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Proximity Mobile Payment: Opportunities for Media Companies
Proximity Mobile Payment: Opportunities for Media Companies
Proximity Mobile Payment: Opportunities for Media Companies
Proximity Mobile Payment: Opportunities for Media Companies
Proximity Mobile Payment: Opportunities for Media Companies
Proximity Mobile Payment: Opportunities for Media Companies
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Proximity Mobile Payment: Opportunities for Media Companies

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Proximity Mobile Payment: 70 million users by 2017 …

Proximity Mobile Payment: 70 million users by 2017

SCHICKLER E-Business analysis: “Smartphones: Tomorrow’s Wallet”

Hamburg/Munich, April 5, 2013. Proximity Mobile Payment has the potential to revolutionise the personal payment market. Mobile payment for goods and services at the point-of-sale will substantially replace cash and credit cards to a noticeable extent in the near future – Proximity Mobile Payment will turn smartphones into electronic wallets. By 2017 just under 70 million users will be paying for goods and services for a value of over 40 billion euros, according to a current analysis by SCHICKLER Consulting.
At present, the mobile payment market is causing quite a stir. Numerous companies are crowding onto the market with credit card swipe systems. These systems transform a smartphone into a mobile credit card payment terminal. “However, this is only an intermediate step on the road to comprehensive mobile payment as the credit card remains a central component”, says Alexander Kahlmann, partner at Schickler Consulting, “the subsequent step in the mobile payment market is actually more interesting: proximity mobile payment.”
Schickler forecasts that the turnover generated by Proximity Mobile Payment will grow over the next five years at a rate of over 50% per year. The number of users who pay with their own smartphone via Proximity Mobile Payment at the point of sale, will rise between 2012 and 2017 to an eightfold.
As the barriers for entrance into the Mobile Payment market are comparatively low, the market will still gain in dynamic. But: “Independently of the exact future market structure, it is alrady quite clear: Proximity Mobile Payment will substantially replace cash and credit cards to a noticeable extent in the near future”, says Kahlmann.

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Media is our DNA.
The SCHICKLER group - corporate consulting and executive search - was founded by hands-on practitioners 30 years ago. Its focus on a limited number of industries - Media and E-Business, complemented by IT/TC-Services and Insurance - enables its consultants to achieve a high degree of specialisation. As a result, Schickler offers its clients in Germany and throughout the world strategic foresight and solutions in line with actual practice. Offices are located in Hamburg and Munich.

