Mobile payments are destined to replace cash, credit cards and even smart cards. Few people would deny this. But what are the pros and cons of the different technical solutions that make mobile payment systems work?
This question is important, especially in the field of transportation: These systems must be fast, reliable, and secure, and their solutions must reduce overhead cost and installation time.
Payment solutions come in two basic types. The first uses the mobile phone as a ticket. The second, more disruptive approach, uses the mobile phone as a payment terminal.
Mobile Phones as Tickets
In the first case, the idea is to simply store the equivalent of your traditional ticket or smart card within the phone. You tap the phone on a terminal to validate your travel. The phone tap doesn’t really change your experience because you must still buy something before you travel. An alternative method to avoid purchasing a ticket is to use the mobile phone as a credit card where the terminal processes the payment.
These approaches have a major drawback. When NFC (Near Field Communication) technology is applied with the phone in this way, every transportation provider must work with every phone operator in order to sort out how the phone will exchange the data. The two parties also have to agree to the fee the phone operator charges for the service. When the phone is used as a credit card, you need extra certification of the terminal. That terminal needs to have a server connection and, on top of that, bank fees may apply for each transaction.
Despite these constraints, these approaches have been most promoted up to now. Less of a surprise has been the very low adoption rate and low return of investment for transportation operators.
Mobile Phones as Payment Terminals
For this solution, NFC smart tags are installed at the point of payment such as a bus stop or in a vehicle. Similar to the solution described above, the traveler taps the phone on the tag. The phone connects to the central server of the payment system to report the transaction, and subsequently bills the customer. For the traveler there is no need to buy and download a ticket before travelling. For the operators, NFC smart tags are quick, low cost and very easy to deploy.
Few operators offer this solution because the phone requires an Internet connection to validate the transaction. When the connection is weak or non-existent (say in a rural station or bus stop, or in a mass transit station with large crowds) processing the transaction is either too slow, or can’t take place at all. Deploying this solution in such conditions means being forever subject to massive fraud by travelers not paying or the inability to operate and provide a service if you enforce payment before travel.
A Seamless Solution
Xerox researchers have developed a different solution that uses our expertise in how information is stored, carried and shared. The Xerox Seamless™ Transportation Solution offers transportation operators a system that is compatible with existing ticketing infrastructures, and allows travellers to use their NFC-enabled smartphone to tap and pay for their travel. It’s based on a patented Xerox invention that allows smartphones to operate as a channel between smart tags and a server.
Our European research team came up with a way for smart tags to perform advanced security/encryption operations and to store transactions. This gives transportation operators a secure mobile payment solution that’s not only seamless for commuters, it’s also cost effective and reliable. Here’s how it works:
Let’s say John wants to use his smartphone instead of buying tickets for his daily commute on the underground railway. He downloads an app to his NFC smartphone, then creates a single account that will pay each of his transportation services with his phone. His smartphone stores an encrypted user certificate that allows him to pay. As he taps on the smart tag at the station, the tag collects the user certificate from John’s smartphone and verifies that he is an authorized user of the mobile payment ticketing system. The tag generates an encrypted certificate of the transaction, stores it in its local memory and gives it to John’s smartphone.
If the station John passes through has network connectivity, the smartphone will push the encrypted transaction certificate to the operator’s server where it is decrypted, and the fare is billed to John. If the station has no connectivity, the process will take place as soon as John moves into an area that has a signal.
If John hacks his smartphone so that it never pushes the transactions to the server, he’ll be billed anyway. That’s because each time his phone makes a transaction with a tag, the tag also stores the encrypted transaction in its local memory. John’s transaction will piggyback on the phones of several other travelers who tap the same tag after John. Their phones will securely send his transaction to the server. As all transactions are encrypted between the tag and the server, the data being carried by the phones cannot be read by the users.
This invention has overcome the technical barrier that - up to now - has prevented a more disruptive model in mobile payments. This new model offers much more compelling advantages for mobile payment for both users and operators. We’re confident it’s the start of seamless payment for travelers.
Frédéric Roulland is a Xerox computer scientist who leads the Data Intelligence group at Xerox Research Centre Europe. He is the European champion for transportation research activities at Xerox.
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