January 14, 2016
It was the year 2008. The 5 largest mobile network operators (MNOs) in the US had started working on a joint play in mobile payments - it was a super secret initiative to take on the very financial institutions who were also their biggest customers! Now this was a big deal, not because it was top-secret and required the involvement of antitrust counsel, but because it was ambitious! Very ambitious! The initiative had the potential to disrupt the balance of payments amongst the 2 proud industries, considering that the biggest US banks pay the biggest operators hundreds of millions of dollars for telecom services of all kinds. In turn, the largest mobile operators pay hundreds of millions of dollars in payments and other fees to the largest financial institutions. With this new secret project, the MNOs were getting ready to eat their lunch, i.e. the big banks’ lunch!
Even though the MNOs were conspiring to invade the greener grass on the other side jointly, there were already some not-so-secret lines of communication between individual banks and individual MNOs to brainstorm areas of collaboration. I remember one such introductory call between the payments & commerce lead at the largest US MNO and the mobile innovation lead at the largest US retail bank. After the pleasantries and the exchange of self-congratulatory statistics (We just crossed 90 million subscribers), there was bound to be some unsavory banter like, So, who owns the customer? - that phase was already going out of fashion in public discourse, regardless of whether or not it is still a consideration in decision-making. And then someone said:
Let’s stick to our knittings…
At the time, this did not seem like an acceptable position to agree to for any self-respecting new business development person in either of the two camps, especially if it was proposed by the other side! After all, remember the reason that the MNOs were secretly banding together was to do exactly the opposite - to try to build a new mobile payments network that would allow them to earn billions of new dollars - and grow into areas outside their competencies.
This was not an isolated US specific scenario. It was a decade-long learning process for MNOs and banks around the world in every market, and after many attempts at different variations of trying trying to own the customer in mobile payments, we now have more clarity: the WINNER is NOT the consumer and the LOSER is NOT the group of Tech Giants. The Tech Giants, specifically Apple, Google and Samsung have stayed true to their core competency of at-scale technology innovation and made sure they have a shot at the gold medal. There are two other broad groups of companies in this race as well, viz. those deeper in the supply chain such as the chip-makers who benefit behind the scenes regardless of who stands on the podium; and the variety of FinTech startups in the space, some of whom have had fantastic exits and many of whom are still working on it.
Now, back to the 2 players at the beginning of the starting line...who is closer to the prize - banks or MNOs? Of course, this is not a linear race, rather a multi-dimensional multi-team strategic sport. There are countries where MNOs have had stellar successes (Kenya) and there are others where the second or third attempt shows promise (Canada), and many other instances around the world where mobile payments is seeing great adoption with or without support from MNOs. In most cases however, the banks seem to be learning much faster as a group, and have managed to not let themselves be disrupted, yet. Especially in the US, they are clearly better positioned than the MNOs to keep doing what they are meant to do, which is to offer financial services that are in tune with the rising expectations of consumers.
How about the US MNOs? LTP has covered their story in detail over the years; in fact, we have been part of the story. As we look at them now from the outside, they seem to have completely abandoned the playing field! Of course, there are bright minds in there who have the potential to bring their respective companies back into the game and re-ignite the new business development opportunities that are not difficult for them to take advantage of. In fact, this is not an ivory-tower ready consulting platitude; it’s an actionable, clear and present revenue opportunity that can be materialized in 2016, supported by our FinTech knowledge-base, now also available to the industry via MEDICI - the research, discovery and engagement platform for FinTech.
So, what could the US MNOs successfully offer in 2016, keeping in mind their unique undeniable strategic assets, the availability of eager capable non-MNO stakeholders (startups or otherwise) willing to engage in real partnerships, and an unbiased understanding of what their subscribers really want from them, all in today’s conducive environment of technology-enabled open innovation?
We have identified some of these low-hanging-fruit use cases that subscribers of the US MNOs will appreciate being offered to them. Each of them is backed by our own analysis and validated by an initial set of conversations with select thought leaders, from US MNOs, US banks and startups in the space. We are now seeking industry-wide input to prioritize them for the benefit of our audience and also add to the list as appropriate.
Your inputs are not only invaluable in bringing back these giants back from hibernation, but you will also be rewarded. LTP is offering a chance to win two $50 gift cards for your votes (randomly selected from all votes). All you need to do is select the one use case that you think is the most appropriate for US MNOs to offer their subscribers (if you want to vote on more than one, simply re-submit your response). To be entered into the drawing, you will also need to provide your email address and share a brief perspective.
