Accueil > Forum > No. 79 - Mobile payments and mobile money

No. 79 - Mobile payments and mobile money

Communications & Strategies - 30/09/2010 No. 79 - Mobile payments and mobile money

3rd Quarter 2010

Around the world, the rapid spread of mobile phones is being followed by their use as a tool for financial transactions and the creation of "mobile money" in "electronic wallets". The cell phone serves as a bank account, debit card, and money. This has many implications.


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Dossier

Mobile payments and mobile money

Edited by James ALLEMAN & Marc BOURREAU

Introduction
By the Editors

Papers


Mobile-Money: Implications for Emerging Markets
James ALLEMAN & Paul RAPPOPORT

A Financial Analysis of Mobile Money Services
Peter LYONS

The Enigma of Mobile Money Systems
Judith MARISCAL & Ernesto M. FLORES-ROUX

Mobile Payments: Moving Towards a Wallet in the Cloud?
Sophie PERNET-LUBRANO

Classifying Payment Instruments: A Matryoshka Approach
Valérie-Anne BLEYEN, Leo VAN HOVE & Monika HARTMAN

Cooperation for Innovation in Payment Systems: The Case of Mobile Payments
Marc BOURREAU & Marianne VERDIER

Interview

Mung-Ki WOO, Vice-President Electronic Payments & Transactions, Orange-FT Group

Other paper

How Firms Interact and Perform in the ICT Ecosystem?

Antonin Arlandis & Stéphane Ciriani

Features

Firms and Markets


• Back from Tel Aviv
Yves GASSOT

Technical Innovations

• Future of the Web
Vincent BONNEAU

Book Review

• Gary MADDEN, Russel COOPER (Eds), The Economics of Digital Markets
By Geomina TURLEA

Author biographies

Future events

• The State of Telecom 2010 - Trans-Atlantic Dialog CITI / IDATE
New York, USA - October 15, 2010

• DigiWorld Summit 2010 – 32nd IDATE international conference
Montpellier, France - November 17-18, 2010

• WIK international conference - Experience with Vertical Separation
Brussels, Belgium - November 22-23, 2010

• 26th EuroCPR Conference
Ghent, Belgium, -  March 27-29, 2011


Dossier : Mobile payments and mobile money

Mobile-Money: Implications for Emerging Markets

James ALLEMAN
, Paul RAPPOPORT
Key words: Competition, economic dynamics, neoclassical economics, pricing policy, regulation.

Developing countries lack effective infrastructure:  transportation, telecommunications, financial systems, etc.  The positive economic impact of the improved telecommunications infrastructure has been demonstrated.  The ability of microfinance has been shown to stimulate and enhance economic activity.  Now a hybrid of the technologies has begun to emerge:  mobile money.  The ubiquity of cell phone service, coupled with the notion of microfinance offers the possibility of service in remote areas of a country where it would be otherwise economically unsustainable to provide banking services.  Mobile money has all of the attributes of money including store of value and medium of exchange.  This paper addresses the economics and policy issues of mobile money:  What are the economics of mobile money?  What policy issues does it raise?  Is it a threat to the traditional banking system?  How should it be regulated?  What can we learn from the microfinance literature?  Do we have empirical evidence of its impact on growth and development?


A Financial Analysis of Mobile Money Services

Peter LYONS

Key words: Mobile money, M-PESA, financial analysis, mobile operators.

With limited reporting by mobile network operators ("MNOs") on the financial performance of mobile money businesses, the paper develops a financial reporting framework to indentify (and quantify) operating costs associated with delivering mobile financial services to unbanked populations in emerging markets. The framework is based on a review of relevant literature and an analysis of the financial reporting of conventional money transfer businesses. Using the mobile money framework and monthly mobile money customer/agent data reported by Safaricom Kenya, we developed a test-case model of the historical performance of M-PESA since its launch in 2Q07. The test case synthesizes the evolution of M-PESA's revenues, operating costs, and cash flow as a separate business-reporting unit within Safaricom. The analysis indicates that even M-PESA Kenya, widely regarded as one of the most successful MMS deployments worldwide,  did not actually breakeven until nearly two years of operation. Based on the analysis, the broader (mixed) impact of mobile money services on a MNO's consolidated operating margins, working capital, and cash flow generation are extrapolated.


