Comviva WP Secure Messaging Platform

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Ensuring the Security of Critical Messaging Communications in the Era of Mobile Finance

White Paper

Introducing Comvivas Secure Messaging Platform

October 2012


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Ensuring Messaging Security in the Era of Mobile Finance

Comviva Technologies Ltd 1

Contents 1 Executive Summary .......................................................................................................... 2

2 Introduction ........................................................................................................................ 3

3 Growth of Mobile Financial Services ................................................................................. 4

3.1. Types of Mobile Financial Services .............................................................................. 4

3.1.1. Mobile Wallet .......................................... ..................................................................... ............... 5

3.1.2. Mobile Banking .................................................. ..................................................................... .... 5

3.1.3. Mobile Payments .............................................. ..................................................................... ..... 5

3.2. Market Requirements .................................................................................................... 5

3.2.1. Developed Market Requirements................................................................................. ............... 5

3.2.2. Emerging Market Requirements .................................................................................. ............... 6 3.3. Channels for Mobile Financial Services ........................................................................ 6

4 Operator Concerns ............................................................................................................ 8

5 Solution ............................................................................................................................. 9

5.1. Secure Messaging Platform .......................................................................................... 9

5.1.1. Secure Messaging ............................................. ..................................................................... .. 10 5.1.2. Service Creation Environment (SCE) ............................................................... ......................... 11

5.1.3. Network Architecture ................................................................. ................................................ 12

5.1.4. Hyper Scalable Platform ........................................................................................................... 13

6 Conclusion ....................................................................................................................... 15


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1 Executive Summary

Mobile telecommunication is one of the fastest growing industries in the world. Whilst voice servicesaccount for the majority of mobile telecom revenues globally, there has been significant growth in theuse of non-voice services, such as messaging, content and data services, including video. A furtherarea creating much interest and permeating mobile users habits is mobile financial services. Bothmobile service providers and banks are looking at the mobile handset as an affordable, available andsecure medium for extending the range of financial services on offer, as well as addressing previouslyuntapped segments.

The uptake and usage of mobile financial services (MFS), such as airtime recharge, money transfersand bill payments, depends on many factors. A fundamental prerequisite is users familiarity with thechannels over which mobile financial services are offered. As SMS and USSD are preferred messagingchannels for many mobile users globally, many service providers in emerging markets, whether banks

or mobile operators, have delivered financial services using SMS and USSD as preferred channels.With the growth of mobile financial services, service providers are facing multiple challenges inensuring available, secure, affordable access to these services over SMS and USSD channels. Thispaper outlines how operators can overcome such challenges to spur further growth in the burgeoningMFS space.


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2 IntroductionThe world will soon be able to claim as many mobile subscriptions as it has people. With a worldpopulation of 7 billion, global mobile cellular subscription stands at 5.9 billion. Globally, mobilepenetration is 87%, whereas penetration of mobile in emerging markets is 79% - and continuing togrow.

Worldwide Wired and Wireless Penetration

Source: ITU World Telecommunication

Growth in the telecommunication sector has been impressive during the past decade. Initially voicewas the primary revenue generator for operators. However, with increased competition in mostmarkets, operators have been forced to look at new ways to drive revenues. The opportunity affordedby value added services (VAS) such as infotainment services, email, mobile commerce andmessaging, has enabled operators to grow revenues. VAS now contributes a significant portion ofoverall operator revenues, climbing to close to 50% in some markets. SMS, in particular, has been astellar performer among non-voice services and is forecast to continue to occupy the lions share ofnon-voice revenues among overall operator revenues registering 16% of total revenues from nowuntil 2016 and absolute revenues of $170 billion in 2016 (Ovum) and growing at a faster rate thanvoice revenues.

With the growing pervasiveness of mobile technology in the lives of people across geographies anddiverse economic spectra, service providers outside the mobile space have latched on to mobile as achannel to engage more closely with their end consumers and also deliver a range of goods and

services. In addition to mobile operators, banks, seeing in mobile technology a way to expand theirconsumer base and penetrate their existing consumer base affordably and conveniently, are now alsoactively reaching out to consumers with a mobile services proposition. Mobile financial services offeredinclude airtime recharge, funds transfer, bill payment and online updates of stock prices and stocktrading.