Each of the choices is also outlined below the Submit button along with a brief explanation of our methodology. If you would like to add to our list of validated use cases or have the time to provide a more thoughtful and thorough response (and are interested in our little incentive to share your perspectives), then please use the free text form at the end of this post.
We used 3 primary criteria in identifying the suggested use cases:
- Possible to launch and earn revenue in 2016
- Uses MNO strategic assets to offer non-telecom product or service
- Offered directly by a US MNO, regardless of brand (existing, new, white-labeled)
So, here they are in no particular order, each of them analyzed and validated by LTP analysts, supported by our initial research:
On-demand Small Credit: Personal Loans in Real-time: Loyal subscribers who have proven their creditworthiness by paying their phone bill on time will appreciate the ability to get a quick loan in times of need. Examples include payday loans, loans at POS, P2P loans and loans aimed at specific needs (education, health emergency, etc.). All these have one common factor, viz. data and technology used for underwriting the risk involved. An MNO who can provide an additional data point of the subscriber’s bill payment history could further extend the range of credit offerings.
Imagine the customer delight when an MNO enables this moment: Subscriber walks into a retailer and gets a text message with a ‘same as cash’ credit line. Now the subscriber can get that washer and dryer and pay later!
Self-managed Identity Protection & Personal Data Protection: A subscriber’s phone number, device and network footprint is almost as good as her unique identity, and who better than the MNO to help her protect and manage that? Solutions and tools aimed at taking care of one’s identity are natural extensions of MNOs’ privacy management offerings This could be in partnership with 3rd party trust companies that store your ID info and allow users to select whom to share these details with and whom to withhold it from.
Solutions which provide subscribers complete ownership of their data, not just their mobile service related information, will be a compelling area of investment that is easily achievable without huge investments. The vast data generated by every individual - browsing, travel, recreational activities, shopping, app usage - are all captured and analyzed to provide advanced personalized services. The most important element is to allow the subscriber to own and manage this data and its use completely and transparently.
In fact, there is a suite of banking and commerce related benefits that can be offered to subscribers: Verified Caller ID - the MNO can tell you if that call you are getting is really from your bank or from that long lost friend; Bank Login Notifications - wouldn't it be great if you can see when someone logs into your bank account from any device? You can then shut down fraudsters who have hacked in; "Kill switch" - this disables mobile banking access when phones are lost or stolen. The MNO knows the phone might be in the wrong hands, and can provide a heads up to the subscriber.
Personalized Shopping and Infotainment Experiences: MNOs are in a unique position to offer their subscribers the ability to personalize the audio and video services that they wish to watch. News, music, ads, etc. could all be aggregated and curated according to the user’s preferences. The connected car initiatives opens new opportunities for innovation in this space that has been addressed numerous times already, but is still dominated by entities other than the MNOs.
Similarly in mobile-enabled shopping, every major retailer or e-commerce provider looks at utilizing apps to provide personalized shopping services. MNOs, with all their data, could start providing similar services to their customers based on expressed and inferred preferences. This one has also been attempted before, but just like mobile payments, there’s always a second chance.
Open-loop Rewards Based on Earned Loyalty Points: Loyalty and rewards have seen huge adoption from every corner and 2nd tier MNOs have attempted to offer such benefits. Retailers, airlines, merchandise stores, online travel sites and many other consumer brands routinely offer their customer loyalty points. The offering here should be seen as a carrot for being a loyal customer rather than the current stick, which is early termination fees.
Payment Card related Security Services: Most consumers don’t really need yet another credit or debit card, but they do need tools and services to use the ones they have more conveniently and securely. There are some logical features that MNOs can add on to their subscribers’ cards:
- Credit card freeze which disables credit or debit cards from your phone when the card is lost; if you leave your card at a bar, why not "freeze" its use using an app on your phone that the MNO can provide?
- Transaction-level approval for online or offline card use, similar to how Discover has been marketing lately, but now for all cards in your wallet. You can also get an alert every time you use the card.
And how about mobile payments and digital wallets...what should or can the US MNOs do in 2016 to re-ignite what they had started in 2008? We do have some pragmatic ideas here at LTP, and we are keen to get your thoughts on the topic as well. We will publish a sequel to this post in a few weeks to include all your inputs and the results of our own consumer research in a summary analysis.
Let’s get the US MNOs back in the game...it will be more fun for everyone!