CURRENT SITUATION AND DEVELOPMENT ...

CURRENT SITUATION AND DEVELOPMENT PERSPECTIVES OF MOBILE PAYMENTS Nenad Tomić1 Abstract: The idea of using mobile phones as a channel to initiate the payment is more than a decade old. During this period a large number of various hardware and software solutions that enable easy access to mobile payments were created. Despite steady growth in the number and value of transactions initiated by mobile phones, this segment still accounts for a fraction of the total payments number. The aim of this paper is to give a review of current situation and prospects of mobile payments market. The first part of the paper is devoted to the comparison of electronic payment channels, including analysis of the specificities of mobile networks as channels. The second part analyzes the factors stimulating the development of mobile payments - widespread usage of smart phones, NFC technology, QR codes and software solutions of digital wallet. The analysis in the final part of the paper will include the Republic of Serbia, along with the analysis of trends in the field of mobile payments in the domestic market. Key words: mobile payments, smart phones, NFC technology, digital wallet

Preface The emergence of mobile phones has led to a revolution in the field of information and communication technologies (ICT). This technological solution created a prerequisite for a wider range of consumers to gain access to the mobile communication channel. Devices that made mobile communication possible - cell phones – have shortly become affordable, and they have quickly found mass use, primarily with business users, and later in daily communication of wider range of consumers. Mobile telephony is now a highly profitable industry, which on the one hand includes manufacturing of mobile devices, and on the other, providing operator services for the smooth functioning of mobile phones. In recent years, with the advent of smart phones, mobile market gained a new segment of mobile operating systems and applications related to it, which brought high profits and market power to the early innovators in this area, similar to that possessed by the mobile phone manufacturers and operators. The original purpose of mobile phone was making phone calls and sending text messages, but their wider potential was observed. This led to the idea that mobile phones could be used as a channel of access to electronic payments. Advantages and disadvantages of mobile as a channel of electronic payments, and comparison with other channels will be discussed in the first part of the paper. The second part of the paper analyzes the factors that 1

Faculty of Economics University of Kragujevac, e-mail: [email protected]

CURRENT SITUATION AND DEVELOPMENT PERSPECTIVES OF MOBILE PAYMENTS are changing the potential of mobile as a channel of payments - in a short period of time there have been a number of new technological solutions that facilitate access to electronic payments, and improve their security. Usability and benefits of these solutions are critically analyzed. The last part of the paper will analyze the presence of mobile payments in the Republic of Serbia, through the analysis of current trends and key issues in this market.

1. Characteristics and development of mobile e-payment channels In general, payment is a transfer of monetary value between the two parties in a transaction, followed by the delivery of a commodity or service. Electronic payment also retains the concept of monetary value exchange, but this process is partially or completely executed through the use of electronic media. In practice, this means that at least one of the elements of payment has migrated to electronic media, and that is not performed in paper form. The only payment system that works entirely without the use of electronic devices is cash payment system. All forms of non-cash payments, to a certain degree use electronic technology to initiate payment, transfer payment instructions or in the process of settlement, so that in the domain of non-cash payments one can discuss semi-electronic payments, or fully electronic payments. Example of a semi-electronic payment is the process of paying the bills for various types of services, which is executed in a bank or in a post office, and which is initiated in paper form (by physically transferring paper bills to post office and delivering cash and bills to initiate payment), but the further transfer of payment instructions as well as the settlement are performed electronically, through a computer system which the computer in the post office or in the bank is connected to. An example of an electronic payment in the same case would be the use of electronic banking services (offered by most banks in Serbia) by which the user can initiate a payment from his home, using a computer connected to the Internet. In this case the initiation of the transaction, the transfer of payment instructions and the settlement take place electronically, without the participation of cash or physical transfer of paper-based instruments. In the last three decades, there have been significant to develop different concepts of electronic payments, which have promised the benefits of higher execution speed and lower cost for the end user. The argument for the increase in speed of execution is the ability of users to initiate transactions from home, without the necessity to physically go to the bank and wait in line, as well as without need to wait for physical delivery of bills or invoices. The lower cost for end users is possible thanks to the absence of fees for the processing of transactions, which are either not paid at all, or they are paid at a much lower price depending on the system, and also thanks to the absence of obligation to pay in cash. For this purpose, different operational solutions have been developed, which differ not only related to the service provider, but primarily in whether the bank account which user already owns is sufficient for their use, or it is necessary to open a different account, which is usually a virtual account. Another very important distinction is the purpose of the electronic payment system, or what kind of payments can be made using system. Thus, for 456

