RESEARCH FORECAST REPORT MOBILE MONEY IN DEVELOPED ASIA PACIFIC: TRENDS AND FORECASTS 2015 2020 ENRIQUE VELASCO-CASTILLO and HARSH UPADHYAY Analysys Mason Limited 2016 analysysmason.com
About this report This report provides: a detailed forecast of mobile money services in developed Asia Pacific (DVAP), specifically covering mobile stored value accounts (MSVAs) and advanced mobile wallets (AMWs), with sub-regional and country splits for selected markets a description of the main drivers and inhibitors of adoption for mobile money services, including market and regulatory dynamics an assessment of the opportunity for mobile operators, financial institutions, and third-party players in the value chain. GEOGRAPHICAL COVERAGE Developed Asia Pacific (DVAP) Individual forecasts for: Hong Kong Japan South Korea Taiwan MAJOR KPIs Total market size Adoption by type of service Registered and active users Fee revenue by provider type Market shares by type of player CASE STUDIES NTT Docomo s Osaifu Keitai SK Telecom s Syrup SmarTone s Kiss KEY QUESTIONS ANSWERED IN THIS REPORT What is the size of the mobile money opportunity in DVAP? How can operators capture a share of this growing market? What percentage of the opportunity can be accrued by operators, banks, electronic money licence holders, and third parties like Apple or Google? What are the key trends that will drive consumer adoption of mobile money in DVAP over the next 5 years? What are the main success factors that determine traction and adoption of mobile money initiatives in the region? WHO SHOULD READ THIS REPORT Strategy executives, directors and managers within mobile operators, banks, and electronic money licence holders in DVAP who are implementing mobile wallet and payment initiatives or designing the response to competitors and over-the-top (OTT) players initiatives. Vendors and software developers involved in developing and integrating mobile wallet platforms, and who wish to identify new opportunities and commercial prospects for mobile wallet players in DVAP. Industry experts and observers who wish to improve their understanding of mobile operators mobile money strategies, trends, challenges and opportunities in the region. Analysys Mason Limited 2016 2
Contents 6. Executive summary 7. Executive summary 8. Recommendations 9. Mobile money in DVAP: regional trends 10. Developed Asia Pacific: Operator-led initiatives stagnate, while financial institutions and OTT players contend for market share 11. Mobile money players in DVAP: Operators still have some strategic advantages over other players 12. Mobile money adoption drivers in DVAP: Growth will come from the convergence of payments and ecommerce 13. Mobile money in DVAP: country-level trends 14. Mobile money trends in DVAP to 2020: Operators face strong competition in all countries 15. Countries in the region vary widely in terms of technology standards, consumer preferences and the overall market opportunity for CSPs 16. Hong Kong: Mobile wallets must compete against the widely available contactless card payment schemes 17. Hong Kong: OTT players from mainland China will put competitive pressure on operators and financial institutions 18. Japan: Declining usage and incompatibility with international standards have stalled the growth of mobile wallets 19. Japan: Operator-led mobile wallets will decline because of competition from financial institutions and OTT players 20. South Korea: Players in this dynamic and competitive market face fragmentation due to many competing options 21. South Korea: Financial institutions and other local players will dominate this advanced market 22. Taiwan: Operators and banks have launched joint mobile payment initiatives, but the market remains nascent 23. Taiwan: The nascent market offers opportunities for operators that combine payments with ecommerce features 24. Case studies 25. Case study: NTT Docomo s Osaifu-Keitai 26. Case study: SK Planet s Syrup 27. Case study: SmarTone s KISS 28. Forecast methodology and assumptions 29. Definition of geographical regions 30. Forecast methodology: Our model combines hard data and the key levers for mobile money service adoption in developed Asia Pacific 31. Definitions and terminology 32. Forecast framework [1]: Main mobile money use cases 33. Forecast framework [2]: Mobile money service types 34. Forecast framework [3]: Mobile money competitive landscape 35. Forecast framework [4]: Dominant players Analysys Mason Limited 2016 3
Contents 36. About the authors and Analysys Mason 37. About the authors 38. About Analysys Mason 39. Research from Analysys Mason 40. Consulting from Analysys Mason Analysys Mason Limited 2016 4
