Mobile Money and the battle for consumer engagement (Monitise)

Mobile Money and the
battle for consumer engagement
Working for everyone
mbanking | mpayment | mcommerce www.monitise.com
MONITISE WHITE PAPER // nov’12

Monitise white paper | Mobile Money and the Battle for Consumer Engagement © Monitise 2012 | page 2
Mobile banking, payment and commerce should be
synonymous with the financial sector. Instead search
engines and technology companies are stealing a march
on mobility.
A shift in consumer mindset and growing demand for anytime, anywhere access to applications is giving rise to
a new kind of competitor. Banks are being left behind as search engines and technology companies capitalise
on the online opportunities to deepen customer engagement and create more connected end-user experiences.
But it’s time for financial institutions to fight back. To invest in the platforms, processes and partnerships to
unlock new revenue streams and deliver more relevant service offerings. Only then can we collectively rebuild
customer confidence and reaffirm the role of the bank in the Mobile Money arena.
In this white paper we consider opportunities to enhance the banks’ strength of position by:
• Embracing mobile customer interaction; it’s no longer a novelty but an integral part of daily life and should be a
fundamental strand of your consumer facing strategies
• Protecting the value of your transactions and customer relationships from new, technology centric competitors
and other financial services entities
• Creating unique and differentiated interaction opportunities that leverage the distinct qualities of the mobile
channel
• Extending the existing business model to capture new forms of revenue
• Developing new and innovative mobile propositions
introduction
Executive summary
01
Mobile is bringing together the digital and physical worlds,
revolutionising consumer behaviour and expectations.
Retailers, banks, mobile operators and more are all battling for airtime in a crowded online space. Social networks,
apps and rich media are providing new platforms for direct end-user engagement and savvy brands are exploiting
the consumer’s quest for a more connected experience.
In an on-demand world, the ability to tap into our most relied upon resources anywhere, anytime and via any device
is driving customers into the arms of the all encompassing players. No longer content to be connected to each other,
we want ready access to the products and services that play a part in our everyday lives. And it’s no coincidence that
the companies most successfully streamlining such transactions are the world’s most profitable: think Google, Apple,
PayPal and Amazon. These heavyweights have mastered the art of simplicity and in doing so are superseding those
that continue to offer a more convoluted customer journey.
Don’t let disintermediation divide and conquer.
Cutting out the middle man is clearly a strategy to capitalise on customer preferences for a slicker, quicker, one-stop
service. It’s an approach that undoubtedly puts us all in jeopardy but amid the current crisis of confidence, the banks
are among the most vulnerable.
Looking ahead, will the likes of Google, PayPal and Apple provide payments and banking as part of their connected
experience – reducing banks to nothing more than utility providers? Or will financial institutions seize the ‘mobile’
opportunity to create an engaging environment that opens up new revenue streams?

The Consumer Revolution02
Technology is quietly revolutionising the way we
behave. Forrester calls it the ‘age of the consumer’.
The web brought us access to the widest possible knowledge base; social networking allows new levels
of online interaction; and mobile has brought both of these and more into our anyplace, anytime physical
world. The result is a power shift from institutions to individuals accompanied by dramatic changes in
end-user expectations. At the same time these technologies are super-charging businesses to provide new
dimensions of service and engagement.
It has never been easier for the consumer to switch allegiance to those who best serve their needs -
creating unprecedented risk for those reluctant to embrace the revolution. Apple and Amazon are early
examples of businesses capitalising on this trend. iTunes has become the most successful music store
in the world with over 16 billion songs downloaded and Amazon.com sells more Kindle ebooks than
hardcover and paperback books combined.
In relative terms, the pace of change is unprecedented.
This shift is so profound that it is hard to believe it started so recently. The web is but a teenager, social
networking is just starting school, and smart phones are taking their first few steps. The internet has
fundamentally changed the way we work and how value is created throughout the economy.
Mobile is the interface between our virtual and physical worlds, extending this transformation from our
desktop anchored digital lives to everything we do. Smart phones represent almost 50 per cent of the UK
and US mobile phone market, yet the poster child iPhone is only five years old. What’s more, over a third of
consumers have owned their smart phones for less than a year and 80 per cent for less than three years.
The global potential paints an even bigger picture.
Ecommerce has undoubtedly transformed retail in a relatively short space of time. But today it only
accounts for eight per cent of shopping spend in the US and far less in emerging markets. Imagine,
then, the impact of extending this to all commerce, on a worldwide scale? The outlook is phenomenal
considering that technology’s only really touched the tip of the iceberg.
In this context it is hard to imagine what the buying experience will be in the next five to 10 years, but it will
certainly be characterised by ever increasing end-user expectations and the search for simpler, consumer
centric experiences.

