Mobile Payments: An IBM Point of View

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Mobile money presentation at the Sept 2012 SmarterCommerce Global Summit in Orlando.

Text of Mobile Payments: An IBM Point of View

  • Mobile Payments: An IBM Point of View Dr. Mark Sherman Lars van Dam IBM WebSphere Strategy
  • Outline Overview of retail payments Mobile money market Mobile money opportunities Scenarios of mobile money applications Impacts to existing payment systems Operational issues for implementing mobile money Case studies Summary 2012 IBM Corporation2
  • Overview of retail payments: Participants Cardholder Merchant AcquirerCard NetworkIssuer (Bank)
  • Overview of retail payments: Merchant, acquirer, network and issuer interactions Batches of transactions are queued by the merchant, including a $100 transaction by Hans Card network distributes each transaction to the issuer, including Hanss $100 purchase $100 Card network routes funds to acquirer $100 http://www.creditcards.com/credit-card-news/how-a-credit-card-is-processed-1275.php Issuer subtracts processing fees ($1.70) which are exchanged with the card network and submits funds, including funds for Hanss transaction $98.30 Merchant sends a batch of transactions to the acquirer to receive payment Acquirer subtracts discount fees ($0.50) and pays merchant $97.80 Acquirer submits batch of transactions to card networks $$ $$ Acquirer submits batch of transactions to card networks $$ $$ Note: Names and fees are illustrative and are not from any particular vendor or relationship
  • Outline Overview of retail payments Mobile money market Mobile money opportunities Scenarios of mobile money applications Impacts to existing payment systems Operational issues for implementing mobile money Case studies Summary 2012 IBM Corporation5
  • Mobile money market: what is mobile money Mobile Banking Balance inquiry Account applications Account transactions Bank locations Alerts Mobile Commerce Promotions Behavior tracking Loyality programs Mobile Payments Person to person transfers Bill pay Payment at POS In application payments Mobile Wallet: linking mobile device with accounts and account activity Bank accounts Credit cards Loyality cards Bank balances Credit balances Gift cards Receipts Credit limits Phone balances Using a mobile device as payment vehicle
  • Mobile money market: payments are accelerating in major markets PayPal processed $4 billion worth of mobile payments in 2011* $750 million in 2010* $141 million in 2009* David Marcus, vice president of PayPal Mobile* Starbucks Mobile Application with rewards and mobile payments Started with Northern California and Seattle Now available nationwide in the US Mobile application is available on apple and blackberry Juniper Research reports consumers will use mobile payments to pay for $670 billion worth of goods and services by 2015. Google Wallet payments are now supported by Toys R Us, Macys, and Bloomingdales
  • Mobile money market: emerging markets Application of mobile money varies greatly among geographies Emerging markets have a combination of circumstances that encourage adoption of mobile money 2012 IBM Corporation8 Source: McKinsey, 2010, Capturing the promise of mobile banking in emerging markets Formal banking reaches about 37 percent of the population 1 branch and 1 ATM per 10,000 people Mobile phones have a penetration rate of 50 percent 5,100 mobiles phones per 10,000 people Very small deposits and loans are not profitable for traditional delivery models 1.7 billion people in emerging markets have a mobile phone and no access to banking services
  • Mobile money transaction volume growing at greater than 50% CAGR thru 2015 Mobile payments are projected to be between 15% and 20% of total consumer payment transaction volume by 2020 Mobile payments made by over 1 billion users by 2016 Mobile money market: sizing the market 2012 IBM Corporation9 Global mobile transaction volume Mobile transaction volume as a % of non-cash consumer payments by geo in 2015 Mobile money is modest now but growing rapidly Sources: Gartner Forecast: Mobile Payments, Worldwide, 2008-2015; Pub May 2011; Winning After the Storm, BCG Global Payments Report, 2010, Portio Research, Mobile Payments 2012-2016 Analysis and Forecasts for the Worldwide Market for Mobile Payment Services, 2012. $B
