Bank of America Tests Mobile Payments Pilot Program Based on Chip Transactions
Bank of America is a pioneer mobile payments and mobile banking arenas. BofA in May 2007 launched its mobile-banking platform and today has 5 million mobile WAP/browser-based and downloadable-banking-application subscribers. In May, the bank launched its SMS/text banking service -- a service that is open to all BofA customers -- and has more than 500,000 users. The $2.36 trillion institution is taking it a step further, moving payments to the mobile channel through a pilot it is spearheading in the New York metropolitan area.

"What is it that customers perceive from a convenience perspective, with respect to contactless payments?" asks Michael Upton, an e-channels and customer solutions executive for BofA. "We have seen, as everyone has, the growing adoption of smart-phone devices by our consumers and by the populous in the United States, and we feel that as more and more consumers continue to embrace smart phones, as data plans and packages continue to come down in price over time, this is a device and a paradigm that will be well received by the consumer."

In this interview, Upton discusses:

  • How BofA expects to use the pilot to gather customer preferences and usability concerns;
  • How BofA will test security measures, such as two-factor authentication, via the mobile channel;
  • And what the bank expects to learn about consumer migration to contactless payments.

Michael Upton is the e-channels and customer solutions executive responsible for e-platforms, such as online banking, mobile banking, e-communication and personal financial management for Bank of America, which is based in Charlotte, NC. Upton joined BofA in 2006 as the e-payments product executive and was promoted to the e-platforms role in 2008. Prior to joining BofA, Upton was chief operating officer at Harbor Payments in Atlanta. While there, Upton was responsible for all corporate operations, including technical data center operations; product development and support services; online payment products; eLockBox; corporate cash management and disbursements; and insurance payments. Prior to his time at Harbor, Upton was the general manager of online banking and payments at Fidelity National, providing products and services to more than 2,000 financial institution customers.

Upton graduated from Oregon State University, where he majored in communication and political science law.

Bank of America: Mobile Payments

TRACY KITTEN: Mobile payments and mobile banking are no doubt grabbing headline sand quickly changing the financial landscape, not just for consumers but also for banks. What opportunities is mobile opening in the area of payments and how are U.S. consumers expected to embrace these new payments options?

Today we hear from Michael Upton, an e-channels and customer solutions executive for Bank of America.

MICHAEL UPTON: With respect to the banks direction in the area, we are very focused on understanding our customers' preferences around usability as it pertains to mobile payments and mobile banking. To that end, we are engaged in a number of activities to really understand our customers and their preferences and also to show our customers that this is an area that we will continue to invest in -- an area that we believe will continue to be important to us as well as to their daily lives.

Mobile Chip Payments

KITTEN: In the payments arena, BofA has announced plans to begin piloting mobile chip payments. Could you give us a little background, such as how the chips will be embedded into mobile devices?

UPTON: Specifically, we are conducting a market trial in the New York metropolitan area to very much focus on our customers' experience when managing and staying connected with their finances through their mobile devices. For the pilot, we are going to be using an SD card and as well as a mobile application. So pilot participants will receive an application -- a mobile wallet -- that will be pushed to them, and we will also be providing them with an SD card that they can insert into their handheld devices. Based on the application and the SD card, they will then be able to select from a number of payment types as they are conducting transactions out in the real world at the physical points of sale.

Mobile Tap and Go

KITTEN: The payment option BofA proposes is ultimately a tap in go or contactless payment. Why does BofA think contactless mobile payments will succeed where other forms of RFID or contactless card payments have previously failed, at least in the U.S.?

UPTON: Well that is a great question and, in fact, part of what we are looking to learn and to understand, through our trial in New York and through other work, is, "What is it that customers perceive from a convenience perspective, with respect to contactless payments?" Our particular trial at this point is a little less focused on, say, the given technology and a lot more focused on the customer experience, as we feel that's what is going to be one of the keys to driving the adoption. We have seen, as everyone has, the growing adoption of smart-phone devices by our consumers and by the populous in the United States, and we feel that as more and more consumers continue to embrace smart phones, as data plans and packages continue to come down in price over time, this is a device and a paradigm that will be well received by the consumer.

We also believe that with near-field-communications types of transactions, since the technology has actually been out for quite some time, the maturity of a lot of the operating systems and of the app models will help fuel growth. We also believe that as we test and understand our customers and their use-cases and the usability of managing multiple accounts will really help us better understand how our customers will use these types of things for different types of interaction.

Mobile Multicard Wallet

KITTEN: Will this mobile payment be a multicard wallet or only attached to one card, such as a debit or credit card? And, if debit is allowed, can the consumer make the choice between PIN and signature debit when he or she conducts a transaction?