Mobile users in both emerging and developed markets have shown a great openness to using theirmobile handsets to perform various financial services, including making mobile payments andremittances. This paper describes how the ubiquity and acceptance of SMS and USSD channels hasenabled the rapid growth of mobile financial services (MFS). It further outlines how this widespreadembracing of mobile financial services and other critical services has raised challenges for serviceproviders in terms of ensuring secure communications over the prevalent SMS and USSD channels.


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3 Growth of Mobile Financial Services As mobile networks are expanding, mobile operators have expanded into new service areas, such asthe provision of mobile financial services. Banks are also embracing the mobile as an effectivetechnology via which to offer banking services and extend their consumer base. By extending servicesvia the mobile network, banks are now offering informational, transactional and advisory services,which will provide greater convenience to banked customers

Global Volume of Mobile Payment Transactions

Source: Gartner

By providing anywhere, anytime access to banking and financial services, banks and mobile operatorsare likely to attain higher levels of customer satisfaction and drive longer term loyalty. Utilizing a mobilechannel will benefit banks further, in terms of lower administrative costs, by serving a greater numberof customers with a fewer number of branches and a reduced headcount, as well as throughstreamlining the number of call centers and reducing overall call handling charges. Consequently, therewill be an upsurge in the use of mobile financial services channel, with transactions slated to grow toclose to 14 billion transactions annually by 2015.

3.1. Types of Mobile Financial Services

Mobile financial services address the needs of consumers in both developed and developing markets.Consumers in these markets have varied requirements, depending on the extent to which they arebanked or unbanked. The range of services provided as part of a mobile financial services offering canaddress the requirements of different markets and market segments.

Typically, a mobile operator offers consumers a mobile stored value account, essentially a mobilewallet that holds electronic currency. Banked consumers mobile wallets are linked to their bankaccount and other payment instruments, such as credit cards. Whilst unbanked consumers use theirstored value account to perform transactions, banked consumers use their bank account-linked mobileto carry out financial and non-financial transactions.

The various transactions a mobile wallet user performs involves the use of mobile technology, such asa short message service (SMS), Wireless Application Protocol (WAP) and Unstructured SupplementaryService Data (USSD) to access the service and confirm transactions using the service.Mobile financial services can be broadly categorized as:

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2011 2012 2013 2014 2015

Latin America EMEA* Asia/Pacific

Nor th Ame ric a We ste rn Europe

Mobile Payment Transaction Volume (Millions)

T r a n s a c t i o n V o

l u m e

( M i l l i o n s )


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3.1.1. Mobile Wallet A mobile wallet is the mobile equivalent of a physical wallet. It can be mapped to the contents of ausers physical wallet - including cash, prepaid cards, debit and credit cards and loyalty cards. The

mobile wallet is mapped to a mobile user and the mobile users MSISDN. The mobile wallet enablesthe user to perform various financial transactions, such as make person to person transfers and billpayments, as well as withdraw and deposit cash from and into the mobile wallet account.

3.1.2. Mobile BankingMobile banking provides consumers with access to banking services that include informational,transactional and information services, both financial and non-financial, that are linked to the usersbank account.

3.1.3. Mobile Payments A mobile payment is an alternative payment method, where the consumer uses the mobile to pay forgoods and services. The combined market for all types of mobile payments is expected to reach morethan $600B globally by 2013 1

For each of the above services, authentication of the user and the transaction is required via the mobiledevice.

. To make a payment through the mobile, the consumer can either use afinancial instrument (e.g. a stored value account or bank account or credit card) or use operator billing.

3.2. Market RequirementsConsumers in different markets tend to have different requirements from a mobile financial service.