List of figures Figure 1: Mobile money adoption by type of service, and active share of registered users, developed Asia-Pacific, 2010 2020 Figure 2: Mobile money fee revenue by type of provider, developed Asia Pacific, 2010 2020 Figure 3: Mobile money adoption by type of service, and active share of registered users, developed Asia Pacific, 2010 2020 Figure 4: Mobile money fee revenue by type of provider, developed Asia Pacific, 2010 2020 Figure 5: Strengths and weaknesses in the mobile money services market by type of player, developed Asia Pacific Figure 6: Drivers of mobile money service adoption in developed Asia Pacific Figure 7: Mobile money dynamics in Hong Kong, Japan, South Korea, and Taiwan, 2015 2020 Figure 8: Overview of mobile money potential for operators in developed Asia Pacific by country Figure 9: Drivers and inhibitors of mobile money adoption in Hong Kong Figure 10: Mobile money adoption by type of service, and active share of registered users, Hong Kong, 2010 2020 Figure 11: Mobile money fee revenue by type of provider, Hong Kong, 2010 2020 Figure 12: Drivers and inhibitors of mobile money adoption in Japan Figure 13: Mobile money adoption by type of service, and active share of registered users, Japan, 2010 2020 Figure 14: Mobile money fee revenue by type of provider, Japan, 2010 2020 Figure 15: Drivers and inhibitors of mobile money adoption in South Korea Figure 16: Mobile money adoption by type of service, and active share of registered users, South Korea, 2010 2020 Figure 17: Mobile money fee revenue by type of provider, South Korea, 2010 2020 Figure 18: Drivers and inhibitors of mobile money adoption in Taiwan Figure 19: Mobile money adoption by type of service, and active share of registered users, Taiwan, 2010 2020 Figure 20: Mobile money fee revenue by type of provider, Taiwan, 2010 2020 Figure 21: Regional breakdown used in this report (individually modelled countries in bold) Figure 22: Mobile money services in developed Asia Pacific forecast methodology Figure 23: Mobile money, main use cases with examples Figure 24: Main types of mobile money services in developed Asia Pacific Figure 25: Four dominant player regimes considered in this forecast Analysys Mason Limited 2016 5
Mobile money players in DVAP: Operators still have some strategic advantages over other players DVAP Figure 5: Strengths and weaknesses in the mobile money services market by type of player, developed Asia Pacific Type of player Strengths Weaknesses Operators Financial institutions OTT players, device manufacturers, etc. Ongoing relationship with customers and knowledge of their behaviour, billing details, contacts, etc. Local knowledge of market, regulators, competitors. Customer support and physical retail networks. Financial services knowledge. Licensed to issue electronic money, stored value account facilities, credit products. Risk-averse consumers tend to trust financial institutions over other types of players for these kinds of services. Worldwide reach and large, engaged user base. Costs can be spread across this large user base. Platforms like WeChat gained scale through messaging, and added value-added payment and ecommerce services later. Lack of expertise in financial services. Must acquire electronic money licence or partner with licence-holding financial institution to launch mobile money initiatives in most markets, which involves time-consuming partnership development and costly revenue-share provisions. Highly regulated activities strong compliance requirements for know-your-customer (KYC), fraud prevention, deposit protection, liquidity ratios, and anti-money laundering procedures make them risk-averse towards innovation. Must acquire electronic money licence or partner with licence-holding financial institution. Otherwise, OTT players can only offer a limited subset of mobile financial services that do not require licences. Worldwide players have limited knowledge of local markets. Lack of consumer trust can be an issue for new entrants. Source: Analysys Mason Analysys Mason Limited 2016 11
