We all have an intimate relationship with our mobile phone.¬† And reading that I wonder of us have reassuringly checked we know where our phone is!
Many years ago‚Ä¶I was part of the pioneering team that bought the Hutchinson PCN network, Orange as we now know it, to the UK.
Could we really have envisaged the market place today back in those exciting infra structure building times? So with that background I relish reading the insight from those with a global of the market place.¬† The Payments Innovation Jury Report is always a report I read.¬† The Jury is composed of 40 uniquely qualified individuals from 23 countries across six continents. Unlike many payments commentators, every Juror has been there and done it before. They have been kept anonymous so they can be totally forthright in their opinions.
Growing mobile phone adoption around the world is undoubtedly one of the biggest current drivers for payments innovation. As more and more people get access to handsets, previously unreached parts of the global population can enjoy formal financial services for the first time and often without involving a traditional bank. Rising availability of low-cost smartphones with far greater functionality than feature phones has also opened up opportunities for new ways to send, receive and spend money.
In March 2015 the GSMA released its report Mobile Financial Services for the unbanked which revealed how mobile money use is expanding. By the end of 2014, there were 103 million active mobile money users globally, up from 60 million in 2013. And there were 255 active mobile money services worldwide with twenty-one of those services currently having more than one million active users. These high-growth figures are tremendously promising but as one juror with direct experience of the sector pointed out the number of mobile money schemes that are currently making money is still in low single digits.
High level overview of the world as the Jurors view it‚Ä¶
‚Ä¶to share a few key findings here:
Mobile money is still in its infancy and the full effect on the global economy has yet to be realised. The Jury was asked in which factor they believed would be the biggest enabler for the universal adoption of mobile money. The widespread availability of low-cost smartphones is seen as the most important driver.
Smartphones are now flooding into many developing economies but it‚Äôs the not the latest iPhone or Samsung Galaxy that most consumers are getting their hands on. Manufacturers such as India‚Äôs Micromax and Karbonn, and China‚Äôs Xiaomi, are building low-cost smartphones (often priced below $100) for developing markets. A large proportion of the world‚Äôs population will not access the internet through fixed-line broadband connections but through smartphones such as these. Although the first generation of mobile money systems such as M-Pesa were designed to work on feature phones, their functionality will be limited by the capability of the handsets. With charges for data falling and data connectivity improving, the Jury sees the cost of the handset itself as the most important factor for mobile money uptake.
Another important factor, according to the Jury, in improving uptake of mobile money will be consolidation of local mobile money services. In many markets, there are currently multiple mobile money services which lack interoperability with one another. As players sign interoperability deals (often under pressure from regulators), build standards and make acquisitions, this may no longer be such an issue in future but there is still a long way to go.
The Jury was asked how mobile money interoperability will develop, if at all, over the next five years. Established payments sectors such as cards, ACH and high-value B2B payments usually already have their own interoperability mechanisms. The Jury is divided when it comes to interoperability arrangements ‚Äì some of them agree that the mobile money industry will develop its own interoperability mechanisms, while others agree that there is limited ROI in creating their own interoperability arrangements (i.e. a ‚Äòparallel universe‚Äô approach).The latter is in line with the preference of many central banks, regulators and payments schemes to utilise and adapt existing arrangements so that mobile money becomes integrated into the retail payments ecosystem (see National Payments Schemes: Drivers of Economic and Social Benefits). A small minority of the Jury does not believe the industry will manage to create interoperability at all.
‚ÄúThe mobile money industry will develop its own interoperability mechanisms, independent from existing arrangements.‚Äù Juror.
‚ÄúIt will clearly develop and it will no doubt include some new participants, but existing infrastructure needs to be leveraged and included in the mix.‚Äù Juror
‚ÄúConsumer demand for mobile wallets remains tepid at best, and it‚Äôs difficult to imagine that changing anytime soon. If there were a pent- up demand, deployment of any requisite infrastructure (e.g. NFC) would not be an issue. Apple Pay has not been the killer app many hoped would rescue mobile payments.‚Äù Juror.
‚ÄúApplePay will dominate the news – and a number of markets. Others will emerge and may become market leader in their domestic/ regional markets.‚Äù Juror.
And on by way of answering the Holy Grail question‚Ä¶What is the outlook for mobile wallets in developed markets in the next few years?‚Ä®
They say. In the developed world, the payments industry has been discussing mobile wallets as the ‚Äònext big thing‚Äô for many years. Banks, established payments firm and technology companies have all made moves in the nascent mobile wallet market. With Google recently announcing the phase out of another version of Google Wallet and Apple making a big move into the sector with Apple Pay, the hype has again reached fever pitch. However, many critics have argued that mobile wallets in the developed world are solutions looking for problems, with payment cards functioning perfectly adequately. The expense merchants or acquirers of buying contactless/NFC terminals is another barrier to mainstream adoption, as is the somewhat lukewarm demand from consumers.
Despite Apple‚Äôs vast resources, 75% of the Jury does not believe that Apple Pay will become the dominant mobile wallet in most markets in the developing world. This perhaps should not be suprising given that there are twice as many Android phones as iPhones in existence. With rivals such as Samsung LoopPay emerging, a sizeable proportion of Jurors sees multiple mobile wallets gaining traction in most markets. It‚Äôs also worth noting that a significant minority of the Jury do not believe that mobile wallets will gain widespread adoption in most markets, suggesting we should still be cautious about this nascent market.
In the next few years, what will happen to the mobile wallet market in the developed world?
Tick one only
Helen Child is a highly accomplished senior leader in the financial services industry. With over twenty years proven experience in the prepaid card and payments processing market, Helen‚Äôs reputation as an expert in this field is apt. Helen was voted globally as one of the top ten women in the prepaid industry and is currently a leading consultant with Striding Edge Ltd who provide Prepaid Payment Solutions & Prepaid Card Marketing.