Adoption of Mobile Financial Services across Emerging and Developed Markets

Source: Comviva

3.2.1. Developed Market RequirementsDeveloped markets are characterized by have high mobile and internet penetration. In addition, the,majority of the population is banked, with each adult having at least one bank account, as well as debitand credit cards at their disposal. In these markets, customers are familiar with remote banking andpayments. Consumers in developed markets are familiar with internet banking and are more likely touse mobile banking and make mobile payments, rather than use a mobile stored value account to

perform financial transactions.1 Juniper Research Forecasts Total Mobile Payments to Grow Nearly Ten Fold by 2013


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3.2.2. Emerging Market RequirementsOverall, in comparison to developed markets, emerging markets have lower banking penetration andlower levels of internet penetration. However, most emerging markets have higher levels of mobile

penetration than internet and banking penetration, making them a suitable candidate for mobilefinancial services. Emerging markets tend to be cash-dominant economies, with a significant proportionof migrant workers. Owing to these characteristics, mobile domestic money transfer and internationalmoney transfer have attracted widespread adoption acting as a springboard for the introduction anduse of financial services such as bill payments.

The diagram below shows the evolution of mobile financial services.

Mobile Money Service Design

Source: Ovum

3.3. Channels for Mobile Financial ServicesService providers have used various telecommunication channels, such as WAP, IVR, SMS andUSSD, to promote and extend mobile financial services (MFS). However, recent trends in emergingmarkets indicate a strong preference for messaging channels - namely SMS and USSD.

SMS is a store and forward communication protocol allowing for the interchange of short textmessages between mobile telephony devices. SMS are transferred via a Short Messaging ServiceCentre (SMSC). For mobile financial services, a SIM Application Toolkit (commonly referred to as anSTK) is frequently deployed to enable transactions, as it enables provision of a menu driven interface.

Although STK uses SMS for communication, STK also offers higher levels of security through identityverification and encryption, which are necessary for secure electronic transactions.

For services where additional network elements are touched, the SMSC integrates with these networkelements to deliver the service and often an SMS is sent to the consumer as a notification to confirmthe status of a transaction.

Unstructured Supplementary Service Data (USSD) is similar in nature to SMS. However, it is a real-time or instant (session-based) messaging service. USSD is a standard for transmitting information

over GSM signaling channels. In addition to content, USSD also offers a menu as an add-on.Consumers can use the menu to query various services, such as checking their available balance and


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other similar information. Due to its ubiquity, affordability and acceptability as a messaging tool, banksare also opting to provide MFS services over USSD.

The main advantage of providing MFS over SMS and USSD is that practically all mobile phones areSMS and USSD enabled. This therefore ensures greater reach for SMS and USSD-enabled services.

Operators are able to set up SMS and USSD infrastructure relatively quickly and cost-effectively,enabling provision of low-cost services access via these technologies.

SMS and USSD-based mobile financial services (MFS) are being promoted by operators and readilyadopted by consumers across the world. Neither SMS nor USSD require GPRS or internet connectivityto function. This has resulted in greater market penetration for services enabled via SMS and USSD,particularly in emerging markets, which has enabled MFS services to be extended to both banked andunbanked segments.


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4 Operator ConcernsExisting operator networks are often sub-optimally designed to cater to changing SMS traffic needs.Many operators have adopted an infrastructure-driven approach to augment throughput capacity atfrequent intervals, in line with evolving demand. There are multiple causes of bursts in SMS traffic.SMS traffic volumes are a function of the time-of-day, day-of-the-week as well as seasonal and festivevariations. Additional factors, such as an increase in promotional activities, including bulk SMSbroadcasts (A2P), also increase SMS traffic.

Traditionally, operators have used the same SMSC to cater to A2P SMS as well as P2P SMS. GlobalSMS trends indicate that A2P SMS constitute the bulk of the messaging pie. With respect to A2P SMS,traffic volumes are the direct result of the popularity quotient of a specific application. Furthermore, as

A2P messaging is a one-to-many broadcast application, it generates high-volume traffic bursts on thenetwork. Finally, the payload of an average A2P message is comparatively bulkier than a P2P SMS.