GLOBALIZATION AND REGIONALIZATION example, different electronic money solutions do not provide a general acceptability, but are specialized for payments of software products - for example in microtransactions on social networks, or in video games. Internet payment systems that use clients’ existing accounts as their basis, such as PayPal, are specialized for P2P (peer-to-peer) payments. They are used to execute most of the transactions on auction sites, in which both a person and a small business can appear as a vendor. At the beginning of the XXI century, this market segment assumed the primacy over electronic money, due to lower technical requirements and a higher confidence rating. First of all, these systems were based on the clients’ existing accounts, so customers did not have to open additional accounts and make transfer of funds. Next, these systems perform transactions in which the money as a legal tender is used, while the electronic money systems offer limited acceptability. An additional advantage lies in the fact that for such systems it was not necessary to lobby for acceptance by the businesses, because it was an electronic transfer of legal tender. Viral spreading is also possible as the user that receives payment via PayPal does not have to have an open account with this service - a partner would send him money using his e-mail to address it, and user can register later at PayPal using the same e-mail, while the money would wait for him. Finally, there are also the electronic banking services offered by the bank in which the customer has an account, which are suitable for payment, but not for one-time retail purchase. Vuksanovic, 2009, defines electronic payments channel as a point of access to electronic payment systems, through which payer contacts the system for the first time and initiates execution of payment transactions. Payment channels can be divided into contact channels and contactless channels, where the criterion for this division is whether the payment instrument has physical contact with the channel or not. Examples of contact channels are POS terminals, which are located in virtually every mall, gas station or supermarket. Thanks to the wide distribution of these terminals, the use of contact channels is more widespread than the use of contactless ones. The contactless channels include primarily the Internet, mobile telephony, and the sensor-based technologies for short distance communication, such as Bluetooth and NFC technology. The use of contactless channels is recording significantly higher growth rates from year to year, but the number of transactions and executed amounts are still far behind contact channels. In the group of contactless terminals, the Internet is the most represented one, but with the recent development of smart phones clear boundaries between the Internet and mobile telephony as a channel of access are disappearing. The term mobile payments apply to electronic payments in which mobile phone is used as an initiating channel. This means that with the help of a mobile phone, a device that has access to mobile telephony, one can initiate or fully complete the payment process. Different stages of development of mobile telephony and mobile devices are offering a variety of payment options.

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2.

Specifics of the mobile payments market formation

In the beginning, desktop and laptop computers were used to access the Internet, but with the development of smart phones and tablet computers at the end of the first decade of the XXI century, the last two types of devices began to take over some of the functions of computer. Among the first ones is the access the Internet, which had already been possible via mobile phones, but the development of the iOS and Android operating system for smart phones has augmented the possibility of applicative use of the Internet. The advantage of mobile phones and tablet computers in using Internet services lays in smaller size and greater mobility of devices, along with the ability to always be with the user. Users are prone to become bound to their mobile phones andto personalize them, and the advantage of using mobile phones for purpose of electronic commerce and electronic payments lays in these traits. Smart phones’ operating systems are suitable for the development of various specialized applications, which in the payment field can be used for storage of all payment data in one place, storage of electronic coupons and vouchers, or scanning bar codes in combination with the phone camera.

