HOW I STOPPED WORRYING ABOUT DEFINITIONS OR TECHNOLOGIES ... · Mobile Money/Payments: a growing...

Jean-Stéphane Gourévitch

JOURNEY INTO THE DIGITAL/MOBILE PAYMENTS ECOSYSTEM OR…

HOW I STOPPED WORRYING ABOUT DEFINITIONS OR TECHNOLOGIES AND ENJOY THE PAYMENT EXPERIENCE…

ETSI WORKSHOP, 1ST JULY 2014

1st July 2014

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Executive summary

Do not use without authorisation from Jean-Stéphane Gourévitch., 1st July 2014

¨  Payment systems are critical underlying infrastructure and the fastest component of mobile money. They are evolving toward much more complex and sophisticated Mobile Financial Services covering the whole scope of new commerce and finance methods.

¨  The question of definitions and difference with electronic payments is a little bit like discussing the gender of angels…What matters is the customer/consumer experience, the additional facilities and features that are specific to them. We can use the general word of digital payments.

¨  In any event, convergence is eliminating the boundaries between mobile and digital, the mobile devices becoming increasingly powerful mini-computers and what matters for the users is always-on, easy broadband access and delivery of content anywhere, whenever and indifferent to the underlying technology

¨  Mobile Payments are increasingly developing on mature markets too, in liaison with the growth of mobile commerce, with new innovative mobile banking and financial services but also the realisation that even in the U.S. or Europe unbanked or underbanked customer segments exist.

¨  A number of regulatory, public policy and competition policy issues have fundamental impact

Mobile Money/Payments: a growing segment globally*

Ø  $721Bn…The total volume of Global Mobile Payments expected in 2017

Ø  $235Bn ….The total volume of Global Mobile Payments in 2013, up 44% from 2012 more important than the 35% expected annual volume/value growth 2012-2017

Ø  $189Bn….The total forecast for all in-store mobile payments in the US in 2018

Ø  245.2m….The number of Mobile Payments users in 2013, up 42.5% from 2012

Ø  450m… The number of mobile payments users expected in 2017

Ø  400m ….The number of mobile money transfers in 2018

Ø  $615 billion… The total amount worldwide remittance flows are expected to reach by 2014

Ø  65%... The number of U.S. consumers to be using regularly mobile payments by 2020.

Ø  20m… The number of UK Consumers to use mobile payments by 2018

Ø  $23.22 Bn … The global value of mobile purchase of goods and services in the UK in 2018 Sources: Gartner, June 2013, Juniper Research September 2013 GSMA, February 2014, Pew Research 2013,

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Source: Cap Gemini, 2013 M-Payments to grow 630% in 4years

Source: MasterCard

•  The MasterCard Mobile Payments Readiness Index (MPRI), a data-driven survey of the global mobile payments landscape. Using public and proprietary data, as well as original market research, the survey gauges the preparedness and receptivity of 34 countries for mobile payments of three varieties – person to person (P2P), mobile e-commerce (m-commerce), and mobile payments at the point of sale (POS).

•  The MPRI runs on a scale of zero to 100, with 100 representing complete replacement of plastic cards by mobile devices. In MasterCard's judgment, the point of inflection - the stage at which mobile devices account for an appreciable share of the payments mix - is a Mobile Readiness score of 60.

•  The 34 countries in the current Index achieved an average score of 33.2. No market reached 50, indicating there is work to be done before mobile payments become mainstream

What are we talking about? Definitions

¨  Mobile financial services (MFS): The use of a mobile phone to access financial services and execute financial transactions. This includes both transactional and non-transactional services, such as viewing financial information on a user’s mobile phone. Mobile financial services include both mobile banking (m-banking) and mobile payments (m-payments)

¨  MFS include: ¤  Mobile Money and Mobile Payments

¤  Mobile Banking ¤  In a certain extent, Mobile Commerce and Mobile Wallets are increasingly part of

the overall ecosystem

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Category of Mobile Financial Services

Definitions Products & Trends

Mobile Money/ Mobile Payments

A mobile-based transactional service that can be transferred electronically using mobile networks. A mobile money issuer may, depending on local law and the business model, be an MNO or a third party such as a bank. Often used synonymously with ‘mobile financial services’. Mobile money uses the mobile phone to transfer money and make payments.