The bursty nature of A2P traffic tends to monopolize SMSC resources and starve P2P messagingflows of capacity, resulting in frequent and expensive SMSC capacity upgrades. This situation hascreated the need for a separate messaging passage for more important, time-dependent, critical SMSsuch as P2P SMS, and SMS relating to mobile financial services, such as stock alerts.

An additional concern for any provider of mobile financial services is security. Consumers tend to bemore willing to adopt mobile based financial service offerings, when they are assured of a secure modeof access and delivery for all financial services.

With application services growing rapidly, mobile operators and banks realize that they need to quicklycreate services that can be launched speedily and removed from the market quickly if they fail.

How the SMSC Delivers P2P and A2P SMS

Source: Comviva


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5 SolutionIn any network, a burst in SMS traffic is generally unforeseen and sporadic in nature. This affects theQuality of Service (QoS) for the delivery of critical messages. As a result, the most efficient way ofmanaging critical messages, such as those associated with the delivery of a mobile financial service, isto shape traffic. Traffic shaping can be achieved in multiple ways. Ensuring security of messages isalso critical. Today, the preferred way to shape traffic is to deploy a messaging component in theoperators network - a Secure Messaging Platform, which is dedicated for critical messages.

5.1. Secure Messaging PlatformThe Secure Messaging Platform is a secure messaging solution that supports both SMS and USSDbased messaging. It extends the capacity in the operators current network by optimally routing criticalmessages over a secure channel. It helps to counter any abrupt spike in SMS messaging traffic trendsand yet deliver critical messages to the destination without any delay. The diagram below shows the

Secure Messaging Platform with both an SMS and USSD channel.Secure Messaging Platform

Source: Comviva

The significance of the Secure Messaging Platform is outlined in the figure below.


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How Secure Messaging Platform Reduces the Operators SMSC Overheads

Source: Comviva

The Secure Messaging Platform offloads A2P SMS traffic from the operators SMSC.

Comvivas Secure Messaging Platform provides dedicated capacity for MFS-based applicationmessages, diverting messaging traffic related to MFS applications. This enables significant trafficoffloads from the operators existing SMSC. By offloading A2P traffic from the operators existingSMSCs, the platform helps to free SMSC resource to handle larger volumes of higher revenuegenerating P2P messages whilst ensuring these messages are handled securely. As shown in thediagram above, additional overhead is removed from the operators existing SMSCs, enabling theSMSC to support sporadic message spikes without investing in additional hardware.

5.1.1. Secure MessagingThe majority of MFS application messaging consists of messages with highly sensitive subscriber

information, such as user name, password and account details. As a result, the Secure MessagingPlatform ensures optimal security for all MFS-based application messaging.


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Provision of a Secure Channel using Secure Messaging Platform

Source: Comviva

The Secure Messaging Platform supports highly secure interfaces, including HTTPS and SSL. Thesesecure interfaces ensure that critical consumer data is safe and secure.

Call Detail Records (CDRs) which contain message content details and which are generated by theSecure Messaging Platform, are encrypted and provide the consumer with security, even from systemadministrators. Data masking is supported to hide sensitive consumer data. The platform also supportsdedicated encryption logging for the operator, as well as for regulators and law enforcement agencies.Comviva is also able to customize security as per an operators unique requirements.

All these measures ensure that the platform offers the level of security required for MFS-basedapplication messages.

5.1.2. Service Creation Environment (SCE)For many operators, the challenge of gaining traction for a new service lies in the ability to educateconsumers quickly and effectively about the benefits of the service offering. Operators may investsignificantly in advertising, but fail to communicate clearly to consumers how to access the service with the result that uptake is unsatisfactory. As a result, operator investment in VAS offerings has notalways translated into high uptake of services and increased revenues.