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Revenue (JPY billion) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Active users (million) Percentage of registered users Mobile money in developed Asia Pacific: trends and forecasts 2015 2020 Japan: Operator-led mobile wallets will decline because of competition from financial institutions and OTT players NTT Docomo s flagship Osaifu-Keitai contactless payments platform, which also serves KDDI and Softbank users, will lose market share to financial institutions and OTT players. Osaifu-Keitai s market dominance is being challenged by Japan s preference for cash transactions, and competition from financial institutions and players like Apple. User registrations for NTT Docomo s id payments facility started to slow down after the introduction of the iphone in 2008 (Apple held over 51% market share in 2015). In addition, operators started offering Android phones with NFC Type-A/B, which is incompatible with FeliCa s standard (NFC Type-F), contributing to a year-on-year decline of 8% as of June 2014. We forecast blended activity rates to decline to 18%, from a high of 22% in 2010, primarily due to a decrease in use of mobile wallets for transit applications. Financial institutions like card networks are expected to invest heavily in competing solutions, and will accrue approximately 43% of the market share, and revenue, by 2020. OTT players will make limited inroads, but global giants like Apple and Google will continue to be active in Japan, and are expected to capture an increasing share of customer-not-present payments that do not require contactless capabilities. Other Asian players like Alipay, Tencent, and Line are also active in this market, but will likely remain minor players. Figure 13: Mobile money adoption by type of service, and active share of registered users, Japan, 2010 2020 12 10 8 6 4 2 0 OTT-led wallet CSP-led wallet Figure 14: Mobile money fee revenue by type of provider, Japan, 2010 2020 25 20 15 10 5 0 40% 20% 0% Financial institution-led wallet Activity rate CSP Financial institution OTT Source: Analysys Mason Source: Analysys Mason Analysys Mason Limited 2016 19
CONTENTS EXECUTIVE SUMMARY MOBILE MONEY IN DVAP: REGIONAL TRENDS MOBILE MONEY IN DVAP: COUNTRY-LEVEL TRENDS HONG KONG JAPAN SOUTH KOREA TAIWAN CASE STUDIES FORECAST METHODOLOGY AND ASSUMPTIONS ABOUT THE AUTHORS AND ANALYSYS MASON Analysys Mason Limited 2016 36
About the authors Enrique Velasco-Castillo (Senior Analyst) is a key contributor to Analysys Mason s Digital Economy Strategies research, focusing on the opportunities for communications service providers and vendors in emerging verticals such as mobile health, payments, commerce, and home automation and security. Previously, Enrique covered mobile financial services and M&A and funding activity for more than 2 years at research firm IHS, where he wrote several reports on the opportunities for mobile operators in mobile payments and venture capital investments in mobile. Enrique also has research experience in cleantech and healthcare from other previous roles. Harsh Upadhyay (Analyst) contributes to Analysys Mason s Asia Pacific research programme, and is based in our Singapore office. His research focuses on market tracking, competitive assessment, data forecasting, next-generation services and consumer behaviour analysis in the Asia Pacific telecoms market. He also supports consulting projects and presents at industry events. Harsh's experience in the TMT industry is diverse, and he has a detailed understanding of the telecoms market in the region. He has previously worked with Frost & Sullivan and IDC as an analyst and consultant, and his clients have included leading ICT firms and government bodies. Harsh holds a Master's and Bachelor's degree in Business Management from India. Analysys Mason Limited 2016 37
About Analysys Mason Knowing what s going on is one thing. Understanding how to take advantage of events is quite another. Our ability to understand the complex workings of telecoms, media and technology (TMT) industries and draw practical conclusions, based on the specialist knowledge of our people, is what sets Analysys Mason apart. We deliver our key services via two channels: consulting and research. Research We analyse, track and forecast the different services accessed by consumers and enterprises, as well as the software, infrastructure and technology delivering those services. Research clients benefit from regular and timely intelligence in addition to direct access to our team of expert analysts. Our dedicated Custom Research team undertakes specialised and bespoke projects for clients. For more information, please visit www.analysysmason.com/research Consumer and SME services Digital economy Regional markets Network technologies Telecoms software Strategy and planning Regulation and policy Performance improvement Transaction support Consulting Our focus is exclusively on TMT. We support multi-billion dollar investments, advise clients on regulatory matters, provide spectrum valuation and auction support, and advise on operational performance, business planning and strategy. We have developed rigorous methodologies that deliver tangible results for clients around the world. For more information, please visit www.analysysmason.com/consulting Analysys Mason Limited 2016 38
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