2.1. Development factors of mobile payment market As mobile payments (m-payments) represents narrower concept of electronic payments, so does the mobile commerce (m-commerce) represent a narrower concept in relation to electronic commerce. While desktop and laptop computers can be used for planned transactions over the Internet (for example, paying the utility bills, purchasing plane tickets and paying for an accommodation for the trip), mobile phones and tablet computers may be used in retail payments, or for purchasing some products or services on the move when the user is outside the home or working place (Ascher, 2013). Using your computer is suitable for searching auction websites and for online sales, thanks to a larger display size (monitor) and an easier navigation through the user application, while mobile devices can use the new technological solutions, such as NFC technology, digital wallet, QR codes, GPS locators and others, which are designed to take the full benefit of the key advantages of smart phones. Federal Reserves’ research showed that in 2012 87% of the United States population owned a mobile phone, and that 50% of the population owned a smart phone (Garrett et al, 2013). The share of the population owning a mobile phone is higher than the share of the population owning a bank account. In Serbia, the percentage of the population owning mobile phone is even higher, and according to RATEL for 2012 it is 126.19%, or, in other words, there are slightly more than 126 active mobile telephone numbers on every 100 people. Serbia is not an exception, because other less developed European countries - such as Montenegro and Albania – also have a higher share of the population using a mobile phone then the USA and the EU average. By the overall number of smart phones, however, Serbia is lagging behind the developed countries, because at the end of 2012 smart mobile 458

GLOBALIZATION AND REGIONALIZATION phones accounted for only 15% of all mobile phones (see Table 1 for the overview of these values worldwide) Table 1: The number of mobile phone and smart phone users, the data for 2012 and 2013, and forecasts for the period 2014-2017 (absolute numbers are in billions) Category Mobile phones World population % Annual growth Smart phones World population % Annual growth Mobile Internet access Share of total Internet access

2012 4.08 58.2% 8.5% 1.13 16% 68.4% 1.58 66.8%

2013 4.33 61.1% 6.2% 1.43 20.2% 27.1% 1.91 73.4%

2014 4.55 63.5% 5.1% 1.75 24.4% 22.5% 2.23 79.1%

2015 4.77 65.8% 4.7% 2.03 28% 15.9% 2.5 83.6%

2016 4.95 67.7% 3.9% 2.28 31.2% 12.3% 2.75 87.3%

2017 5.13 69.4% 3.6% 2.5 33.8% 9.7% 2.97 90.1%

Source: eMarketer In his research in October 2013(see Table 2), Gartner presented the fact that the total value of sold computer equipment is higher in 2013 than in 2012, while in 2014 the expected volume of sales is higher than in 2013, but this increase is accompanied by serious changes in product structure. While the sales volume of smart phones and tablets is recording a steady growth, the sales volume of desktops and laptops is decreasing (Vuksanovic and Tomic, 2014). That is why the latest trends in the development of electronic payment systems, both online and offline, are moving towards the development of payment applications for tablets and mobile phones, which are the drivers of the global computer market. The initial mobile payments services were based on SMS messages and sending utility bills to a phone number in order to be paid via text message. The best known such service is Text Pay Me, created in 2005. Over the last few years, firstly smart mobile phones have been developed first, and on their basis new technological solutions such as NFC technology, digital wallets and QR codes, have been applied, which accelerated the development of the mobile payments market. Table 2: Sales volume od different computer devices for 2012 and 2013, with forecast for 2014 (all volumes are in thousands) Type of device/Year Desktops and notebooks Ultrabook computers Tablets Mobile phones Total

