M-Commerce and its Security Issues

By SAMEER YADAV
Contents

1 INTRODUCTION AND OVERVIEW 1

1.1 Background and Motivation . . . . . . . . . . . . . . . 1
1.2 History of M-Commerce . . . . . . . . . . . . . . . . . 2
1.3 Latest Trends and Consumer Reactions . . . . . . . . . 3

2 M-COMMERCE: Basics 5
2.1 M-Commerce: Definition . . . . . . . . . . . . . . . . . 5
2.2 Mobile devices . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Features of m-commerce . . . . . . . . . . . . . . . . . 6
2.4 Differences to E-Commerce: Advantages and Disadvan-
tages . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.5 Framework . . . . . . . . . . . . . . . . . . . . . . . . . 7

3 KEY ISSUES 10
3.1 Security Issues . . . . . . . . . . . . . . . . . . . . . . 10
3.2 Wireless User Interface and Middleware Issues . . . . . 11
3.2.1 Wireless and mobile middle-ware for mobile com-
merce . . . . . . . . . . . . . . . . . . . . . . . 11
3.3 Wireless Networking Infrastructure . . . . . . . . . . . 12
3.4 Issues for Carriers and Developers . . . . . . . . . . . . 13

4 SECURITY ISSUES FOR M-COMMERCE 16

4.1 Security of Network technologies . . . . . . . . . . . . 16
4.1.1 GSM . . . . . . . . . . . . . . . . . . . . . . . . 16
4.1.2 UMTS . . . . . . . . . . . . . . . . . . . . . . 18
4.1.3 WLAN . . . . . . . . . . . . . . . . . . . . . . 19
4.1.4 Bluetooth . . . . . . . . . . . . . . . . . . . . . 20
4.2 Transport Layer Security . . . . . . . . . . . . . . . . 20
4.2.1 SSL/TLS . . . . . . . . . . . . . . . . . . . . . 20

i
CONTENTS ii

4.2.2 WTLS . . . . . . . . . . . . . . . . . . . . . . . 21
4.3 Service Security . . . . . . . . . . . . . . . . . . . . . . 21
4.3.1 Intelligent Network . . . . . . . . . . . . . . . . 21
4.3.2 Parlay/OSA . . . . . . . . . . . . . . . . . . . . 21
4.3.3 SMS . . . . . . . . . . . . . . . . . . . . . . . . 22
4.3.4 USSD . . . . . . . . . . . . . . . . . . . . . . . 22
4.3.5 SIM/USIM Application Toolkit . . . . . . . . . 22

5 EMERGING M-COMMERCE APPLICATIONS 24

5.1 Mobile Financial Applications (MFA) . . . . . . . . . . 25
5.2 Mobile Advertising . . . . . . . . . . . . . . . . . . . . 25
5.3 Mobile Inventory Management (MIM) . . . . . . . . . 26
5.4 Product Location and Search (PLS) . . . . . . . . . . . 27
5.5 Proactive Service Management . . . . . . . . . . . . . . 28

6 M-PAYMENT 29
6.1 Background on payment systems . . . . . . . . . . . . 29
6.2 Distinctive features of payment systems . . . . . . . . 30
6.3 Categorization of M-payment systems . . . . . . . . . . 31
6.3.1 Software electronic coins . . . . . . . . . . . . . 31
6.3.2 Hardware electronic coins . . . . . . . . . . . . 32
6.3.3 Background account . . . . . . . . . . . . . . . 32
6.4 Standardization and forums . . . . . . . . . . . . . . . 32

7 CONCLUSIONS AND FURTHER RESEARCH 34

7.1 Harnessing M-Commerce potential . . . . . . . . . . . 34
7.2 Interesting Research Areas in M-Commerce . . . . . . 34
CONTENTS 1
Chapter 1

INTRODUCTION AND
OVERVIEW

Advances in e-commerce have resulted in progress towards strategies, requirements

and development of e-commerce application. Nearly all the e-commerce applications
envisioned so far assume fixed or stationary users with wired infrastructure, such
as a browser on PC connected to the internet using phone lines on LAN. The term
E-commerce (electronic commerce) denotes business processes on the Internet, such
as the buying and selling of goods. This general definition of e-commerce does not
say anything about the kind of device that the end user employs to gain access to
the Internet. The underlying technology could be wireline (e.g. using a home PC
as end user device) or wireless (e.g. using a mobile phone as end user device).
Many people do not use a PC outside the office, but keep the mobile phone at
their side all the times. Mobile commerce is perfect for this group. M-commerce
allows one to reach the consumer directly, not his fax machine, his desk, his secretary
or his mailbox, but ones consumer directly, regardless of where he is.
The term mobile commerce is all about wireless e-commerce, that is, where mo-
bile devices are used to do business on the Internet, either in the B2B or B2C mar-
ket. As such, m-commerce is a subset of e-commerce. M-commerce is the delivery
of electronic commerce capabilities directly into the hands, anywhere, via wireless
technology and putting a retail outlet in the customers hands anywhere. This can
be done with just a mobile phone, a PDA connected to a mobile phone or even a
portable PC connected to a mobile phone. M-commerce is the market of buying and
selling goods with wireless technology such as PDAs and cellular phones primarily
within the retail, telecommunications and financial services industries. Many phone
companies are enabling services for M-commerce applications and marketing their
products to organizations who can utilize M-commerce. Wireless technology has
brought its benefits to M-Commerce and its challenges as well.

1.1 Background and Motivation

Electronic commerce has attracted significant attention in the last few years. Ad-
vances in e-commerce have resulted in significant progress towards strategies, re-
quirements and development of e-commerce applications. Nearly all the applications

1
CHAPTER 1. INTRODUCTION AND OVERVIEW 2

envisioned and developed so far assume fixed or stationary users with wired infras-
tructure, such as browser on a PC connected to the Internet using phone lines or a
Local Area Network. A new e-commerce application such as Wireless e-commerce
or Mobile e-commerce will benefit one to reach the consumer directly, regardless of
where he is.
Though e-commerce has grown as expected, M-Commerce has not taken off the
same way for the use of goods and services. Wireless services are not everywhere and
consumers often do not feel safe or happy buying with their phone. As technology
increases this may change. As for now, consumers use M-commerce as a portable
friend to communicate and to do transactions. When consumers feel secure, they
buy. As the younger generation grows with wireless business models will further
develop M-Commerce.
The emergence of M-commerce, a synonym for wireless e-commerce allows one
to do the same function that can be done over the internet. This can be done by
connecting a PDA to a mobile phone, or even a portable PC connected to a mobile
phone. Mobile Commerce is perfect for the group who always keep a mobile phone by
side all the times. A study from the wireless data and computing service, a division of
strategy analytics, reports that the mobile commerce market may rise to The report
predicts that transactions via wireless devices will generate about 14 billion dollars a
year. With the omnipresent availability of mobile phones (and other mobile devices),
M-commerce services have a promising future, especially in the B2C market. Future
applications include buying over the phone, purchase and redemption of ticket and
reward schemes, travel and weather information, and writing contracts on the move.
However, the success of m-commerce very much depends on the security of the
underlying technologies. For example, today the charge back rate for credit card
transactions on the Internet is 15 percent, versus 1 percent for POS (Point-of-Sales)
credit card transactions. Chargeback rates grow to 30 percent when digital products
are sold. For m-commerce to take off, fraud rates have to be reduced to an acceptable
level. As such, security can be regarded as an enabling factor for the success of m-
commerce applications. In this paper, we discuss two main areas of m-commerce
that are relevant to security, namely
• Network technology - In m-commerce, all data is transmitted via a mobile
telecommunication network. Here, we consider existing network and service
technologies for 2G (2nd Generation), 3G (3rd Generation) and other wireless
systems.
• M-payment (mobile payment) - Doing business on the Internet requires the
payment of goods and services. M-payment systems have different require-
ments and characteristics than e-payment systems. Here, we give an overview
of current payment technology.

