Mobile Payments - Threat or Opportunity by jizhen1947

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									Mobile Payments - Threat or Opportunity?




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Mobile Payments - Threat or Opportunity?
Datamonitor

Date: Feb, 2010
Pages: 71
Price: US$ 2,795.00
ID: MAB667A59C9EN

Introduction

Mobile devices are too sophisticated and too widely held not to become the payment tools of the future.
However developments have been slow and the focus must move on from short-term ROI, as investing in
mobile is really about shaping the payment device of the future. This report provides detailed analysis of
the key opportunities in mobile and the true threat from not taking advantage.

Scope


In-depth analysis of the opportunity for mobile payments in each of the three major payment segments:
P2P, NFC, and mobile commerce.
Examines the scale of the global addressable market for each of these segments, along with case profiles
of success stories and notable innovations.
Outlines the strategic need for issuers to prioritise m-commerce over NFC and P2P payments to generate
revenue now and protect future market share.
Highlights the critical importance of investing in mobile as a means for banks and schemes to remain
central to the future of retail payments.

Highlights

Mobile penetration continues to increase, with 4.6 billion mobile subscriptions at the end of 2009. This
suggests nearly two in three people globally have a mobile handset. While the internet is often cited as the
great telecommunication revolution of the last 25 years, the impact of mobile technologies is undoubtedly
much more widespread.

The view of some within the industry is that NFC is the payment product that will ultimately drive the rollout
of wider mobile payment services. NFC will certainly develop strongly, but the need for hardware upgrades
means that it cannot be the first part of the mobile payment landscape that the industry fully brings to
market.

Mobile commerce must be the immediate priority. With global online sales of EUR1.09 trillion to target, no
costly hardware upgrade to manage and merchants who will embrace any opportunities to extend their
sales channels to mobile this opportunity is huge. Most importantly if the cards industry does not move on
m-commerce, others will.

Reasons to Purchase


See the opportunity for issuers, acquirers, and schemes in each of the three sub-segments of mobile
payments: P2P, NFC, and mobile commerce.
Learn where the big opportunities are within each category and where there is space to innovate and
create new mobile payment services.
Understand the importance of acting now on m-commerce to ensure that you are not cut out of the future
mobile payments value chain.

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Table of Content
Overview
Catalyst
Summary
Executive Summary
Despite the hype, mobile payments have yet to take off
Mobile payments are not the same thing as mobile banking
Mobile devices should be the natural heir of plastic cards, but significant challenges remain
Ubiquity in ownership and greater functionality give mobile devices clear advantages over cards
However, the challenges of bringing together a range of stakeholders continue to hold mobile back
Mobile payments: threat or opportunity?
Mobile holds huge opportunities across m-commerce, NFC and P2P payments
M-commerce is a huge potential market and no longer restricted to digital content
Mobile P2P payments present a clear opportunity to replace paper with card transactions
NFC is the biggest opportunity in mobile but will be the last area of mobile to develop
Mobiles also have unique properties that should be leveraged to create entirely new payment services
Combining m-commerce and NFC enables handsets to be the top tools for browsing, payment and
fulfillment
PayPal's move into mobile P2P points to direct opportunities with m-commerce
Combining NFC and P2P is a less developed opportunity, but one that has potential nonetheless
The real threat for the payment industry is not being able to capitalize on this opportunity
Despite the lack of progress to date, mobile will undoubtedly dominate the future payments landscape
The true threat is that inaction will see the cards industry disintermediated from the future market
M-commerce must lead the way, as NFC will not drive mobile payment rollout
M-commerce is the most attractive and immediately addressable market, not NFC
Creating the NFC business model is a challenge that must be resolved
Investing in mobile is not about short-term profit, it is about shaping the future of consumer payments
Table of Contents
Table of figures
Table of tables
Despite the Hype, Mobile Payments Have Yet to Take Off
Despite the attention paid to mobile, there has been little progress to date
Defining mobile payments: Any payment initiated with a mobile handset
More specifically, mobile payments include P2P transfers, NFC and m-commerce transactions
The user interface for mobile payments and banking is becoming more advanced
Apps may provide the best experience but can not yet reach the mass market
Mobile devices are the natural heir of plastic cards, but significant challenges remain
Ubiquity in holding and greater functionality give mobile devices clear advantages over cards
The holding of mobile devices is extremely high on a global level and still rising
Consumer use of mobiles extends far beyond simply telephony
However, the challenges of bringing together a range of stakeholders continues to hold mobile back
Viable business models for mobile payments remain hampered by the potential number of players involved
Key players have yet to agree on technical standards
One of the most successful mobile payment platforms in the world is proprietary
NTT Docomo's success in mobile has been driven by its effective domestic monopoly
The collapse of Simpay shows the difficulties in even bringing together MNOs to work on mobile payments
Mobile Payments: Threat or Opportunity?
Mobile holds huge opportunities across m-commerce, NFC and P2P payments
M-commerce is a huge potential market and no longer restricted to digital content
The development of iPhone apps to facilitate m-commerce shows how this may develop
The key to m-commerce is creating additional business through meeting a need for immediacy
Mobile P2P payments present a clear opportunity to replace paper with card transactions