2012 341 273 9 787 120 203 1 746 177 2 217 440

2013 303 100 18 598 184 431 1 810 304 2 316 433

2014 281 586 39 896 263 229 1 905 030 2 489 723

Izvor: Gartner, 2013. 459

CURRENT SITUATION AND DEVELOPMENT PERSPECTIVES OF MOBILE PAYMENTS NFC (Near Field Communication) technology is a short range wireless technology that is used to transfer data between two devices equipped with appropriate sensors for sending and receiving signals. Vasković, 2012 states that for the communication between two NFC devices, it is necessary to have at least one active device (equipped with NFC reader signal, which can both transmit and receive signal) and a passive device (can receive signal, but cannot emit it), and there is also a possibility that both devices are active. The technology itself was developed independently from the development of mobile phones, but it found application in these devices. The main reason for this, as it has already been noted, is that NFC is short-range communication. This means that the two devices must be at a distance of 10 centimeters or less in order to connect and share information. Mobile devices can easily be brought to such a short distance and separated again after use. This raises the question, why would anyone use communication technology that require users to get closer to each other, when there is Bluetooth, which enables the efficient exchange of data at the distance greater than 10 meters? First of all, with NFC pairing is automated, and all that is required for the connection is a contact (distance less than 10 cm) between the two devices. There is no need for user name recognition, connection requests and receiving data permission. Another advantage is safety - unlike Bluetooth, NFC connection is practically impossible to eavesdrop, and perform data theft due to short-range. NFC technology was first applied for exchanging multimedia data between users. Then the credit card organizations develop their operational version of the technology and incorporate it into the next generation of payment cards. Visa created payWave card class, MasterCard created PayPass card class, and American Express created ExpressPay card class, where all three classes offer identical function of paying without inserting the card into the merchant’s POS terminal. These cards are popularly referred to as tap-and-go because they allow payment on terminals equipped with NFC receiver without inserting the card into the reader, and without entering a PIN or signing the bill. The card is simply waved in front of POS terminal which then reads the signal sent from the card. In order to ensure the safety of the user, these cards cannot be used to pay large sums (in each country there is a defined maximum payment sum for each card brand respectively), and are focused on small value payments. The innovations brought by the development of NFC payment cards were applied on smart phones, which become capable of performing payment transactions at retail. The key factor in addition to NFC technology has been the development of payment applications known as digital wallets. A digital wallet is a software which contains a database that can store information about the owner’s preferred payment methods - numbers of debit and credit cards, PIN number for each card, expiration date, as well as personal information such as the address to which the card is registered, the address for delivery if it is different from user’s personal addresses, and other. Kemp, 2013, states that there are different models of digital wallets, which differ according to what type of data they can store and the possibility of their use. Mobile digital wallets are installed in the form of application for smart phones, and are specialized for paying in retail or in transport in combination with NFC reader. Online digital wallets are stored on the server and are used for purchases via the Internet, and a device used for searching is a smart phone instead of a computer. They 460

GLOBALIZATION AND REGIONALIZATION are used as a payment method instead of credit cards, to avoid direct entry of cards’ numbers on the seller’s website. The digital wallet is such software, which makes the stored data available on request, and virtually automates a process that user would otherwise perform manually choosing the appropriate card from his wallet, inserting the card into the POS terminal and typing the PIN number. In combination with the NFC technology, the digital wallet enables a faster mobile phone payment, compared to the classic card payments. Compared to tapand-go cards, digital wallet has an advantage of providing authentication, because it is possible to store information about PIN and user data, so that there is no upper limit for the amount of the transaction. One can use mobile phone equipped with NFC reader and digital wallet for payment by bringing the mobile phone on short distance to the terminal (or simply tapping phone to the terminal). In practice, another mobile phone - retailer’s phone which also has an NFC reader and a digital wallet associated with the account to which the funds are paid may be used as a terminal for this type of transaction (Wei-Han Tan, et al, 2014). QR (quick response) code is an innovation that indirectly affects the growth of the m-payments volume, because it was introduced as an innovative solution to m-commerce. It is a two-dimensional bar-code, designed so that it can be read by smart phones. On a white background, in a square shape, black rectangular objects are arranged. In this short way, text, URL or other data are written in the encrypted form. The advantage of QR code is that it enables content that is coded to be quickly and easily read (Shin, Jung and Chang, 2012). The original purpose of QR codes was to help tracking parts in automobile production. Today their application is much wider, and the significant part of it is related to the use on smart phones. QR codes are an important part of mass marketing, because they allow customers to come in contact with the product anytime and anywhere. Thus, through QR codes on advertising posters one can get detailed information about the product or the store being advertised. Scanning the code will redirect user to a specially designed web page with the necessary information. It is required for user to possess a smart phone which scans the code and read its contents. The ideal design from a marketing point of view is the code that leads to a page with additional information about the product, but also offers the option of paying, i.e. buying the product. In this case mobile phone is used to complete trading cycle - the noticed product is analyzed, bought and paid. In the case of a software product (for example QR code on posters that enables purchase of music album of an artist), delivery can also be done electronically. Newspapers and magazines, product packaging and advertising brochures today often contain such codes, which in addition to purchasing product or acquiring information can offer achieving discounts, group buying, or getting a promotional period of use of the service. Application of QR codes is not limited, and they can be used in retail, where theoretically every product can have its own code, then they can also be used in the entertainment industry, journalism, and even at sport events. In the United States in certain sports stadiums each seat has its own QR code whose scanning creates a link with the fast