1.2 History of M-Commerce

Mobile commerce was born in 1997 when the first two mobile-phones-enabled Coca
Cola vending machines were installed in the Helsinki area in Finland. The machines
accepted payment via SMS text messages. The first mobile phone-based banking
CHAPTER 1. INTRODUCTION AND OVERVIEW 3

service was launched in 1997 by Merita Bank of Finland, also using SMS. In 1998,
the first sales of digital content as downloads to mobile phones were made possible
when the first commercial downloadable ringtones were launched in Finland by
Radiolinja. Two major national commercial platforms for mobile commerce were
launched in 1999: Smart Money (http://smart.com.ph/money/) in the Philippines,
and NTT DoCoMo’s i-Mode Internet service in Japan. Mobile-commerce-related
services spread rapidly in early 2000. Norway launched mobile parking payments.
Austria offered train ticketing via mobile device. Japan offered mobile purchases of
airline tickets.
The first book to cover mobile commerce was Tomi Ahonen’s M-profits in 2002.The
first university short course to discuss mobile commerce was held at the University
of Oxford in 2003, with Tomi Ahonen and Steve Jones lecturing. As of 2008, UCL
Computer Science and Peter J. Bentley demonstrated the potential for medical ap-
plications on mobile devices. PDAs and cellular phones have become so popular
that many businesses are beginning to use mobile commerce as a more efficient way
to communicate with their customers. In order to exploit the potential mobile com-
merce market, mobile phone manufacturers such as Nokia, Ericsson, Motorola, and
Qualcomm are working with carriers such as AT&T Wireless and Sprint to develop
WAP-enabled Smartphones. Smartphones offer fax, e-mail, and phone capabilities.
Since the launch of the iPhone, mobile commerce has moved away from SMS
systems and into actual applications. SMS has significant security vulnerabilities and
congestion problems, even though it is widely available and accessible. In addition,
improvements in the capabilities of modern mobile devices make it prudent to place
more of the resource burden on the mobile device.
More recently, brick and mortar business owners, and big-box retailers in par-
ticular, have made an effort to take advantage of mobile commerce by utilizing a
number of mobile capabilities such as location based services, barcode scanning,
and push notifications to improve the customer experience of shopping in physical
stores. By creating what is referred to as a ’bricks & clicks’ environment, physical
retailers can allow customers to access the common benefits of shopping online (such
as product reviews, information, and coupons) while still shopping in the physical
store. This is seen as a bridge between the gaps created by e-commerce and in-store
shopping, and is being utilized by physical retailers as a way to compete with the
lower prices typically seen through online retailers.

1.3 Latest Trends and Consumer Reactions

The latest trends of e-commerce include electronic bill pay, digital signatures, online
banking just to name a few. Electronic bill pay is essentially paying your household
bills over the internet. In most cases, it works like this. The consumer subscribes to
an EBP provider, deposits funds (or you allow them access to your bank account)
with them and as the consumer receives their bills in the mail, they in turn email
them to their EBP provider with the date that they want the invoices paid. This
latest trend has also taken off in the housing market. Allowing prospective buyers
to sign closing contracts without taking time off is wonderful. Consumers love this
idea. These contracts are legally binding and hold the same weight in court as if
CHAPTER 1. INTRODUCTION AND OVERVIEW 4

you were there in person.

Online banking is the banking industry to compete with one another and with
the electronic bill pay providers. Online banking allows consumers to check their
balances, pay bills, purchase certificate of deposits and apply for loans all from the
consumers home. This is a wonderful service that the banking industry has offered.
The drawback for consumers is with servers crashing and hackers downloading your
banking information. Whereas, the banking industry has taken extreme measures
to ensure the consumers privacy no system is hacker proof.
Researchers see games as an avenue to attract more consumers as they become
more efficient with their phones. An area of promise for M-Commerce is in the travel
industry. A consumer stuck in traffic or suddenly aware of an unexpected urgent
meeting has a need to pay for an airline/train ticket or secure a hotel room. This
is possible with M-Commerce. Arranging business meetings or short conferences is
a common use of mobile communicating in the business world. Buying stock over
the phone is a convenience for some. Retail consumers still enjoy browsing at stores
or through catalogues. . As technology becomes more common in the consumers
lifestyle, business models will become more apparent for M-Commerce.
Chapter 2

M-COMMERCE: Basics

2.1 M-Commerce: Definition

There are many definitions of the term m-commerce. Common to all definitions is
that a terminal or mobile device is employed to communicate over a mobile telecom-
munication network. There are different views as of the purpose of this communi-
cation. Some definitions restrict m-commerce to transactions involving a monetary
value, whereas other definitions generalize the term to services that involve com-
munication, information, transaction, and entertainment. Summarizing, we define
m-commerce as using a mobile device for business transactions performed over a
mobile telecommunication network, possibly involving the transfer of monetary val-
ues.

2.2 Mobile devices

M-commerce is not just about using mobile phones as end user devices. The follow-
ing list gives an overview of different kinds of mobile devices:

• Mobile phone

• PDA (Personal Digital Assistant)

• Smart phone - The smart phone combines mobile phone and PDA technology
into one device

• Laptop Earpiece (as part of a Personal Area Network)

Each mobile device has certain characteristics that influence its usability, such as

• Size and color of display

• Input device, availability of keyboard and mouse

• Memory and CPU processing power

• Network connectivity, bandwidth capacity

5
CHAPTER 2. M-COMMERCE: BASICS 6

• Supported operating systems (e.g. PalmOS, Microsoft Pocket PC)

• Availability of internal smart card reader (e.g. for a SIM card in mobile phones)

Depending on these factors, the services that the end user can receive differ con-
siderably. Moreover, depending on the network technology used for transmission,
the bandwidth capacity varies and influences the kind of services that the end user
is able to receive. In mobile phones, there exist three solutions to internal smart
cards: single SIM, dual chip, and dual slot. Single SIM is the solution that is most
widely available today, where all confidential user information is stored on one smart
card. Dual chip means that there are two smart cards in the mobile phone, one for
user authentication to the network operator and one for value-added services like
m-payment or digital signature. A dual slot mobile phone has a SIM card and a
card slot for a full-sized external smart card. With this solution different cards can
be used one after the other. Moreover, the cards can also be used in traditional POS
and ATM terminals.

2.3 Features of m-commerce

• Anytime and anywhere access to business processes managed by computer-
mediated networks.

