Mobile payment is an important informatization effort and a typical Internet of Things application in China and, as mobile Internet access and smartphones continue to develop, they have won the attention and confidence of parties in the industry chain including government departments, operators, financial institutions, technology solution providers and users. These parties have been active in mapping out the development path of mobile payment focusing on areas including planning, research, construction, designing applications and promotions. Such efforts point to a bright future for the mobile payment market. With financial payment technology developing quickly and the commercial application of 3G technology expanding, the convergence of the financial payment industry and telecom service industry has quickened.

I. Global Development

　　Currently, mobile payment refers primarily to payment made via mobile handsets. In other words, transactions including payments, purchases and transfers between bank accounts are made wirelessly using handsets. Based on payment distance, mobile payments can be divided into remote payments or POS payments. For remote payments, transfer of funds or payments are typically made through the transaction platform in the handset. Banks have their individual mobile banking arms to operate the business. As for POS payments, Radio Frequency Identification (RFID) technology is used, allowing wireless chip interactions to effect payment for a transaction. The handset can therefore be used locally at automatic self-service kiosks, POS terminals and parking meters, among other devices.

　　Entering the 21st century, Japan, South Korea, and regions in Europe and the US have pulled out all the stops in developing mobile payment businesses employing RFID technology. Their efforts have paid off, winning customer recognition and acceptance for the payment mode. According to the consultancy Informa, by 2013, close to 300 billion transactions (or more than US$860 billion in value) will be made via mobile handsets.

　　Japan is among the countries that excel in promoting mobile payment. Its largest mobile communication operators NTTDoCoMo and KDDI ventured into mobile payment business in July 2004 and July 2005 respectively. NTTDoCoMo now owns 60% of the mobile payment market in Japan and is working with 15 counterparts in 24 European countries to market its mobile payment business. In addition to Japan, countries including South Korea, the US, France, Germany, Sweden, Finland, Austria, Spain and the United Kingdom have been active in promoting mobile payment. More and more consumers are using their mobile handsets for POS transactions, buying subway tickets and making mobile ATM withdrawals. These developments clearly point to a rosy future for the mobile payment business in China.

II. Development in China

　　China has the world's largest mobile communication market. However, in terms of user population and scope of application, the country's mobile payment industry is still very much at the starting line. Until the end of 2009, there were less than 20 million mobile payment users in China, but with growth at 29% the country is fast becoming the third largest non-cash payment market in the world. As an emerging market, China boasts a high handset penetration rate and rapid adoption of mobile payment among handset users, hence this is a mobile payment market with huge development potential.

　　The scale of the mobile payment market in China had been restricted by inconsistent operation standards in the past. As the industry's development path becomes clear, operation standards are also taking shape. Industry players have reached the consensus that the 13.56MHz standard should apply for POS payment and the 2.45GHz solution should be used only in enclosed environments. Once uniform payment standards are adopted in China, the mobile payment industry should take off.

　　As a provider of mobile payment technology and products, MasterCard has projects and solutions for different countries: firstly, to integrate traditional core products and services with mobile payment, for example, putting the PayPass™ card into the handset; secondly, to offer better value-added products and services to handset users, for example, incorporating ATM and special merchant offer positioning applications and e-commerce terminal solutions into the handset; and lastly, to apply its innovation capabilities to ensure mobile payments are secure with the use of technologies such as mobile access codes for handset wallets and contactless SIM card solutions.

　　As with other industries, development of the mobile payment industry hinges on cooperation among players. MasterCard hopes to share its solutions and case studies from different markets with China and seek collaboration opportunities in the market. We wish to grow the industry with local country partners and, in so doing, contribute to the industrial transformation of the nation.

III. Mobile Payment Solution

　　Working with local suppliers in different markets, MasterCard has been offering easy to use "Tap and Go" mobile payment solutions to a growing number of consumers. MasterCard PayPass™ is a worldwide contactless operation that allows consumers to make payments quickly and easily. A MasterCard PayPass™ cardholder may simply use his mobile handset, the card or other PayPass™-enabled equipment and swipe it on a PayPass™ reader to complete a transaction.

　　Since its introduction in Asia Pacific in 2004, the MasterCard PayPass™ mobile payment solution has been on trial or promoted in 11 markets in the Middle East and Africa region, including Australia, China, India, Indonesia, South Korea, Lebanon, Malaysia, the Philippines, Thailand, Tunisia and the Emirates. After the ongoing efforts of MasterCard PayPass™ to promote contactless payment in the region, the number of MasterCard PayPass™ cards and devices issued in Asia Pacific, the Middle East and Africa rose by 49% in the first quarter ending 31 March 2010 when compared with the previous year.

　　In South Korea, MasterCard has cooperative agreements with all major telecom carriers – KTF, LG Telecom and SK Telecom – to launch mobile commercial PayPass™ operations. At the same time, MasterCard has kicked off PayPass™ trial projects in markets including India, Japan, the Philippines and Taiwan. In India, a large scale MasterCard PayPass™ Near Field Communication (NFC) mobile payment trial was conducted jointly with Citibank, Vodafone and Nokia, in which 40,000 transactions involving total payment of more than US$500,000 were successfully completed.

　　MasterCard PayPass™ provides consumers with a quick and easy payment means using mobile handsets, sparing them from the hassle of handling small change. However, the value of MasterCard's contactless payment solutions goes beyond just facilitating simple purchase transactions. They enable economic exchanges among consumers in markets worldwide. That aligns with the mission of MasterCard, which is to work closely with the industry to develop open worldwide standards and encourage product innovation. In collaboration with the industry, MasterCard hopes to help the development of NFC mobile payment with the goal of providing consumers with payment services that are practical, secure and convenient.

　　With Gemalto, MasterCard has launched a NFC device with built-in Gemalto Upteq N-Flex solution that supports MasterCard PayPass™. The device can turn the handset into a PayPass™ contactless payment tool. The Upteq N-Flex solution is a super slim device that can be installed in a mobile phone. Being the first multi-handset compatible industry solution, it has led the way for NFC application in handsets. It is also the first solution among peers that accommodates both GSM and SWP protocols. A trial of the solution with DBS, EZ-Link and StarHub as partners has begun in Singapore.

　　Furthermore, with the In-Control mobile access code solution, MasterCard is able to work with handset providers and mobile payment operators to turn the handset wallet into a MasterCard with a virtual card number. Consumers can also pick a preferred card number and make transactions with merchants all over the world in the MasterCard network. Incorporated into the handset, the solution makes payment safe and easy for handset users.

IV. Market Outlook

　　PayPass™ users have begun to appreciate the convenience of the "Tap and Go" system, but MasterCard has not slowed its NFC technology innovation in its bid to fast-track development of mobile payment tools. According to the latest market statistics, there are 130 million mobile payment users, by general definition, in China, with strong growth expected for the market in 2011 and mobile transaction volumes expected to reach more than RMB100 billion in 2012.

　　It is clear that as mobile payment continues to gain momentum, the user population as well as transaction volumes will continue to grow and more diverse e-banking channels will emerge. Banks are expected to upgrade e-banking platforms to support more service offers and functions and more powerful applications. Dedicated Internet and handset connections and standardized interaction protocols will allow the banking industry to enhance service capabilities and grow. To help nurture the market, MasterCard will keep working with industry partners to build a sound infrastructure and establish business models and mobile payment standards. By cooperating with leading industry players, MasterCard will bring to the market more innovative mobile payment solutions designed for the increasingly mobile lifestyle of consumers.