile phones, PDAs, wireless
tablets and any other

device that connect to mobile te
lecommunication network and

make
it possible for payments to be made

(Karnouskos and Fokus 2004).


2.3.2.
The
Technological View
: Review of
Mobile
Remote
Payment Systems and
Technologies

Not surprisingly
,

the
technological environment

has been the most res
earched
factor
,

as calculated by the

number of
relevant
papers

which were
archived in this
category
.

Y
et the

analyzed literature covers only fragments of technologies used to
develop and produce mobile payment services.

Much of the literature was discarded for
the purpose of this study as it referred to short range wireless technology and protocols
and trust / security mechanisms used for proximity systems. When it comes to analyzing
Mobile Remote Payment, dedicated tech
nological literature is
poorer

compared
with

proximity related technologies, and
is primarily focused on the following top
ics:

1)
Systems

2)
Protocols

3)
Tools

4) S
ecurity and Trust mechanisms
.


B
y reading the
technical
papers
,

one probably finds it diffic
ult to form a high
-
level holistic unde
rstanding of the technology of
mobile
remotes
payments

and its
business implications
.

A

technological review

of wider scope
is necessary

for building a
clear business understanding of the technology
,

and this is also a
nother
reason for
utilizing

“convergence”

a framework for developing this sort of analysis
.

Mobile Remote Payment: An Exploratory
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From this
“Technology Convergence”
perspective,
Mobile Remote Payments are
the integration of Mobile Device and Network Technologies used by
Operator
s
with

Paymen
t technologies

typically used by Financial Institutions and intermediaries
.


2.3.2.1.
Evolution of the
Operator
’s Enabling Infrastructure

Technological environment consists of wireless
8

and other related technologies
which are used to develop and produce
mobile payment services. Some of these
technologies develop
s
lowly, such as mobile network technology or transaction protocols.
Some other technologies have very short development cycles, such as mobile handsets
and their components. Continuous development

of technologies facilitates more reliable,
user friendly, versatile, and functionally rich mobile payment services

(Dhalberg et al
.

2007)
.


Seven technologies have been identi
fied as enabling Mobile Payment business
models (Pousttchi et al
.

2007)
: IVR, Ca
lling Line Identification Presentation (call
capture, CLIP), SMS, Unstructured Supplementary Service Data (USSD), Wireless
Application Protocol (WAP), Near Field Communication (NFC), Java 2 Platform Micro
Edition (J2ME), and, finally, Subscriber Identity M
odule Application Toolkit (SIM
Toolkit).
Yet, after a full review of
literature
this classification can updated
9
.

F
irst of all
,

newer and more recent technologies have been deployed throughout the value chain. For
example
,

J2ME is used in Feature phones, S
martphones rely on iOS, Android and other



8

W
ireless is a quite different platform from mobile leading to differences in its conceptualization (Anckar
and D’Incau 2002, Kumar 2004)
.
A wireless access itself can allo
w only very

limited mobility within the
range of this access point. True

mobility can, however, only be achieved by an underlying

mobile network,
which implements the mobility across the

whole area covered.

9

This includes a wider analysis of technical pap
ers including 3GPP, W3C, ETSI Standards and Mobile
Technology Conference proceedings (including proceedings Mobile World Conference 2011, Barcelona)

Mobile Remote Payment: An Exploratory
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33



more advanced operating systems and middleware (
www.apple.com
;

developer.android.com). Also, s
ome of th
ese technologies enable others
.

F
or
example
,

SIM Toolkit will interact with the us
er via J2ME or other middlewa
re

(
JSR 177: Security
and Trust Services API for J2METM
)
.

Lastly, t
he technologies mentioned are spec
ific
services of a more general Service. For example
,

CLIP is a specific
services utilizing
requests made

to
HLR


Home Location resource


and other datab
ases

u
sed i
n different
mobile payment applications (
3GPP TS 23.082
)
.



When

focusing on
Operator

Billing
Mobile
R
emote
Payments,
for a more clear
distinction

it is possible to provide a more comprehensive perspective by
identifying

two
key enablers
10
:

1)
Enabling Data

and

Network
T
echnologies

2) Enabling

Billing
Communication, Authorization and Authentication
Services.



Enabling
OBMRP

Data
and
Network
Technologies are

GSM, GPRS
(Global Packet radio Services),
EDGE (enhanced data Rates for GSM
Evolution),
W
CDMA (wideb
and Code Civision Multiplexing)
, HSxPA
(High Speed Download or Upload Packet

Access), LTE (Long term
Evolut
ion).
11



Enabling
OBMRP

Billing Communication, Authentication and
Authorization Technologies: Mobile Remote Payments are not necessarily



10

Where the first one will group the literature referred to the lower
-

middle part of the OSI Model, and the
second one will group the literature referred to the middle
-

higher end.

