2020 Foresight: Best Practices in Implementing Mobile Payments

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1 2020 Foresight: Best Practices in Implementing Mobile Payments Product Code: VR0963MR Published Date: November

2 TABLE OF CONTENTS TABLE OF CONTENTS 1 Executive Summary Dynamics of the Mobile Payment Market Market Sizing and Forecast for Mobile Payments Market Size of Card Payments through Mobile Devices in Selected Countries The US The UK Australia Singapore India Regional Overview of Growth Potential Mobile Payment Ecosystem Industry Structure and Stakeholders Types of Mobile Payments Proximity payments Remote payments Key Drivers, Trends and Challenges Key Drivers Technological drivers Business drivers Emerging Trends Issues and challenges Central banks Commercial banks Non-bank and alternative payment companies Key Guidelines and Regulatory Developments PCI Guidelines Regulatory Developments Americas Asia-Pacific Europe Africa Best Practices in Implementing Mobile Payment Products and Services Best Practices Case Studies Launch of innovative mobile app by Barclays in the UK The Home Depot s adoption of MPOS technology to improve consumer satisfaction Starbucks success with mobile payments Telefonica betting big on the power of Direct to Bill Deepening of mobile payments in Kenya via M-Pesa Appendix Methodology Foresight: Best Practices in Implementing Mobile Payments Page 2

3 TABLE OF CONTENTS 7.2 Contact Timetric About Timetric Timetric s Services Disclaimer Foresight: Best Practices in Implementing Mobile Payments Page 3

4 LIST OF FIGURES LIST OF FIGURES Figure 1: Global Mobile Payments (US$ Billion), Figure 2: Global MPOS Terminals (Units in Millions), Figure 3: Global MPOS Terminal Penetration, Figure 4: Card Payments through Mobile Devices in the US (US$ Million), Figure 5: Card Payments through Mobile Devices in the UK (US$ Million), Figure 6: Card Payments through Mobile Devices in Australia (US$ Million), Figure 7: Card Payments through Mobile Devices in Singapore (US$ Million), Figure 8: Card Payments through Mobile Devices in India (US$ Million), Figure 9: Mobile Payment Pyramid Figure 10: Growth Potential of Various Payment Models Figure 11: Dynamics of Various Mobile Payments Figure 12: Level of Transaction Cost for a Financial Institutions Figure 13: Number of Mobile Subscriptions (Million), Figure 14: Broadband Internet Users on Mobile Devices (Million), Figure 15: Mobile Payment Behavior in the US, Figure 16: Payment Source Preference on Mobile Domain, Figure 17: Intensity of Challenge in Developed and Emerging Economies Figure 18: Basel II vs Basel III Figure 19: Key Impeding Factors for Consumers in the US, Figure 20: Responsibilities on Key Stakeholders of Mobile Payment Platforms Figure 21: Pingit App Figure 22: Safaricom s M-Pesa Customers in Kenya (Million), FY2010 FY Figure 23: Safaricom s M-Pesa Revenue in Kenya (US$ Million), FY2010 FY Foresight: Best Practices in Implementing Mobile Payments Page 4

5 LIST OF TABLES LIST OF TABLES Table 1: Global Number of MPOS Terminals and Penetration, Table 2: Card Payments through Mobile Devices in the US, Table 3: Card Payments through Mobile Devices in the UK, Table 4: Card Payments through Mobile Devices in Australia, Table 5: Card Payments through Mobile Devices in Singapore, Table 6: Card Payments through Mobile Devices in India, Table 7: Potential Roles and Benefits for Key Participants of the Mobile Ecosystem Table 8: Guidance for Securing Payment Transactions Table 9: Risk Management Guidelines for Supporting Environment Table 10: Regulatory Attitude Towards Mobile Payments Foresight: Best Practices in Implementing Mobile Payments Page 5