•  Mobile prepaid account recharging/Airtime Transfer & purchase;

•  Micropayment handling (remote, proximity, payments, contactless/NFC)

•  Bill Payments; •  Payment processing/Payment initiation (e.g. credit

transfer); Mobile remittances/P2P money transfers; •  P2P; Government to People (G2P) & B2B •  Convergence with other sectors (m-Health, M-

Education) •  Mobile donation (gifts and charities)

Mobile Banking The use of a mobile phone to access banking services & execute financial transactions. This covers both transactional/non-transactional services, e.g. viewing financial information on a bank customer’s mobile. It includes the use of the mobile phone to access/provide insurance, credit, savings services.

•  Mobile Credit and savings •  Mobile Insurance •  Mobile Foreign Exchange •  Cross-channel & omni-channel banking •  Virtual Currencies •  Interconnection with social media and crowdfunding •  Micro-loans;

•  Mobile Commerce

•  Mobile Wallets

•  The use of wireless handheld devices to make commercial transactions on the go. Includes the purchase/sale of a wide range of goods & services, online banking, bill payment, information delivery and so on.

•  Functionality on a mobile device that can securely interact with digitized

valuables. mobile wallet in increasingly more than a payments facility but include loyalty/coupons & more.

•  mPOS (mobile Points-of-Sale); •  Mobile wallets and loyalty programs; •  Ticketing; •  Interconnection with social Coupons & discount •  Mobile Marketing & advertising; •  Big data; •  Intelligent store, Retail 2.0.

Electronic Payments and mobile payments ¨  The term electronic payment can refer narrowly to e-commerce e.g. a payment

for buying and selling goods/services offered through the Internet or broadly to any type of electronic funds transfers.

¨  The difference between Electronic payments and mobile payments come from the much broader scope of facilities and the different customer experience that can be enjoyed. Mobile Payments are increasingly much more than paying for a good or a product

¨  Ultimately, what matters is the customer/consumer experience beyond the definitions or the technologies.

¨  Could be considered as being Digital payments

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Some characteristics of m-Payments ¨  Mobile payments can be:

¤  Bank account based

¤  Credit card based

¤  Telecommunication company billing based (Direct Carrier Billing), pre-paid (debit) or contract/post-paid subscription (credit)

¤  They can be operated remotely (Direct Carrier Billing, Mobile Wallets), contactless or proximity(Quick Response code or QR) bar code, numeric code, Bluetooth Low Energy/BLE) or NFC-based

¨  To become a widely acceptable mode of payment on the market, following conditions are necessary:

¤  a)  Simplicity and Usability:

¤  b)  Universality and cross-border:

¤  c) Covering both micro-payments and very high payments

¤  d)  Interoperability;

¤  e)  Security, Privacy and Trust

¤  f)  Cost and Speed: Not more expensive than other modes and acceptable speed for consumers and merchants.

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Innopay, 2012

Mobile Payments categories and customer segments

Some elements about the proximity and contactless payments in the U.S.

Source: Merchantwarehouse, 2014

Types of Mobile Payments models

Sapient Nitro 2012

•  The slide shows types, models and payment oriented mobile apps in the U.S. •  It shows a very strong adoption by Retailers of a number of mobile apps Within 24 months in particular:

ü  Support to barcode screening to be used by 51% of respondents within 24 months ü  Coupons on mobile screen by 51% of respondents ü  Support to 2-D barcodes by 47% of respondents ü  Coupons/loyalty by NFC/RFID by 35% of respondents and 26% for NFC/RFID payments ü  Consumer self-checkout by 16% of respondents

Possible business models

Sapient Nitro 2012

•  The slide shows the different scenario and trajectories for m-Payments markets ü  The business model most frequently seen

as viable by 43% of respondents is a partnership between mobile players and financial institutions.