11

GSM is the second generation mobile communication technology that enabl
es among other things SMS
and GPRS services. GPRS was the first packet access data traffic deployed on Mobile Network
infrastructure, released 1997, allowing communication for mobile devices. WCDMA (in its different forms
UMTS, IMT2000, etc..), HSxPA, LTE

are subsequent technology upgrades that have substantially
increased the speed of data communication rates bringing the Mobile Network to be comparable in terms of
Internet data speed to Fixed Line Broadband systems such as ADSL and FTH (Fiber to the Home
).

Mobile Remote Payment: An Exploratory
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en
tirely performed on the Mobile Device or Network.
According to the
definition utilized in this study, in order for the Mobile Remote Payment
to take place t
he transaction can
even be

just ini
tiated, authorized or
completed
on the
operator
’s mobile network.

These technologies are
primarily:

o

SMS (
Short
Message
Service
-

3GPP TS 23.040):
3.3 Trillion SMS
Text messages will be sent in 2011
(Mobithinking 2011,
Portio
Research,

201
1
)
. This technology is among the most widely
adopted by consumers for sending short

messages and does not
require advanced mobile handset,
or any special configuration.
B
asically any cell phone of the 5.3
billion
(
ITU,

2011)
active
mobile subscribers globally can send an SMS.
SMS is utilized both
for authentication and/or billing pu
rposes
. SMS is used for billing
in the so called Premium SMS format: 1)
P
-
SMS MT (Mobile
Terminated) is
an
SMS that
,

when delivered by the
Operator

to the
Mobile User, automatically charges the amount of the purchase to
the phone bill or to the available u
ser’s prepaid credit. P
-
SMS MO
(Mobile Originated) is a text message that
,

when sent by the user
,

charges him the amount of the purchase

to his phone bill or
available credit.

o

USSD:

It is usually associated with real
-
time or instant messaging
services. Th
ere is no store
-
and
-
forward capability, as is typical of
other s
hort
-
message protocols like SMS
. The vendor's "check
Mobile Remote Payment: An Exploratory
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of Merchant Adoption


35



balance" application hides the details of the USSD protocol from
the user. USSD can also be used to refill user's money balance on
phone (S
IM card to be exact).

USSD is also utilized in Mobile
Payment to charge the user for purchases directly to the phone bill
or available pre
-
paid credit.

o

WAP (Wireless Application Protocol) and Mobile Internet: Both
are services

for accessing information o
ver a mobile wireless
network
. WAP was strongly embraced by mobile
operator
s to
standardize the production of microsites
for mobile devices and to
support advanced functionalities related to the mobile environment

(Kumar et al., 2003)
. Mobile Internet is a

generic term utilized to
describe the access to the
World Wide Web

through the
I
nternet
APN
. In general terms, WAP is seen as more

closed


(with
reference to the operator environment) and legacy compared to
Mobile Internet. All new generation smartphones

(iPhone, Android
based handsets, etc.) either are not equipped or discourage the use
of WAP. Yet WAP does have an interesting advantage, compared
to the internet protocol.
Operator
s have equipped the protocol with
the MSISDN (Telephone number) of the user
.
This comes in
particularly handy for identifying securely the user when browsing
a
WAP
site. Mobile Internet

standards do

not c
arry the MSISDN
Information.
WAP and Mobile Internet are used
either for

authentication or for billing
purposes:
1) User purcha
ses on the
Mobile Remote Payment: An Exploratory
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of Merchant Adoption


36



web, and WAP Billing

or Web

protocols are used to charge the
user to his mobile bill or available prepaid credit, 2) User
purchases content from Mobile Site
and WAP Billing protocols

(e.g. purchase from
the
Apple iStore)
.


2.3.2.2.
Evolution of

the Mobile Device

All mobile
devices

have a number of features in common, but manufacturers also
try to differentiate their own products by implementing additional functions to make them
more attractive to consumers. This has led to great innovation in mo
bile phone
development over the past 20 years.

Different
classifications
are available in literature
and in market studies
.

Kang et al. 2011

distinguish t
wo

categories of handsets
12
:

1)

Smartphones:
T
here is no clear industry
-
standard definition of smartphone,

but generally the PDA (Personal Digital Assistant) and the general mobile
phone combine the functions of various applications, using the Internet and
the
portable PC
(Yangil and Chen, 2007).

