Mobile banking users doubling every year

Mobile financial services include a range of various applications and usage areas. Most of these services could be classified as mobile payments, mobile money transfer or mobile banking. The mobile handset is now established as a means for payments in certain niches such as digital services and ticketing using premium SMS.

Berg Insight believes that this type of applications will continue to grow with WAP billing and credit card payments gradually increasing their market shares. Mobile money transfer is expected to achieve a market breakthrough in the coming years, generating revenues in the range of US$ 1.2-6.2 billion in 2015.

Berg Insight also anticipates that mobile banking will become highly popular among existing Internet bank users and also become the main digital channel for retail banks in emerging markets. As a result the number of active users of mobile banking and related financial services worldwide is forecasted to increase from 55 million in 2009 to 894 million in 2015.

Mobile payments refer to the utilization of mobile handsets for making purchases. Traditionally, mobile payments have focused on purchasing mobile content, but over time the application area has diversified to include goods and services. Initially, premium SMS was the vehicle for payments as it offered unmatched reach and a simple process familiar to the vast majority of the subscribers.

As the number of people using their phones for data services increases a range of alternative methods opens up. Today, many content providers are moving over to WAP billing, which offers practical advantages and higher payout rates. Furthermore, the mobile devices are converging with PCs and a natural step is to utilize the payment methods already established on the Internet, which offer better payout rates and do not rely on operators. These methods are primarily transactional networks and credit cards. In a long term perspective the mobile handset has also been identified as a vehicle for delivering contactless payments using NFC technology and we are starting to see commercial roll-outs in a number of markets.

The money transfer market has grown considerably over the past years, however the current global economic downturn has constrained the remittance volumes temporarily. Still remittance is a growing market in a long term perspective, driven by a number of factors such as migration, globalization and urbanization. Many mobile banking and payment providers are glancing at the US$ 600 billion flowing every year to developing countries, which generates about US$ 60 billion in remittance service revenues. There are over 4 billion mobile subscribers in the world and extensive networks of airtime agents have been built up giving the mobile media unmatched reach and it has been identified as a vehicle for remittance. Today, there are a number of international mobile remittance services available in the US, Europe and the Gulf states. Yet, money transfer networks such as Western Union and informal value transfer systems still dominate the market.

Mobile banking is an evolution of telephone and Internet banking that provides mobile subscribers with access to standard banking services such as account information and payments. There is a major difference between mobile banking for the banked population in the US and Europe compared to the unbanked population in Africa, Asia and Latin America. The services differ significantly as they fill different needs and builds upon different business models. In Europe the service is at the initial stage and seen as a convenience service that does not generate additional revenues, but more a service to build value-added applications upon. In emerging markets the service targets unbanked or under-banked people that do not have access to other official banking systems.

There is a wide range of players of every size in the mobile banking and payments industry. Since the different services are strongly interconnected most firms dedicated to developing platforms for mobile commerce offer a number of services. Many platforms comprise for example banking services, over the air payments, proximity payments (NFC), remittance, airtime top-up as well as other functions such as marketing and vouchers. In addition to these players there are also large IT firms with the capabilities of delivering tailored solutions to operators or financial institutions that integrate with the current systems. Large banks such as Citigroup or Bank of America have the competence to develop mobile banking and payment schemes in-house. There have also been initiatives from the international card payment giants Visa and MasterCard.

We have recently seen some acquisitions in the industry. First when Firethorn was acquired by Qualcomm at the end of 2007 followed by the acquisition of Paybox by Sybase 365 in January 2009 and Macalla by Roamware in September 2009. The latest acquisition in the industry was Gemalto that increased its investment in Netsize in January 2010. Another trend is the acquisition of financial institutions by mobile operators that aim to take full control over the ecosystem. China Mobile in China, Telenor in Pakistan, Globe Telecom in the Philippines and SK Telecom in South Korea have all made investments in financial institutions or payment providers recently. This may either be a way to meet financial regulations or to increase control of the ecosystem with the aim of increasing revenues and speed up deployments of services.

Find out more at www.berginsight.com