The Enigma of Mobile Money Systems
Ernesto M. FLORES-ROUX , Judith MARISCA

Key words: M-banking, financial inclusion, mobile applications, mobile opportunities, developing countries.

In this paper we argue that the success of mobile banking models represents an enigma in terms of their replicability to other countries. These models offer the opportunity to diminish the financial exclusion suffered by the poor by providing access to credit, savings, and transfers, which are key tools capable of transforming the livelihoods of the poor as well as the efficiency of the market. We show that mobile phones need a complete ecosystem that supports its application to a functioning mobile banking service. The aim of this paper is to contribute to existing knowledge of mobile money across the value chain by providing insight into the mechanisms of m-money and the value propositions within the business of m-banking. We develop a taxonomy of the key drivers of the business model to help assess the replicability of these models in other countries. We focus on models developed in Kenya, the Philippines, and Brazil, and explore if some of the conditions present in these models are lacking for a widespread adoption in others. We conclude, however, that there appears to be no set of clearly identifiable variables that serve as a basis for success and that those necessary conditions for the replication of m-banking models identified by the existing literature to other countries around the world do not guarantee results. Moreover, we find that some of these conditions are not present in countries where m-banking models have been successful.


Mobile Payments: Moving Towards a Wallet in the Cloud?
Sophie PERNET-LUBRANO

Key words: M-Payment, M-Banking, Remote payment, Proximity payment, M-commerce

This article deals with mobile payments in developed countries. Even though it only accounts for  a relatively small share of the market (between 10% and 20%), mobile payment merits in-depth analysis in developed countries as there are many economic and technological issues that still need to be addressed.


Classifying Payment Instruments: A Matryoshka Approach
Valérie-Anne BLEYEN, Leo VAN HOVE, Monika HARTMANN

Key words: Payment instruments, classification, money, technology.


The payments market is a dynamic market. Novel payment instruments are being launched at a fast clip. Unfortunately, a classification that adequately distinguishes all possible payment instruments by their most relevant characteristics is missing in the literature. In this paper a classification system is introduced that – just like a matryoshka doll – consists of multiple nested layers. The classification has five layers, comprising the type of money, the core payment mechanism, the channels and networks involved, the form factor and authentication device used, and, ultimately, seven generic payment methods. The idea is that a specific combination of features from each of the five layers ultimately defines a real-life payment instrument. Besides its comprehensiveness, the added value of the classification is that it reveals the true nature of a payment instrument, which on closer scrutiny may not be all that novel.


Cooperation for Innovation in Payment Systems: The Case of Mobile Payments
Marc BOURREAU, Marianne VERDIER

Key words: mobile payments; payment systems; mobile banking; mobile commerce

In this paper, we provide a definition of mobile payments and we analyze the markets that could be targeted by mobile payment service providers, both in developed and in developing countries. Focusing on the case of developed countries, we introduce five cooperation models that have emerged or could emerge between banks, mobile network operators, and payment systems, for the development of this payment method.



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James ALLEMAN is a Professor Emeritus, University of Colorado – Boulder. Dr. Alleman was a visiting professor at the Graduate School of Business, Columbia University, and director of research at Columbia Institute of Tele-Information (CITI). Professor Alleman continues his involvement at CITI in research projects as a Senior Fellow.

Antonin ARLANDIS is economist at Coe-Rexecode where he works on digital economy. Before joining Coe-Rexecode he was Ph.D. candidate at France Telecom – Orange Group. He was also visiting researcher at the Columbia Institute of Tele Information. He holds a Ph.D. and a Master in Economics from University of Montpellier 1. His main research interests are digital economics, industrial organization, regulation and competition policy, firms' strategies and macroeconomics.