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CURRENT SITUATION AND DEVELOPMENT PERSPECTIVES OF MOBILE PAYMENTS food or the fan shop, where it is possible to order food and drinks or fan equipment which shall be promptly delivered to the buyer. Users who want to use the QR code must have a smart phone equipped with a camera, which will scan the code, and the application that will decrypt it. Fortunately, these two elements are now integral parts of every new smart phone. On the other hand, in order to use QR code for the purchase instead of only in promotional purposes, the phone must be equipped with some sort of digital wallet, which will allow payment. For those who want to add QR codes to posters, there isa number of free Internet applications that enable automatic code generation based on the entered content. Examples of m-payments at retail that do not require NFC technology are Swedish iZettle and PayPal mobile application. For the payment application iZettle seller is not required to have POS terminal, but only smart phone, as well as a small addition that connects to the phone and serves as a card reader (Trenholm, 2011). In this case, seller’s smart phone changes the POS. Seller uses iZettle applications on his smart phone to create a shopping basket for the customer, who then puts the card into the reader. The customer types PIN on seller’s smart phone, and for the cards that use signature for authentication instead of a PIN, signing is done on screen of a smart phone. The bill can be printed (if seller has a printer in the shop) or sent via e-mail to customer in electronic form. This application works successfully in the Scandinavian countries, with less success in several EU countries and Mexico. In the USA, it is possible to pay in retail with PayPal account via mobile applications. Customer needs to type phone number and PIN in the terminal to pay. There is no need for the card, because PayPal account is already synchronized with the customer’s credit card, and also there is no need for the physical presence of the phone either. The disadvantage is that such payments are not possible in most retail stores, because they require a new type of POS terminals. In the United States this method has been supported from the beginning by Home Depot, but more retail stores have been included lately (Tomic, 2014).

2.2. The factors that limit the growth of mobile payments volume Analysts were predicting big growth in volume of m-payments over the last decade. Even though there was a significant increase in the volume, higher growth rate was observed at low initial basis. As the m-payments are a new category of payment, any increase in the volume of one year compared to the previous led to an extremely high growth rate. M-payments, for the time being, did not meet the expectations of the professionals and wider public, and it is still not a dominant category of payment. Garret et al, 2013, reported that in 2012 only 15% of the population of the United States used a mobile phone to make the payment at least once during the year, while at the same time electronic banking was used by 35% of the population. Ozcan and Santos, 2014, give an assumption that m-payments will never become the dominant form of payment, justifying this assumption by the structure of the mobile payments market. In contrast to earlier assumptions related to electronic payment systems, 462