6 EXECUTIVE SUMMARY 1 Executive Summary The increased use of mobile devices to manage day-to-day activities and the rise in the use of social media has encouraged a number of organizations to build business and product strategies around mobile platforms. Banking institutions and non-banking startups are increasingly targeting consumers with new mobile payment solutions, allowing consumers to transfer funds and make payments at any time and in any location. Technological developments, changing consumer preferences and an increase in competition among stakeholders in the payments value chain have been the key drivers in the development of new platforms. To promote mobile payment products and services, financial institutions and payment companies are adopting multiple strategies, focusing on mapping changes in consumer behavior, applying the relevant technology and capitalizing on new trends. Focus on existing customer relationships to promote mobile payments Service providers are promoting mobile payment solutions through existing relationships with consumers, especially in the case of banks and mobile network operators which have the advantage of a ready market built from their existing product offerings. Encouraging loyal customers to adopt new payment solutions has turned out to be a rewarding strategy due to its relatively low cost and higher probability of adoption. One of the key success factors for M-Pesa, a mobile payment service offered by Safaricom in Kenya can be attributed to its strong presence in the country s telecommunications industry. As well as banks and mobile network operators, merchants with strong and loyal consumer bases such as Starbucks are also capitalizing on this strategy. New product offerings to target regional diversity With more competitors entering the mobile payment arena, there is an increasing trend to commoditize products and services. This erodes the comparative advantage of an existing service provider and requires extra effort to acquire customers. To overcome this issue, both banks and non-bank payment companies are concentrating on exploiting gaps in the value chain through new product offerings. The desire for innovative services has resulted in the introduction of services such as smartphone- and tablet-based mobile point-ofsale (MPOS) terminals, contactless payment technology, mobile wallets and remittances by mobile phone numbers, all of which have the potential to disrupt the current payment ecosystem. Geographical diversity in economic conditions has prompted service providers to offer a variety of product and services. Increasing reliance on social media and promotional offers to drive sales Social media has become a mainstream channel to target consumers. Mobile payment solution providers are developing processes to respond to social media-oriented consumers, and are using the channel to promote new schemes and loyalty programs, and to identify customer needs through feedback. Payment solution providers are offering discounts on products purchased through partner merchants. Product giveaways and the use of advertising via social networks have become commonplace. Security and data privacy risks act as key deterrents Consumer-grade mobile devices usually lack bank-level security to protect sensitive information. Most new payment solutions revolve around mobile devices and social media platforms, and the risk of being exposed to data theft or other fraudulent activity has increased. Moreover, new payment systems generally require regulatory authority intervention to change existing standards and accommodate new solutions; a new payment concept can fail if regulators fail to recognize its potential or legitimacy. Although security issues exist, the potential benefits are likely to outweigh these concerns, and new payment solutions are expected to gain significant market share over the next five years. Companies have begun to focus on improving security, so customers feel confident in using payment products and services. Digital security operators such as Gemalto, McAfee and Symantec have recorded an increase in demand from mobile security systems and mobile wallet developers, as PIN protection, remote blocking and one-time passwords gain popularity Foresight: Best Practices in Implementing Mobile Payments Page 6

7 EXECUTIVE SUMMARY New market entrants more innovative than banks Burdened by their legacy structures and preference for proven systems, banks are expected to lag behind new market entrants in terms of offering new mobile payment solutions. Banking regulations are also generally risk-averse, and promote prudence in the banking industry, a key inhibitor of innovation. In contrast, payment startups with a relatively flexible regulatory environment and disruptive concepts are well positioned to enter the payments market. However, rising competition and the redistribution of market share will act as a stimulus to push forward the new ideas of banking institutions. Additionally, the rise of non-bank companies such as Google and Amazon into the payment domain is expected to encourage the use of prepaid instruments over the next five years. Technological advancements to power new payment concepts Developments in cloud technology and the increasing use of open application program interfaces (APIs) have provided powerful tools for payment companies to develop new solutions with enhanced security features. Cloud technology and open APIs offer cost savings and flexibility to developers, significantly increasing the functionality of available resources. In addition, data analytics, combined with the cloud and the large pool of data available on social networks and mobile devices, is attracting attention in the area of predictive analytics. The improved efficiency of predictive analysis is allowing payment operators to streamline their strategies. Smartphone apps and MPOS to be key drivers of mobile payments Among the various mobile payment platforms, payments through MPOS terminals and mobile apps focused on instant fund transfers to individuals and enterprises are likely to gain attention from consumers and merchants over the next five years. MPOS enables payments through mobile devices such as iphones, ipads and Android handsets. Although mobile wallets and near-field communication (NFC) payments offer several advantages to users, they have been difficult to engage with consumer profiles and, consequently, have expanded below expectations. Consequently, mobile wallets and NFC payments are expected to gradually gain strength over the next five years as consumers become more aware of, and confident about, their capabilities Foresight: Best Practices in Implementing Mobile Payments Page 7

