Mobile money will make the world go round

The world has gone m-tastic… m-commerce, m-banking, m-coupons, m-tickets, m-wallets, m-travel, m-retail and many other things pre-fixed with an “m-” (for mobile). All those that are money-related – or should we say m-money – fall into two categories: using a mobile device to a) do banking-type things with cash (deposit, transfer funds, withdraw, get paid, pay bills) and b) purchase things (physical and digital goods, travel and entertainment either on the mobile Web or at the store/venue/station.

All the forecasts – newly added to our compendium of mobile stats with analysis below – suggest that both will be massive. As these services develop, they will make a big difference to consumers, life-changing in some cases (no really, we’re serious) and help to create new revenue, win more customers and increase customer loyalty for operators, banks, retailers etc. But this will only work if every m-implementation fits into the big picture: one consumer using the mobile device of their choice – seamlessly, easily and cheaply (for all parties) – to bank, purchase on the mobile Web or in all stores or restaurants (maybe with a discount coupon), to travel on public transport or by plane, to go to the cinema or ball game, to pay a utility bill – home or abroad – and to settle up by the method they choose via bank account, phone bill, m-wallet, credit card etc.

In a recent blog, IDC analyst Trevor LaFleche said: “the problem with all this media interest [in all things mobile] is several market nuances get lost in the rush to cover an emerging story. Many people believe mobile banking and mobile payments are the same thing… There is a fundamental difference between mobile banking and mobile payments. Software vendors and banks can ignore this difference at their peril.”

While this frustration is understandable and his point valid, mobiThinking wonders whether the problem with the media coverage is the opposite. Most coverage appears at best to focus on isolated fragments of the market e.g. m-commerce, m-coupons or m-ticketing (while at worst the media focuses on trivial consumer applications for niche platforms), rather than taking a holistic view, i.e. the concept is the same: buying goods and services using a mobile. If this fragmentation manifests itself in non-standard implementations in retail, travel etc that don’t conform to the same standards of, for example, contactless payments (which is touching a mobile – or card – to a terminal to pay, redeem a coupon, collect loyalty points, pay to travel, check in, use a ski lift), then the big picture is lost.

Aren’t these ubiquitous services the true definition of ‘mobile application’, rather than some gimmicky download that works on a handful of handsets? Surely this is what the mobile business should be driving towards? Operators need to foster an environment where it is economically viable for big business to use the mobile channel and technology providers – handset manufacturers particularly – need to maintain an open homogenous environment and makes sure their piece fits the jigsaw puzzle (not visa versa). This, we are told, is why the mobile market is so much more mature in Japan than in the West. It is also why many m-money services in developing countries (of which the largest are in Asia) are projected to make the West look like a side show.

About those statistics

The vast world of m-money subdivides into two broad categories of mobile financial services (MFS) and m-purchasing or m-payment. Most analysts tend to divvy up along these lines, though – take note – there is little agreement between them on what falls into which category.
• There’s more details on all these statistics (and lots more) in our compendium of mobile stats.

1) MFS is mobile access to banking-like services – the term is carefully chosen, as these do not have to be (and often aren’t) provided by a bank. This includes deposit, withdrawal, money transfer and bill payment. Analysts at GIA and Berg Insight forecast that by 2015 MFS will be used by 1 billion people globally. There are two key elements to MFS.

a) M-banking mirrors both online banking and traditional high-street banking, and in developed nations – where most people have bank accounts – will be provided predominantly by banks, as they extend their customer services to mobile. (Aside: any bank that thinks there’s no hurry to move to mobile, take note: Jibun Bank in Japan was set up as a mobile-only bank in July 2008 and has attracted 900,000 accounts in two years).

b) Person-to-person (P2P) transfers or remittance by mobile. By 2011, this is predicted to be used by 170 million people by ABI Research – that’s three times the number of people who will use m-banking services. P2P transfers will be driven by demand from people in developing nations without bank accounts, and provided mostly through m-wallet-type services from mobile operators. P2P transfers are mostly about sending money home (increasingly this will be from abroad), but will also (depending on definition) include paying utility bills or being paid wages (which clearly overlaps with mobile payment, see below).

• An aside on m-wallets:
  The m-wallet is part of the most interesting and evocative story in mobile today. These services unify MFS and m-payment services into one offering and, worryingly for financial institutions, the provider doesn’t have to be a bank. Two of the most successful services are M-PESA run by Kenya’s Safaricom, and GCASH run by Philippines’ Globe Telecom, and similar services are spreading rapidly across Asia and Africa.
  • For more insight into GCASH and M-PESA, see: The insider’s guide to banking the unbanked.
  To the vast numbers of people who have cell phones, but not bank accounts, in developing nations, it provides banking-like services via mobile – i.e. deposit/withdrawal of cash via agent networks, or through deals with banks from ATMs, and to transfer of funds to another person’s mobile (or sometimes bank account) via SMS, or pay a utility bill. It also enables payments for digital and physical goods or to top up your or someone else’s mobile credit. M-wallets are compatible with any phone, however, as they are often run by mobile operators, they may be restricted to one mobile network. As Internet-enabled phones spread (note, you don’t need an expensive smartphone to access the Web), the m-wallet allows people previously without a PC, bank account or credit card, to access online commerce for the first time.
  • That is life-changing. What can you download from your favourite app store that comes close?

2) M-payment or m-purchasing is the purchase of/payment for one-off physical and digital goods (e.g. music) and services (e.g. travel) on the mobile Web, i.e. m-commerce, and physically paying for goods in-store or at the station, cinema etc using contactless or near-field-communications-based transactions (NFC). Again definitions vary, so analyst forecasts range considerably. The biggest numbers come from Juniper Research, which predicts that as many as one half of the world’s mobile subscribers will be making m-payments by 2014, stating that there will be 500 million people making m-payments on the Indian Sub Continent, alone.

M-payment can be subdivided into two types of purchase, those on the Web, i.e. m-commerce and those on the premises, including m-ticketing and m-coupons, which is typified by contactless payments. All areas are forecast for strong growth. ABI Research expects m-commerce to reach US$119 billion globally in 2015, while Jupiter Research predicts that more than 1 in 10 mobile subscribers will use m-ticketing in 2014.

Today, Japan leads on virtually all areas of m-purchasing. ABI Research points out that in 2009 m-commerce in Japan was US$10 billion, while it was US$1.2 billion in the United States (with a much larger population).
• See The insider’s guide to mobile in Japan for examples of what’s happening in Japan, including demo and details of the use of contactless payments and coupons at McDonalds – the m-coupon service is used by 4.5 million people.

What about tomorrow? Will m-payment also be dominated by Asia’s huge developing nations? ABI Research predicts that long-term growth for m-commerce will come from developing nations where mobile is “virtually the only way to access the Internet”. However, predictions for m-ticketing or in-store payment via NFC don’t seem to be available, but in nations where consumers are far less encumbered by payment methods – debit cards, credit cards, store/loyalty cards, electronic travel pass, online payment services, coupon services etc – don’t contactless m-payments stand far more chance of taking off?

P.S. (03-06-10) Thanks to Holly Kolman from mobiEnthusiast for including this post in the latest Carnival of the Mobilists, a weekly roundup of the best in mobile and wireless blogs.

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