Last week I attended a conference in Singapore devoted to mobile financial services. So what you may ask? Well, when I asked some speakers if anything had changed in three years they admitted, very little.
Sure, we have those amazing success stories emanating from Africa about the banking of ‘the great un-banked’ and the awesome payment transfer systems that some Asian operators have introduced but, in general, revenues from mobile financial transactions have eluded most. I’m talking here about mBanking, mPayments and mCommerce!
It seems that success comes to telecommunications companies that have mastered the art of cooperation with financial institutions, rather than competing directly against them, or where they provide a service in places, so remote, that banks would never bother to service. In all honesty, the success stories are few and far between, but why?
After hearing from payment services companies, credit card issuers, mobile operators, banks and NFC (Near Field Communications) providers I can confidently say that they are still eons away from understanding viable business models that will benefit all parties. We heard for example, that over 100 NFC trials have been undertaken worldwide over the last five years or so and only a handful have been implemented, outside of Japan and Korea that is. Yet it seems remarkably logical for most of us to have all our payments and banking capabilities available via our mobile handset. Not to mention easy access to buses and trains.
When you think of all the players that have to agree on the business model, the technology and revenue sharing to make such a system viable and you see each of the players trying to protect their own turf, it all becomes painfully obvious. When you are presented with the many technologies available to parties external to the existing value chains (like secure SD cards you can plug into a phone and thin film SIM covers) you can see the potential for disruptive players to enter the market, and trust me, they will.
One of the world’s leading experts in this field, David Birch, spent some time with me explaining how mobile operators, in particular, could actually become ‘smart pipes’ with financial transactions. The ‘secret sauce’ according to Birch, lies in the ability for operators to provide secure identification linked to the SIM providing private and public keys for multiple providers. The resultant digital signatures would allow for ultra-secure tow level authentication via the mobile device.
According to Birch, the revenue derived for the operator providing the service is not the driver, it’s all about churn prevention. In fact, the ‘smart pipe’ operators will give the service away to as many key holders as possible to offer a wide range of secure transaction services to their customers. The hassle of swapping to another mobile operator will become considerable will likely outweigh the attraction of moving.
He cited GarantiBank in Turkey and Bank ID in Sweden as excellent examples of how this would work. See the last issue of Inside Revenue Management for David’s article ‘Mobile Payments – Safer than Cards?’