Drivers and Trends in Mobile Payments MMT APAC Manila, Philippines Lance Blockley 18 January 2011
Mobile payments covers a number of different types of transaction Mobile Proximity Payments Mobile Money Transfers (P2P) Mobile as a Point of Sale (POS) $ Mobile Remote & Bill Payments Mobile Digital Payments* * Including those charged to the mobile operator bill 2
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We recently completed two separate surveys, each covering about 600 payment professionals Global payment trends Importance of different payment products & channels Most influential market participants Key industry events shaping the market Drivers of advanced payment usage Understanding current drivers of activity Barriers to adoption Drivers of future growth 4
Mobile products rank low in importance for today s payment transaction landscape PLEASE SCORE THE CURRENT RELATIVE IMPORTANCE OF THESE PAYMENT PRODUCTS IN YOUR COUNTRY? (Percent of Respondents) 85% 74% 73% 73% 73% 67% 60% 51% 46% 32% 31% 28% 27% 24% Global Payment Trends Survey 5
But are given a higher ranking of importance in Asia compared to all other regions PLEASE SCORE THE CURRENT RELATIVE IMPORTANCE OF THESE PAYMENT PRODUCTS IN YOUR COUNTRY? Product % Respondents who rated the product as important or very important Global Asia Australia / NZ Europe USA / Canada Credit / charge cards 85% 83% 92% 78% 92% Direct debit / direct credit / Giro / ACH) 74% 77% 76% 73% 73% Internet based payments 73% 76% 83% 66% 73% International scheme debit cards 73% 62% 83% 75% 70% Electronic bill payments 73% 85% 84% 51% 85% Domestic debit cards 67% 49% 78% 61% 81% Cash 60% 70% 56% 64% 46% Remittances 51% 82% 41% 39% 49% Prepaid cards 46% 47% 42% 36% 64% Contactless cards 32% 40% 40% 31% 25% Mobile transfers 31% 48% 25% 22% 36% Cheques 28% 45% 16% 22% 33% Mobile NFC payments 27% 34% 21% 25% 31% Mobile SMS payments 24% 34% 18% 22% 24% Global Payment Trends Survey 6
Over the next 5 years, the greatest growth is expected to be in Internet, Mobile and Contactless payments WHAT ARE THE 3 PAYMENT PRODUCTS WHICH WILL EXPERIENCE THE GREATEST GROWTH IN IMPORTANCE IN YOUR COUNTRY OVER THE NEXT 5 YEARS? (Percent of Total Respondents) 24% 49% 31% Respondents in Asia Global Payment Trends Survey 7
The mobile payment channel is now perceived to be more important than bank branches Please score the current relative importance of these payment channels in your country? (Percent of Total Respondents) 90% 84% 75% 48% 59% 23% 32% 55% Respondents in Asia 18% Global Payment Trends Survey 8
Both the mobile and internet channels are expected to continue to grow in importance in the coming 5 years What are the 3 payment channels which will experience the greatest growth in importance in your country over the next 5 years? (Percent of Total Respondents) Global Payment Trends Survey 9
Globally, smart phones will drive the growth in the mobile payments channel, however basic phones will still play a key role in Asia Which type of device you believe will be primarily responsible for the growth in importance of the Mobile channel? (Percent of Total Respondents) ** ** Significantly higher outside of Japan, Korea, HK & Singapore Global Payment Trends Survey 10
With the growth in mobile, network operators are expected to play a key role, becoming more influential than card issuers and payment schemes In 5 years time, who do you believe will be the 3 most influential market participants in your country? (Percent of Total Respondents) Global Payment Trends Survey 11
Payment professionals believe that technology advancements are going to be the key driver in shaping the immediate future of payments markets Which of the following events will have the greatest impact in shaping the payments market within your country over the next 3 years? (Percent of Total Respondents) Increasing from 40% in the 2009 Survey Global Payment Trends Survey 12
Whilst regulation continues to be the most significant issue payment professionals are facing, the rapid advancement of technology in payments is now a key focus What is the single most significant issue that you expect to face in your current organization over the next 3 years? Increasing from 10% in the 2009 Survey Global Payment Trends Survey 13
The ubiquity of mobile telephony drives this new payment channel How important are the following FEATURES for mobile payments? % of Respondents who said important or very important 74% Respondents in Asia 61% Drivers of Advanced Payment Usage Survey 14
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Asia has pioneered the use of mobile phones for payments and become the leading region in the world for mobile payments! In the telco industry, many added-value features and services have started in Asia before becoming global standards Japan and South Korea were among the first countries to offer mobile payments and have seen widespread adoption Technology savvy consumers drive the adoption of new technologies Many mobile wallets or mobile payment solutions have been launched This has created an environment for the development of mobile payments in other Asian countries In the Philippines, G-Cash and SmartPay have experienced significant adoption rates Partnerships between banks and telcos in China have fostered customer adoption with a growth rate of 70% between 2006 and 2009 16
EDC forecast that the Philippines, China and the United States would form the three largest markets for mobile money transfers in 2010! Philippines And they were Source: EDC Market Sizing; MMT value shown above for countries with MMT value greater than US$50mn 17
EDC had forecast that 52m users worldwide would make 162m mobile money transfers, accounting for US$2.4bn of value in 2010! ATV US$50/txn US$10/txn Domestic P2P mobile transfers accounting for more than 80% of users (83%) and transaction volumes (89%) However, international remittances are larger value transfers, accounting for 38% of the total value transferred through mobile phones Source: EDC Market Sizing & Analysis 18
Growth in 2010 was more muted than forecast, such that our 2011 projections show modest increases on where we should have been! Original projections for 2010 9mn 20mn US$1 bn ATV US$50/txn US$50/txn 52mn 171mn US$1 bn US$10/txn US$6/txn Current projections for 2011 Source: EDC Market Sizing & Analysis 19
However, EDC still forecasts that mobile money transfers will experience tremendous growth over the next six years! 6,000 5,000 4,000 Forecast P2P Domestic Transactions (Billions) Mobile P2P Domestic $ Value in 2016 by Region Other Europe 8.1% EU & EEA 6.9% North America 4.9% Latin America 3.7% 3,000 2,000 1,000 Africa 24.0% East Asia 21.8% South Asia 30.1% - 2011 2012 2013 2014 2015 2016 North America Latin America East Asia South Asia Western Asia Australia and Oceana Australia and Oceana 0.4% Western Asia 0.0% US$126 Billion 20
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MNO s and banks not seeing eye to eye continues to be a problem. Regulatory hurdles and an uncertain business case are equally serious issues in thwarting mobile payment growth How significant are the following ISSUES for mobile payments? % of Respondents who said important or very important 51% Respondents in Asia Drivers of Advanced Payment Usage Survey 22
Quite often providers focus on consumers, but tend to overlook merchant needs and incentives in order to accelerate growth How important are the following proposals to further ACCELERATE the growth of mobile payments? % of Respondents who said important or very important 81% 54% 75% Respondents in Asia Drivers of Advanced Payment Usage Survey 23
Key steps in developing an effective mobile payments strategy 1. What are the key needs of the customer? Both consumers & merchants 2. Why is this solution better than existing payment methods? Problems that the solution addresses 3. What are the key success factors to achieving critical mass? Both infrastructure and commercial 4. What is the business case? Partnerships / joint ventures Revenue generation Profitability 24
Thank you! Lance Blockley Managing Director Edgar, Dunn & Company lance.blockley@edgardunn.com +61 2 9279 2442 25