New “Mobile Wallet” Scheme in 2013

Written by Ken Ding || March 10 2013

Last month, China Mobile, the biggest mobile network operator (MNO) in China, and China UnionPay (CUP) unveiled their latest mobile payment product – “Mobile Wallet”- at MWC 2013 (Mobile Word Congress, the world’s premier mobile industry event).

It was not the first time for China Mobile to promote its mobile payment product. In 2009, it launched its first near field payment product also called “Mobile Wallet”, which was based on 2.4GHz standard and enabled users to have an “own account” which means that users had specific accounts linked to their mobile phones which were completely separate from their bank accounts and normal mobile phone accounts. Users could use the money in the account to complete small value payments, such as public transit, by swiping their mobile phones on enabled POS terminals. China Mobile directly controlled and managed these specialized accounts, so that it mined the usage data and further drove the business directly. Although this “Mobile Wallet” could be operated relatively independently from financial institutions, the development of China’s mobile shopping market gradually has pushed the MNO giant towards working more directly with financial institutions for mobile payment so that users can pay for anything through mobile phone just as they use their bankcards.

At the same time, CUP soon realized that it also needed large user base than MNOs brought to the table in order to further take advantage of its strong relationship with banks and wide merchant network. Therefore, the cooperation between CUP and China Mobile seems to be a win-to-win strategy for both sides since its formalization in 2011. Unlike their previous cooperation, which was only launched in some pilot cities, this new “Mobile Wallet” product will be promoted throughout the whole country from March 2013.

Based on NFC-SIM technology, this product integrates a financial IC bankcard into the NFC-SIM card so that users can directly swipe their mobile phone on CUP’s POS terminals to complete payments. In addition, as the product is based on the TSM (Trusted Service Management) platform, the two partners connect and integrate mutual systems together so that all transactions, usage data, application developments can be processed and managed by the TSM platform. Users first install the “Mobile Wallet” application in their mobile phone and directly download their financial IC bankcard information into the “Wallet”. After that, users can swipe the mobile phone like a bankcard. This wallet supports many payment environments, such as public transit, shopping mall, restaurants, and online shopping. Thanks to CUP’s strong relationship with banks, so far six commercial banks have joined this “Mobile Wallet” scheme to promote this convenient payment product among their cardholders.

This cooperation between the two giants in China will significantly boost the development of China’s mobile payment industry and IT vendors will benefit a lot in future. It is estimated that the demand on NFC-SIM cards will increase to over 200 million in the next 3 to 5 years. The number of POS terminals that support financial IC cards will also grow rapidly as the widespread use of new IC cards. For software vendors, we expect that innovative payment solutions, value-added products, such as loyalty and couponing plans, and risk control products will be key focus areas.