Convergent commerce
and the battle for consumer engagement
03
Individuals are expecting more from every business and becoming intolerant of mediocre consumer experiences.
Whether poor service levels are attributable to your organisation direct or further down the supply chain is
irrespective. It is no longer sufficient to be the best at providing your component, leaving the rest to others. Now,
more than ever, it is important to own the entire customer journey.
There is a critical shift from silos of product and services to
ecosystems that collectively deliver connected experiences.
The iPod is an early example of this approach. Apple recognised the consumer
desire for simplicity. Furthermore, forward thinking executives established
that this could only be delivered by creating an end-to-end service: in other
words, a connected experience. The result was market dominance, with Apple
moving from the limitations of hardware and software supplier to orchestrator of
ecosystems. Now the world’s largest music retailer, incumbents such as Sony -
who arguably once owned the category with the Walkman - didn’t so much as
lose the battle as never enter the field. Similar success stories will surface across
other sectors, inevitably leaving a trail of causalities in their wake.
Banks be warned. The disruptive power
of the connected experience will touch all
industries.
To survive, existing businesses must act urgently to defend their consumer
relationships, extend engagement and become the owner of the entire
experience. As businesses transcend into new areas, a convergence of
commerce and a battle for consumer engagement will ensue. The losers will
at best become commoditised within the ecosystem, while the winners will be
rewarded with even greater opportunities.
Traditionally banks have been highly revered institutions but today’s consumer
is as likely to trust Apple, Google, or Amazon – the masters of the connected
experience. This rapport is making it easier for these businesses, and many
others, to move into the payment space and beyond, threatening the consumer
relationship with traditional financial institutions.
First Generation iPod 2001

The Bad Scenario
Banks lose the consumer relationship
04
The leaders in mobile and connected experiences, such as Google, Apple, and Amazon, are already winning the
battle for consumer hearts and minds but the real threat spans much wider. ‘Big data’ is giving many businesses
the opportunity to build a deeper understanding of their customers - providing a dangerous advantage in delivering
innovative, consumer centric, financial services. For the consumer, the journey from commerce-to-payments-to-
banking may be a short one. The result being that end-users elect to have their banking needs met by an Apple,
Amazon, or one of many trusted relationships built on wider connected experiences.
Sticking with the status quo could spell the end of value-add
banking services.
This is no empty threat. For the first time studies show that consumers would consider or even prefer using PayPal,
Google or Apple for their banking. This worst case scenario could see financial institutions become marginalised and
disintermediated from their consumers; at best reduced to banking utility providers while others capitalise on the
Mobile Money opportunity.
BANK
commoditised Mobile banking app
Thinks banks for:
mbanking
Thinks these brands for
mcommerce
consumer perception
The Bad Scenario
Banks lose the battle for
consumer engagement
Leading brands eat into
banking value chain
The Good Scenario
New revenue and deeper consumer engagement
05
Banks have a fantastic opportunity to build on existing consumer relationships before they are eroded. Mobile Money
can make banking a seamless part of daily life, create new value in the payment chain, and allow banks to become a
natural and trusted gateway for mcommerce.
With basic mbanking driving over 20 log-ins per month, compared to seven internet logins and one branch visit,
Mobile Money can clearly play an important part in bringing greater relevance to the customer journey. In difficult
economic times, consumers have an increased need to actively manage their money, making mbanking even more
attractive. This virtuous circle of deepening engagement builds trust and opens up additional revenue streams –
enhancing end-user experiences and supporting the financier’s aspirations too.
Playing devil’s advocate, payments are a necessity for commerce but provide little added value. In fact it’s debatable
whether we need ‘a new way to pay’ at all. So what separates mobile from just another online banking service?