Vincent BONNEAU
is Senior Manager, Head of Internet Services Practice at IDATE. He is in charge of issues relating to the IT and Internet services industries' impact on the telecommunications market's offers, consumption and business strategies. His assignments focus on technological and marketing innovations in these two industries. Before coming to IDATE, Vincent worked as the "Internet Software and Technologies" attaché to the French Trade Commission (DREE)

in San Francisco, in addition to having gained strategic operational and marketing experience working for Noos, Wanadoo and France Télécom in Paris. He is a graduate of the Ecole Polytechnique (1997) and the Ecole Nationale Supérieure des Télécommunications (2002), and holds a Masters Degree in New Technologies Management from the HEC business school (2002).

v.bonneau@idate.org

Marc BOURREAU
is Professor of Economics at Telecom ParisTech, Paris, France. He is also a research associate at the laboratory of industrial economics (LEI) of the Center for Research in Economics and Statistics (CREST). He obtained a master's degree in engineering science from Telecom ParisTech and a Ph.D. degree in economics from Université Paris 2 Panthéon-Assas. His research interests lie in the field of industrial organization, with a strong emphasis on telecommunications. He has published several articles on these topics in leading economic journals. His recent research focuses on the relation between regulation and investment in the telecommunications industry, and innovation dynamics in the payment industry.

Valérie-Anne BLEYEN
was, at the time of writing, a Ph.D. student at theVrije Universiteit Brussel (Free University of Brussels), Belgium, at the Department of Economics, Social and Political Sciences and Solvay Business School. Her research focused on digital goods and online payment instruments. She was also involved in an interdisciplinary research project on Flemish E-Publishing Trends (FLEET). She is currently working as a senior researcher at the Center for Studies on Media, Information and Telecommunication (SMIT) of the Free University of Brussels and her research domain includes e-publishing, 3D animation film, public broadcasting and online payment and revenue models.

Stephane CIRIANI holds a Ph.D. in Economics from the University Paris II Assas, where he has been a research assistant for two years. He then joined France Telecom Orange Labs in 2006 as an Engineer Economist, and is currently assistant director of economic studies at Coe-Rexecode where he works on the links between ICT and economic growth.

Ernesto M. FLORES-ROUX (B.S.  in Mathematics, National Autonomous University of Mexico – UNAM; master studies in economics at Instituto Tecnológico Autónomo de México – ITAM; Ph.D. in Statistics at The University of Chicago) worked in McKinsey & Company, Inc., a leading consulting firm, until 2004; he was the partner in charge of the Rio de Janeiro Office and a core member of the Americas Telecommunications Practice. During this time, he worked extensively with the governments of Mexico (1995-1996) and Brazil (1996-2000) in their efforts to restructure and open to competition their telecommunications sector. In 2004 he joined Telefónica, initially as Director of Marketing and Strategy in Mexico, and later in various leadership positions in Peru, China (Beijing), and Brazil. In 2008 he joined the Mexican Ministry of Communications and Transports (SCT) as Chief of Staff of the Undersecretary of Communications. In 2009 he became a researcher at the Centro de Investigación y Docencia Económicas (CIDE – Mexico), focusing his work on telecom public policy issued. He has published extensively in industry and general journals (DIRSI, IMCO, Plano Editorial, Forbes Brasil, Teletime, McKinsey Quarterly, Gazeta Mercantil, Valor Económico, Revista Ahciet, among others).

For more than fifteen years, Yves GASSOT has been at the head of IDATE (www.idate.org), an institute that has established itself as one of the leading research centres in Europe concerned with the telecommunications, Internet and media industries. In this position, he has taken part in numerous studies of the various markets and the strategies being pursued in the telecommunications sector. He is on the panel of several expert committees, including the Conseil Général des Technologies de l'Information , ITS  and the advisory Committees of the PTC and Iris Capital. He was special adviser of the European Commissioner of the Information Society during the last regulatory framework review. He serves as Executive Director of the journal Communications & Strategies and is scientific head of the annual DigiWorld Yearbook and DigiWorld Summit. With a background as DPLG architect, he is a graduate of the Institute of Political Studies, Paris (3rd Cycle).
y.gassot@idate.org

Monika E. HARTMANN
is Senior Market Infrastructure Expert at the European Central Bank. Her work focuses on integration and innovation of retail payments in Europe. She holds a university degree in Industrial Engineering and Management (1996) and a Ph.D. in Economics (2000) from the University of Karlsruhe, Germany. From 2000 until 2003 she analysed long-term macroeconomic trends at HypoVereinsbank (now UniCredit Group). She did a two-year business training at Deutsche Bank (1988-1990). Since the mid-19990s she has participated in various payments-related research projects, especially studying the evolution of payment services and their regulatory impact.

