The pace of evolution is quickening in the mobile payments market, driven by new technologies and customer needs, alongside a changing regulatory environment.
In this study – the latest in a series of reports on developments and opportunities in the mobile payments market – we highlight the opportunities for telecoms operators.
In compiling the 2014 report, we have drawn on detailed research and client insights from EY industry professionals, supplemented by an online survey of 6,000 consumers in 12 countries worldwide across four continents.
3 key findings
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Mobile payments are set for a new wave of growth, but disruption is rising in a blurring industry landscape
- Mobile payments innovations have occurred sporadically over the last decade to suit local scenarios. Operators in emerging markets were the first to leverage mobile money, but the pace of innovation is now quickening in developed markets.
- Accelerating growth is expected in the value and volume of mobile payments transactions globally, with non-banks accounting for a rising share.
- The universe of mobile payments services is expanding rapidly as boundaries blur between payments, marketing and shopping services delivered via mobile and as new entrants disrupt existing market scenarios.
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Strong enabling environments are vital to the long-term success of mobile payments
- Around the world, support from governments and central banks has provided the bedrock for scalable mobile money transfer services.
- Sector-specific policies and consumer protection frameworks need to be aligned to help overcome fragmentation in mobile payments.
- Horizontal (multi-operator) and vertical (multi-industry) partnerships in mobile payments are becoming more prevalent. However, as partnering models become more complex there is a growing risk of ecosystems competing with each other.
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Operators must widen their service offerings
- Operators should include a greater range of financial services while also combining payments with related functionalities in location-sensitive marketing and advertising for consumers, businesses and partners alike.
- Flexible business and operating models are vital if service providers are to meet evolving customer demands, adapt to local market conditions and cope with shifting regulatory imperatives.
- Our consumer research shows the importance of segmenting customers, which will only become more important as addressable markets widen and new use cases arise. Care must be taken to highlight the relevance of new services while ensuring that privacy and security credentials are well understood.
5 strategic success factors for mobile operators
To succeed in the mobile money services space, operators must remain sensitive to the evolving nature of the mobile payments opportunity and execute their service strategies by leveraging existing strengths and growing new competencies to support a phased expansion.
To claim their share of users, transactions and revenues in this diverse and expanding mobile payments landscape, we believe operators need to harness five key success factors:
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Leverage established strengths and reputation in security and customer insight
Operators have trusted consumer brands in terms of security — and this is a vital competitive advantage in a fast-evolving service environment where security concerns hinder customer take-up.
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Improve and align payments-related competencies within the organization
This is needed to achieve the necessary blend of flexibility and focus, and should be supplemented by external hires with experience in payments and marketing. Design and development of payments services should be linked and integrated with other emerging competencies in cloud, big data and customer analytics to sustain and grow long-term differentiation.
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Engage with customers, suppliers and stakeholders in new ways
Engaging in new ways with a widening set of ecosystem partners and stakeholders is essential to ensure that value chains are incentivized. Engagement with merchants and vendors can strengthen service creation — while greater focus is needed on the end user experience.
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Consider targeted investments to improve time-to-market
Targeted acquisitions may prove invaluable as operators ramp up their service portfolios and may help them get to market more quickly with compelling services in high-potential areas like insurance and customer loyalty solutions.
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Reinvigorate partnerships and joint ventures to grow capabilities and improve credibility with end users
Partnerships will remain the lifeblood of successful mobile payments and related propositions, particularly as operators look to differentiate their offerings with more sophisticated functionalities. In this light, robust partner screening and alignment are essential, as is leadership buy-in from organizations looking to partner.
In our view, the mobile money opportunity is one that no operator can afford to ignore. As mobile transfer and payment solutions become increasingly differentiated and integrated into the wider mix of mobile services, they will increasingly drive buying and usage decisions by customers of all types. Operators that invest now in the necessary capabilities, technologies and relationships will reap the benefits for many years to come.