Secureinterfaces

HTTPSSSLXMLSMPP

SecureMessagingPlatform

SecureSMSC

SecureUSSD+

mWalletapplication

Rechargeapplication

Secure Messaging

Supports highly secure interfaces e.g. HTTPS / SSL

Encryption support for CDR and message content

Data masking to hide sensitive information

Dedicated encryption logging and storage to meet operator andregulatory requirements


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Service Creation Environment within Secure Messaging Platform

Source: Comviva

The Secure Messaging Platform provides a single window for the management of all internal andexternal applications via a GUI based service creation environment (SCE). The SCE can be used forSMS and USSD. The SCEs primary goal is to enable rapid service creation, thereby enabling fastlaunch of services. This is enabled via the single platform, which also equips content providers with aneasy to use interface for service creation and management.

5.1.3. Network ArchitectureThe Secure Messaging Platform can be easily integrated with an operators network elements. Itsupports both SS7 based signaling channels, as well as supporting the IP (SIGTRAN) channel formessage transfer with an operators core network elements, such as the MSC, VLR and HLR.

Charging and billing All communication relating to the prepaid charging system, mediation system and other applicationsystems are supported over various protocols, such as Diameter, UCIP and XML. For postpaid billing,

CDRs are generated and are sent via FTP to the billing server.

The Usage Funnel shows the relationshipbetween user service discovery and

operator revenue.

Service Discovery

Trial

Buy

Repeat

Service differentiation and innovation are

vital to overcome declining revenuegrowth.

Broad portfolio of VAS services preventsquick s ervice discovery

Separate stand alone products increaseCapex and Opex

Primary reasons for slow uptake of mobile VAS are:

I forgot theshort code

for recharge -I wish therewas a menu!

Lack of ubiqu itousaccessPoor InteractivityHard to use services

Service Discovery

Cost of Introduction ofnew servicesService maintenancecostService promotion costTime to market

Cost

Ensuring rapid launch ofnew & relevant services

Long tail of services toappeal to diverseconsu mer tastes

CustomerEngagement


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Secure Messaging Platform - Network Architecture

Source: Comviva

Varied Application InterfaceThe Secure Messaging Platform supports a wide number of interfaces towards the various MFSapplications. These interfaces include HTTPS/ SSL/ SMPP/ Web / FTP towards applications, as wellas towards charging interfaces, such as Diameter, UCIP and XML towards the IN. This helps to easilyand quickly integrate the Secure Messaging Platform with various MFS applications, such asmPayment applications, mBanking applications and remittance applications such as airtime recharge.

Deployment ModesThe platform can be deployed as a standalone unit in a redundant as well as a non redundant mode.The platform can also be deployed in a geo redundancy setup. This mode of deployment ensures veryhigh system availability and system uptime, even if the primary setup fails. However, other modes ofdeployments, such as cloud based, hub based, grid based and centralized modes of deployment arealso supported.

5.1.4. Hyper Scalable Platform Application messages (A2P SMS) constitute as much as 60% to 70% of total SMS traffic volumes formost operators, with year on year growth of application messages standing at around 10%. TheSecure Messaging Platform helps to avoid routing A2P SMS via the SMSC, whilst being capable ofhandling the entire application traffic load. As a result, the Secure Messaging Platform is able to handlevery high messaging traffic requirements without investing in incremental hardware.

CORE NETWORK

MAP

Secureinterface

HTTPSSSLXMLSMPP

SecureMessagingPlatform

SecureSMSC

SecureUSSD+

mobiquity

mobilefinancialservicessolution

PreTUPSprepaid

rechargesolution

IN

Billing InterfaceDiamete r, UCIP,XML etc


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Hyper Scalable Platform

Source: Comviva

The Secure Messaging Platform supports hyper scalability. The platform can be deployed with eitherSMSC or USSD capability or can support both SMS and USSD simultaneously. In both these cases,the platform can scale significantly to support more than 50,000 TPS in a cluster mode. This highscalability helps operators scale quickly and cost effectively - by avoiding investment in additional

capex and opex.Very high messaging traffic volumes can be handled at peak times by simply increasing the number ofsoftware licenses, without a corresponding increase in hardware. As a result, operators can scalequickly, smoothly and cost-effectively.

