Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
Mobile payment is currently one of the hottest topics in the Brazilian ICT industry. Frost & Sullivan had the opportunity to discuss the trends of this market with telcos and value chain participants during two industry events held in São Paulo during September: the Mobile Payment Summit, organized by Corpbusiness; and Mobile Payments, organized by Dialogia, in which the findings of our recent study on the topic were presented.
Discussing with Brazilian telcos, we observed that operators find mobile financial services as one of the most promising revenue streams in the future. Evidence of this is the creation of specialized business units for this service within telcos. Also, Brazil’s four major telcos – Vivo, Claro, Oi and TIM – have all already partnered with banks (and other stakeholders) to provide mobile payment services. However, the Brazilian market is currently characterized by: few companies having commercial offerings of mobile payment services; a high penetration of mobile phones; and a low penetration of banking products.
Frost & Sullivan estimates that the market will grow from 500,000 registered users in Brazil in 2012, at a very early stage, to 80 million in 2018. The growth of the service will be driven mainly by member-get-member, in addition to the marketing efforts of mobile payment companies, which will make
m-payment a common habit among the population.
There are two main target markets in the m-payment market. On one hand we have the “premium” profile: high-income consumers, owning one or several bank accounts and credit cards. They usually already possess smartphones and are familiar with new technologies. On the other hand, we have the mass market profile with low-income users, often characterized by an income that changes from month-to-month and no bank account. In addition, they have feature phones or low-end smartphones and a low awareness about new technologies.
The two target markets also differ in terms of technology needs. Tex messaging, unstructured supplementary service data, wireless application protocol and direct mobile billing have more synergy with massive customers as they don’t require any new infrastructure other than the current one. These technologies work on any mobile phone, are simple and easy to use. On the other hand, near field communication requires the client to possess a smartphone, which decreases significantly the potential market. In this scenario, Brazilian carriers are in the spotlight as the current most popular technology for mobile payments is text messaging. However, future trends point toward a rapid smartphone penetration and the intensification of NFC adoption. This evolution would benefit financial players who would use partnerships with operators mainly to obtain their user base and market their services, and therefore exploiting handset sales to boost the use of m-payment services.
Since the market is still incipient, banks are analyzing investments more intensely. The banks entry in the mobile payment business is fully embraced by the market as it enables to diversify revenues and reduce operating costs thanks to virtual channels. Customers’ needs regarding prompt payment, convenience, financial control, coupled with benefits from other services, could be sold as part of a bundle, and would represent an opportunity to increase Brazilian financial inclusion for those who still don’t participate in the traditional banking system.
The ecosystem of m-payment is complex and until recently suffered from rivalry between market players. The role each player would execute is still unclear as well as if operators would take responsibility for financial services. As the market evolves, it becomes clearer that the solution lies in strategic partnerships between operators and banks, or operators and credit card brands, for example, in which each player would carry out the activity that already represents its core business in the ecosystem.
For further expansion, the mobile payment ecosystem demands integration between the existing infrastructure of payment processing and mobile payment applications, end-user education, consumer confidence regarding mobile applications, interoperability between the available services in the market as well as government regulations.
Finally, the provision of financial services to the un-banked population, including peer-to-peer micro transactions, in a secure and convenient way for a population that uses cash frequently and/or pays bills in person, is an opportunity for carriers and other market players to increase revenues through new services bundled with m-payment.