• Access takes place using mobile communication networks, making availability

of these services independent of the geographic location of the user.

2.4 Differences to E-Commerce: Advantages and

Disadvantages
In comparison to e-commerce, m-commerce offers both advantages and disadvan-
tages. The following list summarizes the advantages of m-commerce [1]:

• Ubiquity - The end user device is mobile, that is, the user can access m-
commerce applications in real time at any place.

• Accessibility - Accessibility is related to ubiquity and means that the end

user is accessible anywhere at any time. Accessibility is probably the major
advantage by comparison with e-commerce applications involving a wired end
user device.

• Security - Depending on the specific end user device, the device offers a certain
level of inherent security. For example, the SIM card commonly employed in
mobile phones is a smart card that stores confidential user information, such as
the users secret authentication key. As such, the mobile phone can be regarded
as a smart card reader with smart card.

• Localization - A network operator can localize registered users by using a po-

sitioning system, such as GPS, or via GSM or UMTS network technology, and
CHAPTER 2. M-COMMERCE: BASICS 7

offer location-dependent services. Those services include local information ser-

vices about hotels, restaurants, and amenities, travel information, emergency
calls, and mobile office facilities.

• Convenience - The size and weight of mobile devices and their ubiquity and
accessibility makes them an ideal tool for performing personal tasks.

• Personalization - Mobile devices are usually not shared between users. This
makes it possible to adjust a mobile device to the users needs and wishes
(starting with the mobile phone housing and ringtones). On the other hand,
a mobile operator can offer personalized services to its users, depending on
specified user characteristics (e.g. a user may prefer Italian food) and the
users location (see above).

The following list summarizes the main disadvantages of m-commerce:

• Mobile devices offer limited capabilities (such as limited display). Between

mobile devices these capabilities vary so much that end user services will need
to be customized accordingly.

• The heterogeneity of devices, operating systems, and network technologies is

a challenge for a uniform end user platform. For this reason, standardiza-
tion bodies consisting of telecommunication companies, device manufacturers,
and value-added service providers integrate their work. For example, many
current mobile devices implement an IP stack to provide standard network
connectivity. At the application level, the Java 2 Micro Edition (J2ME) offers
a standardized application platform for heterogeneous devices.

• Mobile devices are more prone to theft and destruction. According to a gov-
ernment report, more than 700000 mobile phones are stolen in the UK each
year. Since mobile phones are highly personalized and contain confidential
user information, they need to be protected according to the highest security
standards.

• The communication over the air interface between mobile device and network
introduces additional security threats (e.g. eavesdropping).

2.5 Framework
We are aware that consensus within business and industry of future applications is
still in its infancy. However, we are interested in examining those future applications
and technologies that will form the next frontier of electronic commerce. To help fu-
ture applications and to allow designers, developers and researchers to strategize and
create mobile commerce applications, a four level integrated framework is proposed.
These four levels are as follows: m-commerce applications, user infrastruc-
ture, middleware and network infrastructure which simplifies the design and
development. By following this framework a single entity is not forced to do every-
thing to build m-commerce systems, rather they can build on the functionalities
CHAPTER 2. M-COMMERCE: BASICS 8

provided by others. The framework also provides a developer and provider plane
to address the different needs and roles of application developers, content providers
and service providers. Fig. 2.1 depicts the Framework of M-commerce in brief (cf.
[10]).
Content provider can build its service using applications from multiple applica-
tion developers and also can aggregate content from other content providers and can
supply the aggregated content to a network operator or service provider. Service
providers can also act as content aggregators, but are unlikely to act as either an
application or content provider due to their focus on the network and service aspects
of m-commerce.

Figure 2.1: A Framework for m-Commerce

Wireless carriers can play a very active and important role in the mobile com-
merce applications and services due to the fact that mobile user is going through
their network to perform all mobile commerce transactions. Mobile user is likely to
prefer a common bill for voice, data and mobile commerce services. Fig.2.2 shows
the Life Cycle of Mobile commerce (cf. [10]).
CHAPTER 2. M-COMMERCE: BASICS 9

Figure 2.2: Mobile Commerce Life Cycle

Chapter 3

KEY ISSUES

3.1 Security Issues

As mentioned earlier, m-commerce is not possible without a secure environment,
especially for those transactions involving monetary value. Depending on the point
of views of the different participants in an m-commerce scenario, there are different
security challenges. These security challenges relate to:

• The mobile device - Confidential user data on the mobile device as well as
the device itself should be protected from unauthorized use. The security
mechanisms employed here include user authentication (e.g. PIN or password
authentication), secure storage of confidential data (e.g. SIM card in mobile
phones) and security of the operating system.

• The radio interface - Access to a telecommunication network requires the pro-

tection of transmitted data in terms of confidentiality, integrity, and authentic-
ity. In particular, the user’s personal data should be protected from eavesdrop-
ping. Different security mechanisms for different mobile network technologies
(i.e. in 2G, 3G, etc.) will be presented in Chapter 4.

• The network operator infrastructure - Security mechanisms for the end user
often terminate in the access network. This raises questions regarding the
security of the user’s data within and beyond the access network. Moreover,
the user receives certain services for which he/she has to pay. This often
involves the network operator and he/she will want to be assured about correct
charging and billing.

• The kind of m-commerce application - M-commerce applications, especially

those involving payment, need to be secured to assure customers, merchants,
and network operators. For example, in a payment scenario both sides will
want to authenticate each other before committing to a payment. Also, the
customer will want assurance about the delivery of goods or services. In ad-
dition to the authenticity, confidentiality and integrity of sent payment infor-
mation, non-repudiation is important.

10
CHAPTER 3. KEY ISSUES 11

3.2 Wireless User Interface and Middleware Is-

sues
To make the application described previously a reality, several functional compo-
nents are necessary as highlighted in the first figure. Although it is able to do
some simple mobile commerce transactions using a simple hand-held device, many
sophisticated mobile commerce applications require other capabilities. For example,
• Dynamic, adaptable and smart user interface that learns from and with user,

• Ability to accept user input in many forms including voice,

• Ability to display rich and usable contents,

• Location awareness and ability to track users, products and devices,

• Multi network interfaces for increased and reliable wireless access,

• Basic security features to handle malicious code, support for authenticating

user, services and applications,

• Ability to work with and adapt to mobile commerce applications with diverse
requirements,

• Possible support for context awareness,

• Ability to discover and download upgraded applications and software proac-

tively,

• An operating system that can manage resources to support many of the func-
tions.
Some of these features are already available in hand-held devices. Many of these
capabilities will increase the size and weight significantly, and thus, potentially affect
the usability and portability of these devices.

3.2.1 Wireless and mobile middle-ware for mobile commerce

Traditionally, middle-ware unites different applications, tools, networks and tech-
nologies; allowing user access via a common interface. Mobile middle-ware can be
defined as an enabling layer of software that is used by the applications develop-
ment to connect the m-commerce applications with different networks and operating
systems without introducing mobility awareness in the applications.
To allow for web content to be accessible from everywhere, from PCs to TVs
to palm devices to cellular phones, the World Wide Web consortium (W3C) had
developed several recommendations. These recommendations include the Extensible
Makeup Language (XML) for richer semantic information, improved Cascading Style
Sheets (CSS) and Extensible Style Sheet Language (XSL) to further separate content
from presentation, and a Document Object Model (DOM) which defines a language
independent application programming interface that applications can use to access
CHAPTER 3. KEY ISSUES 12

Figure 3.1: Mobile middleware for application and content adaptation

and modify the structure, content and style of HTML and XML documents. Fig.
3.1 above shows the Mobile middleware for application and content adaptation (cf.
[9]).

