Since the turn of the millennium we have heard that one day the mobile phone could replace the humble leather wallet, by storing electronic cash and enabling convenient electronic transactions. Yet so far, except for a few isolated cases, there has been little evidence that the consumer has embraced this new paradigm despite the availability of mobile payment and banking services in most markets worldwide. However, according to Informa Telecoms and Media’s recent report, Mobile Payments and Banking: Worldwide Market Analysis, Strategic Outlook & Forecasts to 2013, this day is getting closer.
Informa Telecoms & Media forecasts that in 2013 almost 300 billion transactions, worth more than US$860 billion, will be conducted using a mobile phone – a twelve-fold increase in gross global transaction values in just five years.
“The mobile payments and banking market has evolved considerably over the last two years. Major industry initiatives led by the GSMA and significant commitments to the market from major financial services and telecoms leaders have changed the dynamics of this market,” says John Darnbrough, Associate, Informa Telecoms & Media and author of the Mobile Payments and Banking report. “At last there is real evidence of demand for these services, some from the unlikeliest of places such as the emerging markets of Africa and Asia. The prospects for growth and the emergence of new opportunities in mobile financial services are encouraging more players to enter the market.”
This comprehensive report defines and analyses the mobile payments and mobile banking market, looking individually at four key sub-markets: remote mobile payments, local (NFC) mobile payments, mobile banking and mobile money transfer (MMT).
Remote Mobile Payments
Informa predicts that by 2013, over 445 million mobile subscribers will be regularly using their mobile phone to purchase physical goods and services remotely. Furthermore, Informa estimates that of the total value of mobile payments and transactions in 2008 – around US$71 billion – approximately a third was spent on purchases of mobile digital content such as ringtones, games and music tracks, but by 2013 over 95% of mobile transactions will be for physical goods and services.
Local (NFC) Mobile Payments
The report also analyses developments in mobile NFC technologies, business models and the results of recent market trials and concludes that despite its promise the mobile NFC market will be held back by the lack of availability of NFC enabled handsets and uncertainties regarding the business model and business case for mobile NFC. Nevertheless, Informa forecasts that in 2013 approximately 11% of all mobile handsets shipped will be NFC enabled and that over 178 million mobile subscribers will be regularly using mobile NFC phones to buy physical goods and services, such as tickets, locally at the point of sale.
Mobile Banking
The report examines the trend of banks in developed markets utilizing the mobile phone as another channel to market for their existing services and the emergence of mobile enabled ‘branchless banking’ services for ‘unbanked’ consumers in developing markets. It forecasts that by 2013 there will be 977 million users of mobile banking services worldwide a dramatic increase from approximately 67 million at the end of 2008.
Mobile Money Transfer
The report also looks at the evolution of the mobile money transfer market, primarily driven by the requirements of migrant workers from emerging markets. By 2013 Informa forecasts that almost 424 million consumers will be sending over US$157 billion of personal funds via mobile domestically whilst a further 73 million will be sending US$48 billion of funds via mobile internationally.
The research for the report identifies a number of drivers and enablers that are creating an environment more conducive to the development of the mobile payments and banking market. Mobile phone and network technologies are now more sophisticated and more mature than ever before and, thanks to industry initiatives, more coordinated and standardized. Regulatory authorities are being empowered by national and regional government agencies to take a more ‘enlightened’ approach to this market – particularly in developing markets where it is recognized that mobile banking and mobile money transfer services can facilitate and encourage economic growth in the poorest and most deprived regions. Consumers are becoming more familiar with the use of the mobile phone for applications beyond calls and are more confident in the use of electronic commerce (via their experience of online shopping). Furthermore, there are signs that the key players in the ecosystem are now more prepared to collaborate and invest in creating the systems, infrastructure and consumer confidence necessary to ensure this market thrives.
However, uncertainties still exist, not least the potential impact of the global financial market melt-down that has suddenly gripped the world economy in the last few months. With the banking sector in crisis, industry and consumer confidence has been dealt a hammer blow that will potentially severely limit spending in all parts of the economy – reducing investments in new services and infrastructure, and reducing the consumer spending needed to drive revenues from these new services.
Yet these new technologies and service opportunities do offer the potential to make real cost reductions, attract and retain customers and potentially drive new revenue growth and profit opportunities for mobile operators, banks and credit card companies. The opportunity still exists for the mobile and financial services industries to exploit technological innovation, regulatory reform and changing consumer behavior and perceptions to create a new commercial paradigm and transform how consumers purchase products, exchange money and manage their finances.
In the developed world, the behavioral change, in both business practices of the financial institutions and of consumers themselves, will happen slowly, probably as a consequence of the adoption of proximity (NFC-based) payments and increasing use of the adjuncts to mobile payments such as mobile marketing and advertising. Once the full ‘leather wallet’ analogy is achieved by the mobile wallet – with the mobile phone holding multiple ‘virtual’ accounts or cards, including loyalty cards as well as ad-hoc discounts (vouchers), and other applications such as ‘mTickets’ and ‘mAccess control’ – mobile payments and mobile banking will become fully integrated in the consumer’s lifestyle. However, Informa Telecoms & Media expects that this new paradigm will not be widespread until the end of the forecast period of this report – around 2012/13.
According to Darnbrough, “in the developing world, the behavioral change amongst consumers has already begun; mobile payments and mobile banking are already the natural and only financial services to millions of previously unbanked consumers. Although the market will look differently in the developing world – few mobile NFC deployments, for example – it will lead the world in the use of mobile payments and banking.”
The report concludes that the mobile phone will inevitably become embedded in the financial services’ infrastructure and be accepted as a natural means of payment by the consumer. However, Darnbrough cautions that this will not happen overnight, and that it will not happen in isolation. “It will require unprecedented levels of collaboration and coordination between two very different industries. There is a strong appetite for these new business opportunities but the key players – mobile operators, banks and credit card companies – must acknowledge and take advantage of each other’s respective strengths, and work together to overcome the remaining barriers rather that attempt to control everything on their own.”
Informa predicts that if the key players collaborate effectively the mobile payments and banking market offers a shared annual revenue opportunity of over US$10 billion in five years time. The biggest revenue opportunity is expected from mBanking services, which Informa predicts will be worth US$5.5 billion in 2013.
