Mobile PaymentsIs fragmentation an Opportunity for Banks?

Some Interesting Facts

Source – Celent, February 2014, FICO, January 2014, British Banker’s Association, March 2014, CEB Tower Group, December 2013, Nielsen, Dec 2013

Do you know that…..

90% of US bankers surveyed expected at least a 10% decline in branch numbers over the next 5 years, with45% expecting the decline to be 25% or more. Branch numbers have declined 9% in just the last 3 years.

50% of smartphone users in the UK would like to do more mobile banking in the future.

In the UK 12.4million banking apps have been downloaded, which are used on average 18.6million times per week.

76% of banks see the key value of a mobile solution as competitive advantage – yet 68% of respondents to the same survey already have mobile banking technology and 21% are in the process of adopting it.

More than a third of the UK population now use Facebook every day, and of the daily users some 20 million – 83% –use a smartphone or tablet to check updates on Facebook.

Do you also know that…..

1,008 million - Number of Facebook mobile monthly users 341 million - Number of Facebook mobile-only monthly

users. Starbucks claims that in 2013, of the $1.6 billion Americans

spent via their smartphones, 90 percent went to Starbucks. Starbucks' mobile wallet now accounts for nearly 16 percent of the chains' 47 million weekly transactions, which means ~ 7.5 Mn purchases per week via the app

$10 billion - Apple’s app revenue for 2013 500 million – Number of tweets sent per day 540 million – Active Google+ users $108 (UK) $96 (US) – Google revenue per adult (15+)

population in 2013 50 billion – Apps downloaded from Apple’s App Store The Facebook smartphone app had the most unique users

in the US in 2014 – the next five most used apps were all Google properties. (Search, Play, Youtube, Maps and Gmail).

Mobile Money – Key Facts and View points

Source – Financial Services Club Blog, March 2014, Pew Internet, August 2013, Business Intelligence Insider, March 2013 , MasterCard (50 Variables in index), 2013

28% of mobile professionals voted GAFA (Google, Apple, Facebook, Amazon) payment schemes as the likely leaders of future successful mobile payments offerings.

For the first time, there is a possibility that innovation in the payment system technology would be driven not by banks or networks, but by other players. This could have the impact of forcing banks or networks to innovate, or it could enable the entry into some payment systems markets of non-banks, like mobile phone companies and others.

Why Google, Apple, Facebook and Amazon will eat the banker's lunch. It’s just a matter of time before someone creates a truly Digital Bank for the Digital Age, and it probably won't be a traditional bank.

It is only a matter of time before Google and Apple move into core retail banking — either directly or through further joint ventures. After all, they both own a strong channel to the consumer; offer a number of comparative services; and Google has been the proud owner of an as-yet-to-be-exploited banking license from the Dutch regulator since 2007.

Fifty-one percent of US adults, or 61 percent of internet users, bank online. Thirty-two percent of US adults, or 35% of cell phone owners, bank using their mobile phones

77% of people feel more in control of their money because they use mobile banking. 73% of mobile banking users agree they have more control over their spending with mobile banking.

45.6

42 41.540.4 39.7 39.6

37.536.5 36.1 35.3

33.7 33.4 33.2 32.731.6 31.5 31.2

29.1 28.8 28.5 27.9 27.725.5

Score on mobile payment readiness index( 100 points maximum )

By 2017, the total value of global offline transactions facilitated by mobile devices will reach about $1.5 trillion, up from $120 billion in 2012. The number of mobile payments users globally is set to explode as well. By 2017, the total consumer user-base will climb past the500 million mark. That will be more than a five-fold increase from the less than 75 million consumers who used mobile payments at year-end 2012.

There is no such thing as a mobile payment industry or a mobile payment. What we are dealing with as an industry is the use of mobility (mobile devices, wireless networks, etc.) to create, augment and replace components of the payment value chain.

Banks should not attempt to define an isolated mobile payment strategy, but rather define how mobility could assist them in extending the control and influence of their payment value chains (and, therefore, of the underlying payment services and assets). It's about how mobility impacts payment and information process management.

New delivery models, such as the use of APIs, as well as the reuse of existing platforms (for example, instant messaging, social media and Bitcoin blockchain) provide lower cost of entry and an ability to deliver need-based payment solutions to consumers and merchants/ small and midsize businesses (SMBs).

In this transforming payment system, if banks fail to "connect the dots" between the different payment innovations, they will generate new silos, which, in turn, will lead to new risks, higher costs and poor differentiation.

The primary objective of a payment strategy should, therefore, shift from a focus on the development of a payment product to the development of solutions to follow the flow of payment information and then monetize this flow, for example, to capture new deposits via saving goal management services.

Mobile Payments

It's Not About Mobile Money and Mobile Payments, but Mobility of Monies

Source – Gartner July,2014

The mobility of monies implies more options and mechanisms for economic agents to move their money around. For example, instant mobility of monies enabled by the adoption of messaging technology.

The growing number of payment instruments, origination methods and related processes all contribute to accelerate the mobility of monies and this also increases the fragmentation of the supply chain

On the surface, fragmentation doesn't appear to be good news for banks. This makes it more difficult to invest in the most suited solutions in a given market. However, all research shows that banks are trusted by consumers with regard to the delivery of digital wallet solutions. This provides them an opportunity to achieve competitive advantage by supporting digital wallet functionality

Banks can turn their digital wallet solutions into a control center for their customers. With the increasing mobility of monies, providing control features is key to maintaining (and increasing) consumer trust in banks payment services.

Banks have to realize that if they want to remain or become more relevant to their customers, they have to lose some control to gain some influence and benefit themselves from the payment fragmentation

Mobile Payments

Fragmentation Is an Opportunity for Banks

Source – Gartner July,2014

Mobile Payments

Time and Resources

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Visual interpretations of financial health

Txn searches by keywords

Add payee & billers

Pay credit card bills & EMI payment options

QR code based payment

Check deposit, Report lost card, order new replacement card

Access products and services such as new account, SIP, FD, digital statement etc

Safe bank cloud storage for documents

Click to call & Branch appointment booking

Social Network Payment Systems

Social Messaging App-Based Payment System

Mobile Digital Payment Advisor

PIVAS — Tracking and Negotiation

Digital Wallet Solutions Mobile-Originated P2P Solutions

PIVAS — Reward and Loyalty Biometric Payment Systems

Mobile-Originated Proximity Payment systems Wearable-Originated Payments

Sound-Wave-Based Payment System

Tactical Initiatives

Strategic Initiatives

Leading banks in Mobile Payment and Mobile Commerce

Source: Forrester’s 2014 Global Mobile Banking

Garanti ( Turkey ) la Caixa ( Spain ) mBank ( Poland ) CIBC (Canada ) BMO (Canada ) Chase ( US ) US Bank ( US ) Bank of America ( US ) RBC (Canada ) BNP Paribas ( France ) Commonwealth Bank ( Australia ) Barclays ( UK ) Société Générale ( France )

Thank You