|Issue:||Asia-Pacific III 2011|
|Topic:||The rise and rise of mobile money|
|Title:||Vice President, Strategy|
Sanjay Mewada is Vice President of Strategy in NetCracker Technology Corp. Since joining NetCracker in 2005, Mr Mewada has been instrumental in leading the company’s growth through strategic initiatives that have accelerated the company’s growth and success. In his current role of Vice President of Strategy, Mr Mewada is responsible for the company’s image and market development, corporate communications, media relations, and brand management.
Prior to joining NetCracker, Mr Mewada worked at Yankee Group as the Vice President of the Telecom Software Strategies (TSS) Decision Service. There he managed research and programs to improve Communications Service Providers’ business results. Specifically, he helped clients make decisions regarding the use of business and operations support systems (BOSS) software and services. Before joining Yankee Group, he worked at MCI, Intelsat and the World Bank in Product Management and Technology Evaluation functions.
Sanjay Mewada holds a Bachelor’s degree in Physics and an MBA from Bombay University. He also holds a Master’s degree in International Business from the Fletcher School at Tufts University.
The next big thing must be Mobile Money, however, the road to success is not straight and the triggering conditions are very different around the world. Availability of smart phones and tablets is essential, as is favourable regulation, but forging strong partnerships with banks and point-of-sale are also key ingredients. In the case of Japan, a huge market has opened up, with innovative mobile services and thriving advertising. This important set of functions adds to the versatility of the mobile smart device – it makes the mobile phone “a remote control for life”.
It can be argued that mobile money has taken more than a decade to arrive. Ten years ago the industry witnessed clever advertisements that depicted smiling salesmen handing over badly wrapped items and asking viewers whether they wanted to ‘pay with cash or phone’. Companies experimented with different techniques and approaches, but were generally defeated by the lack of infrastructure, smart chips or some other key ingredient. Now, however, mobile money has arrived.
The meandering path to success
Almost every day there are dozens of news items about mobile money from a range of markets. For example, clearXchange has launched in the United States a service that allows Bank of America, JPMorgan Chase and Wells Fargo customers to transfer money via mobile phones or email addresses. Similarly, Google has announced a major investment initiative to bring digital wallets to mobile phones, leveraging NFC technology and partnerships with major global banks. At the same time, Uganda’s mobile money infrastructure reportedly has reached $400 million in transfers. In Kenya, 13 million people transfer money via mobile, and Nigeria and Ghana are poised to ‘lead the way’.
(RC comment – I found this on: http://mobilemoneyafrica.com/category/news/nigeria/
– can you use it?)
By anyone’s standards, the opportunities presented by the broad and varied mobile money market are huge. In a recent survey of more than 50 Communications Service Providers (CSPs), NetCracker Technology, in conjunction with Pipeline magazine, placed the opportunities provided by mobile money and commerce as second only to home networking.
Several factors lie behind the success of this market. They include smartphone adoption, uptake of mobile applications, emergence of enabling networks and point of sale technologies, and the potential to leverage existing customer relationships. Japan, a market that is often cited as a living laboratory for new technology (iMode for instance), is already a thriving mobile money market. It points to a clear and extraordinary opportunity for CSPs.
However, the path to success for CSPs is not a straight line. In each market, success or failure depends on the relationships developed with partners, the regulatory bodies, the technology platforms and the challenges involved. Each market has different barriers and challenges for those trying to address them. CSPs have driven the spread of high-capacity access and networks as well as smart device and application adoption. Yet they are still figuring out their exact place in this new ecosystem. That said, the fact that CSPs possess the technology that enables mobile money transactions, have existing financial relationships with customers and can influence the technology (i.e. mobile devices) in customers’ hands, positions them advantageously to seize this new opportunity.
Is a Tablet a mobile device or the new PC?
Mobile phones have become central to customers’ lifestyles. Surveys suggest that in many markets the theft or loss of a mobile phone is more traumatic than the loss of keys or a car. The phone provides a single, personal and increasingly trusted device to run their lives, to buy things, to download and use applications. Essentially the mobile phone is becoming a remote control for life.