  • Outline Overview of retail payments Mobile money market Mobile money opportunities Scenarios of mobile money applications Impacts to existing payment systems Operational issues for implementing mobile money Case studies Summary 2012 IBM Corporation10
  • Mobile money opportunities: overview Customer Care and Insight Mobile money software gives a holistic, single view of the customer and glean deeper insight into customer needs, so you can innovate with less risk. Develop high quality, tailored services to restore customer confidence, increase loyalty, and drive revenue. Mobile Banking Branch of the Future Mobile Payments Mobile Commerce Mobile Agents/Claims Store of the Future Virtual currency Location based shopping Personalized campaigns Mobile cross-sell, up-sell Mobile Network Monetization Mobile field-force enablement Retail TelecommFinancial Services Healthcare Mobile check-in, Mobile prescriptions Mobile payments Mobile Health Monitoring & Prevention Mobile enabled Clinicians Virtual currency FF Miles Customer Loyalty programs Ecommerce Ticketing, Entertainment Travel & Transportation
  • Banks - leverage the users financial profile data Help banks protect and grow revenue by maintaining brand relevance and leveraging emerging business models Provide a safe way to transact business, secure assets, reduce fraud, ensure compliance Offer secure digital vault services to aggregate coupons, transport, loyalty rewards, traditional currencies Merchants - leverage the users shopping patterns Drives a more customer centric view; control point shifts to the end-user with the mobile device. Shift more towards one to one marketing and leveraging the value of intelligent data from digital currency Telcos - Leverage subscriber base and delivery channel Mobile Money will allow MNO's to increase customer retention and generate new revenue through value added services Mobile money opportunities: key players Create new value by aggregating data and applying insights across the enterprise, Provide secure, high availability, large scale transaction processing Leverage Smarter Commerce New mobile money entrants transform business
  • Outline Overview of retail payments Mobile money market Mobile money opportunities Scenarios of mobile money applications Impacts to existing payment systems Operational issues for implementing mobile money Case studies Summary 2012 IBM Corporation13
  • Application scenario: consumer on-line purchase with tablet In the last year, tablets commerce traffic increased 348% Tablets converted visits into purchases at a rate of 3.23 percent, well ahead of smartphones at 1.39 percent. Payment processing for tablets mirrors web on line purchases Special considerations beyond web experience Exploitation of location information More accessible than PCs Need tablet-aligned gestures (e.g., sweeps) Need visually large carts 2012 IBM Corporation14 Customer Merchant Acquirer Credit Card Bank Source: Monetate, Couch Commerce: How Tablet Shoppers are Changing Online Sales, 2012
  • Application scenario: mobile banking Customers interact directly with bank like on the web Special considerations beyond web experience Diversity of devices beyond browsers Smaller screen UI redesign necessary Location awareness enables services such as ATM and branch locations Authentication streamlined for mobile devices 2012 IBM Corporation15 Customer Bank
  • Application scenario: consumer purchase at retailer NFC (Near Field Communication) Mobile device uses information in mobile wallet to act as credit card Communicated at POS thru NFC Much hyped, little used Not a compelling convenience compared to a credit card Gartner Hypecycle: For the past decade, NFC has been a technology looking for a solution May revive for virtual currency (loyalty points) 2012 IBM Corporation16 Customer Merchant Acquirer Credit Card BankMobile Wallet Source: Gartner, Hype Cycle for Mobile Device Technologies, 2011
  • Application scenario: consumer purchase at retailer bar code platform control Merchant generates transaction information Customer uses custom app to send to mobile payment platform Mobile payment platform also serves as acquirer Purchase confirmation sent to merchant thru different path Mobile payment platform may require return path to go through its system 2012 IBM Corporation17 Merchant Mobile payment platform Credit card BankCustomer
  • Application scenario: consumer purchase at retailer bar code merchant control Merchant generates transaction information Customer uses custom app to send to mobile payment platform Mobile payment platform