GLOBALIZATION AND REGIONALIZATION as well as the concept of electronic money, that these will not work due to non-acceptance of users, the authors make the argument that the m-payments market is overloaded with the entry of a large number of major companies from different markets. For the functioning of m-payments, synergy effect of dominant companies accessing from other markets is required. Thus, the stakeholders in m-payment market are mobile operators, financial institutions, mobile phone manufacturers, producers of additional devices necessary for the execution of m-payment (this primarily relates to manufacturers of NFC readers and new POS terminals), software companies that develop operating systems and smart phones payment applications, and so on. The authors believe that the problem is in the division of responsibility and influence in this market, because all interested companies are in fact the dominant companies in their own markets. For one company that is dominant in its market, it is difficult to accept that its role in the new market could be any less important. The problem in communication between these companies is not just who will be "in charge", but a clash of visions of the future market development. A typical example that confirms the contention of the author is the development of a digital wallet named Google Wallet. While Google is one of the most powerful software and Internet companies in the world, its digital wallet is supported by only one of the four leading mobile phone operator in the United States - Sprint - and in retail it is possible to pay only at MasterCard's PayPass terminals (although one could use Visa and American Express cards to pay with the wallet). Also, the installation of the wallet is only possible on a small number of smart phones, mostly on Samsung devices. This example demonstrates the complexity of the market construction in terms of rigid negotiation positions of participants. Another argument skeptics emphasize in terms of growth rate of the m-payments is that technological innovation are carried out in the wrong direction. An example for this argument is the NFC technology, which was predicted to have revolutionary impact on growth of m-payments volume, but the practice has shown that its contribution was limited. Except in the Asia-Pacific region, i.e. in several East Asian countries, where the payments initiated through NFC terminals have been noticeably high, this technology has not significantly contributed to the growth of NFC payments anywhere, not even in the United States. This topic has been a frequent subject of discussion in scientific papers, but also on the technological web portals. General conclusions are that NFC technology does not solve users’ key problems related to payments, was first reported by King, 2012, and later summarized by Talbot, 2014. The authors believe that users will not see the difference between paying with debit cards at POS terminals and paying by mobile phone at the same terminal equipped with NFC reader. Rosenblum, 2013, explains that as long as people need to stop at the cash register, and take out the phone to reach the POS terminal in order to pay, there is no particular advantage in payment process for them, because there is no big difference whether they take the phone or the card out from the bag. On the other hand, migration of payments from one card to a mobile phone, which in the form of a digital wallet keeps records of all user’s payment options, can lead to a serious threat to the security of financial data. Another problem is that sellers also are not encouraged to update their POS terminals and incorporate NFC readers, since this requires investment of 463

CURRENT SITUATION AND DEVELOPMENT PERSPECTIVES OF MOBILE PAYMENTS significant financial resources to improve the payment process, which promises no increase in sales. On the contrary, the volume of traffic can remain exactly the same, with a slight migration of payments from credit cards to m-payment, which would leave the fixed costs of installing NFC readers as a pure loss for the company.

3. Operative solutions of mobile payments in Serbia Large m-payments market potential was recognized by the companies in the Republic of Serbia. It should be emphasized that Serbia has traditionally been much more under economic influence of Europe in relation to the economic influence of North America and the Far East, so the dominant influence of Europe in the field of mobile payments proved to be no exception. The European market for mobile services is fragmented and does not operate in accordance with the EU principle of common market. Only in late 2015 will roaming service be abolished on the territory of Member States, which will create the conditions for a higher concentration of the mobile market, but also a space for the development of new types of services, which in comparison to North America and the Far East were not enough invested in (except in Scandinavian countries). Two out of three mobile operators in Serbia are European companies, while the third one is the national operator – Telekom - owned by the state, so the trend of European business in the field of m-payment was transferred to Serbia. M-payments market in Serbia is dominated by payment services offered to clients by mobile operators, which connect a client’s current account with their postpaid number. For now, the two operators offering payment services are domestic Telekom and Norwegian Telenor. Telekom offers an SMS payment service, i.e. payment of utility bills, payment of insurance premiums, payment of postpaid mobile phone bill, as well as paying bills for fixed telephony and BOX package (shared subscription for mobile phone, fixed phone, and IP television). For this service one need to obtain permission from the bank where he opened current account, and to request mPIN at the Telekom office, as a security PIN for payments via mobile phones. The mPIN itself serves as confirmation of payment transactions. As it can be seen, this service, offered by Telekom since April 2010, is derived from the world-famous Text Pay Me payments via SMS service, which has been used since 2005 around the world. The probable reason for the lack of interest in Telekom to develop an application modeled on digital wallets that are used in developed countries is the probable mild response of sellers to this service, who would hardly be willing to improve their billing infrastructure, and potentially low acceptance of end-users in Serbia, where even the credit card use is far below European average (see website for Telekom SMS payments). The payment system "PlatiMO" was developed for Telenor by Halcom, which creates and designs payment systems for banks and clearing houses. This payment service available since 2011 for customers with postpaid contract represents the first attempt of Telenor to engage in m-payments market in Serbia by developing advanced applications that are more reminiscent of a digital wallet than the SMS payment. To use this service, 464

