M Payments Variety May Trump Grand Schemes
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8/9/2019 M Payments Variety May Trump Grand Schemes
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Digitaleconomyandstructuralchange
E-Ban
king S n a p s h o t
34
AuthorThomas Meyer+49 69 [email protected]
EditorAntje Stobbe
Technical AssistantSabine Kaiser
Deutsche Bank ResearchFrankfurt am MainGermanyInternet: www.dbresearch.com
E-mail: [email protected] Fax: +49 69 910-31877
Managing DirectorThomas Mayer
M-payments have stirred great expectations but shown limitedmarket success so far. According to Gartner, a technology advisory company,less than 1% of European and less than 2% of North American mobile users alsopay with their mobile phones. Yet, new attempts to establish m-payments shouldnot be written off automatically. It may not be the grand m-payment schemes manyoptimists imagine that succeed eventually, but a number of smaller, diverse andintuitively useful applications. chart 1
M-payments usually cover payments involving a mobile phone (e.g.,paying a parking ticket via premium SMS). There are many varieties depending onthe technology, the accounting vehicle, the purchase scenario or the serviceprovider. Some definitions exclude purely mobile content (e.g., ringtones), othersdont. A key distinction is between proximity payments at the point of sale an dremote purchases. With the growing overlap of online and mobile experiences(mobile internet) the answer to what constitutes an m-payment is becomingincreasingly blurred. chart 2
Successful applications can be seen e.g. in Japan or in somedeveloping countries. M-payments will be much harder to establish in Europeand the US because the existing financial infrastructure (and cash) offers many
alternatives unlike in some developi ng countr ies. Moreover, the supply side ismore fragmented than, say, in Japan. chart 3
Few consumers are excited about purchases via their phone. Thispoints to serious adoption hurdles in Europe and the US. Potentially game-changing technologies (e.g., contactless payments via NFC) need substantialinfrastructure investme nts and b road support from shops and merchants beforeconsumers will sign up. chart 4
Yet, there are some purchase scenarios that stir more interest thanothers. Germans are more open-minded when it comes to mobility-relatedexpenses. Lacking the right change to feed a parking meter is a scenario thatquite convincingly illustrates the usefulness of m-payments. chart 5
M-payments need to be safe and easy to use. Moreover, Germanconsumers dont want to reveal their mobile phone number during the paymentprocess: nobody wants an unsolicited call from a business or a creepy salesman.chart 6
Apps and mobile internet open up new business models. Modernsmartphones offer access to app stores and additional services. This has loweredthe entry barriers of new m-payment solutions substantially because almosteverybody can offer apps and mobile websites. As a consequence, well likely s eea large num ber of dif ferent mobile applications with embedded paymentcapabilities . chart 7
Many small front-end applications may integrate m-payments. Appsand mobile internet unleash the creativity of developers to produce new,
unexpected and useful applications. Each may only have a limited scope (e.g., aloyalty and payment app for a specific store) and rely on traditional paymentoptions for settlement. In fact, German smartphone owners already use manyapps in parallel. chart 8
Mobility and location-based applications are a good starting point. They combine the highest consumer interest, the most likely purchase scenario(on the move) and leverage the technical capabilities of modern phones. chart 9
August 2010
M-payments: Variety maytrump grand schemes
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8/9/2019 M Payments Variety May Trump Grand Schemes
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E-Banking Snapshot 34 M-payments
August 2010 2
M-payments have stirred greatexpectations but shown limited marketsuccess so far. According to Gartner, atechnology advisory company, less
than 1% of European and less than 2%of North American mobile users alsopay with their mobile phones. Yet, newattempts to establish m-paymentsshould not be written off automatically.It may not be the grand m-paymentschemes many optimists imagine thatsucceed eventually, but a number ofsmaller, diverse and intuitively usefulapplications. back to front page