Smartphones
are instead advanced
handsets with high performing c
omputing ability and network performance.
Some smartphones also have other advanced
features, such as

HD screens,
Touch Screen capabilities and very advanced browsing features.


2)

Feature phones:
These
are
all those handsets that cannot be considered
smartph
ones

and are

thus
lower end and mid
-
tier handsets. Except for more
basic handsets (that have very limited features and are used almost exclusively
for voice and SMS communication)
,

feature phones offer

functions such as



12

Such distinction is commonly accepted and utilized within the mobile industry.

Mobile Remote Payment: An Exploratory
Study

of Merchant Adoption


37



playing music and taking photos, an
d sometimes simple applications based on
generic managed platforms such as Java ME, Symbian or BREW
.


Surprisingly
,

smartphone technology or
advanced
features are
not an
enabler
:

different
Mobile
Remote Payment solutions

utilize

SMS

(Pousttchi et al
.,

2007),
which

is
available

even on the most basic of all handsets. Traditional Mobile Value Added Service
Industry
,

such as ringtone and mobile g
ames providers
,

have thrived from basic and
especially f
e
ature phones, creating an industry worth

46.9

billion

euros
in 200
8

(Yankee
Group 2008)
before iPhone and any other smartphone were available or relevant.
Furthermore
,

a basic phone is enough for a user to purchase on the web through P
-
SMS.

Yet evolution of handsets
has contributed to the growth of Mobile Pa
yments,
especially in the purchase of digital content and applica
tions from mobile sites and app
stores (Mobithinking
,

2011).


2.3.2.
3.

Operator
-
Billed
Mobile Remote Payment Services

The research did not produce any article which made a clear overview of t
he
solutions utilized for Mobile Remote Payments.
Again
,

different articles did describe
specific architectures and solutions for mobile remote payments, especially based on case
studies of solutions offered by service providers.




Mobile Remote Payment: An Exploratory
Study

of Merchant Adoption


38



Following is a list of

operator
-
billed Mobile Remote Payment solutions

collected
in the review:

1.

M
obile Terminated
13

(MT) Premium SMS
:

if a mobile user sends an SMS
to an advertised number with a specific message

(e.g. ‘text WIN to
84225’) he

w
ill get an SMS response to his

device, which will cost them
money

to receive
14
.
(
Garner

et al. 2006
; Pousttchi et al
.

2007
)

2.

Mobile Originated
15

(MO) Premium SMS
: Customers pay a premium to
send a message rather than to receive it. MO Billing is less popular than
MT billing. First of all
because
operator
s prefer to have a confirmation
that the content or service is actually delivered before charging the user.
Also, it is preferable to have the possibility to use information from the
operator
’s systems to check that the requested content is

suitable for the
customer.

(
Garner

et al.
,

2006)
.

3.

OTP
16

(One Time Password): The OTP application uses time
synchronization between a server and a mobile application to generate one
time passwords. The consumer starts the OTP application on the mobile
phon
e and enters the PIN. A hash is being built, using the PIN and other
information to identify the consumer on the server side (
Massoth
and
Bingel
,

2009
).




13

This is the SMS sent from the carrier’s systems to the user’s device

14

A crucial mechanism in MT Premium SMS is the ability to send multiple receipts to a user for conten
t of
a higher value. For example, to pay for a game at £4.50, three messages at a cost of £1.50 will be received
by the user. The first two messages will display something trivial, such as ‘billing receipt’, with the third
containing WAP push information i
n the SMS header enabling the device’s browser to download content
with a GPRS connection (Garner et. al 2006)

15

This is the SMS sent by the user.

16

Merchants interviewed in this study mainly refer to this solution as “Pin
-
Code Flow”.

Mobile Remote Payment: An Exploratory
Study

of Merchant Adoption


39



4.

WAP Billing: The WAP application sends a WAP Push message
containing a customized URL to the consumer.
The consumer opens the
message which loads the WAP browser loading a web page asking for
authorizing a payment with the PIN. (
Massoth
and Bingel
,

2009
).
Alternatively, the user browsing a WAP page
clicks on the link to
authorize the payment.

5.

I
nteractive Vo
ice Response.

IVR application uses the basic GSM mobile
telephone technology to call a consumer and ask for a PIN

(
Pousttchi et
al
.,

2007;
Massoth
and Bingel
,

2009
)
.


2.3.
3
. The Competition Perspective: Review of the Mobile Remote Payment Value
Network an
d Competitive Environment

The growing intensity of businesses' direct competition increase pressure on
margins and sustainability of their competitive advantage, especially in the more mature
or declining markets. This drives businesses into migrating into

adjacent or at least
accessible market sectors (Valdani, 1995) by integrating or reutilizing their resources,
assets and know how. Prahalad and Hamel (1994), Hamel (1996), use the concept of
"driving convergence" for those companies using "out of bounds"
strategies that redefine
and reshape industry boundaries.


