Abstract – This post was originally published on 06-May-2015 on Linkedin (Click here). As per the title “Rumble in the Jungle” (no I am not referring to the October-1974 boxing match played in Kinshasa-DRC that went down in history as the most popular/viral event of the 20th century) this article explores the different payment options and opportunities.
“Mobile Payments – Industry to explode above 3 trillion euros by 2020“ viral in its true sense. Artificial intelligence will re-invent FinTech in next few years and boost Mobile Payments i.e. ApplePay, Samsung, Microsoft, Google, Facebook and many more define where we are in terms of advancement in the payment space and where we target to be. There has been so much jostling and tussling in the payments industry and this article should be titled “Rumble in the Mobile Payment Jungle.”
Introduction – The world should become a cashless society and that’s my thought process. I know I am not the only one who thinks/dreams along the same line and millions other have said this before. Some exciting developments in the mobile payment space have put prominence on the most important points as Mobile Payments are expected to bring about a transformation. Virtual currencies aim to combine the advantages of direct cash transactions with the power of digital technology. Same question still unanswered, “Speed to market is The King” for who consumer or service providers?
Mobile Payments Industry explosion to trillion euros – Forecast needs Revenue Models and Market Strategies which can examines the predominant service & revenue models in the mobile payments arena, as well as the market approach of selected players, in order to identify effective strategies and key success factors. The analysis should prove, show and build upon in-depth case studies of selected mobile payments services around the world, including Alipay, Apple Pay, Boku, Samsung Pay, Microsoft Pay, Dwolla, LevelUp, RURU, Paym. The below analysis tries to brief not conclude with recommendations on best strategic approaches to maximize the mobile payments revenue opportunity.
Bitcoin (a form of digital currency, created and held electronically. No one controls it – to me a very dangerous payment instrument in some specific countries) known as “a Peer-to-Peer Electronic Cash System” is making huge impact and lots of discussion rounds but where does it fit in Mobile Payment Industry of 3 trillion euros by 2020 or it has its own separate segment on top of 3 euros trillion stash.
Some background on Mobile Payments, a new convenient scheme for customers to perform transactions, and is predicted to increase as the number of mobile phone users increases. The use of mobile devices to make payments is increasingly common, particularly in Africa and Europe. Mobile payments can be defined as any payment transaction, which involves a mobile device. There are wide ranges of options available to perform mobile payments due to the availability of network technologies.
Some contributing factors/reasons (Source Google & market research study)
- Prepaid Airtime top-ups through mobile money
- Loans of Airtime through Mobile Money
- Along with many players in the payment jungle it is very easy to conclude that cash is expensive to handle and cheques are due to be phased out very soon. Individuals and corporates need electronic methods of completing payments, most of which will involve mobile technology which is easy, fast, low cost and quick.
- Smartphones will contribute and penetrate this area of transactions and most of the payment services offered will be online i.e USSD, SMS, Mobile App.
- Utility bill payments, the third most commonly offered product by mobile money providers which represents the second largest contribution to the global product mix by value. Bill payments like water, electricity, internet, gas, school fees
- A number of small card readers and associated applications are being developed for smartphones this means the big and bulky POS machines which are costly in CAPEX and OPEX might soon be phased out (Not Sure)
- Cross Border remittances in under a minute, which should be very cheap and flexible in terms in accessibility.
- Merchant Payments a very important and crucial key success factor for this 3 trillion euros hot cake.
- Contactless payment systems based on near field communication (NFC), QR or scan codes will contribute and offer a viable alternative for low value transactions in developed countries.
- Hospitals, schools and colleges will need to provide alternative payments technologies, as cash, internet and cheques will be phased out due to speed & cost.
- Railway stations, bus terminals, movie theatres, game show, events and all mass sales need to come on mobile payments.
- How to ensure all daily sales of water bottles, cokes and all micro payments comes to mobile.
The mobile payment industry has emerged over the past few years through the convergence of services provided by financial & Mobile Network Service institutions – 
Mobile Network Service providers, Banks and credit/debit card companies and now BitCoin. Critical to the development of the industry has been the creation of technical standards by a number of international standards bodies to enable cross-industry collaboration. Because of the concern by the financial and telecommunications industries about encroachment from each other into important new sources of business, key standards have relied upon the development efforts of start-up firms. These firms are independent of both industries and form a catalyst to collaboration and a conduit for mutually acceptable standards formation.