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  • 1. Photo: audioundwerbung | istockphoto.com SCHICKLER COMPACT: PROXIMITY MOBILE PAYMENT Smartphones: Tomorrow’s wallet
  • 2. Turnover viaProximity Mobile Payment grows by over 50% per year COMPACT SMARTPHONES – TOMORROW’S WALLET The mobile payment market is causing quite a stir. Numerous companies are crowding onto the market with credit card swipe systems. These systems transform a smartphone into a mobile credit card payment terminal. However, this is only an intermediate step on the road to comprehensive mobile payment as the credit card remains a central component. In addition, the extension of the payment chain holds the profit margins down – this business model is unprofitable in the long term. For this reason the subsequent step in the mobile payment market is really interesting: Proximity Mobile Payment. It will substitute cash and credit card payments to a noticeable extent and turn smartphones into digital wallets. SCHICKLER forecasts that the turnover generated by Proximity Mobile Payment will grow over the next five years at a rate of over 50% per year. The number of users who pay with their own smartphone via Proximity Mobile Payment at the point of sale, will rise between 2012 and 2017 to an eightfold. Thus by 2017 just under 70 million users will be paying for goods and services for a value of over 40 billion euros, from today’s perspective. STRUCTURE AND DEVELOPMENT OF THE MOBILE PAYMENT MARKET The mobile payment market can be structured on the basis of the two dimensions “Locality” and “Participant”. “Locality” differentiates between remote and local payment, i.e. payment from a distance and locally at the point of sale. In the dimension “Participant” one differentiates between person-to-person and person-to-business payment systems (Fig. 1). LOCAL PAYMENT Mobile payment Direct money transfer for goods and services between persons at the point-of sale LOCALITY REMOTE PAYMENT Distant money transfer M-commerce between persons PERSON-TO-PERSON PERSON-TO-BUSINESS PARTICIPANT Fig. 1: The Mobile Payment market is divided into four segments Remote payments have particularly succeeded in establishing themselves in Asia and Africa. The most frequent use cases are text message-based payments and money transfers. Especially in Africa, text message-based money transfers are often the only way of transferring money to other people over great distances. On the other hand, due to the differing technical situations in the grid expansion and the technical status of smartphones, SCHICKLER estimates the potential of remote payment for the USA and Europe as being low. SCHICKLER COMPACT: PROXIMITY MOBILE PAYMENT 2
  • 3. Technical development is gradually accelerating COMPACT Instead, numerous start-ups and cooperations are active in these regions in the segment Local Payment – especially for person-to-business payment transactions, i.e. for paying at the point of sale. SCHICKLER forecasts the greatest potential for this segment over the next few years. Due to the large number and diversity of the business models in this emergent sector, SCHICKLER distinguishes the sub-segments Credit Card Swipe, the Acceptance of Credit Card Payments by Smartphone, and Proximity Mobile Payment, i.e. paying via smartphone at the point of sale (Fig. 2). CREDIT CARD SWIPE PROXIMITY MOBILE PAYMENT Fig. 2: The multi-facetted Local Payment segment can be sub-divided yet again (Source: SCHICKLER) The trends in Mobile Payment follow a logical development. This began with the introduction of money as a means of payment, continued with card-based payment and is now moving on to the *NFC: Near Field Communication NFC*- and cloud-based method of payment. The business models for credit card swipe systems, Transfer standard for the contact-free which were already developed in 2010 and are being extensively implemented today, only represent exchange of data over short distances. one evolutionary step on the way to Proximity Mobile Payment (Fig. 3). The technical development of the payment systems has accelerated increasingly over the past few years. For this reason, one can reckon with further innovations over the coming years. As the barriers for entrance into the Mobile Payment market are comparatively low, the market will still gain in dynamic. Numerous new players will enter the market over the next 3 to 5 years, followed by a consolidation phase of 2 to 3 years. During this time many players will leave the market again. Only then will the future structure of the Mobile Payment market be established. Cloud-basedDEVELOPMENT payment via Physical abstraction Contract-free smartphones of several credit payment via Contact-free cards smartphones Mobile acceptance of payment by card Completely cash-free credit card payments transactions via POS Abstraction of terminals Abstraction of coins/bank notes concrete goods/ services Money as means First Credit card Smartphone-based Cards with All-in-one card NFC-/barcode- Cloud-based of payment credit cards terminals credit card terminals NFC chip with smartphone based payment payment 7th century B.C. 1950 1972 2010 Current trends TIME Fig. 3: Payment systems are becoming more and more sophisticated (Source: SCHICKLER) SCHICKLER COMPACT: PROXIMITY MOBILE PAYMENT 3