3.3 Wireless Networking Infrastructure

In this section the wireless networking requirements for various mobile commerce
applications are being discussed. Mobile commerce applications would present five
general networking requirements: location management, multicast support, network
dependability, and support for Quality-Of-Service, and the ability to roam across
multiple wireless networks. To help network designers and developers, we translate
these five networking requirements into more specific attributes as shown in the
Table 3.1 below (cf. [13]).
.
CHAPTER 3. KEY ISSUES 13

Networking
Specific attributes
requirements
Multicast support
• support for multicast in infrastructure wireless
networks

• support for multicast in ad hoc wireless

networks(much more difficult due to dynamic
topology and other factors)

• group connectivity under mobility/failure

• synchronization/ atomicity of transactions from

multiple users

Network
dependability
• impact and frequency of component failure

• fault-tolerant design

• user access to multiple networks

• levels of network availability

Quality of service
• bandwidth requirements

• delay and delay variation

• tolerable loss characteristics

Roaming across
multiple networks
• handoff among multiple wireless networks

• keeping track of users across networks

Table 3.1: Wireless infrastructure requirements for mobile commerce

3.4 Issues for Carriers and Developers

Wireless carriers can play a very active and important role in the mobile commerce
applications and services due to the fact that a mobile user is going through their
network to perform all mobile transactions. Service providers can also act as content
aggregators but are likely to act as a clearing house for content and application
providers in advertising and distributing their products to its customers.
CHAPTER 3. KEY ISSUES 14

Issues
Comments
Network processing
and storage
• Band width and delay requirements (real-time vs.
requirements
non-real time applications)

• Mobile device capabilities

• Disconnected operation

• Multicasting for group communications

• Symmetric vs. asymmetric processing and storage

Application
Development
• Use of any existing Software Development Kit (SDK)

• Simulation of environment where application will be used

• Maximum number of simultaneous users

• The size of application code

• Support for secure transactions

• Support for fixed users

Compatibility and
interoperability
• Independence from the underlying wireless access
technologies

• Independence from the device functionalities

• Interoperability with IP

• Compatibility with Wireless Application Protocol (WAP)

Desirable features
• Support for intermittent connectivity

• Adaptive to the user and network environment

• Support for “atomic” transactions

• Easy upgradability

• User specified features invocation

Table 3.2: Some important issues for applications developers

CHAPTER 3. KEY ISSUES 15

Wireless carriers are also to face challenges involving how to price mobile com-
merce services, and because several carriers are likely to be involved in completing
a mobile commerce transaction, another issue is how to divide revenues among mul-
tiple carriers. There are many important issues that need to be addressed before
mobile commerce applications can be widely deployed. These include the devel-
opment of new business models for charging wireless customers and for revenue
division among providers, maturity of application software, middle-ware support,
vendor support and user trust necessary for conducting mobile transactions. There
are some important issues for developers of m-commerce applications. These issues
are presented in the Table 3.2 above (cf. [13]). Due to the potential values of many
mobile commerce applications, atomic transactions may be necessary. It is possible
that the mobile middle-ware may provide most of such functions and thus reducing
the amount of work needed to support atomic transactions.
Chapter 4

SECURITY ISSUES FOR

M-COMMERCE

In this chapter, we give an overview of the technologies which are relevant to secure
m-commerce transactions. We focus on those network and service technologies which
are specific to mobile devices.

4.1 Security of Network technologies

We first discuss the security of network technologies used for mobile commerce.

4.1.1 GSM
GSM (Global System for Mobile Communication) is the current European standard
for mobile communications. Since GSM handsets are popular and widespread, they
have to be considered as the major device for mobile commerce at the moment. In
the first years of GSM (beginning of the 1990s), the devices were very limited with
respect to their capabilities other than telephony. Dial-in data sessions over circuit
switched connections were possible but relatively slow (9.6 Kbit/s) and required a
separate device (computer) which reduces mobility. As the GSM core network was
extended with more and more data service elements, the cellular phones also became
more powerful. A number of data services were established:

• SMS (Short Message Service) allows the exchange of 160 character short mes-
sages over the signaling channel.

• WAP (Wireless Application Protocol) permits access to internet content and

applications formatted in WML (Wireless Mark-up Language). At first, WAP
was based on circuit switched connections.

• HSCSD (High Speed Circuit Switched Data) provides higher data rates by
channel bundling.

• GPRS (General Packet Radio Service) extends GSM with packet oriented
services. With GPRS, the mobile node can stay “always on” without blocking

16
CHAPTER 4. SECURITY ISSUES FOR M-COMMERCE 17

Figure 4.1: GSM Architecture

a connection timeslot with the base station. GPRS can also be used as a
bearer service for WAP and SMS.

The basic architecture of GSM including GPRS, IN (intelligent network) and SMS
components is depicted in Figure 4.1 above (cf. [3]).
The mobile station communicates over the wireless interface with a base transceiver
station (BTS) which is part of a base station subsystem (BSS). The base station
controller (BSC) is connected with a MSC (Mobile Switching Centre) and a SGSN
(Serving GPRS Support Node). The latter two are the central switching compo-
nents for circuit and packet switched data. When a customer subscribes, the GSM
home network assigns the mobile station a unique identifier, the international mobile
subscriber identity (IMSI), and an authentication key Ki. The IMSI and the secret
authentication key Ki of the mobile station (MS) are stored in the SIM (subscriber
identity module), which is assumed to be tamper proof. On the network side, the
IMSI, Ki and other information are stored in the HLR (Home Location Register)
and AuC (Authentication Centre). GSM provides the following security features for
the link between the mobile station and the network (cf. [7]):

• IMSI confidentiality

• IMSI authentication

• User data confidentiality on physical connections

• Connectionless user data confidentiality

• Signaling information element confidentiality

GSM provides the basic security mechanisms for m-commerce transactions. In

particular, the mobile customer authenticates towards the network with a chal-
lenge/response protocol based on the secret key Ki. Furthermore, the wireless link
between the mobile station and the BTS is encrypted with a symmetric key which is
also derived from Ki. The secret key Ki is never sent over the network. But there are
CHAPTER 4. SECURITY ISSUES FOR M-COMMERCE 18

weaknesses: since the network is not authenticated, a false base station can perform
a “man-in-the-middle” attack. The base station can suppress IMSI confidentiality
and encryption and this is not even visible to the mobile station.