Peter LYONS
is Vice President for business development with Techpolis, Inc. a mobile telecommunications & technology management consulting firm. Prior to joining Techpolis, Peter was an equity research analyst with New York-based institutional brokerage, Oscar Gruss & Son, Inc. since 2006,  where he covered emerging markets telecom, media, and technology sectors between 2006 - 2010. Peter began his career in the late 1990's as a project manager in Motorola's Mobile Commerce Core Solutions Center and co-authored one of the Company's first mobile commerce related patent applications in 2001.  Peter has a bachelor's degree in Economics from Purdue University and a master's degree in Telecommunications Systems from DePaul University.

Judith MARISCAL
(Ph.D. LBJ School of Public Affairs at UT in Austin) is full Professor at the Centro de Investigación y Docencia Econmicas (CIDE, Mexico) where she is Director of the Telecommunications Research Program, Telecom-CIDE. She is a member of the Steering Committee for DIRSI, a research network on ICT policy for development in Latin America and the Caribbean as well as Social Witness for Transparency International Chapter Mexico and member of the Board of Advisors for Telecommunications Policy Research Conference (TPRC). Her current research focuses on ICT regulatory and public policies. She has authored two books:  Unfinished Business: Telecommunications Reform in Mexico, by Praeger Press in 2000, and Digital Poverty: Latin American and Caribbean Perspectives, by ITDG in 2007 coauthored with Hernan  Galperin. She has authored numerous articles on telecommunications policy and regulation in leading journals such as Information Technologies and International Development, Telecommunications Policy and Latin American Studies.

Sophie PERNET-LUBRANO
is Senior Consultant at IDATE. She is specialised in demand analysis, particularly in the area of consumer applications. Sophie also contributes her expertise in supply analysis, notably companies' Internet service strategies. Her assignments focus on various aspects of the telecom industry: Internet, media, landline and mobile telephony. Prior to joining IDATE, Sophie was an economic consultant for B.I.P.E., where she was in charge of telecom market monitoring. She is an economist, with a post-graduate degree from ESLSCA (Ecole Supérieure Libre des Sciences Commerciales Appliquées).
s.pernet@idate.org

Paul N. RAPPOPORT is Associate Professor of Economics at Temple University.  He has over 25 years of experience in data analysis, modeling and statistical assessment. Dr. Rappoport's current research interests include:  modeling consumer's willingness to pay; the construction of internet metrics; assessing the Digital Divide; specifying and modeling business broadband; forecasting internet demand and measuring the nature of network externalities.

Geomina TURLEA
joined the IS Unit in April 2005 as a Research Fellow working on a research training project entitled 'R&D in the ICT sector: Situation, outlook and impact on the European ICT sector'. She has a Ph.D. ('Econometrics of short and volatile time series') from the Romanian Academy of Sciences (2003). Geomina was previously employed by the Institute for World Economy in Bucharest, Romania and has worked with various national and international institutions and organisations in academic research projects. She has also carried out consultancy for policy makers and private agents. Her main interests are in macromodelling and applied econometrics, particularly as regards the knowledge economy and endogenous growth.

Leo VAN HOVE
is Professor of Economics at the Vrije Universiteit Brussel (Free University of Brussels) and Vesalius College, where he teaches courses in monetary economics, network economics, and e commerce. His current research interests include currency usage, demand for e-money, and e-publishing. 

htpp://www.vub.ac.be/ACCO/


Marianne VERDIER is an Assistant Professor of economics at the University Paris Ouest Nanterre la Défense. She received a Ph.D. from Telecom ParisTech in economics and has worked as an expert for the payment card scheme "Le Groupement des Cartes Bancaires, CB". The subject of her dissertation was "interchange fees and pricing of payment card systems". She has published in several journals about interchange fees, such as Journal of Banking and Finance, Journal of Economic Surveys, International Journal of Industrial Organization, and COMMUNICATION&STRATEGIES.


Marianne VERDIER is in charge of mobile transaction services payment, contactless, authentication, etc.) within France Telecom - Orange Group. After graduating from Ecole Polytechnique and Ecole Nationale Supérieure des Télécommunications, he started his career in the UK working on very large defence communication projects. He then joined a consultancy as a Practice Director. His last position was Technical Director at a French interbank organisation
specialised in electronic payment systems.




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