IHS Global Insight Perspective | |
Significance | Nokia is seeking to tap into the potentially lucrative mobile payment market, leveraging its brand strength with the Obopay mobile payment platform in which it invested earlier this year |
Implications | Nokia is entering a market which has made significant strides in the last few years as regulatory authorities have established guidelines and rules to manage such services—this should provide some lucrative opportunities which Nokia seeks as it diversifies its portfolio from handsets |
Outlook | Nokia faces competition from established players in the biggest potential markets, and will likely rely on partnerships with local operators |
Nokia has announced that it is to launch a new set of mobile financial services which will allow users to send money to another person using just their mobile phone number. It will also support payments for goods and services, including utilities, train and cinema tickets, and prepaid phone top-ups.
Central to the plan is to build a network of Nokia Money Agents—likely by initially tapping into Nokia's existing support and distribution infrastructure—where users will be able to deposit money or withdraw cash from their accounts.
The service is being operated in co-operation with Obopay—which Nokia acquired a stake in earlier this year—reported in some sources (such as the Financial Times) to be valued at US$70 million, roughly equal to the existing venture investments in the business, though Nokia reportedly took a minority stake (see World: 27 March 2009: Nokia Buys Stake in Mobile Payment Specialists Obopay). Obopay's business model charges US$0.25 per transaction sent, with maximum transfers of up to US$1,000 in the United States. Nokia notes that it has developed new mobile elements to the service and it intends the system to be interoperable with other payment services.
Nokia will present the Mobile Money service for the first time at the Nokia World conference on 2—3 September and it will be rolled out in selected markets from early 2010.
Outlook and Implications
Nokia notes that there are now some four billion mobile phones in use around the world compared with only 1.6 billion bank accounts—showing the massive potential market for such services—particularly in emerging economies. Use of mobile banking services has been growing rapidly. This was particularly seen in Africa where strong uptake of prepaid mobile phones saw informal mobile banking organically emerging. Users bought credit and transferred it to others as an easily distributed form of currency by quoting the phone credit reference numbers to remote creditor to pay for goods received.
Nokia faces stiff competition in establishing this service internationally. A number of successful operations are already in place—most notably M-Pesa in Africa. Operators also have a strong advantage in that they have already established networks of local agents for distributing and selling prepaid credit—lines of communication which the handset vendor does not have. Nokia does have strong brand and trust is critical in mobile banking; it does not have the same type of continuing relationship established with users as carriers do. It is likely that Nokia intends to partner with carriers, offering the service as a banking platform rather than going it alone.
M-Pesa was one of the early moves to create a more formal system for such mobile payments. Kenyan operator Safaricom noted that it had some 712,000 registered users by 30 September 2007, and 635,761 active users after launching in March 2007 (see Kenya: 11 December 2007: Safaricom Reports Strong Uptake of M-Pesa Mobile Banking Solution). By 31 March 2008 it reported over two million users and has spread into new countries (see Tanzania: 10 April 2008: Vodacom and Zantel Plan to Launch Money-Transfer Services in Tanzania and Kenya: 29 May 2008: Safaricom Reaches 10.2 mil. Subscribers, Reports 29.3% Annual Revenue Growth). In the United States mobile banking has generally emerged as an offshoot or portal to traditional banking services, rather than a standalone system. Mobile banking platforms developed by smaller start-ups such as Firethorn have been used to deliver many of these services (see United States: 12 June 2008: Bank of America Claims 1 mil. Mobile Banking Customers).
Regulatory Pauses
Many other regions were slower to establish rules which would support mobile banking services, partly as banks and banking solutions were already widely taken up by the population.
- Mexico: 14 July 2009: Mexico Sets Rules for Mobile Banking Services
- United States: 23 February 2009: CTIA Publishes Guidelines for Mobile Financial Services in U.S.
- India: 31 July 2008: Banks in India Explore Mobile Payment Services
- World: 4 July 2007: Vodafone, Nokia Call for Regulatory Boost to Mobile Banking
M-Banking Specialists Become Investment and Partnership Targets
However mobile operators, equipment vendors, banks and payment specialists have seen the potential to enable new customer solutions and broaden their sphere of influence and have bought into or partnered with many of the early movers in developing such systems.
Specialists in the mobile transfer market include
M-Pesa (Africa, Safaricom)
mChek (India)
Paymate (India)
Wizzit (S. Africa, has a partnership / deal with Vodacom)
SwipePay (United States—mainly focussed on prepay time/credit solutions; Boost, Virgin)
The potential for mobile banking attracted investment from many sources—including operators, vendors, banks and existing e-payment platforms such as PayPal, which has moved to buy in or develop their own mobile solutions
- Belgium: 17 March 2009: Belgacom Buys 40% of Mobile Payments Specialist Tunz
- World: 15 November 2007: Qualcomm Buys Mobile Banking Company Firethorn for US$210-mil.
- Latin America: 24 September 2008: EverMobile Ties Up with RIM for Mobile-Banking Across Latin America
- World: 11 July 2007: PayPal Launches Mobile Payments in Canada, U.K., and U.S.
- Sub-Saharan Africa: 16 March 2009: MTN Rolls Out Mobile Money Transfer Service Across Operations
- Peru: 1 July 2009: Visa Launches Mobile Payment Service in Peru
- Middle East and North Africa: 11 April 2008: Orascom Launches Mobile Banking for All Customers
- United Arab Emirates: 8 July 2009: Emirates NDB to Launch U.A.E. Mobile Banking in Partnership with Etisalat
- United States: 14 November 2007: AT&T Launches Mobile Banking Service
Integrating Near Field Communications
One of the next steps seen to vault mobile payments to the next level—particularly in mature banking markets—is to integrate contactless ''Near Field Communications'' systems into mobile phones, making the handset a wallet which can simply and effectively enable both remote and card present transactions—particularly enabling simple micropayments.
- South Korea: 29 July 2009: KT and SK Telecom to Launch NFC USIM in 2010
- World: 25 February 2009: The Potential of NFC-Enabled Handsets as a Mobile Revenue Stream
- United Kingdom: 23 October 2008: Mobile Phones May Replace Oyster Cards on London Transport