Horizontal Scalability

V e r t i c a

l S c a

l a b i l i t y

PerBox

SMSC

USSD

Box 1

Box 2

Box n

Total 50,000+ TPS

SMSC Only

A 2 P

SMSC+ USSD

P e r

B o x

A 2 P


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6 ConclusionGiven that people everywhere need access to convenient and affordable formal financial services whether banked or unbanked the use of mobile financial services is predicted to grow significantlyworldwide in the coming years. Consequently, mobile operators and banks are gearing up for thecoming surge in MFS related services. Many banks are still considering their preferred service accessmedium. Given the high penetration and success of communication channels such as SMS and USSD,many banks and operators will deliver mobile financial services over these channels.

Mobile banking has the potential to be to the mobile phone what E-mail was to the Internet. However,mobile operators need to be ready to handle this increase in traffic quickly and securely. Based onservice performance levels, many operator networks already appear to be suffering from overload.With traffic shaping and congestion controls, operators can optimally manage very high messagingtraffic spikes caused by surges in application messaging. This is critical for operators offering MFSservices, where high performance is essential to ensuring a financial transaction is completedsuccessfully.

Comviva has designed a number of solutions to enable operators to manage their traffic flowsoptimally. The Secure Messaging Platform is one such solution. It augments the operators messaginginfrastructure to enable secure financial services over SMS and USSD. The platform is robust,promotes traffic shaping, caters to critical messages from applications such as MFS, supports bothSMS and USSD channels and most importantly, is highly secure offering a route to highly scalableand secure growth of sensitive, time-bound messaging traffic.


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n a consumers based on actual services consumers use, such as video,

About Comviva

Comviva adds value to the mobile service providers business and operational environment, creatingsubscriber stickiness via innovative products, applications and service offerings that cater to every aspectof the subscriber wish list, whilst addressing critical operational issues confronting the mobile serviceprovider today.

With an extensive portfolio of solutions that drives content, commerce and community-focused servicesand revenues for operators, Comviva enables mobile users to interact, transact and access infotainmenteasily.

Operator goals of improving performance and enhancing the user service experience are supported withsolutions that enable rapid and profitable service extension to new and existing subscriber segments,whilst enabling end-to-end service and customer lifecycle management.

A global leader in deploying mobile solutions beyond VAS, Comvivas solutions power services for morethan 1 billion mobile subscribers in over 90 countries worldwide.

Gurgaon Office

A-26, Info City, Sector 34Gurgaon-122001Haryana, India.Tel: +91-124-4819000Fax: +91-124-4819777

Mumbai OfficeUnit No. 1-4, 1st Floor, ParadigmTower, Tower B, MindspaceMalad-West, Mumbai- 400064,India.Tel: +91-22-40774300Fax: +91-22-40774333

USA Office1411 Sawgrass Corporate

ParkwaySte B, SunriseFL 33323-2888, USATel: + 1 954 495 9877

Kenya Office

13th

Floor, Landmark Plaza, Argwings Kodhek Road,Nairobi, KenyaTel: +254 20 3673520Fax: +254 20 3673232

South Africa Office260, Surrey Avenue Ferndale, Randburg, 2194 Johannesburg. Tel: +27 11 293 0500 Fax: +27 11 293 0555

Dubai OfficeOffice # 240, Building # 16,Dubai Internet City, Dubai,UAE Tel: +971 50 6468545.

Bangalore Office

Kirloskar Park#: 50,51 , Hebbala, Kempapura Bangalore- 560064 India. Tel: +91-80-43401600 Fax: +91-80-28565854

UK OfficeLevel- 1, CyberhouseMolly Millars Lane, WokinghamRG41 2PX, United Kingdom.Tel: +44-118-9890144

Fax: +44-118-9793800

Bangladesh Office25,Gulshan Avenue, Gulsha Circle I,Dhaka 1212, Bangladesh.Tel: +88-028823935

Comviva's registered office is in New Delhi and primary development centre is in Gurgaon, with additionalR&D centers in Bangalore and Mumbai. Comviva has representative offices in the Dubai, UK, South

Africa and the USA.


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Comviva WP Secure Messaging Platform