IrFM Messaging Standard Ready to Test the Waters

B y H.R. Damon González Jr., Dover Court Consulting

This is the third in a series of articles that review the concept, creation, evolution and potential future of a project to standardize an important component of payment initiation systems. This segment of the story covers early demos of IrFM as well as some of the market trials planned for domestic and international sites.

From Idea to Reality

In the last article we covered some of the history behind the formation of the Infrared Financial Messaging (IrFM) standard development project.

You will remember that the central aim of the project was to create a protocol to standardize the way payments are made when they are transacted over a wireless connection. You might also recall that the team's original members decided early on to lay out a number of operating principles that would govern both the project scope and its development plan.

On top of that list of principles - and very nearly a first priority - was the group's commitment to produce prototypes and proofs-of-concept as soon as it possibly could. The view was that this approach assured a quick path to valuable assessments of feasibility, degree of implementation difficulty and market acceptance.

The main idea was to avoid years of design work trying to produce the perfect protocol in favor of something that worked "straight out of the chute." Results did not need to be perfect or, for that matter, all- encompassing. It merely had to be something that worked in the case of a consumer making payment to a "bricks-and-mortar" merchant would suffice for a start (accordingly, the first prototype closely resembled the aftermath of a catfight in an electronic parts factory).

To begin, the team selected the existing "plastic card" form of payment as a basis for most of the original protocol design work. Even the proposed market trials were to be based on the card form of payment.

Since much had already been done in the world of e-commerce (electronic) and m-commerce (mobile) payment solutions, it was believed that consumers, merchants and banks alike would have fewer wrenching changes to manage as they make the transition from physical payment instruments to digital equivalents.

In keeping with the bias for quick results, very little time passed before the first proof of concept was completed and made public.

Proof of Concept

Owing to Infrared Data Association's successful infrared communications specification, literally millions - 200 million at last count - of handheld computers, personal data assistants, cameras, printers and laptop computers have been able to send documents, pictures, business cards and sundry other things back and forth by simply "pointing and shooting."

CrossCheck, Inc., a leading player in the IrFM project, built on the existing infrastructure to develop the first working model of a financial transaction between consumer and merchant.

Assembling a package including a standard point-of-sale (POS) device, an infrared adapter, a personal data assistant (PDA) and software components developed in-house, the company executed a live check guarantee transaction.

Emulating exactly the kind of process that it manages daily throughout the United States and Canada, CrossCheck used its live production system for the tests, as reported in the Aug. 7, 2000 issue (00:08:01) of The Green Sheet.

This simple but powerful prototype demonstrated unquestionably that a consumer handheld device could be used to generate a completely digital, wireless financial transaction from beginning to end. Within months, IrFM project members were well into plans to expand on CrossCheck's test. Several teams of member companies, merchants and banks set out to produce market trials that would test card-based payment initiation and settlement in a real world setting.

Market Trials

+ in2M Payment Trials: in2M Inc., headquartered in Salt Lake City, is building its market trials around the credit card authorization and settlement system, consumers using personal data assistants and test merchants equipped with infrared adapters connected to in-store POS terminals.

An in2M-style transaction is predicated on an electronic wallet holding one or more digital credit cards placed there by, or on behalf of, a bank that is a member of the trial team. The wallet itself is actually software loaded into the user's PDA.

In practice, a consumer standing near an infrared-enabled POS terminal at the checkout stand with his or her PDA effects payment by beaming a digital credit card to the terminal. In the next few seconds, the POS terminal sends an authorization request, receives approval, records the sale and produces a receipt that gets sent back to the consumer's PDA. The transaction ends with an issued receipt (technically a transaction record stored in the PDA).

Except for the fact that it is now accomplished with an electronic virtual credit card, this kind of transaction is every bit like its predecessor in the plastic world. The "card" conforms to existing credit card data format standards. It is held in a wallet, albeit an electronic wallet. The POS terminal sees exactly what it is used to seeing. Authorization and settlement, including receipts and statement transaction detail, remain the same as before - for both buyer and merchant.

However, one major thing is different: No paper is used to make the payment.

In2M plans to field-test its payment system model in the second quarter of 2002.

+ Harex IT "ZOOP" System: Working in Korea, Harex IT has designed a prototype system that may be the most ambitious of the market trials. It has targeted no less than the city of Seoul and Singapore as the proving ground for a wireless (infrared) payment system. In addition to its broader scope, Harex IT also is basing its methodology on mobile phones as the consumer device.

A piece of software, commonly known as an electronic wallet, will be installed on a buyer's mobile phone along with a digital version of a credit card. It is interesting to note here that while the consumer's bank, as always, issues a digital credit card, a cellular service provider can be used to get it wirelessly inserted in the mobile phone's electronic wallet. Once the digital credit card is inserted in the mobile phone, the buyer is ready to make wireless payments.

In the simplest version of a ZOOP transaction, the payment starts by beaming credit card data to a special device comprised of an infrared adapter and simulacrum of a credit card that the merchant inserts into the store's POS terminal "swipe" slot. Then, following the same process as a plastic card swipe, the terminal polls an authorization network for transaction approval. The purchase is completed with a paper receipt for the consumer and a higher balance on the credit card. The merchant's account is credited in the same fashion as it normally would have been.

The most distinguishing feature of ZOOP is that by using the mobile phone it is possible to disable the financial function of the phone when it is stolen or lost.

Incidentally, Harex IT already has developed versions of this payment system that will make it possible to pay not only merchants selling consumer goods but also to pay for bridge fares, highway tolls, vending machines and airline tickets - to name just a few options. ZOOP's first commercial appearance is scheduled for the end of this year or at the beginning of next year, with full national rollout in Korea in time for the 2002 World Cup soccer games in Japan and Korea.

+ C-SAM and Global eTelecom (GeT): These two companies are unique among the market trial developers in that they are building a "checking system" based model. In their plans, the consumer will be equipped with a Windows CE type handheld computer, and the merchant will be using a POS terminal and check reader connected to an infrared adapter (also known as a dongle).

In a typical transaction, a consumer will activate an electronic checkbook in his or her handheld computer. As in the physical world, the consumer's bank will have previously supplied a set of "checks," the big difference being that these checks are now electronic and reside in the client's handheld computer.

With a few strokes of a stylus, a buyer's digital check will be completed and beamed to the merchant installation. On the merchant side, the digital check will be received and routed through the POS device to GeT for processing and forwarding on to a clearing and settlement network.

When the transaction is completed, the consumer will have an electronic entry in a digital checkbook, a receipt from the merchant and a detailed line-item entry in a bank statement. Live trials are scheduled for later in 2001.

Participation

Thus far in this series of stories about IrFM, we've taken a survey of key aspects of the project's evolution from an idea in a white paper to the beginnings of field tests with real users of the proposed standards and associated components. The concept behind this work is compelling. It is nothing short of creating a worldwide all-electronic, wireless payment capability - a vision that anyone will be able to pay for anything, from anywhere in the world they might be.

The IrFM project team has issued a standing invitation to all stakeholders to join its ranks in the task to build a universally workable set of standards. Lest anyone think they have no place in creating detailed specifications, remember that a protocol can be successful only if it accommodates the practical and environmental needs of its proposed beneficiaries.

This means that consumers (meaning individuals AND businesses), merchants (also individuals and businesses), legal/regulatory bodies and global payment infrastructures can, and should, work hand-in-hand to assure the operational aspects are represented in this evolving standard. It is not too late.

In many respects, the work is just beginning, and the need will continue to evolve well past the first introduction of the IrFM wireless payments standard. Cat herders are especially welcome.