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Fang Fang Senior Strategy Analyst Shanghai Pudong Development Bank fangf01@spdb

Fang Fang Senior Strategy Analyst Shanghai Pudong Development Bank fangf01@spdb.com.cn. Mobile Payment in China —— Concepts, Current Situation and the Future. Mobile financing is getting popular nowadays in China as wireless network promoted to 3G. Mobile Payment:. Mobile Banking:.

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Fang Fang Senior Strategy Analyst Shanghai Pudong Development Bank fangf01@spdb

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  1. Fang Fang Senior Strategy Analyst Shanghai Pudong Development Bank fangf01@spdb.com.cn Mobile Payment in China——Concepts, Current Situation and the Future

  2. Mobile financing is getting popularnowadays inChina as wireless network promoted to 3G • MobilePayment: MobileBanking: The services offered to customers to allow them to access a bank account from mobile phones, i.e., the on-line banking from mobile phones. Major functions: account management, fund transfer and etc. The services offered to customers to allow them to make the payment by mobile phones, either linked to a bank account or not. supermarket utilities payment shopping mall online shopping metro online remote payment onsite contactless payment

  3. While many Best Practices in the World …… Japan：NTT DoCoMo Osaifu-Keitai – ‘e-wallet’ iD mobile payment platform DCMX – consumer loans Korea: SK Telecom MONETA – mobile credit card Kenya: Safaricom M-PESA – money transfer Philippines: SMART Smart money – online payment & money transfer

  4. Mobile Payment in China is only at the beginning Mobile Payment Solutions Advantages Disadvantages Intelligent SD card iSIM SIMPASS NFCmobilephones Need to install an antenna or change a mobile phone for onsite contactless payment A financial IC card is embedded, compatible with PBOC2.0 standard, can leverage current POS machines with update Not compatible with PBOC2.0 standard, need to put new POS machines Justneed to change a SIM card, easy to promote RF-SIMcard: ‘e-wallet’ with no bank accounts linked Strategic Alliance: China Mobile & SPD Bank, China Unicom & China Industrial Bank

  5. Several Issues need to be addressed …… 1st Issue: Technical Standards • 2.4Gfrequency • The ‘e-wallet’ developed by China Mobile applies 2.4G standard. • 2.4G standard is not compatible with the current standards applied in financial and metro areas. The technology maturity needs to be further tested. • If apply 2.4G standard to mobile onsite payment, the signal is quite strong and customer just needs to change a SIM card. • Need to put new POS machines other than update the current POS machines for bank cards. • 13.56M frequency • 13.56M standard is quite mature internationally. • In China, PBOC2.0(the standard for 2nd generation of financial IC card) is 13.56M. • If apply 13.56M standard to mobile onsite payment, the signal is not quite strong, hence an antenna is required. • China Union Pay prefers 13.56Mstandard since it is compatible with PBOC2.0. Neither party takes leading role so far

  6. 2nd Issue: Business Model High bank involvement bank-lead cooperative model customer->bank->merchants bank operator customer-> ->merchants wireless service wireless operator involvement Low High operator-lead 3rd party-lead customer->operator->merchants customer->3rd party->merchants bank accounts service accounts & wireless service Low There is no answer for the best model

  7. 3rd Issue: Customer experience & Consumption environment • 89.1%internet users ever heard of mobile banking, but only 33.2% used it. • Customers are getting used to swipe bank cards for onsite payment. • Signed merchants & compatible POS machines are far from enough. • Need to promote to more business & applications. • Different mobile phones make customer experience different. • Security & Regulatory issues.

  8. We are optimistic about the prospects for mobile payment in China Huge potential customer base: Mobile phone is more popular than computer in China. Almost 0.8 billion mobile subscribers, 0.23 billion of them are using mobile internet. Number of 3G subscribers doubles each 5 month. Convenience of mobile financing: Anywhere、anytime services: reach financial services with less restrictions Accelerating financial inclusion: provide low-cost financial services in rural areas Banks and operators are realizing the importance of cooperation: Banks control the customer accounts、clearance/settlement channel、POS machines; Wireless operators control the SIM card、mobile phones、wireless network. Both parties are irreplaceable.

  9. End of branch? Branches are everywhere! remote payment, e-wallet, e-debit card, e-credit card bill payment market campaigns, loyalty programs, e-coupons transaction and payment among users, e-business onsite large amount contactless payment onsite small amount contactless payment What matters is not the physical shape of the branches but who controls the customer accounts

  10. Thank you!

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