Payments Footprint of Mobile Operators
The traditional telco business model has evolved from being monopolistic and conventional voice service providers to being a key stakeholder in an era of OTT and several ubiquitous applications across various fields. One such key field is “Payments”.
Here are some of the key issues that have forced carriers globally to look beyond their core competency into newer verticals like payments:
- Providing adequate data capacity and monetization: As we shift from traditional voice based models to data based models, the demand for data is increasing day by day. Today, consumers value access to data more than the voice. The telcos are expected to provide their users with a seamless user experience and high quality speed during their data access. As a result, they need to shift their strategies from voice models to data models and have to seek solutions through which they can earn revenue from the additional bandwidth that the users are demanding.
- Investments in infrastructure and ROI: With the shift away from traditional models, the operators also need to examine their physical infrastructure to provide users the high quality speed which they are demanding.
- No longer want to act as 'dumb pipes': The carriers were reduced to being just dumb pipes, even while services being offered by players like Apple and the OTT players grew. With the rise in competition, telcos are not left with many choices but to enter into strategic partnerships with other players, and to look at newer revenue opportunities.
Carriers & Payments:
With the expanding telecom ecosystem, the operators are now exploring new verticals for revenue generation. Mobile payments technology is one of them. Today almost every operator is expanding its horizon into this segment as they have the customer’s trust for their billing services. The telcos are trying to cash in on this opportunity in every possible way. According to IDC Financial forecasts, more than a trillion dollars will be spent around the world using mobile devices by 2017. So mobile commerce is hot for operators.
Some key strategies adopted by the carriers to leverage this opportunity:
- Telenor collaborated with Telefonica’s BlueVia API platform. BlueVia was launched to provide mobile app developers the access to operator application programming interfaces (APIs) so that they can utilize operator services for payments, location, messaging and advertising from within mobile apps and services.
- In Denmark TDC, Telia & H13G along with Telenor have established a joint venture with the aim of developing mobile payments.
The payment players need the support from operators mainly for two reasons:
- Any transaction that happens on mobile phones has to be authenticated and the processing has to be safe and secure. This can be made possible in a seamless manner with the operator’s help.
- A lot of data generated by the transactions lies with the operator. This data can be used for analytics, which can be used for data licensing.
Let us discuss the various mobile payment modes being implemented by the three global Carriers: Telenor, Telefonica & Vodafone. These are very global in nature.
Operators and their payment strategies:
History: Telenor Group is a Norwegian multinational telecommunications company headquartered at Fornebu, close to Oslo. It is one of the world's largest mobile telecommunications companies with 166 million mobile subscriptions and operations in Scandinavia, Eastern Europe and Asia. As of March 31st 2013, Telenor had 3.2 million mobile subscriptions in Norway, of which around 80% were contract subscriptions.
Forms of Mobile Payment used by Telenor:
NFC (Near field Communication): Telenor in collaboration with DNB (Norway’s largest bank) offers a mobile contactless payment product.
Easy paisa: This service was launched in Pakistan in 2009 through a partnership between Telenor Pakistan and Tameer Microfinance group. Telenor has a 51% of ownership in Tameer group. The main differentiating factor here is that the customer does not require a mobile phone or an account with Telenor to pay her bills. These transactions can be completed by the merchant on her mobile phone.
a) Easy paisa mobile accounts (m-wallets): This facility was launched in Pakistan in 2010 for Telenor subscribers only.
b) Mobicash: The service was launched in Bangladesh. It has offered Billpay services for the last four years, which is an agent assisted utility bill payment service.
c) Platimo: This is an electronic payment system by Telenor Serbia. It provides subscribers the facility of paying their monthly bills with the mobile phone.
d) ATM SIM: Dtac and KBANK, in collaboration, introduced an ATM SIM project in 2007. This service offers bill pay, fund transfers, balance checks and ticket purchases.
History: Vodafone is a British multinational telecommunications company. It owns and operates telecommunications networks in 21 countries and has partner networks in 40 countries. It's currently the world’s 2nd largest mobile network operator. It first launched a payments service in March 2007 in Kenya with Safaricom in the form of M-PESA.
Various modes of payment supported by Vodafone today:
M-PESA (M for mobile, PESA is Swahili for money) is a mobile phone based money transfer and micro-financing service. M-PESA was aimed at mobile customers who did not have bank accounts. The M-PESA system provides customers with basic banking facilities.
Presence in market: By 2008 M-PESA had 1.6 million registered customers; by 2011, it had 14 million registered users, who accounted for 40% of the country’s transactions. Next, the M-PESA service was introduced in Tanzania and Afghanistan following the success in Kenya. M-PESA was then launched in South Africa in 2010 and in India in 2013.
2. Mobile Wallet
In 2012, Vodafone partnered with VISA, to introduce a Vodafone Mobile Wallet. This enables subscribers to transact for goods and services using their smartphones instead of traditional coins and notes.
Presence in market: Mobile Wallet was initially launched in Germany and then gradually expanded in Europe to Spain, Turkey and the Netherlands.
3. NFC Mobile Wallet / Contactless Mobile Wallet
In 2013, Vodafone announced its contactless mobile wallet wherein the transaction could take place with just a touch or a wave of the subscriber’s smartphone. This was the first mobile payment service built on Global Platform.
Presence in market: The mobile wallet was initially launched in Spain, followed by UK, Germany and Italy.
Vodafone is also moving to more developed nations with the NFC Mobile wallet or contactless financial services. They have recently launched their services in Romania and have plans to even expand further.
History: Telefonica is a Spanish multi-national telecommunications company. It has operations in Europe, North America, South America and Asia. It's the world’s 5th largest telecom operator.
Telefonica in the Payments Industry:
Started in late 2012 with M-wallet services in UK, which was eventually converted into a contactless M-wallet.
1. Mobile Pass
Mobile pass is a mobile-to-mobile money transfer facility. It enables the transfer of money from any M-Pass account to another M-pass account, virtually in real-time.
2. O2 Wallet / Mobile Wallet
Telefonica launched this service initially in UK in partnership with Monitise in 2012. This service enables users to transact for goods and services using their smartphones rather than traditional coins and bank notes. It was later introduced in Spain in a tie-up with Bango and other banks in 2013. Following this, it was introduced in Germany in the same year.
3.) Contactless Mobile Wallet
With the advent of NFC technology, the mobile wallet was converted into a contactless mobile wallet using which the transaction could take place without a touch. This service is now available in UK, Spain and Germany.
While the steps taken by the carriers around the globe indicate their shift in focus towards integrating payment solutions, we have already witnessed a few failures and shutdowns (e.g. O2 wallet in UK). In our opinion, the carriers' approach so far has worked well in monopolistic markets like Africa, but the carriers might need to tweak their approach in the more competitive markets and work with FIs and banks. In these markets, collaboration with other industry stakeholders, and perhaps even rivals, is a better approach than launching standalone services. Going forward, customers will appreciate wallets that are interoperable across operators, handsets and all mobile OS. Thus the key question for the carriers is not how to launch their own wallet, but how to find the right business model and get to market with a realistic possibility to scale!