Operator
s, platform providers and financial services compan
ies are increasingly
indicating
their interest in
commercializing mobile payments.

The convergence between
Mobile and Payments is defin
ing a new competitive landscape
, where the boundaries are
Mobile Remote Payment: An Exploratory
Study

of Merchant Adoption


40



still not clearly defined and no player or solution can be considered today the standard.
The opportunities that arise from the integration of these technologies have attracted the
interest of Mobil
e and of the Finance Industry that are cooperating but also competing to
increase their stake in this new market

(De Meijer & Bye, 2011)
. New players are
emerging, dedicated to offering Mobile Payment solutions to merchants competing to
consolidate their p
osition in the market. The competitive landscape is affected also by
regional or local regulation and restrictions imposed by
operator
s and other players in the
market.


2.3.
3
.1. Finance and Mobile Industry Competition and Cooperation

The different solut
ions offered today in the market, whether based on remote or
proximity are developed either as single player model (individual banks and MNO) as
intra
-
industry collaboration (between MNOs or between

banks) or even inter
-
industry
collaboration (between ban
ks, MNOs and others).

For the Finance industry u
sing mobile phones for financial transactions is clearly
an opportunity to bring major benefits to
its current users and to attract the

world's
unbanked
or “un
-
carded”
population
.
Yet most of these systems ar
e closed, limited to one
bank or one operator, dooming them to limited growth and ultimately losing out to the
newer, more open mobile payment business model

(Holmes
,

2011)
.

The Mobile industry has been growing into new adjacent spaces based on the new
opp
ortunities that have risen from the improvement and evolution of mobile technology
and to its integration with other technologies such as Television and Video (Silenzi,
2004; Vernuccio
&

Silenzi, 2008) reduce the impact of commoditization of voice services

Mobile Remote Payment: An Exploratory
Study

of Merchant Adoption


41



(Bhattacharyya
&

Sivanand
,

2011).
The escalation and convergence of distributed
networks and wireless telecommunications has created a tremendous potential platform
for providing
marketing

services

(
Barnes

&
Scornavacca
,

2004
), where today Mobile
Operator
s act as publishers selling advertising on their Mobile Portals. The evolution of
mobile technology has led Mobile handsets to become an Interactive and Multimedia
platform
(Leung &

Wei, 2004)

making it possible for Mobile Operators to offer users a
wide r
ange Value Added Services such as Ringtones, Images, Information, Applications,
Music and Video downloads and Streaming. Operators

have leveraged three very
important assets for the development of Value Added Services market, exploiting their
large base of

mobile users, their pervasive network for distribution of content and
services and their billing systems for charging users for such services directly to their
phone bil
l or pre
-
paid “airtime” traffic
.


Operator
s have also understood the potential of re
utilizing the same VAS assets
for enabling the mobile payment market, and they can leverage an enormous customer
base that already owns a “payment instrument”
-

the mobile phone bill or pre
-
paid credit
(Zhang et al.
,

2002). In fact, by utilizing Mobile Rem
ote Payment solutions, there is no
need for users to purchase NFC, RFID or other short
-
range technology devices or for
merchants to invest in such infrastructure.
Operator
s can exploit their billing solutions for
enabling their users to purchase online or
over their phone third party goods and services
and be directly charged to their bill.
Operator

Billing
Mobile payment offers a practical,
convenient and easy
-
to
-
use alternative to cash that is safe and opens up terrific new
possibilities for consumers,
es
pecially in the form of remote
purchasing

(Bhattacharyya
Mobile Remote Payment: An Exploratory
Study

of Merchant Adoption


42



&

Sivanand
,

2011)
.

This means for the operator the possibility of growing into a new
sector and growing its revenues through the remote spending that is charged to its users’
bills.


The
cornerstones of the payments industry are interoperability, standards,
ubiquity, and scale

(Holmes, 2011)
. Card payments have achieved scale and are now
ubiquitous in many parts of the world. The interoperable payments system feeds itself.
The more places
there are to pay (or draw cash) using cards, the more cards are in
demand from cardholders
.


The success of the mobile network operators in the value added services and
micro payment leads to the question whether financial services firms should let the
mob
ile network operators take the initiative in the m
-
payments arena.

Efforts to cooperate have been made, such as providing joint mobile payment
solutions
17
. Economic theory says that inter
-
organizational investments in IT are never
easy, due to the difficul
ties of identifying how to apportion
the emerging benefits (Bakos
&