Informa predicts service revenues of over USD 10 billion from mobile

Released: 26th February 2009
Since the turn of the millennium we have heard that one day the mobile phonecould replace the humble leather wallet, by storing electronic cash andenabling convenient electronic transactions. Yet so far, except for a fewisolated cases, there has been little evidence that the consumer hasembraced this new paradigm despite the availability of mobile payment andbanking services in most markets worldwide. However, according to InformaTelecoms and Media’s recent report, Mobile Payments and Banking: WorldwideMarket Analysis, Strategic Outlook & Forecasts to 2013, this day is gettingcloser.

Informa Telecoms & Media forecasts that in 2013 almost 300 billiontransactions, worth more than US$860 billion, will be conducted using amobile phone – a twelve-fold increase in gross global transaction values injust five years.

“The mobile payments and banking market has evolved considerably over thelast two years. Major industry initiatives led by the GSMA and significantcommitments to the market from major financial services and telecoms leadershave changed the dynamics of this market,” says John Darnbrough, Associate,Informa Telecoms & Media and author of the Mobile Payments and Bankingreport. “At last there is real evidence of demand for these services, somefrom the unlikeliest of places such as the emerging markets of Africa andAsia. The prospects for growth and the emergence of new opportunities inmobile financial services are encouraging more players to enter themarket.”

This comprehensive report defines and analyses the mobile payments andmobile banking market, looking individually at four key sub-markets: remotemobile payments, local (NFC) mobile payments, mobile banking and mobilemoney transfer (MMT).

Remote Mobile Payments
Informa predicts that by 2013, over 445 million mobile subscribers will beregularly using their mobile phone to purchase physical goods and servicesremotely. Furthermore, Informa estimates that of the total value of mobilepayments and transactions in 2008 – around US$71 billion – approximately athird was spent on purchases of mobile digital content such as ringtones,games and music tracks, but by 2013 over 95% of mobile transactions will befor physical goods and services.

Local (NFC) Mobile Payments
The report also analyses developments in mobile NFC technologies, businessmodels and the results of recent market trials and concludes that despiteits promise the mobile NFC market will be held back by the lack ofavailability of NFC enabled handsets and uncertainties regarding thebusiness model and business case for mobile NFC. Nevertheless, Informaforecasts that in 2013 approximately 11% of all mobile handsets shipped willbe NFC enabled and that over 178 million mobile subscribers will beregularly using mobile NFC phones to buy physical goods and services, suchas tickets, locally at the point of sale.

Mobile Banking
The report examines the trend of banks in developed markets utilizing themobile phone as another channel to market for their existing services andthe emergence of mobile enabled ‘branchless banking’ services for‘unbanked’ consumers in developing markets. It forecasts that by 2013there will be 977 million users of mobile banking services worldwide adramatic increase from approximately 67 million at the end of 2008.

Mobile Money Transfer
The report also looks at the evolution of the mobile money transfer market,primarily driven by the requirements of migrant workers from emergingmarkets. By 2013 Informa forecasts that almost 424 million consumers willbe sending over US$157 billion of personal funds via mobile domesticallywhilst a further 73 million will be sending US$48 billion of funds viamobile internationally.

The research for the report identifies a number of drivers and enablers thatare creating an environment more conducive to the development of the mobilepayments and banking market. Mobile phone and network technologies are nowmore sophisticated and more mature than ever before and, thanks to industryinitiatives, more coordinated and standardized. Regulatory authorities arebeing empowered by national and regional government agencies to take a more‘enlightened’ approach to this market – particularly in developingmarkets where it is recognized that mobile banking and mobile money transferservices can facilitate and encourage economic growth in the poorest andmost deprived regions. Consumers are becoming more familiar with the use ofthe mobile phone for applications beyond calls and are more confident in theuse of electronic commerce (via their experience of online shopping).Furthermore, there are signs that the key players in the ecosystem are nowmore prepared to collaborate and invest in creating the systems,infrastructure and consumer confidence necessary to ensure this marketthrives.

However, uncertainties still exist, not least the potential impact of theglobal financial market melt-down that has suddenly gripped the worldeconomy in the last few months. With the banking sector in crisis, industryand consumer confidence has been dealt a hammer blow that will potentiallyseverely limit spending in all parts of the economy – reducing investmentsin new services and infrastructure, and reducing the consumer spendingneeded to drive revenues from these new services.

Yet these new technologies and service opportunities do offer the potentialto make real cost reductions, attract and retain customers and potentiallydrive new revenue growth and profit opportunities for mobile operators,banks and credit card companies. The opportunity still exists for the mobileand financial services industries to exploit technological innovation,regulatory reform and changing consumer behavior and perceptions to create anew commercial paradigm and transform how consumers purchase products,exchange money and manage their finances.

In the developed world, the behavioral change, in both business practices ofthe financial institutions and of consumers themselves, will happen slowly,probably as a consequence of the adoption of proximity (NFC-based) paymentsand increasing use of the adjuncts to mobile payments such as mobilemarketing and advertising. Once the full ‘leather wallet’ analogy isachieved by the mobile wallet – with the mobile phone holding multiple‘virtual’ accounts or cards, including loyalty cards as well as ad-hocdiscounts (vouchers), and other applications such as ‘mTickets’ and‘mAccess control’ – mobile payments and mobile banking will become fullyintegrated in the consumer’s lifestyle. However, Informa Telecoms & Mediaexpects that this new paradigm will not be widespread until the end of theforecast period of this report – around 2012/13.

According to Darnbrough, “in the developing world, the behavioral changeamongst consumers has already begun; mobile payments and mobile banking arealready the natural and only financial services to millions of previouslyunbanked consumers. Although the market will look differently in thedeveloping world – few mobile NFC deployments, for example – it will leadthe world in the use of mobile payments and banking.”

The report concludes that the mobile phone will inevitably become embeddedin the financial services’ infrastructure and be accepted as a naturalmeans of payment by the consumer. However, Darnbrough cautions that thiswill not happen overnight, and that it will not happen in isolation. “Itwill require unprecedented levels of collaboration and coordination betweentwo very different industries. There is a strong appetite for these newbusiness opportunities but the key players – mobile operators, banks andcredit card companies – must acknowledge and take advantage of each other’s respective strengths, and work together to overcome the remaining barriersrather that attempt to control everything on their own.”

Informa predicts that if the key players collaborate effectively the mobilepayments and banking market offers a shared annual revenue opportunity ofover US$10 billion in five years time. The biggest revenue opportunity isexpected from mBanking services, which Informa predicts will be worth US$5.5billion in 2013.