UPTON: For our particular trial at this point, we know that our customers carry multiple cards in their physical wallets, so we will be supporting multiple cards in the digital wallet. The customers will have the ability to make choices between debit cards and credit cards when they are selecting how it is they want to make a particular payment at the point of sale.

Mobile Contactless Payments

KITTEN: And will they be able to have a PIN-based option or a signature-based option?

UPTON: At this point, we are primarily testing the contactless element; so for the purpose of this trial, we are not putting the PIN or the signature in scope.

KITTEN: And how will these payments be facilitated? For instance, will merchants have to sign directly with Bank of America?

UPTON: This trial will actually leverage the preexisting infrastructure that is out there with the major network partners.

Mobile Payments: Merchants are Ready

KITTEN: Are there merchants out there interested in investing in contactless POS devices for chip-based, tap-and-go mobile payments?

UPTON: A number of merchants in some concentrated segments, such as fast food, convenience stores like Walgreens and CVS, and gas stations, already have contactless readers in place and this trial will work on all of those types of channels.

Mobile Payments and Security

KITTEN: One thing that we have talked quite a bit about in the mobile space is the whole notion of security concerns surrounding this emerging channel. What are some of the security concerns that you have identified and how are you addressing them?

UPTON: Certainly security is top of mind for the bank. We have invested a tremendous amount of dollars and manpower in ensuring that our customers' information is secure. We are fortunate enough to have the site-key solution, which has been recognized as one of the top consumer security solutions. In continuing to take advantage of that, a big part of our test will be how we secure the wallet and how customers interact with that particular security. The other premise is that the mobile device, even more so than a traditional credit card, is always with the consumer -- the consumer is more conscious and more aware of that particular device, when it comes to whether they have it or do not have it with them. So we think there are multiple layers of security that come into play here, and really that is a lot of what we are trying to learn through these types of tests. We want to know what the consumer experience is with security, as well as what their perceptions are, their comfort and their trust in the security.

Mobile: Legislation and Guidance

KITTEN: Given the current legislative environment, with more government oversight on the financial industry, what kind of compliance or regulatory concerns could possibly face mobile payments, and are you concerned about any?

UPTON: Well, regulation is just a natural part of the financial-services industry. We have quite a bit of work that takes place in that area, in terms of understanding legislation that may have passed recently and in influencing regulation, to ensure that there is a level playing field as it pertains to payments. The financial-services providers are very familiar with it; but there are some folks that are looking to get into the space that may not be quite as familiar with security concerns. So we want to make sure that we comply with regulations, but that we also help ensure that the regulations that are contemplated for the future take our voice into account, as it pertains to mobile and to the payments space.

Mobile Payments Pilot

KITTEN: Can you tell us how long you plan to pilot this program, and do you have any idea about the number of users?

UPTON: Our goal with this particular trial is to ensure that we gain statistical significance. We want to make sure that we have enough participation that we are able to get statistically valid results; so in terms of the number of people and the duration, there is a little flexibility built into the pilot, purposely, so that we are able to capture the learning that we need to capture, but also make sure that we have enough scale and volume that it represents relevant feedback for us.

Mobile Payments: The Next Big Move?

KITTEN: And do you expect this to be the next big move in payments?

UPTON: Relative to the next big move in payments, I don't know that I would look at it that way. I think what we are seeing is, as consumers continue to adopt mobile devices and as the mobile ecosystem and the players in it continue to mature at a rapid pace, our learning and understanding of consumer preferences -- how they want to interact with those devices and how financial services and payments fit into what consumers expect from us -- is going to help us determine whether it is the next big thing, or whether it is a natural extension and/or evolution of some of the leading services that we provide to people today.

Mobile Payments in The U.S. and Abroad

KITTEN: Over the next 12 months, where do you expect the U.S. market and the world to see and feel the greatest changes in mobile payments and mobile banking?

UPTON: Over the next 12 months, we believe that we will continue to see strong adoption-growth within the United States, particularly of mobile devices with data plans. Where smart phones make up a minority of the phones available today, the price points for data packages and coming down and we believe, strongly, that we will continue to see growth in smart-phone usage. We believe very much that mobility and mobile devices are in favor with the U.S. consumer and will continue to be so.

Relative to the world, they are already a little bit ahead of the United States, relative to the adoption of these devices, as well as the adoption of some of the contactless payment paradigms. There are certain things you can look at around the globe that help you, but there are other things that are very different. When you are looking at the European market, the Asian market or global markets, it's not just consumer preferences, but also about differences in the banking infrastructures and the merchant infrastructures.

So, while we can look at those things and we can learn certain things, there is not always that one-to-one correlation, and I don't know that I would speculate so much about Europe. We are aware of the global services offerings, and Bank of America is a global company, but right now a lot of the usability is focused on the U.S. customer.

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