4.1.2 UMTS

Figure 4.2: UTRAN system

UMTS (Universal Mobile Telecommunication System) is the next generation

(3G) mobile telecommunication system and a further development of GSM. The
major difference to GSM is the radio network (UTRAN) with its transition to the
WCDMA (Wideband Code Division Multiple Access) radio technology. Two new
network components, RNC (Radio Network Controller) and Node B are introduced
in UTRAN. Furthermore, the security protocols have been modified and now the
RNC is responsible for de-/ciphering. The main components of the GSM/GPRS
core network with MSC, SGSN etc. can be reused or evolved to UMTS. This is
depicted in Figure 4.2 above (cf. [3]).
In general, the security architecture of UMTS is carefully designed to fix the
security weaknesses of GSM (cf. [6], [11]). As is described above, the main prob-
lems of GSM originate from two facts: authentication is one way (the mobile station
does not authenticate the network), and encryption is optional. In UMTS, authen-
tication is mutual, and encryption is mandatory unless the mobile station and the
network agree on an enciphered connection. In addition, integrity protection is al-
ways mandatory and protects against replay or modification of signaling messages.
Sequence numbers in authentication vectors protect against reuse of authentication
vectors by network impersonators. UMTS introduces new cipher algorithms and
longer encryption keys. Thus, UMTS does not seem to have any obvious security
holes.
CHAPTER 4. SECURITY ISSUES FOR M-COMMERCE 19

4.1.3 WLAN

Figure 4.3: WLAN security with IPsec

The IEEE standard 802.11 specifies families of Wireless Local Area Networks
(WLAN) which operate in the unlicensed 2.4 GHz and 5 GHz band. The standards
specify the physical layer and the medium access control layer. For the network
layer and above, WLAN employs a classical IP stack. A number of commercial
products (even for PDAs) are available, and IEEE 802.11b, offering 11 Mbit/s raw
bandwidth, is currently very popular. When operated in the infrastructure mode,
the mobile station attaches to an Access Point which provides connectivity to fixed
net IP networks or to other mobile stations. In the default mode, WLAN does
not provide any security. This means that a mobile attacker can eavesdrop and
manipulate all the wireless traffic with standard tools. In order to provide a certain
level of security, the IEEE defined WEP (Wired Equivalent Privacy). WEP was
designed to provide:
• Authentication to protect the association to an AP

• Integrity protection of MAC frames

• Confidentiality of MAC frames

The protection is based on secret WEP keys of either 40 or 104 bits. Concatenated
with a clear text initialization vector, the secret key serves as input for the RC4
stream cipher. But it has been shown that authentication and integrity protection
is completely insecure and encryption is at least partly insecure. It suffices for an
attacker to intercept a single successful authentication exchange between a mobile
station and the AP to be able to authenticate without knowing the secret keys.
Furthermore, since a CRC checksum is used for integrity protection, an attacker
can modify the data and adapt the checksum accordingly. For example, if the
position of commercially sensitive information (e.g. an amount) within a datagram
is known, the corresponding bits can be XORed with any value. With a large
number of intercepted frames, the WEP keys can even be recovered, breaking the
encryption. Furthermore, since the WEP keys are network keys, preserving their
secrecy is difficult for private networks and impossible for public WLAN hotspots.
In recent work of the IEEE Task group on security (TgI), the new security standard
IEEE 802.1X has been adopted. 802.1X is a framework for authentication and key
management which employs the Extensible Authentication Protocol for a variety
of authentication mechanisms, e.g. certificate based TLS. But the weaknesses of
CHAPTER 4. SECURITY ISSUES FOR M-COMMERCE 20

WEP cannot be remedied by the new authentication and key management schemes
in 802.1X. The IEEE is currently working towards a new standard (WEP2), and a
number of proposals are in circulation. Another approach is to employ VPN (virtual
private network) technologies and in particular IPsec in order to establish network
layer security. The IPsec protocol (or more specifically the ESP Tunnel protocol) is
an internet standard (cf. [8]) for the protection of IP packets between two nodes (e.g.
a mobile station and a security gateway). This architecture is depicted in Figure
4.3 above (cf. [3]). Note that link layer specific information (e.g. MAC addresses)
is still unprotected.

4.1.4 Bluetooth
Bluetooth is a wireless technology developed by the Bluetooth Special Interest
group3 and is mainly aiming at ad hoc piconets and connections to peripheral
devices. Bluetooth is also operating in the unlicensed 2.4 GHz band and can be
considered as a de-facto-standard. The Bluetooth specification defines a complete
OSI stack, so, unlike WLAN, it is not restricted to IP connectivity. Although raw
bandwidth is limited to 1 Mbit/s, the Bluetooth technology will probably often be
used in the future to connect devices in the personal environment, which makes it
relevant for m-commerce. Bluetooth specifies three security modes, including “no
security”. Bluetooth provides link layer security with a challenge-response protocol
for authentication and a stream cipher encryption of user and signaling data (cf.
[2]). When the connecting devices do not share a key in advance, they have to
establish an initialization key in a pairing procedure. This is based on a PIN, which
must be entered into both devices (or imported from some application). Bluetooth
can currently be considered secure for small ad hoc networks, provided the pairing
happens in a safe environment and the PIN is strong enough. The existing attacks
are still theoretical in nature. However, privacy requirements may not be met since
the Bluetooth device address (unique MAC address) allows the tracing of personal
devices and hence their owner.

4.2 Transport Layer Security

The above technologies provide security for the wireless link between mobile cus-
tomer and access network or access device. If the access network is considered secure
and the m-commerce transaction is completely handled within the access network,
this may be sufficient. But often, an m-commerce transaction involves parties out-
side the access network (merchant, payment service provider etc.). In this section,
we discuss end-to-end security for mobile devices. This protects applications which
communicate over an IP port.

4.2.1 SSL/TLS
The SSL/TLS protocol is by far the most widely used internet security protocol.
Its main application is the HTTPS protocol (HTTP over SSL), but it may also
be used as a standalone protocol. SSL requires a bidirectional byte stream service
CHAPTER 4. SECURITY ISSUES FOR M-COMMERCE 21

(i.e. TCP). SUN has implemented a client side version of SSL for limited devices,
called KSSL (Kilobyte SSL). KSSL does not offer client side authentication and only
implements certain commonly used cipher suites, but it has a very small footprint
and runs on small devices using the J2ME platform.

4.2.2 WTLS
The WAP forum has standardized a transport layer security protocol (WTLS) as
part of the WAP 1 stack. WTLS provides transport security between a WAP device
(e.g. a mobile phone) and a WAP gateway which performs the protocol transfor-
mation to SSL/TLS. Hence, no real end-to-end security is provided and the WAP
Gateway needs to be trusted. Note that the WAP Forum now proposes a WAP 2
stack which is a classical TCP/IP stack on a wireless bearer medium. This permits
end-to-end SSL/TLS sessions.

4.3 Service Security

Here, we discuss the security of network services which can be used for m-commerce
transactions.

