Frost & Sullivan Mobile Phone Analyst Briefing

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Frost & Sullivan’s analyst briefing on the mobile phone retail market.

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Frost & Sullivan Mobile Phone Analyst Briefing

  1. 1. Convergence of the Mobile Phone and the Wallet - Is the Market Ready? Shyam Krishnan, Industry Analyst Smart Cards Practice September 30, 2008
  2. 2. Focus Points Agenda • M-Commerce Overview • NFC Overview • Business Models • Conclusion 2
  3. 3. Mobile Commerce A brief overview 3
  4. 4. Overview – Smart Card Payments and m-Commerce • Contactless cards are revolutionizing the payment industry. • MasterCard working on initiatives to migrate to contact-less readers in retail. • Concerns over low-value transactions alone being mobile- phone compatible. Higher values of transactions need to be approved. • Contactless smart cards would enable greater numbers of m-commerce transactions worldwide. • Tie-ups of online and mobile transactions would further boost industry – companies like Paypal are working on this. 4
  5. 5. Value Chain for Mobile Payment Solutions 5
  6. 6. Mobile Payment • Value chain includes • Telecommunication sector (mobile operator, device vendors, solution providers, and others) • Financial sector (financial institutions such as banks, billing intermediaries) • Consumers • SIM/Payment software developers • Application providers • Trusted service managers • Merchants • Handset manufacturers • SMS Based, WAP based payments gaining momentum • Mobile payment is a multi-billion dollar market worldwide 6
  7. 7. Near Field Communication An overview 7
  8. 8. NFC • Simple and powerful communication mode • Short read range technology • Typically operates at 13.56 MHz • Secure transactions for short range communication • Active and passive modes exist • Mobile phone compatible • Apart from P2P transactions, mobile banking and proximity payment, NFC adoption for marketing purposes is expected to be widespread • Integration could vary from – • Card Emulation • Reader Mode • P2P Mode 8
  9. 9. NFC Challenges • Standards – Need to ensure inter-operability between various platforms • Merchant Adoption for smaller-value transactions • Co-operation between major participants in the eco-system; fee and cost splits • Proving the business case to vendors who prefer standalone- contactless based payment systems • Ensuring significant installed base by 2015 – to achieve global NFC penetration • Gather momentum from pilot phase to enter roll out phase 9
  10. 10. Advantages of NFC – Payment perspective • Brings simplicity and security across verticals. • Ensures a higher degree of personalization, with no card swiping or contactless card interference. • One phone – for all applications; OTA personalization and deployment for transit applications are predicted to drive growth. • Enables tying in preferences with transactions. Ex: Saved searches and preferred purchases could be brought up from memory to make next automatic transaction. • Trials in 2007 and 2008 – Include initiatives from Citi, HSBC, Nokia, Vivotech, US Bank, Wachovia (now Citi), Wells Fargo, Master Card – all in different deployment trials across application areas. • NFC Marketing is expected to be widely popular by 2015 – enables marketers to reach consumer directly. 10
  11. 11. Audience Poll Question
  12. 12. Business Models Solution Providers • Transactional Model – Fixed, per transaction • Percentage share of merchant transactions Mobile Operators • Transaction fee • Data traffic • Application management on the handset Financial Institutions • Soft-card issuance P2P Model Collaborative Model 12
  13. 13. Global Handset Forecasts Global Handset Sales Forecast Global Handsets Sold (Millions) 2,000 1,599.8 1,391.2 1,500 1209.7 1051.9 914.7 1,000 735 795.4 678 500 - 2004 2005 2006 2007 2008 2009 2010 2011 Handsets 13
  14. 14. Conclusion • Though NFC is popular and is gaining momentum, with many US based vendors showing interest, the returns on the investment in R&D on NFC integrated with mobile payment has to be evaluated. • Currently, the technology has to move beyond the pilot phase to the roll out phase – the only way to reach more end-users. • More and more targeted user segments (Ex: teens, young professionals, etc.) should be brought into focus for spreading awareness. • Economic slowdown in the US will affect NFC deployment – however, the ecosystem’s stakeholders should ensure that a mandate is set for complete deployment in the next 10 years or so – by 2020. • The opportunities that NFC presents are immense; but the market is just not ready yet – going by past evidence, NFC-oriented optimism needs to translate into tangible market presence. • Nokia handsets with NFC supporting Google Android is expected to drive growth. 14
  15. 15. Your Feedback is Important to Us What would you like to see from Frost & Sullivan’s Smart Card practice research? Growth Forecasts? Competitive Structure? Emerging Trends? Strategic Recommendations? Other? Please inform us by taking our survey. 15
  16. 16. For Additional Information • To leave a comment, ask the analyst a question, or receive the free audio segment that accompanies this presentation, please contact Stephanie Ochoa, Social Media Manager at (210) 247- 2421, via email, analystbriefings@frost.com, or on Twitter at http://twitter.com/stephanieochoa. 16

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