8 APPENDIX 2 Appendix 2.1 Methodology In this report the global market sizing and forecast of mobile payments include: All card payments carried out through mobile devices regardless of proximity or remote payments such as through MPOS terminals, NFC and cloud based payments (including mobile wallets), and using payment APIs All remittances through mobile devices, both domestic and international via bank accounts and stored value accounts Direct bank account debits by using mobile payment applications Carrier billings Timetric s dedicated research and analysis teams consist of experienced professionals with industry backgrounds in marketing, market research, consulting and advanced statistical expertise. Timetric adheres to the Codes of Practice of the Market Research Society ( and the Society of Competitive Intelligence Professionals ( All Timetric databases are continuously updated and revised. 2.2 Contact Timetric If you have any queries about this report, or would like any further information, please contact info@timetric.com. 2.3 About Timetric Timetric is a leading provider of online data, analysis and advisory services on key financial and industry sectors. It provides integrated information services covering risk assessments, forecasts, industry analysis, market intelligence, news and comment. Timetric helps over 1,500 financial services institutions and their partner companies around the world benefit from better, timelier decisions. Timetric provides: High-quality data including proprietary, specialized industry data, survey-based research, social media monitoring, macroeconomic data and forecasts Expert analysis from experienced economists and analysts, who use robust proprietary models, indices and forecasts Powerful proprietary visualization and workflow technologies developed over years of extensive investment Timetric has office locations in London, New York, San Francisco, Hyderabad, Seoul, Singapore and Sydney. It employs 500 people, including 150 analysts and economists, and 200 professional researchers Foresight: Best Practices in Implementing Mobile Payments Page 8

9 APPENDIX 2.4 Timetric s Services Intelligence Centers Timetric s industry intelligence centers are premium web-based services that provide access to interactive tools, comprehensive research and expert analysis in key sectors. They provide invaluable decision support presented in an easily digestible format and grounded in deep research. Timetric offers Intelligence Centers covering the following industries: Banking Insurance Wealth Construction Travel and Tourism Briefing Services Timetric offers a range of briefing services, which offer cutting-edge thought leadership and expert commentary on and for the financial services industries. Driven by influential and respected editorial teams with years of experience in their respective fields, these services deliver need-to-know insight and analysis to decision makers across the financial services value chain. Timetric offers briefing services covering the following financial sectors: Accountancy Asset Finance Banking Cards and Payments Insurance Consultancy Timetric specializes in the development and delivery of innovative research solutions designed to provide competitive advantage and profitability to clients. Dedicated industry analysts and economists provide expert advice and actionable recommendations underpinned by Timetric s market and country knowledge, experience and proprietary databases, panels and research infrastructure. For projects requiring quantitative data, Timetric undertakes special research projects using its in-house panels and survey technology. These provide ready access to an extensive source of specialist business executives and consumers. Core capabilities include: Economic Research and Consulting Highly experienced economists provide a number of bespoke research services covering subjects ranging from macroeconomic forecasting to sector outlooks, business presentations and workshops. Industry Analysis and Consulting Information analysis, independent expert opinion and advice, facilitated decision or strategic support, are provided by Timetric s extensive body of proprietary data and analysis models. It provides expertise-based consulting to deliver solutions that best suit its clients requirements Foresight: Best Practices in Implementing Mobile Payments Page 9

10 APPENDIX Quantitative Research Timetric connects with thousands of potential customers for various markets every day. Using sophisticated, interactive and highly engaging graphical surveys, research speed is increased and costs reduced, while ensuring that respondents deliver the insight needed. Qualitative Research Timetric s Qualitative Research service helps customers understand the emotional and cultural behaviors of a target audience. Timetric provides unique access through market-leading publications and information services to decision makers specifically brought together to discuss topics that are important to the client. Technology Solutions Timetric has built a unique technological platform to collect and visualize data, and employs some of the world s leading experts on data collection and visualization. Through technology and software consulting services, Timetric can provide clients with the means to gather and visualize the data the client has, or wants to collect. 2.5 Disclaimer All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, Timetric. The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the findings, conclusions and recommendations that Timetric delivers will be based on information gathered in good faith from both primary and secondary sources, the accuracy of which Timetric is not always in a position to guarantee. Timetric will accept no liability whatsoever for actions taken based on any information that may subsequently prove to be incorrect Foresight: Best Practices in Implementing Mobile Payments Page 10