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There are four clear areas of P2P where mobile could develop
The main challenge with domestic P2P payments in developed economies is fees, but services for
merchant acceptance could drive take-up
The lack of alternatives makes the potential for domestic mobile P2P strongest in developing economies
The cross-border remittance market also has strong potential for mobile P2P
NFC is the biggest opportunity in mobile but will be the last area of mobile to develop
NFC also offers clear consumer and merchant benefits over contactless cards
Despite the market opportunity, the lack of activity in contactless is a major barrier to the rollout of NFC
Convincing merchants is the key, but there are other stakeholders to consider
Mobile also has unique properties that should be leveraged to create entirely new payment services
Combining m-commerce and NFC enables handsets to be the tool for browsing, payment and fulfillment
Mobile barcodes are an effective stepping-stone to a more complete NFC-based offering
However, technological limitations reduce the scope for this to become widespread quickly
PayPal's move into mobile P2P points to direct opportunities with m-commerce
PayPal's mobile products position it well to capitalize on future developments in m-commerce
The PayPal experience highlights the opportunity for further innovation in P2P and m-commerce
Combining NFC and P2P is a less developed opportunity, but one that has potential nonetheless
The real threat for the payment industry is not being able to capitalize on this opportunity
Despite the lack of progress to date, mobile will undoubtedly dominate the future payments landscape
Trends in mobile banking show the emergence of a link between financial services and mobile handsets
The true threat is that inaction will see the cards industry disintermediated from the future market
Mobile operators and other third parties are beginning to move into this space
Interchange revenue is a compensation at the moment, but may also be removed
M-commerce must lead the way, as NFC will not drive mobile payment rollout
M-commerce is the most attractive and immediately addressable market, not NFC
The aim has to be achieving critical mass across all three areas of mobile payments
Issuers and schemes need to remember that MNOs have more to gain from NFC
Creating the NFC business model is a challenge that must be resolved
The issue of customer ownership is central to any viable business model, particularly in NFC
The issue of revenues is a critically important one
Investing in mobile is not about short-term profit; it is about staying involved in the future of consumer
payments
Investments in mobile payments are not going to generate a return within even three-to-five years
Mobile will replace the plastic card, and this will define the future role of banks and schemes in payments
Offerings that are led by consumer demand, rather than technical feasibility, will be those that succeed

APPENDIX

Supplementary data tables
Definitions
Credit card
Debit card
European Payments Council (EPC)
ePurse/eWallet
Interchange
Merchant service charge (MSC)
Mobile network operator (MNO)
Mobile payments
Point-of-sale (POS) terminal
Methodology
Primary research
Secondary research
Further reading
Ask the analyst
Datamonitor consulting
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Disclaimer

LIST OF TABLES

Table 1: Current standards bodies and their sector focus
Table 2: The four areas of P2P payments and their relative attractiveness for mobile
Table 3: Total online commerce (goods and services) by country, 2009
Table 4: Total addressable market for contactless payments by value band
Table 5: The total global addressable market for contactless payments by merchant sector
Table 6: Total online payments (for goods and services) by country made by PayPal, 2009
Table 7: Current relevant Datamonitor publications
Table 8: Future relevant publications

LIST OF FIGURES

Figure 1: The user experience in mobile payments is advancing
Figure 2: More advanced mobile platforms are only currently available to a niche audience
Figure 3: On a purely functional level, mobile devices are the next stage in the development of payment
technologies for POS payments, 2009
Figure 4: Mobile phone subscriptions far surpass any other communications tool globally, 1998-2009
Figure 5: Mobile phone usage has become widespread across all parts of the globe, 2009
Figure 6: The broad span of potential players in m-commerce is slowing its wider roll-out
Figure 7: Docomo has successfully leveraged its market power to develop a multi-functional mobile
payment service
Figure 8: The global online commerce market will hit €1.09 trillion by the end of 2009
Figure 9: The Ocado App provides a rich user interface for m-commerce
Figure 10: Square provides a way for merchants to accept card payments using their iPhone and a plug-in
magnetic stripe reader
Figure 11: Mobile phone subscriptions globally are rising in line with the value of remittances, suggesting
an opportunity to bring these two elements more closely together
Figure 12: The addressable market for contactless payments globally is $963 billion
Figure 13: Petrol stations are the largest potential market for NFC payments
Figure 14: In the Payez-Mobile trial, consumers making NFC payments above €20 could pre-authorize their
payments using the keypad on their phones
Figure 15: Integrating discounts with NFC is a potential value-creator for the merchant
Figure 16: There are opportunities for mobile payments to occupy new areas of the payment landscape
where there is overlap between the major clusters of opportunity
Figure 17: Lufthansa is marketing its mobile boarding pass as a time saving option
Figure 18: The US saw an estimated €16 billion in PayPal transactions during 2009
Figure 19: PayPal's mobile presence covers SMS-, WAP- and application-based services
Figure 20: TransferJet's service points to opportunities for P2P NFC payment products
Figure 21: The Mint application enables consumers to gain a view of their finances across multiple
providers
Figure 22: MoBank customers can make m-commerce payments through their handset
Figure 23: Mobile payments will reach maturity when services across all three major payment areas are
available
Figure 24: The trusted service manager sits between the MNO and issuing/acquiring banks in the NFC
ecosystem




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