Mobile Payments in Europe: Making it Pay

Mobile Payments in Europe: Making it Pay

Adrian Drozd, Principal AnalystInformation & Communication Technologies

September 2010

2

Focus Points

Current user adoption status

Available and substitute technology options

Market structure & dynamics

Summary & key messages

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Current user adoption status

4

Defining m-payments

• GSMA – Mobile Money Initiative• Pay-Buy-Mobile • Mobile Money Transfer• Mobile Ticketing• Mobile Money for the Unbanked

• Frost & Sullivan Mobile Payment• NFC based m-payment• Non-NFC based m-payments• Remittance• Mobile banking

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M-payment is positioned as a potentially lucrative revenue stream

Time

Mar

ket

Vo

lum

e

Low

Introduction Growth Maturity DeclineHigh

Fixed telephon

yMobile

communications

Enhanced TV

services

Fixed broad-band

Source: Frost & Sullivan

Broadcast mobile TV services

NB: bubble size approximates revenue accruing to communications service providers

Mobile payments (excluding

SMS-based)

Quad-Play servicesQuad-Play services

Mobile broadband

Mobile broadband

Triple Play

services

6

M-payment status around the world – some examples

Source: Frost & Sullivan

•France•NFC trials•Mobile ticketing

•Italy•Mobile ticketing

•Germany•Mobile ticketing

•NFC trials

•United Kingdom•NFC trials•Oyster

•Bangladesh•Mobile remittance

•China•Contactless mobile payment (Non NFC based)

•The Philippines•Mobile banking

•Japan•Contactless payments since 2004

•Korea•Proximity payment services since 2002

•Kenya•Mobile for the Unbanked

•South Africa•Mobile remittance

•Sub-Saharan Africa

•Mobile remittance

•Canada•NFC trials

•USA•NFC trials

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Advanced markets in Asia Pacific show the way

8

Expectations of mass market M-payment adoption yet to materialise in Europe

•Expectations of mass market adoption yet to materialise in 2010

•Timelines expected to move another 18-24 months

9

Available and substitute technology options

10

Available technology enabling M-payment services

M-paymen

t user

SMS based transactions

IM based transactions

M-Internet based

transactions

Bluetooth based

transactions

Contactless Non-NFC based

transactions

Contactless NFC based

transactions

Source: Frost & Sullivan

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There is currently a coexistence of m-payment technologies

Low

High Introduction Growth Maturity Decline

Timeline

SMS

IM

M-Internet

Bluetooth

NFC

Contactless Non-NFC

Timeline: 2010

Source: Frost & Sullivan

Mar

ket r

eadi

ness

12

Future technology landscape defined by demand for improved security

Low

High Introduction Growth Maturity Decline

Timeline

SMS

IM

M-Internet

Bluetooth

NFCContactless

Non-NFC

Source: Frost & Sullivan

Timeline: 2020

Mar

ket r

eadi

ness

13

Market structure & dynamics

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The eco-system for m-payment remains fragmented

• Industries involved• Financial institutions • Retail• IT & Communications • Technology

• Types of stakeholders involved• Telecommunication service providers• Regulators (Financial and Telecoms)• Financial institutions• Application & Solution providers• Merchants• Device/POS/Terminal vendors• Consumers

• Types of enabling technology platforms• Barcode• IM• SMS• Bluetooth• Internet• Contactless (such as NFC) Source: Frost & Sullivan

Complex interactions amongst stakeholders

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Progress in m-payment can be accelerated through standardisation and achieving interoperability

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Emerging providers – including mobile operators – seek to meet growing demand from financial institutions

Infrastructure and service enablers

Payment service providers

End user

Emerging

Traditional

Mobile operatorsMobile devices

Retailers

Financial institutions

Non bank affiliated payment communities CampusesPublic transport

Payments IT & Communications infrastructure providers

Software applications providers

Service providers

Hardware providers

Source: Frost & Sullivan

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Key players to watch: mobile money enablers – Monitise

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Key players to watch: mobile operators

• Telefonica’s UK mobile operation, O2, has pushed into the financial services space, teaming up with the bank, NatWest, to launch a prepaid debit card.

• This is the first fee-free prepaid VISA card and has been available to O2 contract and prepaid customers since Q3 2009. The card is designed to help people manage their spending by doing away with overdrafts and providing real time balance updates on the mobile phone.

• The card can be used anywhere that accepts VISA within the United Kingdom and overseas. It can be used online and the card can be used to withdraw cash from an ATM. These cards can also be personalised to define the appropriate uses available to children aged 13 and above. For example, there are user specified rules that prevent a card to be used on different web locations such as online gambling sites.

• Mobile operators are taking different routes, including collaboration with financial institutions, to create awareness of alternative payment methods. This push certainly adds to Visa Europe’s optimism of contactless technology adoption in UK. It expects the number of Visa contactless cards in use in the UK to reach 12million by the end of the year.

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Summary & key messages

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Summary & key messages

Market status There has been progress in m-payment trials and deployments in Europe but mass adoption remains to be seen.

Market outlook

The outlook for m-payment remains positive because of technology availability, an increased sense of urgency amongst key stakeholders to enable m-payment functions, and a growing number of end users being comfortable with m-payment functions.

Market expectations

M-payment methods will vary across Europe; the dominance of SMS-based m-payment functions will continue but contactless technology may become important over the medium term.

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Key success factors

Ease of use for the consumer

In the absence of any life critical need, m-payment is a new service that requires consumers to change their habits. Convenience of use becomes very critical.

Security assuranceFrost & Sullivan strongly believes that the predominant m-payment technology will be the one that provides an appropriate security level proportionate to the m-transacton.

Standardisation & Interoperability

The eco-system requires further development to reduce complexity in interactions amongst stakeholders. Standardisation and efforts of interoperability are crucial to decrease fragmentation in the eco system.

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Security concerns will remain a key inhibitor

Mobile Money Market: Key Market Drivers & Restraints (2010-2015)

Security concerns

Lack of regulation on mobile transactions

Quality of service

Lack of collaboration between players

High cost of solution

Better user awareness

Ease of payment

Secure network

Interoperability across networks and platforms

Efficiency and speed of mobile networks

Drivers Restraints

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A €6 billion opportunity by 2013 in Western Europe

The market is expected to grow at an average of 25 per cent annually over the next five years

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For Additional Information

Joanna LewandowskaCorporate CommunicationsICT Europe

(0048) 22 390 41 46 joanna.lewandowska@frost.com

Gustavo CurySales managerICT Europe(0048) 22 244 0864gustavo.cury@frost.com

Adrian DrozdPrincipal Analyst & Research ManagerTelecoms Europe(0044) 1865 398 699adrian.drozd@frost.com