GLOBALIZATION AND REGIONALIZATION user of postpaid number in Telenor should first ask the operator to replace SIM card with sSIM card, which carries sPIN and sPUK codes for activation and has a digital certificate Similar to the principle used in the Telekom payment solution, the sPIN will be used to confirm transactions. In addition, the user must obtain permission from the bank where he opened current account to connect it with a mobile phone number, whereby user can connect up to three different accounts or credit card numbers. The first banks to support this payment service were Komercijalna Banka, Raiffeisen Bank, Erste Bank and Credit Agricole. The user will notice a new application installed on their mobile phone, which will be activated with the use of sPIN. Application collects bills that can be viewed and paid by inputting sPIN as a password. For every confirmed transaction a notification is coming out in the form of SMS message (see Halcom website). Merchants who want to become part of this payment system must be registered with the banks mentioned above to enable billing via mobile phone. By registering for this service, entities have the option to "demand payment" otherwise inaccessible to physical individuals, which can directly transmit the purchase for payment by using the customer’s phone number. Using this payment system is suitable for remote trade or ordering goods from catalogs, shopping in online store, or purchasing via phone. In addition to buying, it is possible to send money from one PlatiMO account to another. In late 2013, Telenor bought a branch of KBC Bank in Serbia. All customers moved to Societe Generale, while Telenor used the license for the establishment of their own Telenorbank. The idea was that through this institution Telenor take advantage of participation in two important markets, and to provide users with advanced mobile-banking services. The Bank currently operates only in New Belgrade, but is expected to expand business network to the rest of Serbia. Telenor has had the experience since 2012 as it came into possession of a bank in Pakistan in the same way. Mobile banking in domestic banks serves only as a substitute for electronic banking services, and offers identical features the electronic banking does for computer access via the Internet.

Conclusion M-payments market has not so far fulfilled the expectations of experts, nor the forecasts from the beginning of XXI century, that mobile phones will replace not only cash, but also the card. The amounts of m-payments in developed countries are growing from year to year; however, this increase is far below the expected level. It can be concluded that the Internet and mobile phones as payment channels continue to lag far behind the POS terminal as the most widely used channel, or credit cards as the most widely used payment instrument. Although all mentioned above reflects the real state of things, the whole story can be seen from another angle as well. The m-payments are just over a decade old, and in a very short period of time they succeeded to establish themselves as a relevant factor in the development of future payment system. Corporations in finance area, mobile industry, and 465

