The Battle Over Mobile Banking

Throughout the world, the competition for consumer spending is intensifying – if that’s even possible.

One of the latest weapons in this battle is mobile payments in the form of mobile wallets and mobile NFC payments. The key players vying for a piece of this opportunity include banks, retailers, Internet service providers, and yes, even your mobile phone company.

Implementation of mobile payment systems varies widely, and with the major players relying on their strengths and attempting to overcome their weaknesses, there is not yet a single business model that dominates across the globe.

Developing economies are leading the way

The use of mobile payments is already well underway in emerging economies such as Africa, where there are plenty of largely cash-based communities. Transactions are often small, making service fees from banks and credit cards prohibitively high.

However, prepaid mobile phones are prolific, which has allowed communications service providers (CSPs) to turn phones into a payment network for simple transactions such as transferring money, remittances, micro-finance, and sending or receiving payments.

The more developed the country, the more complicated it becomes

It’s a different story in the developed world. In these economies, many people already have one or more bank accounts or credit cards. In addition, there are stricter banking, telco, and government regulations, so there are more challenges to overcome.

Banks and retailers typically have the advantage, but who’s leading the way varies from country to country. For instance, in Canada where there are highly regulated banking and telco markets, there is a cohesive effort between these industries and the government. Consequently, Canada is now a highly wired society that has pin-enabled payment terminals and contactless cards all set up, with prepaid cards available for transactions of $100 or less. CSPs are capitalizing on this, and are putting mobile wallets on phones to enable these kinds of services. To gain an even bigger advantage, one CSP has gone through a lengthy process to actually get a banking license.

In the U.S., however, there is no one industry taking the lead – yet. However, a few of the major mobile operators teamed up with some of the leading merchants and banks to create the Isis Wallet, a free app that enables payments from phones. Yet another mobile operator has built an open platform for mobile commerce, enabling other wallets such as Google’s. To mobilize the acceptance of traditional credit cards, a few merchants now offer mobile point-of-sale terminals.

The inconsistent presence of contactless or pin-enabled card terminals, along with the fact that smaller stores don’t accepts card payments at all, makes for a complex environment to launch mobile payments. So in the push to capture the revenue for this market, how will CSPs fare? They have a good fighting chance and here’s why.

The opportunity is there for the taking

When it comes to serving customers in the digital mobile world, banks are a bit behind from a technology viewpoint, and will continue to lag until they revamp their infrastructures to be more customer-centric.

This leads the door wide open for others to step in, which Walmart and other retailers, along with Google and Apple, recognize. But they too have a few challenges before they can master this market. So while banks, retailers, and other players try to figure this out, how can CSPs edge forward? Here are a few key steps they should take:

  • Create a compelling customer experience. With all the payment options consumers have, CSPs will only gain their mobile payment business if there is a compelling reason to switch. Certainly, the convenience of using an ever-present phone is one, but CSPs will need to do more, whether it’s added value, loyalty programs, or some other unique motivation.
  • Unify customer billing. CSPs are not built to be banks, but they do know how to be a biller of services. The technology is now available for them to bring mobile payments and telecommunication charges together in one bill. This makes it easy to offer such things as family mobile wallets, much like the family calling plans that CSPs offer in North America.
  • Learn from the wins. There are lots of lessons CSPs can learn from the success of the M-Pesa service and how it’s helping billions of people around the world without bank accounts.
  • Look at other industries. Retailers, consumer package goods companies, and even brand market agencies are experts on consumer spending patterns as well as loyalty and merchandising programs. And banks certainly know how to provide financial services, so CSPs can learn what platforms these industries are using and capitalize on a bit of cross-industry pollination.
  • Be willing to collaborate. For mobile payments to be effective, CSPs will need the cooperation of the other industries. For instance, there needs to be a retail infrastructure for mobile payments if a customer wants to pay with a phone in a store. Canada has already made terminals pin-enabled, but this may be a big challenge for CSPs in other countries.
  • Leverage inherent strengths. CSPs typically have a good brand reputation, as they protect customers’ personal information with watertight security and stringent data privacy policies. Consequently, CSPs can securely guarantee the identity of a person and protect his or her personal data as they enable mobile wallets.
  • Work with the right partners. There are technology vendors that are already working with the world’s leading banks, retailers, and telcos to build an efficient mobile payment business model. Their expertise and existing relationships offer CSPs an opportunity to interconnect with the best from each stakeholder industry.

SAP is working on next-generation services such as mobile commerce and is poised to help CSPs take the lead in leveraging this business model.

Howard Stevens is the global manager of telecommunications at SAP. He leads a team that is dedicated to working creatively with telecommunications companies to develop long-term strategies for innovation, new revenue generation, and the use of best practices.

Photo: Shutterstock

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