It is not only phones. Their close relatives, tablets, are increasingly gaining trust in the technology. According to Berg Insight, the use of tablets such as iPads is leading to a 20 per cent increase in the value of transactions taking place on smart devices. This gives rise to an interesting question about the function of the tablet and whether it is a phone or a personal computer. Wherever that conversation might lead, the truth is that tablets bridge the gap between the types of user behaviour found in both formats. Further, tablets increase the use of personal and personalised devices and therefore increase the potential of a range of new markets, including mobile money.
Differing drivers across markets
Still, each market is different and has unique requirements. Demographics, geography, the extent of mobile penetration and the maturity of the banking and money market shape these requirements. Across Africa, for example, the market has flourished because of a low level of banking and credit card usage. Credit is low and the infrastructure is under-developed. These factors have given rise to the large market opportunities that have emerged. Conversely, the North American and European markets, where the level of credit and the use of credit cards and banks is high, has created an equally large but very different opportunity based on convenience and speed.
Market maturity also plays a key role in determining the relative maturity of an appropriate mobile money offering. In Japan, for example, many transactions take place, driven by the widespread availability of point-of-sale technology and the ubiquity and maturity of mobile phone usage. In markets such as Brazil and Africa the drivers are very much the need to transfer and settle money and, to a lesser but growing extent, to enable access to micro capital.
Nothing of course, happens without the right regulatory environment, not only for CSPs, but also for their partners as well, most notably the banks. The regulatory environment determines whether a CSP partners or competes with a bank, whether the bank’s own infrastructure can handle credit cards and settlements, or whether there are gaps that the CSP can fill — as long as the regulatory authority allows it.
Partnerships and platforms
It is important to understand that whatever role the CSP plays, it is not about replacing or competing for an existing relationship. The keys to success are to choose the right partners and to develop the most relevant and workable relationships. If partnerships and ecosystems are made to work, the possibilities for innovation are almost endless. For example, in Hong Kong mobile operators have partnered with the transportation authority to enable mobile phones to act as tickets. Partnerships with vending and cash register providers mean that the mobile device enables point-of-sale access. These relationships create seamlessness and liquidity across the ecosystem, albeit built on critical enabling technology.
The enabling platform in the background must provide the mechanisms that allow the ecosystem to grow organically without technical barriers. Robustness, scalability and accessibility are givens. Exemplary security in regard to encryption and authentication is absolutely necessary. The platform must also support all billing models from prepaid to postpaid to hybrid models and be able to conduct settlements. It must support the extraordinary number of machine-to-machine transactions that happen among the mobile devices, networks, servers and applications to glue the transactions together.
Another fundamental part of the mobile money equation is the choice of revenue model. A much-discussed topic in almost every industry, the mobile money market gives rise to many possible approaches: settlements, fixed fees, service charges, and advertising-funded models.
Advertising itself is a huge opportunity. Once the service is in place, CSPs have the ability to understand customers’ buying behaviours and preferences. This is, of course, valuable information for targeted advertising campaigns and brings the potential to develop reward schemes, loyalty and retention programs. In Japan, the mobile money market has spun off a US$1.4 billion segment based on mobile advertising revenue alone.
NTT’s Model for Success
Success in the Japanese market has resulted, in large part, from the right partnerships being put in place at the outset. NetCracker, as part of NEC Corporation, has been involved in mobile money in Japan since 2004. Sony, NEC and NTT DoCoMo came together early on, to drive the market for mobile commerce in a significant way.
The success was greater than anyone expected and has generated a completely new revenue stream for NTT. Penetration is almost 60 per cent of the population, and more than 50 million subscribers use mobile commerce in supermarkets and vending machines across Japan. NetCracker’s role was to provide the end-to-end technology offering, including the ability to bill, rate and charge every transaction, and to provide the kind of availability and service assurance that is expected in carrier-grade OSS applications.
Ultimately, CSPs have a massive opportunity as enablers that can pull together working-partner ecosystems built on effective technology platforms that make mobile money functional. They can drive market maturity and technology adoption. They can deliver secure and reliable transactions. They can enable a range of useful and lucrative business models. Most importantly, CSPs can also make the strategic investments that generate the critical mass necessary to ignite mobile money’s explosive growth in key markets. With those advantages in hand and well understood, mobile money represents a superb, new revenue opportunity for the global CSP industry.