The payments landscape is shifting significantly. Digital payments are making way for mobile commerce and consumers are now spending more time and money on their mobile devices than on their desktops and in stores. Research found mobile payment spending in Europe will reach €231 billion by 2022. The research also forecasts that all POS terminals are expected to facilitate mobile payments in the next two years, while users will own nine connected devices on average by 2021.
However, the facilitators of this shift, telcos, are currently only billing around 3% of all mobile payments spend. For telcos to gain a share of the mobile payments pie and avoid being disintermediated, they must proactively add value to the payment process. According to recent analysis by ACI Worldwide, telcos could increase their mobile payments revenue at least fourfold by 2022. Add to this the increasing number of new market entrants, in particular OTT (“over the top”) players, which are threatening the traditional bread and butter revenue streams of telco companies, and it is clear that MNOs and MVNOs need to consider how to carve out a profitable, sustainable path in a digitally-connected future.
The Internet of Things as key driver for change
In the next 10 years, there will be an exponential expansion in the number of devices and applications consumers will use to make mobile payments. You could pay for your groceries on your mobile, for delivery at home, then two days later receive a message from your fridge alerting you that the milk is running low. By the time you get back home, a new bottle of milk could be waiting for you, thanks to real-time delivery, even by a drone.
For this cross-functional environment to work, the market must move away from fragmentation towards integration. In this new digital marketplace, telcos should act as hubs the integrators for devices, applications, methods of mobile payment and customer identity management to work in cohesion.
Greater innovation requires greater responsibility: if device manufacturers, software developers, merchants and payment enablers do not integrate their products and services, consumers may have more choice, but a poorer experience. Ensuring customer convenience and trust is key for merchants to grow their mobile payments in the long term. Forming partnerships with merchants, manufacturers and payment enablers as well as focusing on convenience and trust to improve the customer experience will be an important step to striking the right balance.
Mobile devices, which are currently kept on standby for 96% of the day, can play a central role in driving both online and in-store consumer payments forward. To resolve the complexity of mobile payment options, the market needs an aggregator. Telcos have the technology know-how, the subscriber base advantage, and the identity management expertise to be the aggregators. But, in taking this step telcos need to develop a robust payments solution, one that can handle more transactions and create a more seamless customer experience, while protecting against the increasing threat of fraud.
Technology solutions that enable those ideas
From the arrival of PayPal in checkout pages to the incorporation of NFC technology in smartphones, the mobile payments market is moving toward improving customer convenience. In this environment, the most innovative and convenient solutions are the ones that connect the dots the quickest, particularly between customer and payment: think peer-to-peer transfers via Facebook chat for Transferwise account holders, or the Telstra One Number, which uses e-SIM technology to allow voice and data sharing across devices. Or the millions of Chinese WeChat and Alipay users who pay for products by scanning QR codes from newspapers, online adverts or smart TVs.
What can telcos take away from these examples? Firstly, the e-SIM makes it easier to use consumers’ telephone numbers as quick authentication methods across devices. The data gathered from device-specific payments and traffic can be analysed to understand and monetise consumer interests. Telcos could also play a role in the increasing move to peer to peer payments.
In this emerging payments landscape, telcos have a unique opportunity to drive the shift to mobile. In pursuit of this, telcos should look to build strategic relationships with merchants, consumers and technology platforms, alongside major disruptive players including Uber, Apple and PayPal. To truly take mobile payments to the next level, telcos should also build on direct carrier billing through multiple payment options, data management and seamless fulfilment.
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