ü  The revenue model seen as most likely by

30% respondents is the one based on sharing of merchant revenues between mobile carrier and financial institutions;

ü  But market and policy pressures as well

as issues such as data breaches could bring massive changes and create a decoupling between merchants, mobile and financial institutions toward a much more aggressively competitive market;

ü  This is particularly true if Apple is finally

entering the battle.

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Japan NFC (FeLiCa) mobile payment technology

•  FeliCa is a technology developed by Sony in which a microchip, embedded in a card or electronic device, combines processing, storage, and communications functions. The name derives from the word "felicity," suggesting convenience. The data on the chip is nonvolatile and can be overwritten indefinitely. •  The FeliCa chip can be used in portable digital devices such as cell phone sets, handheld computers, wristwatches and calculators. It makes it

possible for the portable device to contain multiple forms of data incl. personal or business ID information, bank account numbers and balances, medical information, credit account data, transportation passes and authorisation codes.

•  For example, a user can upload digital cash from a credit card to a cell phone set, pass a wristwatch near a scanning device at the a department

store checkout station, use a calculator as a virtual train ticket or use a FeLiCa card to log on to a computer at an Internet kiosk. The data is exchanged by mere proximity without need for physical contact. NTT DoCoMo which offers a product line using the FeLiCa chip refer the device as a mobile wallet.

Do not use without authorisation from Jean-Stéphane Gourévitch, 1st July 2014 From Gerd Leonard, Gerd Future

An integrated virtual Swiss knife? Mobile wallets to be much more than a virtual money purse, as a pumped up FeLiCa….

•  From e-Money and payments, Mobile wallet are increasingly becoming an intelligent assistant •  They integrate all types and

multifunction cards (payments, loyalty/store cards, vouchers, etc.)

•  They are ticketing enabled and transports cards

•  They contain crucial identity utilities and possibly in the future key healthcare information (e.g. medical history, etc.

Infographics from: PYMNTS.COM, 2013

The interactions between multiple functions create a complex ecosystem: ü  Digital Wallets are at the central facility;

ü  Ecosystem players are both forced to compete and cooperate and play multiple roles.

ü  Retailers are those that have presence/interests in the highest numbers of the key Functions/features/services

ü  Several functions are converging (e.g. social, Local & mobile into SoLoMo; Payments, loyalty & advertising/marketing, etc.);

The mobile commerce ecosystem and digital/mobile wallet

From mobile payments to much more.. A new customer experience

¨  New segments are increasingly focusing on the customer/consumer experience

¨  Payments are integrated as a building block of broader products/services: ¤  Mobile Banking: the mobile become the cockpit to manage all financial

needs and requirements ¤  Mobile wallets and mobile solutions for vertical industry segments e.g.

hospitality, transport, etc.

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Geo. Zones/players types

Europe USA/North America Asia Africa Latin America/Caribbean

Telcos & Telcos Grouping Device manufacturers/OS

•  Orange •  Telefonica •  Vodafone •  Turkcell •  Telia Sonera •  Belgacom •  UK: Weve (EE, Vodafone, O2

Telefonica UK) •  Denmark: Paii (main mobile operators) •  Apple, Samsung, Android

•  T-Mobile USA* •  AT&T Mobility •  Verizon Wireless •  ISIS: Verizon Wireless/

AT&T Mobility/T-Mobile USA

•  Rogers Communications •  Apple, Samsung, Android

•  Smart •  Gameenphone (Telenor) •  China Mobile •  Banglatel (Ooredoo) •  Maxis •  NTT DoCoMo •  Bharti Airtel •  Vodafone •  Idea Cellular •  Apple, Samsung,

Android, Nokia

•  M-Pesa (Safaricom/Vodafone)

•  Orange Money •  MTN •  Tigo Cellular •  Airtel Money •  Econet

•  Nokia, Apple, Samsung, Android

•  Telefonica/Movistar/Vivo •  TIM •  Oi •  Tigo (Milicom) •  America Movil/Claro •  Digicel •  PT Telecom •  Viettel •  Uff! (MVNO Colombia) •  Nokia, Apple, Samsung,

Android

Banks and Banks grouping

•  BNP Paribas Fortis/Sixdots •  Barclays •  BBVA •  Caixa •  France: Paylib •  UK: Paym and VocaLink’s Zapp

