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M Payments Variety May Trump Grand Schemes

M Payments Variety May Trump Grand Schemes

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Published by: ReadEverything on Aug 06, 2010
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   D   i  g   i   t  a   l  e  c  o  n  o  m  y  a  n   d  s   t  r  u  c   t  u  r  a   l  c   h  a  n  g  e    E  -   B  a  n   k   i  n  g
     S    n    a    p    s     h    o     t
   3   4
 Author
Thomas Meyer+49 69 910-46830thomas-d.meyer@db.com
Editor
Antje Stobbe
Technical Assistant
Sabine Kaiser
 
Deutsche Bank ResearchFrankfurt am MainGermany
Internet:
www.dbresearch.com
E-mail:
marketing.dbr@db.com
 Fax:
+49 69 910-31877
 Managing Director
Thomas 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), others
don’t. 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 manyalternatives
 –
unlike in some developing countries. 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 investments and broad 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, German
consumers don’t want to reveal their mobile phone number during the payment
process: 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 almost
everybody can offer apps and mobile websites. As a consequence, we’ll likely s
eea large number of different 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
 
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, lessthan 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
don’t
. 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
ExamplesTechnologyAccountingPurchaseServicevehiclescenarioproviderSMSDirect debitShopTelecomoperatorNFCCredit card Vending(near fieldmachineFinancialcommuni-Pre-paidinstitutioncation)RemotepurchaseThird partyMobile internetPhone billMoneytransfer
 
2
12102468101214JapanEurope
Source: Forrester Research Inc., 2009
Share of consumersusing m-payments in stores (%)
Japanese inspiration
3
 
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 substantialinfrastructure 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 consumers
don’t want to reveal their mobile phone
number during the payment process:nobody wants an unsolicited call from abusiness or a creepy salesman. back tofront page
 
3.43.43.12.92.72.72.300.511.522.533.54Parking ticketPublic transportVenue ticketMobile stampsOnline shoppingVending machineTransfer 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
1.63.33.63.94.04.3012345SecureEasy to useDoes not disclose my mobile numberDetailed information on my transactionQuick transactionEasy registration
Source: Gapgemini, 2009
Q: What are the most importantcharacteristics of a mobile payment system?Rank from 1 (most important) to 6 (least important)
Base: German consumers
Safe and easy
6
7412731641013860102030405060708012345 EuropeUS
Source: Forrester Research Inc, 2010
Very interested ... ... not interested at allQ: How interested are you in buying products or services via your mobilephone? (%)
Cold reception
4

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