A battle of giants in a segmented market
Within its latest study “Mobile Payments” IDATE spotlights the mobile payment market, provides details about the related services and their technological aspects, analyses the usages and the industrial structure with a drawn of the value chain. The report makes an in-depth look in examinating several business models - for NFC, SMS, Fixed/mobile wallet & App Stores - their impacts and upcoming opportunities.
“Mobile payment is a complex market, with many technical alternatives addressing different marketing targets based on different business models. At least, four main solutions should be clearly distinguished - SMS-based payments, fixed-mobile wallets, appstores payment and NFC - with regards to their contrasting potential and competition landscapes”, writes Sophie Lubrano, Director of Studies at IDATE. “The complexity is also coming from the value chain: the mobile payment market brings together major players, which are all leaders within their core businesses: card issuers, mobile operators, handsets manufacturers, retailers, Internet giants, and also start-ups. And currently usages are still low”.
Four main markets
The m-payment market can be segmented into four main domains, each with specific issues and very different competitive landscapes:
• SMS-based technologies: Premium SMS platforms or money transfers via SMS for underbanked people
• Extension of fixed wallets such as Paypal or Amazon checkout services on the mobile
• Payment on mobile applications storefronts
• And NFC Payment.
A battle among giants
In this complex market, competition involves major players, which are all leaders within their core businesses: card issuers, mobile operators, handsets manufacturers, retailers, Internet giants. These players can rely on their customer bases, which contain millions of accounts and that sometimes include bank details such as card numbers. For instance Apple handles around 100 million iTunes accounts, Visa Europe has issued 380 million cards, and Amazon manages 114 million active customers.
Each type of player is positioned on different markets:
• Mobile operators have the widest range of services
• Internet giants provide essentially fixed-mobile wallet services, with an extension to application storefronts (Google in particular)
• Apple payment solution relies on iTunes accounts (fixed/mobile wallet and App Store)
• Cards issuers focus on NFC, as well as retailers
• Start-ups have also a wide range of services, but not on the NFC market.
Three controlled markets and the NFC open market
Between the four main solutions distinguished (SMS-based payments, fixed-mobile wallets, appstores payment and NFC), three of them are clearly controlled markets.
• Three tightly controlled markets: the SMS-based market is less competitive, as mobile operators rule here. It could be a cash cow market for operators generating high margins and is growing rapidly in emerging countries. In the mobile wallet market, the competitors are the same internet giants that dominate the fixed online payment market: PayPal, Amazon and Google. As for application storefront payments, it is fundamentally an OS battle between Apple, Google and Nokia in a narrow market. In developed countries, key developments for those markets are not coming from the mobile payment which is just an additional enabler.
• NFC is an open market: NFC payment potential is huge as it has the potential to address the specific requirements of the retail payment market. However, competition is fierce between players as most are leaders in their core markets: card issuers, mobile operators, retailers. We believe that the development of contactless services (ticketing, loyalty-programme management, access control) will help to drive mobile NFC payment. There are also some positive signs regarding the development of NFC compatible handsets: Nokia's announcement, as well as alternative ways to emulate NFC such as the MicroSD card. To conclude, although, value sharing remains l a sticking point, mobile operators have started to build partnerships with financial institutions, like in the USA: the m-payment joint-venture AT&T, Verizon, T-Mobile has partnered with Discover Financial Service. The business model is still to be defined, but the market is large enough to foster partnerships
Visit our blog for the full article or download the press release