  • 4. More and moresolutions are developed within cooperations COMPACT STRATEGIC POSITIONING OF MOBILE PAYMENT PROVIDERS Whereas early mobile payment solutions were mainly turnover-oriented, current developments place their emphasis on strategic positioning. Major players are now bringing integrated solutions such as “Google Wallet”, “Apple Passbook” or “Microsoft Wallet” onto the market. These products do not involve direct turnover drivers, but are concerned with the strategic positioning as a central point of contact for the payment and administration of finances - for example also for the management of tickets and reward programs. These efforts clearly show the long-term strategic significance of Mobile Payment (Fig. 4). Besides the strategic positioning of providers, it is recognisable that Mobile Payment solutions are increasingly being developed in cooperations and brought onto the market. In particular the coope- ration with mobile communications providers and credit card institutes is being encouraged in this connection. Mobile communications providers on the one hand operate an existing infrastructure for communication and on the other hand have existing contact with and confidence of the customer. Credit card institutes have the necessary processes, licences and contracts for the transfer of money. STRATEGICALLY ORIENTED TURNOVER- ORIENTED 2010 2011 2012 Current development TIME Fig. 4: Strategically oriented providers are gradually appearing on the market (Source: SCHICKLER) WHY PROXIMITY MOBILE PAYMENT IS SO IMPORTANT More than 1 billion people possess a smartphone. Proximity Mobile Payment enables the use of these smartphones for cash-free payment at the point of sale. SCHICKLER estimates that by 2017 70 million users throughout the world will be applying Proximity Mobile Payment with their smartphone to pay for goods and services at the point of sale. The value of goods and services paid for world- wide via Proximity Mobile Payment will rise by 2017 to more than 40 billion euros per year. (Fig. 5). 50 billion euros 40 billion euros 30 billion euros 20 billion euros 10 billion euros 0 billion euros 2012 2013 2014 2015 2016 2017 Fig. 5: The use of Proximity Mobile Payment will increase rapidly (Source: SCHICKLER) SCHICKLER COMPACT: PROXIMITY MOBILE PAYMENT 4
  • 5. 1.1 billion euros turnover inGermany in 2017 COMPACT Of this amount just under 10 billion euros will be allocated to turnover in Europe and more than 10.5 billion euros to turnover in the USA (Fig. 6). 12 billion euros 10 billion euros USA 6 billion euros EUROPE 4 billion euros 2 billion euros 0 billion euros 2012 2013 2014 2015 2016 2017 Fig. 6: USA and Europe are important markets for Proximity Mobile Payment (Source: SCHICKLER) In Europe the DACH countries (Germany, Austria, Switzerland) will be responsible for 15% of the turnover generated via Proximity Mobile Payment. Within the DACH countries 77% of the turnover will take place in Germany. According to estimations this turnover of 1.1 billion euros, will be generated in Germany in 2017 through more than 87 million Mobile Payment transactions. In Switzerland and Austria the turnover in 2017 will amount to 225 million euros and 118 million euros respectively. This will be created with 11 million Mobile Payment transactions in Switzerland and just under 9 million transactions in Austria (Fig. 7). D: 1.1 BILLION EUROS EUROPE WITHOUT DACH: 8.3 BILLION EUROS DACH: 1.4 BILLION EUROS A: 118 BILLION EUROS CH: 225 BILLION EUROS Fig. 7: Around 1.4 billion euros of the European turnover figures are allocated to the DACH countries (Source: SCHICKLER) OPPORTUNITIES AND RISKS Mobile Payment offers considerably more opportunities than risks: Opportunities + New turnover generators and increase in customer spending + Cost reduction in retail thanks to simplified processing of payments and handling of cash + New aspects for customer retention, marketing and targeted advertising + Added value for customers thanks to integrated management of finances Risks - Splitting of the market into isolated solutions and lack of customer acceptance - Security problems and lack of customer confidence SCHICKLER COMPACT: PROXIMITY MOBILE PAYMENT 5
  • 6. Opportunities for media and other businesses COMPACT WINNERS AND LOSERSWINNER TIED LOSER Print – extremely recommendable + New possibilities for the on-the-spot sale of print items.WINNER TIED LOSER Digital publishing – extremely recommendable + Increase in confidence in digital payment and therefore increase in acceptance for digital contents at a charge.WINNER TIED LOSER Brands – extremely recommendable + Possibilities for brand positioning and marketing.WINNER TIED LOSER Retail – extremely recommendable + Sales drivers through use of Proximity Mobile Payment. + Reduction of costs involved in the payment procedure. + Brand positioning with a target group affine to technology. Radio – conditionally recommendable +/- Low on-the-spot contact to consumers, therefore little possibility of using Mobile Payment.WINNER TIED LOSER E-commerce companies – conditionally recommendable +/- Unclear as to whether increased purchases are effected in the physical world and therefore substitute e-commerce turnover. TV – not recommendable - Low on-the-spot contact to consumers, therefore little opportunity of using Mobile Payment. Conclusion Proximity Mobile Payment has the potential to revolutionise the personal payment market. Cooperations between hardware/software producers, mobile communication providers, credit card institutes and banks are vital for success. Up to now no player has asserted himself in this expanding market. However, in particular the larger players are strategically positioning themselves at present. But, independently of the exact market structure, it is already quite clear: Proximity Mobile Payment will substantially replace cash and credit cards to a noticeable extent in the near future. We look forward to receiving your queries and feedback. Contact: Alexander Kahlmann SCHICKLER Consulting Group Tel. +49 40 376650-0 a.kahlmann@schickler.deCOPYRIGHT SCHICKLER 2013 SCHICKLER COMPACT: PROXIMITY MOBILE PAYMENT 6

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