Mobile payments

​While mobile payment in retail is now gravitating towards contactless payments based on NFC, the market for mobile payments is still quite fragmented with mobile payment providers often deploying proprietary solutions. Hans Henrik Hoffmeyer, Senior Vice President and Head of Mobile Services, Nets, explains how Nets is focusing on international standards to ensure scalability and adoption.

What payment solutions does Nets offer retail?

As a Nordic FinTech company, we offer a complete portfolio of payment solutions and value-added services for all types of business and channels. We enable a strong mobile payments ecosystem, making the Nordics the benchmark for mobile payments. Applying international standards, we are a partner to leading mobile payment solutions across the Nordic markets and are developing the existing portfolio of Nets products and infrastructure for digital payments together with our customers. We help both issuers and acquirers with solutions ranging from transaction processing to entire card management systems and merchant acquirer services, and we handle domestic card schemes in Denmark and Norway, currently processing over 2.7 billion transactions a year for Dankort and BankAxept combined.


The contactless Dankort was launched last summer, with 1.8 million issued contactless cards and over 11.5 million transactions so far, and we've let the market know the mobile Dankort will arrive in the fall. In fact, already last year we launched a white label mobile wallet together with Eika Bank in Norway. The successful introduction of contactless cards will further drive the development as more and more merchants will accept contactless payments and customers will get used to "tap" to pay.


Tell us more about tokenisation

With first generation mobile payments, you basically took all the qualities of a credit card and put them into your mobile. It worked, but never really took off.  Today, everyone looks to HCE, where the phone's processor emulates a credit card, generating the cryptograms necessary for it to communicate with a payment terminal.

The challenge is where to store the data – if you store it on the phone's memory, malicious apps could potentially access it. Hence the need for tokenisation, substituting sensitive data with non-sensitive data.


How does it work?

The token is created by Nets' Token Service Provider (TSP) and corresponds to an actual card number stored in our token vault. The token can be used for transactions and other value-added services.

When we handle tokenisation for a bank, our TSP allows us to recognise a consumer and perform on-us processing for Danish and Nordic banks, for example, when a Dane uses his or her MasterCard. We can then skip routing the transaction data through the global networks and instead send it straight to the consumer's Danish bank instead, reducing processing fees considerably.

Basically, the POS terminals don't care if they get a card number or a token number to work with. Due to mandatory standards, all contactless EMV terminals accept mobile contactless payments, and in that sense our terminals were ready for Apple Pay, Samsung Pay and other OEM pays from day one. 


What are the benefits to your customers?

Apart from keeping transaction costs down, banks are also interested in being able to offer their customers services based on aggregated data. In fact, value-added services could well be a deal-breaker for banks when deciding on a service provider. E-receipts is a good example and one of the reasons why Nets recently acquired the company Storebox. Historically, we are closer to the Nordic banks which puts them more in control of data when using our services.

Obviously, their customers will not settle for just one option but will expect  their bank to offer a solution to fit whatever hardware they prefer, be it Apple Pay, Samsung Pay or any other OEM Pay. Having opted for international standards, our networks are compatible with whatever Pay banks decide to go with. Rather than going between banks or merchants and their end-users,  we enable them to deliver services that will strengthen customer relations while at the same time bringing them into the future to meet end-user demands.


What will be the endgame in the mobile payment scenario?

We doubt that the endgame will be to tap a mobile on a POS, and this keeps us on our toes. Who knows, in a future Internet of Things era, enhanced in-app/in-device payments could well be next. Paying will be relatively easy once you have payment tokens in all devices. The smart fridge will order the milk AND pay for it, the smart car not only parks itself, but also pays for it. Contrary to the card-on-file solutions today, the transaction price will be much lower as security levels rise and merchants risk less. Tokenisation and biometrics will play a key role in this future scenario to ensure efficient and secure connected commerce.