4.3.1 Intelligent Network

With the introduction of the IN (Intelligent Network) technology to GSM networks,
additional services could be realized. The IN architecture for GSM (called CAMEL,
Customized Application for Mobile Enhanced network Logic) was adapted from the
fixed network standard ETSI Core INAP, and was originally designed for circuit
switched calls (CAMEL phase 1 and 2). The IN is triggered during call handling at
the MSC if the HLR entry indicates subscription to an IN service. With CAMEL
phase 3, the IN services can also be applied to SMS and to packet data services.
The IN component SCP (Service Control Point) controls the call or data service
via the CAMEL Application Part (CAP) protocol which runs on top of the SS7
(Signaling System Number 7) protocol. Prominent examples of IN services are
the transformation of dialed numbers (e.g. to realize Virtual Private Nets) and
prepaid services. The IN platform provides some flexibility for the generation of
m-commerce services. IN handling can e.g. be triggered by a specific called party, a
calling party, an USSD string (requiring CAMEL phase 2), mobile originating SMS
(requiring CAMEL phase 3) or mobile terminating SMS (requiring CAMEL phase
4). The security of an IN service depends on the underlying GSM or UMTS network
security (see above) and on the specific characteristics of the service application.

4.3.2 Parlay/OSA
Parlay/OSA (Open Service Access) is an initiative of the industry (Parlay group),
ETSI and 3GPP and aims at introducing standard interfaces to network services.
The IN platform and their SS7 based protocols like INAP and CAP are relatively
complex and generation of services is reserved to operators and manufactures. Now
CHAPTER 4. SECURITY ISSUES FOR M-COMMERCE 22

Parlay offers standard application programming interface which allows service pro-
visioning on IT platforms using standard middleware. The Parlay/OSA framework
then provides gateway functionality between applications and Service Capability
Features (SCF’s) of the IN. M-Commerce applications can then access core network
functionality, e.g. inquire status and location of a mobile user, send messages or
place calls. Parlay/OSA applications are portable among networks which is usually
not possible with IN services. Security is an important issue, since Parlay/OSA
potentially opens the core network to intruders. Parlay/OSA specifies authentica-
tion and encryption on the application layer. But the security also depends on the
underlying network architecture, e.g. firewalls and strict policies should protect core
network components.

4.3.3 SMS
SMS (short message service) is a very popular data service for GSM networks. Al-
though SMS messages are limited to 160 characters, a considerable number of m-
commerce scenarios are based on this service. The sender and receiver of an SMS
are identified by its IMSI which an attacker cannot forge without breaking the
GSM/UMTS security mechanisms (e.g. by cloning a SIM card). Hence SMS mes-
sages can be used for authentication (at least towards the network). Furthermore,
SMS data is transmitted in the GSM (UMTS) signaling plane, which ensures the
confidentiality of messages. However, the protection ends in the GSM or UMTS
network, there is no end-to-end security, and the network operator and its infras-
tructure (e.g. SMSC, Short Message Service Centre) must be trusted (when no other
security mechanisms are applied to the SMS message, confer section on SIM/USIM
Applications below).

4.3.4 USSD
The GSM Unstructured Supplementary Service Data (USSD) service allows data
communication between a mobile station and either the HLR, VLR, MSC or SCP
in a way transparent to the other network entities. Unlike the asynchronous SMS
service, an USSD request opens a session which may induce other network operations
or an USSD response before releasing the connection. Mobile originated USSD may
be thought as a trigger for a network operation. USSD works with any mobile
phone since the coded commands are entered in the same way as a phone number.
With USSD, roaming can be offered for prepaid GSM customers before IN services
(CAMEL) are implemented in a network. Another USSD application (requiring
CAMEL phase 2) is replenishing a prepaid account by incorporating the voucher
number in an USSD string. In principle, any transaction, e.g. a payment operation,
could be triggered by USSD data. USSD possesses no separate security properties;
instead it relies on the GSM/UMTS signaling plane security mechanisms.

4.3.5 SIM/USIM Application Toolkit

The SIM and USIM Application Toolkits (SAT and USAT respectively) allow opera-
tors and other providers to create applications which reside in the SIM/USIM. These
CHAPTER 4. SECURITY ISSUES FOR M-COMMERCE 23

applications can e.g. send, receive and interpret SMS or USSD strings. Currently,
there exists banking applications using SAT. The required security mechanisms are:

• Authentication

• Message Integrity

• Replay detection and sequence integrity

• Proof of receipt and proof of execution

• Message Confidentiality

• Indication of the security mechanisms used

However, it depends on the applications whether these security mechanisms are

implemented and whether their cryptographic strength is sufficient.
Chapter 5

EMERGING M-COMMERCE
APPLICATIONS

There are potentially an unlimited number of mobile applications, we attempt to

identify several important classes of applications and provide examples within each
class. Table 5.1 summarises the different types of Mobile Applications with their
category and examples.
.
Type of Mobile Category Examples
Applications
Mobile Financial B2C,B2B Banking, brokerage and mobile
Applications payments
Mobile B2C Sending user-specific and
Advertising locationadvertisements
Mobile Inventory B2B,B2C Location tracking of goods, people, etc
Management
Product B2C,B2B Ordering items by a mobile device
Shopping
Wireless B2C,B2B Improvement of Business Services
Reengineering
Mobile Office B2C Working from traffic jams,
conferences, etc
Wireless Data B2B,B2C Information downloaded by mobile
Center users / vendors
Mobile B2C Video on demand and other services
Entertainment
Mobile Distance B2C Taking a class using streaming audio
Education and video

Table 5.1: Different types of Mobile Applications

24
CHAPTER 5. EMERGING M-COMMERCE APPLICATIONS 25

5.1 Mobile Financial Applications (MFA)

Mobile financial applications are likely to be one of the most important components
of m-commerce. They could involve a variety of applications such as mobile banking
and brokerage service, mobile money transfer, and mobile payments as shown in the
figure. One interesting mobile financial application is micro payment involving small
purchases such as vending and other items. A mobile device can communicate with
a vending machine using a local wireless network to purchase desired items. Micro-
payments can be implemented in a variety of ways. One way is that the user could
make a call to a certain number where per minute charges equal the cost of the
vending item. This approach has been used by SONERA, a finish wireless provider,
in the famous Coke machine service. In effect it collects money from the users and
credits it to the vending providers. Figure 5.1 below shows various Mobile Financial
Services available presently (cf. [13]).

Figure 5.1: Several Mobile Financial Services

5.2 Mobile Advertising

Mobile advertising is also a very important class of mobile commerce applications.
Using demographic information collected by wireless service providers and informa-
tion on the current location of mobile users, much targeted advertising can be done.
The advertising messages sent to the user can be location-sensitive and can inform
a user about various on-going specials (shops, malls and restaurants) in surround-
ing areas as shown in Figure 5.2 below which shows a possible scenario for mobile
advertising and shopping.
This type of advertising can be performed using Short Messaging Service (SMS)
or by using short paging messages to mobile users. The messages can be sent to all
users located in a certain area, a user-specific message can be sent independent of
the users’ current location. Since the services need the current location information
of a user, a third party may be needed to provide location services. However this
may require a sharing of revenues between the network service provider and location
service provider. As more wireless bandwidth becomes available, content rich adver-
tising involve audio, pictures and video clips can be produced for individual users
CHAPTER 5. EMERGING M-COMMERCE APPLICATIONS 26

with specific needs, interests, and inclinations. It is also possible that direct adver-
tising to users may be performed without much control from the wireless service
providers.