M-payments usually cover paymentsinvolving a mobile phone (e.g., payinga parking ticket via premium SMS).There are many varieties depending onthe technology, the accounting vehicle,the purchase scenario or the serviceprovider. Some definitions excludepurely mobile content (e.g., ringtones),others dont . A key distinction isbetween proximity payments at thepoint of sale and remote purchases.With the growing overlap of online andmobile experiences (mobile internet)the answer to what constitutes an m-payment is becoming increasinglyblurred. back to front page
Successful applications can be seene.g. in Japan or in some developingcountries. M-payments will be muchharder to establish in Europe and theUS because the existing financialinfrastructure (and cash) offers manyalternatives unlike in somedeveloping countries. Moreover, thesupply side is more fragmented than,say, in Japan. back to front page
Source: DB Research, 2010
Great expectations - limited success
1
Many varieties of m-payments
Source: DB Research, 2010
Examples
Technology Accounting Purchase Servicevehicle scenario provider
SMS Direct debit Shop Telecomoperator
NFC Credit card Vending(near field machine Financialcommuni- Pre-paid institutioncation) Remote
purchase Third partyMobile internet Phone bill
Moneytransfer
2
12
1
0
2
4
6
8
10
12
14
Japan Europe
Source: Forrester Research Inc., 2009
Share of consumers using m-payments in stores (%)
Japanese inspiration
3
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8/9/2019 M Payments Variety May Trump Grand Schemes
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E-Banking Snapshot 34 M-payments
August 2010 3
Few consumers are excited aboutpurchases via their phone. This pointsto serious adoption hurdles in Europeand the US. Potentially game-changingtechnologies (e.g., contactlesspayments via NFC) need substantial
infrastructure investments and broadsupport from shops and merchantsbefore consumers will sign up. back tofront page
Yet, there are some purchasescenarios that stir more interest thanothers. Germans are more open-minded when it comes to mobility-related expenses. Lacking the rightchange to feed a parking meter is ascenario that quite convincinglyillustrates the usefulness of m-payments. It also demonstrates a clearadvantage of m-payments over otherpayment options: users can oftenextend the validity of the parking ticketvia phone without having to return tothe car. Mobility-related expenses arethus often seen as a way to enlist acritical mass of consumers upfront to anew payment system . back to frontpage
M-payments need to be safe and easyto use. Moreover, German consumersdont want to reveal their mobile phonenumber during the payment process:nobody wants an unsolicited call from abusiness or a creepy salesman. back tofront page
3.4
3.4
3.1
2.9
2.7
2.7
2.3
0 0.5 1 1.5 2 2.5 3 3.5 4
Parking ticket
Public transport
Venue ticket
Mobile stamps
Online shopping
Vending machine
Transfer money to friends
Source: Gapgemini, 2009
Q: In which situations can you imagine using a mobile payment service?Score from 1 (not at all) to 5 (very well)
Base: German consumers
Mobility-related expenses rank highest
5
1.6
3.3
3.6
3.9
4.0
4.3
0 1 2 3 4 5
Secure
Easy to use
Does not disclose my mobile number
Detailed information on my transaction
Quick transaction
Easy registration
Source: Gapgemini, 2009
Q: What are the most important characteristics of a mobile payment system?Rank from 1 (most important) to 6 (least important)
Base: German consumers
Safe and easy
6
74
12731
64
101386
01020304050607080
12345
Europe USSource: Forrester Research Inc, 2010
Very interested ... ... not interested at all
Q: How interested are you in buying products or services via your mobilephone? (%)
Cold reception
4
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E-Banking Snapshot 34 M-payments
Apps and mobile internet open up newbusiness models. Modern smartphonesoffer access to app stores andadditional services. This has loweredthe entry barriers of new m-paymentsolutions substantially because almost
everybody can offer apps and mobilewebsites . As a consequence, welllikely see a large number of differentmobile applications with embeddedpayment capabilities. back to frontpage
Many small front-end applications mayintegrate m-payments. Apps andmobile internet unleash the creativity ofdevelopers to produce new,unexpected and useful applications.Each may only have a limited scope(e.g., a loyalty and payment app for aspecific store) and rely on traditionalpayment options for settlement. In fact,German smartphone owners alreadyuse many apps in parallel. back to frontpage
Mobility and location-basedapplications are a good starting point.They combine the highest consumerinterest, the most likely purchasescenario (on the move) and leveragethe technical capabilities of modernphones. back to front page
0
5
10
15
20
25
30
>40 21-40 11-20 6-10