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Digital Commerce 2.0: Show me the (Mobile) Money

At our forthcoming Digital Commerce 2.0 Executive Brainstorm in London, 12-13 June, we will be presenting new research exploring the business case for mobile money services from both a telco’s perspective and a bank’s perspective. We will consider whether the business case is strong enough to justify the roll out of new hardware, as advocates of NFC maintain, or whether mobile money services should primarily be implemented in software. To find out more about our research services, to join the event, or find out how else you can participate, please email us on contact@stlpartners.com.

Background to the research

Mobile money services are gaining momentum across the world. In fact, some experts believe we are on the cusp of a mobile money revolution. At the recent Digital Commerce 2.0 Executive Brainstorm in Silicon Valley (report here for subscribers), Antonio Benjamin, Managing Director, CTO, Global Transaction Services at Citi, forecast that in 2014 there will be $1.13 trillion in global mobile transactions, up from $60 billion in 2010 (see slide below). That represents a head-turning compound annual growth rate of more than 100% per annum.


These bullish forecasts are being fuelled by the proliferation of mobile money transfer services across the developing world, in the wake of the success of M-Pesa in Kenya, and the expanding pipeline of handsets equipped with Near Field Communications (NFC) technology, which can be used to enable mobile payments at point of sale.

But how much value will mobile money transactions actually create and for whom? Will consumers be the primary beneficiaries or will the entire mobile money value chain prosper?

How will value be created?

In theory, at least, mobile money services will create value in many different ways - faster transactions, higher security, less fraud, less cash-handling, the creation of digital receipts and a digital data trail, automatic redemption of coupons and the digitisation of loyalty schemes. These latter three factors, in particular, may be enough to justify the expense of deploying mobile money services.

At the Executive Brainstorm in Silicon Valley, Baris Cetinok, SVP at American Express, presented the slide below, suggesting that mobile wallets could take digital marketing to a new level by enabling the smooth delivery of targerted advertising and the straightforward issuance and redemption of loyalty points and coupons. Cetinok described the cost of payments as “a negligible conversation, compared with marketing costs”, adding that “the prize is all about the marketing dollars that merchants spend today”.


Making the benefits outweigh the costs

Of course, the potential benefits of mobile money services have to be balanced with the potential costs. In the case of hardware-based solutions, such as NFC, these include the cost of adding NFC chips to handsets and deploying NFC terminals in merchant outlets, as well as the cost of developing the necessary software and services to support a mobile wallets. Someone will also have to pay to educate consumers and merchants on both the benefits of mobile money and how to use it. Moreover, there are major differences in the mobile money business case between developed markets, where debit cards are well established, and developing markets, where cash is still king.

Liberating the (Mobile) Wallet

Our new research will be presented during a session on how to stimulate mass-adoption of mobile wallets, which will be followed by a session on how to scale a new approach to merchant-consumer interaction. Speakers will include Cenk Bayrakdar, Chief New Technology Business Officer at Turkcell, which is rolling out NFC-based mobile money services, and Shaygan Kheradpir, Chief Operating Officer at Barclays Global Retail Bank.

These highly-interactive sessions will look to establish the best way to educate consumers on the capabilities and benefits of mobile payments, the kinds of partnerships and collaboration in the ecosystem that will help drive adoption, and which products will best bridge the online and offline worlds.

Soon after the EMEA Brainstorm, we will publish its research into the business case for mobile money as an Executive Briefing - one of a series of reports on M-Commerce 2.0 that we will produce over the next 12 months. This research stream will explore key aspects of mobile commerce, such as the effectiveness of personalised advertising, the data that can be captured by smartphones, and the roles of different players in the value chain.

To find out more about our research services, to join the event, or find out how else you can participate, please email us on contact@stlpartners.com.

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