Figure 5.2: A possible scenario for mobile advertising and shopping

5.3 Mobile Inventory Management (MIM)

Figure 5.3: Location tracking of goods

This class of application involves location tracking of goods, services and even
people. The tracking of goods may help service providers in determining the time of
delivery to customer, thus improving customer service and obtaining a competitive
edge over other business. One very interesting application is rolling inventory-which
CHAPTER 5. EMERGING M-COMMERCE APPLICATIONS 27

may involve multiple trucks carrying a large amount of inventory while on move.
Whenever a store needs certain goods/items, it can locate a truck (preferably in
nearby area) and just-in-time delivery of goods can be performed. The rolling in-
ventory and delivery application can reduce the amount of inventory space and cost
for both vendors and stores and may reduce the time between when an order is
placed and the goods are delivered (shown in figure 5.3 above) (cf. [13]).
Location tracking of components can be broken into two components: indoor
and outdoor. Indoor tracking can be performed by a chipset (TX/RX) and loca-
tion information may be transmitted over a satellite or cellular/PCS system to the
component supplier where such information is needed.

5.4 Product Location and Search (PLS)

Figure 5.4: Product Location & Search

This class of application includes locating an item in a particular area or location.

This is concerned with finding an item with certain specifications and whether it
is available in a specified area or not. Potentially, there could be multiple places
where such an item or items of similar attributes are located. Currently many
people are going to several stores to find an item (certain brand/size of TV, VCR
or an automobile) and compare prices and features. Using a mobile device and
centralized/distributed database containing information on products, a user should
be able to find the exact location of the store where a certain item is located. After
that the user can buy online using a browser on his/her mobile devise. In the case
of multiple stores/vendors carrying an item desired by a user, they could compete
to get customer by real time manipulation of prices or by offering instant discounts.
From the technological point of view, a mobile user can send a query message to a
centralized location (shown in figure 5.4 above), which in turn can interface several
different stores/dealers and decide if the item is available or not (cf. [10]).
CHAPTER 5. EMERGING M-COMMERCE APPLICATIONS 28

5.5 Proactive Service Management

This class of application is based on collecting pertinent information about current
or near future user needs and providing services to users proactively. One such
application may involve collecting information about the aging components of an
automobile (shown in figure 5.5 below).

Figure 5.5: Information Transmission on aging Automobile components

to dealers

This would help reduce anxiety levels of owners and improve the general con-
ditions of automobiles on the road leading to the reduced number of traffic jams,
accidents and even fatalities. From the technological point of view, automobiles
can be equipped with smart sensors that keep track of how much wear and tear a
car component has gone through. This information can then be transmitted using
a radio/microwave/satellite system to a specified service center or other location.
Some implications of such applications are privacy, security, reliability and cost of
deployment.
Chapter 6

M-PAYMENT

This section gives an introduction to payment mechanisms for m-commerce. First,

we will motivate the heterogeneity of payment system solutions, before categorizing
e-payment and m-payment systems respectively. Figure 6.1 below shows the different
Payment Mechanisms for Mobile Services.
.

Table 6.1: Different Payment Mechanisms

6.1 Background on payment systems

E-payment systems provide means for payment of goods or services over the Internet.
In contrast to conventional payment systems, the customer sends all payment-related
data to the merchant over the Internet; no further external interaction between
customer and merchant is required (e.g. sending an invoice by mail or confirmation
by fax). To date, there exist more than 100 different e-payment systems.

29
CHAPTER 6. M-PAYMENT 30

6.2 Distinctive features of payment systems

There exist a large number of payment systems for E- and M-payments. The fol-
lowing distinctive features of payment systems motivate this diversity (cf. [12]).

• Time of payment

• Payment amount

• Anonymity issues

• Security requirements

• Online or offline validation

Time of payment denotes the relation between the initiation of a payment transac-
tion and the actual payment. In pre-paid payment systems, the customers account is
debited before the payment and the amount is stored, for example, on smart cards,
in specific customer accounts or as electronic cash. In pay-now payment systems, the
customers account is debited at the time of payment and in post-payment systems,
payment can be regarded as a ’payment promise’ where the merchants account is
credited before the customers account is debited (for example, credit card systems).
The payment amount has an influence on the design of electronic payment protocols.
Electronic payment systems often originate with conventional payment systems.
As such, cash-like payment systems should provide anonymity to the customer.Generally,
integrity, authentication, authorization, confidentiality, availability, and reliability
issues need to be considered, depending on the specific requirements of an electronic
payment system. Offline payment validation means that no third party is involved
during the payment procedure, whereas Online payment validation involves some
kind of background payment server as a trusted third party. The latter causes an
additional communication overhead, but reduces certain risks, e.g. double spend-
ing. The above discussion summarizes some distinctive features of payment systems.
There are other issues such as

• Overhead imposed on customers and merchants (e.g. installation of software,

registration)

• Performance (e.g. response times)

• Cost incurred per payment transaction

• Fulfilment of the ACID (Atomicity, Consistency, Isolation, Durability) prin-

ciple for payment transactions (i.e. transactions have to be executed all or
nothing, leaving the system in a consistent state, and their effect should be
durable)

• National or international deployment

The above list of distinctive features gives an idea of the complexity and variety of
payment systems.
CHAPTER 6. M-PAYMENT 31

6.3 Categorization of M-payment systems

Most e-payment systems are not suitable for use in a mobile context, i.e., using a mo-
bile device and communicating over a mobile telecommunication network (cf. [1]).
This is due to the special characteristics of mobile devices and mobile telecommuni-
cations. Consumers can use many forms of payment in mobile commerce, including:

• Premium-rate telephone numbers- which apply charges to the consumer’s long-

distance bill

• Charges added to the consumer’s mobile telephone bill, including deductions

to pre-paid calling plans

• Credit cards - Some providers allow credit cards to be linked to a phone’s SIM
card

• Micropayment services

• Stored-value cards, often used with mobile-device application stores or music

stores.

In the following, we categorize m-payment systems according to the whereabouts of

the customers money:

1. Software electronic coins - electronic money stored on the mobile device in file
format.

2. Hardware electronic coins - electronic money stored on the mobile device on a

smart card.

3. Background account - electronic money stored in a remote account at a trusted

third party.

6.3.1 Software electronic coins

In this case, monetary value is stored on the mobile device and the customer has
full control of his/her money wherever he/she goes and whatever he/she does. An
electronic coin is represented as a file containing, among other information, a value, a
serial number, a validity period, and the signature of the issuing bank. Since software
electronic coins are easy to copy, the validity of an electronic coin depends on its
uniqueness in terms of its serial number. The customer transfers electronic coins to
the merchant, who forwards them to the issuing bank for the ’double spending test’.
In this test, it is checked whether the electronic coin has been spent beforehand. If
yes, it is rejected. Otherwise, its serial number is entered into the double spending
database and the money is credited to the merchants account4. The generation and
storage of electronic coins is an orthogonal problem. Due to the limitations of mobile
devices, electronic coins may have to be generated and stored externally, until they
are downloaded onto the mobile device.
CHAPTER 6. M-PAYMENT 32

6.3.2 Hardware electronic coins

In this case, monetary value is stored on a secure hardware token, typically a smart
card, in the mobile device. The presentation of electronic money is not important, as
long as it is stored securely on the smart card. Electronic money could be represented
as a simple numeric counter. In order to get to the money, the customers smart card
and the merchants payment server authenticate each other and a secure channel is
set up between them. Then, electronic money can be transferred from one to the
other. This approach is quite attractive because smart cards provide an additional
level of mobility. That means the payment smart card can also be used in POS
transactions.

