Royal Bank of Canada (RBC) is testing a mobile payment system that lets users transfer up to $100 per transaction using text messaging but the security measures may actually discourage users, according to one analyst.
The bank says its Mobex Mobile Payment Service is designed for payments between consumers. Any time a customer tries to transfer more than $25, they will get a call asking them to verify the transaction and enter a PIN. Customers transferring less than $25 will still have to enter a password, said Anne Koski, head of RBC Payments Innovation.
“I think the phone call will add a layer of comfort amongst Canadians who test drive this service,” said Michelle Warren, president of MW Research and Consulting. “It’s a good layer to require a PIN even though PINs can be copied.”
RBC will not let users transfer more than $100 in a day or more than $500 in a month, Koski said, adding RBC expects most payments will be less than $20.
“We don’t think it’s going to be very attractive for somebody to try to break into,” she said.
Warren agreed. “For fraud artists if they could figure out a way to get multiple users – they’re not targeting one person or twi people, that’s going to be a very large amount of work for relatively small payoff, especially in the initial stages because I don’t think they’ll have a widespread adoption,” Warren said.
The trial, schedule to end next January, is open to employees of RBC, plus family and friends. RBC said it will announce details of a “wider” trial “at a later date and time.”
RBC said this works with all Canadian carriers, and users do not need an RBC account. They would need to enroll for the service through the RBC Web site and load money into their stored value accounts from their credit cards or bank accounts.
Koski said Mobex Mobile Payment Service has three security measures in place to ensure no one signs up using someone else’s identity. If you want to sign up you must first prove you are who you say you are. You must also prove you are in control of deposit account, by making a “micropayment” and then logging back into an online portal to let RBC know what the micropayments was. RBC also requires you to confirm you own the phone number.
“We send out a text message and you have to go back into portal and put in that secret code to be able to validate that,” Koski said. Mark Tauschek, senior research analyst at London, Ont.-based Info-Tech Research Group, actually tested the system and thinks it may deter users, in the event that RBC rolls it out to the general public.
“Anybody can sign up for it, you don’t have to be an RBC employee or family member or friend, because I don’t know anybody at RBC and it never even asked me that question,” he said. “At the end it says you have to bring two pieces of valid identification to your local RBC branch in order to validate this. If they do that if they actually roll it out, that will be a nuisance.”
For purposes of the trial, there are no fees for the service itself, Koski said.
“I don’t have control over what your cell phone company might be charging you for SMS text messaging, (and) there would be fees potentially with that,” she said. “I don’t have control over fees if you don’t bank with RBC. “
But Warren believes if the service gets rolled out there will probably be a fee per transaction.
“I don’t think this is going to be free,” she said. “The convenience of typing in the number on the phone will be weighed against the service charge.”
The purpose of the trial is not so much to test the technology, but to see if people would want to use it, and if so how they will use it, Koski said.
“We wanted to give our staff the actual functionality … and let them try it out in this form,” she said. “Then we have to understand how they were using it, when they were using it, how frequently they were using it, what was the average amount that was sent back and forth, were people loading from their bank account? Were people loading from their credit cards? How, when , how frequently? What was the average amount?” Once RBC compiles all the data they will “figure out the next steps from there,” she said.
Tauschek said wireless phones have strong potential to double as payment devices.
“Adoption has been quite high particularly in Japan and Korea so I think there is potential to use it more as a payment method for purchasing from merchants, “ he said. “I think they’re probably going to lean more towards using RFID and near-field communications (NFC) embedded into cell phones to do that.”
RBC is using NFC in a mobile credit card trial, dubbed payWave, for Visa customers. Instead of using credit cards, they would have near field communication (NFC) chips embedded in their handsets, which they would wave at payWave checkout readers.
The trial, originally announced at the Mobile Payments Conference in June, has been hampered by lackluster adoption among merchants and handset makers.
“We don’t nave nearly enough terminals with payWave capability yet in stores but we expect that number to go up dramatically over the next couple of months,” Koski said. “That technology is complex and you need a fairly sophisticated mobile device. Getting a hold of and sourcing those devices is taking longer than we had originally anticipated.”
She added RBC will probably be issuing a press release in next two to three months to announce consumer wave of the payWave trial.
MasterCard is also conducting mobile payment trials in the Kitchener-Waterloo area using NFC for its PayPass service.
The Payment Card Industry also conducted a chip and PIN trial last year, announcing positive results in April.
“Mobile payments are finally starting to become a reality,” Tauschek said. “It’s been talked about for along time but given the proliferation of mobile devices in people’s pockets, North Americans soon will see on a widespread basis the ability to use either the phone itself or the functionality within the phone to make payment. I think that’s a good thing, it’s convenient thing, as long as it’s secure. I feel pretty good that it’s pretty secure at this point and the opportunities for fraud will be relatively limited.”