•  Citi •  Commercial and

Industrial Bank of Canada

•  US Bank •  Bank of America

•  UBL Bank •  Habib Bank •  Bank of China •  Commercial Merchants

Bank Sinar •  ICICI Bank

•  Standaard Bank •  Ecobank •  Commercial Bank of

Kenya •  Equity Bank

•  Banco de Chile •  Tarjeta Naranja •  CBW Bank •  Bancolombia •  Scotia Bank •  Bancop do Brazil

Payment firms, Tech. Firms & Startups

•  Visa & MasterCard •  Google (Google Wallet) •  iZettle •  Facebook •  Western Union •  Payleven •  Aldyen •  Paypal/eBay •  Amazon •  Worldpay

•  Visa & MasterCard •  Google (Google Wallet) •  Amazon •  Paypal •  Square •  Western Union •  Boku •  Facebook •  Twitter •  Many startups

•  Visa •  MasterCard •  Alibaba/Alipay •  Amazon •  Paypal •  Rakuten •  MpayMe/Znap •  Baidu •  Boku •  Square

•  Visa/Monetise •  MasterCard •  Western Union •  Moneygram •  Paypal •  Amazon •  SnapScan

•  Credibanco Visa, •  MasterCard •  Yellow Pepper •  Western Union •  Paypal

Retailers

•  Tesco •  Carrefour •  El Corte Ingles •  Delhaize

•  Wal-Mart •  Merchant Customer

Exchange (MCX)

•  Carrefour •  WalMart •  Tesco •  AS. Watson

•  Shoprite Checkers •  Pick n’Pay

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Compelling reasons for key stakeholders to invest in mobile money/payments

An example of visualisation of the Mobile Payments Ecosystem in the U.S.A

Source: Payfirma, 2012

An increasingly fierce battleground ¨  HCE vs. Secure element

¨  MNOs vs. Digital players vs. Banks vs. Retailers: From cooperation to competition?

¤  Mobile operators investing the mobile banking/payments area (Orange push on mobile banking, Vodafone/M-Pesa, Airtel Bharti in Africa,

¤  Banks becoming MVNOs (e.g. Kenya) or grouping together to avoid being bypassed by operators (e.g. UK with Zapp and Paym),

¤  Incumbent banks being challenged by new entrants without legacy issues and investing massively into new mobile/digital products (Moven, Simple, Soon, etc.)

¤  Mobile/digital players becoming banks (Rogers Wireless in Canada, Alibaba in China)

¤  Retailers trying to become more autonomous from both Banks and operators (MCX in the US)

¨  The integration of mobile payments into broader emerging products/services (mobile banking, mobile insurance, mobile loans, etc.) is increasing competition

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Regulatory, competition and privacy issues

¨  How to regulate converging markets formerly separated and regulated by specific regulatory systems e.g. financial/banking regulations, digital communications regulations, consumer protection? ¤  E.g. PSD2, Interchange regulation, creation of the UK Payments Systems Regulator (PSR)

¨  How to maintain a competitive level playing field on converging markets with actors from formerly separated segments both cooperating and competing. Competition policy increasingly adding activated e.g. Africa, Europe?

¨  Standards and interoperability are crucial

¨  Privacy and security major concerns that still limit consumer adoption but in turn… ¤  How to avoid privacy regulations to stiffle emerging markets and startups?

¨  Consumer adoption, information and trust are key Do not use without authorisation from Jean-Stéphane Gourévitch, 1st July 2014

Coordination/cooperation between key regulators

Source: ITU/Telecommunications Management Group, Inc. 2011

UK solution: Payments Systems regulator (PSR) part of the FCA but autonomous from it Economic regulator of payments sector Concurrent sectoral competition competences

Thank you very much!

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Jean-Stéphane Gourévitch, Director, Chappuis Halder and Cie. jsgourevitch@chappuishalder.com Managing Director, Mobile Convergence Ecosystems Ltd. jsgourevitch@hotmail.com + 44(0)788 775 4615 www.mobileconvergenceecosystems.com