CURRENT SITUATION AND DEVELOPMENT PERSPECTIVES OF MOBILE PAYMENTS software and Internet business are seriously considering this category of payments for many years, and they are investing considerable resources into the development of new technology payments based on mobile phones. Given that paper money needed many centuries to become the official currency, and to be more widely accepted by retailers and customers, it can be concluded that m-payments require more patience. The future will certainly bring a particular m-payment system that will be acceptable to both customers and sellers. M-payments have a good foundation for the future, because the number of active users of mobile telephony in the world is growing every year. Number of smart phones is also growing. These trends are an excellent prerequisite for the further development of the m-payment, because the greater number of owners of mobile phones, the greater is the potential for the use of payment applications, and the greater will be the desire of traders to modernize payment terminals and thus to attract customers. As the problem of paying utility bills and parking via mobile phones was successfully solved a decade ago, new problems are emerging today seeking a payment solution. Users want to be able to pay via mobile phone everywhere, since they always carry them. A major challenge for designers of payment applications will certainly be retail payment, and how to make the customers and sellers accept a solution (or, more likely, a group of related solutions) at the same time. The future of mobile payments lies in improvement of digital wallet technology, increase of their safety level and reduction of their basic requirements, to make them accessible to a wider range of consumers. PayPal is a great example of the direction in which the development of m-payments should be moving. Regarding Serbia, the problem is not only in attitude of customers and retailers towards new solutions, but in a very low standard of living and general purchasing power. On the other hand, mobile phones are very widespread devices in Serbia, with a stable share of 1.2 - 1.3 units per capita. A potential payment solution that is not expensive for the users, which also does not require high-cost introduction could be very popular, even as popular as credit cards have never been. References: Ascher, B. (2013). Why the financial technology revolution is just getting started, Forbes, November 19th, online available at: (2 September 2014) Kemp, R. (2013). Mobile payments: Current and emerging regulatory and contracting issues, Computer Law and Security Review, Vol. 29, 175-179 Garrett, J.L. et al. (2014). Adoption of mobile payment technology by consumers, Family and Consumer Science Research Journal, Vol. 42, No. 2, 358-368 King, R. (2012). PayPal: NFC will fail to gain mass adoption in 2013, ZDNet, December 17th, online available at: (1 September 2014) Ozcan, P. and Santos, F.M. (2014). The market that never was: Turg wars and failed alliances in mobile payments, Strategic management journal, accepted paper

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GLOBALIZATION AND REGIONALIZATION RATEL (2013). Pregled tržišta telekomunikacija u Republici Srbiji u 2012. godini, Republička agencija za elektronske komunikacije (RATEL), Beograd Rosenblum, P. (2013). PayPal will win the mobile payments Race, Forbes, November 9th, online available at: (1 September 2014) Shin, D.H. Jung, J. and Chang, B.H. (2012). The psychology behind QR codes: User experience perspective, Computers in Human Behavior, Vol. 28, 1417-1426 Talbot, M. (2014). The six obstacles to NFC mobile payments – and why they suddenly don’t matter, Blogs Blackberry, online available at: (1 September 2014) Tomić, N. (2014) Karakteristike i funkcionisanje PayPal sistema, Megatrend Revija, Vol. 11, No. 2, 255-269 Trenholm, R. (2011) iZettle iPhone credit card reader pays your bills with your phone, CNET, May 25th, online available at: (2 September 2014) Vasković, J. (2012). Primena NFC tehnologije u sistemima plaćanja, Bankarstvo, Vol. 41, No. 4, 86103 Vuksanović, E. (2009). Elektronski sistemi plaćanja, Ekonomski fakultet Univerziteta u Kragujevcu Vuksanović, E. and Tomić, N. (2014). Alternativni mehanizmi plaćanja u elektronskoj trgovini, Uticaj Interneta na poslovanje u Srbiji i svetu, Singidunum, Beograd, 153-159 Wei-Han Tan, G., Ooi, K.B., Chong, S.C., Hew, T.S. (2014). NFC mobile credit card: The next frontier of mobile payment?, Telematics and Informatics, Vol. 31, 292-307 eMarketer http://www.emarketer.com/Article/Smartphone-Users-Worldwide-Will-Total-175Billion-2014/1010536 (28 August.2014 ) Gartner - http://www.gartner.com/newsroom/id/2610015 (28 August.2014) Halcom - http://www.halcom.rs/index.php?section=111 (30 August.2014) Mts Telekom Srbija - http://www.mts.telekom.rs/index.php/sms-placanje-racuna.html (30 August.2014)

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