Apple Pay boasts about their mobile payment growth, and at the end of the day, yes, they’ve done a great job and it’s excited the market, but it’s still a very small percentage of what the total number of transactions are and now they already have competition from other players (FB & MS etc). To build a viable business amidst the wealth of competing solutions and applications for mobile payments, players must take a strategic approach to the market.
There are a number of best practices to generate consumer uptake of mobile payments services and build transaction volume. Focused on four key elements specific to the end-user and merchant’s value proposition, the use case strategy and cross-border partnerships examples here are EcoCash Zimbabwe & World Remit UK & Western Union. Airtel across Africa have opened cross border remittances (Few are in flow some of them are about to flow)
Rumble in Payments Market – Examples
Korea- has one of the most advanced mobile payments industries after USA in the world, and a start-up Korean company. Theories of industrial development need to account for the importance of start-up firms, which fail, yet are critical to the creation of important technologies and standards. The case study shows how the contribution of start-up firms is strongly influenced by specific national and cultural factors. As more technologies emerge, these factors need increasingly to be taken into account in analyses of industrial development.
Dwolla (a United States-only e-commerce company that provides an online payment system and mobile payments network) launched a new feature called “Proxi” which allows users to send and receive cash-based mobile payments based on their current proximity to another connected device. The technology bypasses the need for special hardware, like Square’s plastic dongles or NFC chips built into a phone, in order to make mobile payments.
Brixton Pound- Businesses across the London district of Brixton were equipped with Bluetooth beacons that allowed residents to make mobile payments using the Brixton Pound, a local currency designed to encourage consumers to spend their money on independent local businesses.
E-Commerce : Payments through Mobile, Internet & Cards – This has vastly transformed the way businesses are being transacted these days. Within the past few years, online businesses have grown rapidly with business-to-consumer electronic-commerce (e-commerce) sales growing 21.1 per cent. E-commerce hit US$1 trillion for the first time in 2012, also the forecast that the growth in China’s digital shopper will be expanding enormously as the number of people who buy goods online is expected to double between 2012 and 2016. According to an independent market research company eMarketer. According to data released by China E-Commerce Research Centre (CECRC) recently, e-commerce in China grew by 31.4 per cent last year, reaching a total market value of more than US$2.1 trillion in 2014.
Few Highlights
- Presently, the major challenge or issue we are facing in the mobile payments market is the high level of market fragmentation meaning it has basic flow in terms of usability technology which is not very friendly with normal user even though technology should be friend and secondly defined both by the multiplicity of platforms/solutions technologies are being deployed and the increasing range of service configurations being offered. This slows down merchant acceptance and makes it difficult for providers to gain scale. We expect the market to reach a point where consolidation among players and solutions becomes the best way to drive address this issue.
- Mobile Money Service providers have to take a wide range of approaches (based on conditions mentioned before) to roll out merchant network for their mobile payment strategy in their markets. In Indonesia or even US what makes sense and work very well will never work in Kenya or Tanzania as services in the region offering merchant payments issue companion cards to their customers, leveraging the existing payment card industry infrastructure. In Africa (Example as Kenya or Tanzania), where card payments or card penetration / bank penetration is almost in ZERO, most merchants have merchant lines which separate from their regular line and merchant codes are associated with it to accept payments and interfaces they use again depends on their capability , volume and business type ie. May be POS, MPOS, Cheap Smart Phone or connection to their PC and some time even 30-50 dollar Chinese device meant only for touch and pay capabilities, example buying a bottle of water or a pack of cigarettes would be about 0-3 dollar transaction or toll gate fee 1-2 dollars needs transaction time of 5 – 10 seconds.
- Few central banks observed that under the new regime of Mobile Payments pricing, transactions conducted through online banking & Mobile Payment channels will attract the lowest fee, followed by transactions carried out at automated teller machines (ATMs) and lastly transactions performed over-the-counter (OTC). This allows and enforce Partnerships with ecosystem participants from all sectors (banks, retail, service providers and public sector) are essential to building a ubiquitous network of acceptance points. In addition, having a well-defined pipeline of compelling use cases is key for mobile payment providers to leverage the ecosystem to grow their user base and drive transaction volume.
Conclusion – Few vital questions, which need responses
What is the total strength of world Payment Market irrespective of mode & means then we draw
the pie and start slicing the modes. Use of pool accounts/wallets/funds are now growing where people come together and save money for future incidents like funeral, births, medical expense or marriage expense where it helps lower segment of society to keep running their life as usual without much problems but In a pragmatic sense, however, the distinction between shared and secret accounts remains a very real one. Now question is can these transaction will part of the same pie.
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