6.3.3 Background account

Here, the money is stored remotely on an account at a trusted third party. Depend-
ing on the specific payment system, the account could be a credit card account, a
bank account, or an account held at the network operator. Common to all scenarios
is that, on receipt of an invoice, the customer sends an authentication and autho-
rization message to the merchant that allows the trusted third party (that holds
the account) to identify the customer and to verify the payment authorization. The
accounts can then be settled. There are numerous payment systems that fall into
this category. The differences are regarding the nature of the trusted third party
and the procedure to send authentication and authorization data. For example,
in some cases this data is sent in the clear (e.g. a credit card authorization) not
providing any security against eavesdropping and in some cases this information is
encrypted and digitally signed, providing anonymity to the customer (e.g. SET -
Secure Electronic Transactions).

6.4 Standardization and forums

One important aspect of m-commerce is standardization. Due to the heterogeneity
of technologies for mobile devices, and the need for transmission and payment over
the air interface, it is essential to find common approaches, both at a national and
an international level. The following list summarizes standardization bodies and
forums dealing with issues relating to m-commerce:

• PayCircle® (www.paycircle.org) - is a vendor-independent non-profit organiza-

tion. Its main focus is to accelerate the use of payment technology and develop
or adopt open payment APIs (uniform Application Programming Interfaces)
based on XML, SOAP, Java and other Internet languages.

• MoSign (www.mosign.de) - banks, technology partners and end-device manu-

facturers have joined forces in the MoSign (Mobile Signature) project to create
a platform for secure, legally binding mobile transactions based on existing
standards.
CHAPTER 6. M-PAYMENT 33

• Mobile Payment Forum (www.mobilepaymentforum.org) - is a global, cross-

industry organization dedicated to developing a framework for standardized,
secure, and authenticated mobile commerce using payment card accounts.

• mSign (www. msign.org) - the Mobile Electronic Signature Consortium is an

association of companies and organizations from the mobile phone and Internet
sectors. The objective is to establish and develop a secure cross-application
infrastructure for the deployment of mobile digital signatures.

• mwif (www.mwif.org) - the Mobile Wireless Internet Forum (MWIF) is an

international non-profit industry association. Its mission is to drive acceptance
and adoption of a single open mobile wireless and internet architecture that is
independent of the access technology.

• Radicchio (www.radicchio.org) - As a non-profit organisation, Radicchio brings

together market leaders to establish a common foundation for secure m-commerce
by reaching a consensus on important inter-operability issues.

• Encorus (www.encorus.com) - Encorus Technologies is focused on building a

flexible and open infrastructure and efficient payment processing services to
drive the acceptance and usage of mobile payments worldwide.
Chapter 7

CONCLUSIONS AND FURTHER

RESEARCH

7.1 Harnessing M-Commerce potential

In India, m-commerce is in its initial stages and its advantages will soon be realized.
M-commerce revolution will take the country by storm since statistics are on our
side. Another encouraging trend is that the Indian consumer is fast maturing and
is open to new ideas.
Some key points:

• About 2 percent of Indians, which is 20 million people, have a per capita

income exceeding 13,000 dollars - a number greater than the populations of
Malaysia and Singapore put together.

• Customers surfing the Internet through their mobile phones will have to pay
an access charge of only Rs 0.42 per minute. These trends suggest that a
fertile ground for m-commerce already exists in India and its revolution seems
inevitable.

7.2 Interesting Research Areas in M-Commerce

There are many interesting research problems in mobile commerce. Some of these
are unique due to the limitations of mobile devices and wireless networks and some
are similar to research problems that are currently being addressed by e-commerce
research developers. The problems that are unique to m-commerce are:

• Novel applications and services made possible due to the wireless networks
and mobile devices.

• Security and privacy problems that is unique to wireless networks and mobile
devices.

• Middle-ware issues that are unique due to device, network and protocol limi-
tations

34
CHAPTER 7. CONCLUSIONS AND FURTHER RESEARCH 35

• Role of different wireless networking standards

• Adoption factors of mobile devices that are significantly different in different

parts of the world

• Context and location awareness in unique to mobile commerce as many of the

applications are sensitive to the context and the location of a user.

The research problems that can be addressed by the existing e-commerce research
with some modifications and extensions are:

• Strategy of new service offering

• Role of m-commerce providers

• Trust building

• Adoption of new services

• Pricing models and sensitivity analysis.

Mobile commerce is an interesting and challenging area of research and development.

It presents many issues that cover many disciplines and may best be addressed by an
active participation of computer and telecommunications experts, social scientists,
economists and business strategists.
M-commerce introduced several new classes of applications, reviewed network-
ing requirements, and discussed application development support. Since the area
of mobile commerce is very new and still emerging, several interesting research
problems are currently being addressed or should be addressed by the research and
development community. It is believed that user trust will play a crucial role in ac-
ceptance and widespread deployment of mobile commerce applications. Regarding
m-payment, some systems are under development or already operational. One of
the main future challenges will be to unify payment solutions, providing the highest
possible level of security.
Bibliography

[1] T. Weitzel, W. König: "Vom E- zum M-Payment" (in German), http://much-

magic.wiwi.uni-frankfurt.de/profs/mobile/infos.htm.

[2] ePayment Systems Observatory, Database on E-payment Systems,

http://epso.jrc.es/.

[3] Secure M-Commerce, by Scarlet Schwiderski-Grosche, Heiko Knospe

[4] http://www.roseindia.net/services/m-commerce/mobile-commerce.shtml

[5] www.wikipedia.com/wiki/m-Commerce.htm

[6] 3GPP TS 33.102 3.9.0 Release 1999, 3rd Generation Partnership Project; Tech-
nical Specification Group Services and System Aspects; 3G Security; Security
Architecture.

[7] GSM 03.48 version 8.3.0 release 1999. Digital cellular telecommunication system
(Phase 2+); Security Mechanisms for the SIM application toolkit.

[8] S. Kent, R. Atkinson. Security Architecture for the Internet Protocol. RFC
2401

[9] T. Dierks, C. Allen. The TLS protocol, Version 1.0. RFC 2246

[10] UNDERSTANDING USABILITY in Mobile Commerce, by Viswanath

Venkatesh, V. Ramesh, and Anne P. Massey

[11] IEEE Standard 802.1X-2001. Port-Based Network Access Control.

[12] D. O’Mahoney, M. Pierce, and H. Tewari, Electronic Payment Systems for

E-Commerce, 2nd Edition, Artech House Computer Security Series.

[13] M. Oliphant. The mobile phone meets the Internet, IEEE spectrum(August
1999).

[14] IMT-2000.http: // www.itu.org/imt [20] Datamonitor,

Mobile Payment Systems, Whitepaper, November 2000,
http://www.sun.co.uk/wireless/resources/pdf/datamonitor.pdf.

[15] GSM 02.09 version 7.0.1 Release 1998. Digital cellular telecommunication sys-
tem (Phase 2+); Security Aspects.

36