The Good Scenariocont...
New revenue and deeper consumer engagement
05
Mobile goes beyond basic transactions – it gives an opportunity to transform the entire payment experience. Banks
can do so much more than facilitate the obvious - replacing cards with NFC and surrounding payments with offers
and loyalty. Moreover, they can directly engage the consumer with their money. When cash was king, the wallet
was a key budgeting tool. Mobile Money can recreate this value and more by making payments a connected part of
active money management, providing instant feedback at every transaction.
Imagine paying for your lunch with a tap of your phone, which responds with your entertainment spend this month
and a comparison to last month. Buying a new outfit and instantly seeing the impact on your holiday savings plan. Or
making a more considered purchase, like a new TV, and being offered a ‘buy now pay later’ alternative with instantly
approved credit.
From the consumer’s perspective the connected experience doesn’t stop at their mobile phone. It encompasses
multiple devices and the ability to interact on-demand in the channel of their choice. The possibilities are indeed
exciting, but it’s important to remember the potential pitfalls. There is, after all, a fine line between engagement and
harassment.
We all have a limited capacity for relationships, and
commerce is no different. Banks can help strike a careful balance.
When we buy - even from a regular vendor - we don’t want a relationship, or an app, or another password to
remember. But the retailer needs to engage us to a certain extent in order to provide a simpler experience, better
service and drive sales. It’s a difficult dilemma that actually creates a great opportunity for banks. Embedding
commerce within a mobile banking service gives both the consumer and retailer all the benefits without any of the
downsides. As a consumer, if I already use my safe and secure bank app most days, then why not use it to top-up
my mobile phone, or manage my transit card, or buy a cinema ticket? It removes the need to register and provide
card details to yet another third-party, so saving time and frustration.
There’s no doubt about it - mcommerce will be massive; providing new revenue and deeper engagement as
consumers adopt more products and services through the bank’s Mobile Money channel. But when’s the right time
to join this curve?
The Good Scenario
Defend the value chain
Enabling extension into the mbanking,
mpayment mcommerce world
BANK
mcommerce enabled Mobile Banking App
Perception shifts
“I trust this to be secure and in one place”

Mobile Money tipping point
today, tomorrow or yesterday?
06
It may seem like every year is cited as the mobile tipping point by some industry guru or analyst, but there can be
little doubt that mobile is moving from tactical initiative to strategic imperative.
Industry experts predict that Mobile Money will have made
its mark by 2015.
Mbanking is predicted to reach 500million users in the next three years. Bearing in mind that this number currently
excludes the 2.5billion unbanked consumers with no access to traditional financial infrastructure, the actual figure for
penetration levels by this time is likely to be far higher.
Indeed, today’s 141million mpayment users are only the start with mobile transactions predicted to grow to $1trillion
globally by the same year. Even the green shoots of mcommerce can be seen, with 500million people already using
mobile devices as transport tickets and over 863million NFC enabled phones expected in circulation by 2015.
Mobile Money’s potential has attracted many entrants, new and old, creating a complex, multi- faceted market.
Apple, Google, RIM and Microsoft smart phones are close to becoming the norm for the majority of UK and US
consumers. In tandem, mbanking usage is rapidly growing, with 37 per cent of the US under 30s having used a
similar service in the last 12 months.
So, if we haven’t already reached the tipping point for Mobile
Money then now is the time to make strategic investments in
preparation for its imminent arrival.
The journey from tactical mobile to strategic imperative is the transition from multi-channel to contextual services
and connected experiences. Along the road, the breadth and complexity of Mobile Money increases in-line with the
demands of richer services requiring greater simplicity, expanding ecosystems, and deeper integration. Certainly
there’s much to consider before embarking on a successful mcommerce strategy but for financial institutions at least,
it’s simply a case of building on existing systems – not starting from scratch.

Conclusion: The Evolution of Money
Survival of the simplest
07
Banking and money are already largely digitised so the sector could and should step into mobile territory with
relative ease. In addition, existing banking and payments infrastructures are inherently geared up to provide the
foundation for long term success. Ubiquitous, interoperable, and independently regulated, finance systems are
scaled to robustly and reliably manage millions of transactions. Furthermore, it’s a protocol known and understood
by the consumer.
That’s not to say financial services should sit on its laurels. Far from it. We earlier established the real threat from
forward thinking companies already delivering a connected customer experience. To counteract competitive
activity it’s imperative the banks act immediately – but not without strategic purpose.
Mobile Money is an opportunity for all, so banks need to have a clear roadmap in place:
1) Establish basic mbanking across the targeted customer base
2) Develop focused propositions targeting specific consumer segments - extending out to mpayments
3) Further build on the trust and engagement, opening new revenue streams and monetisation opportunities through
mcommerce
The optimisation of online information and account management for mobile users will start as a complementary
channel offering basic services for everyone. The next step is to develop increasingly targeted propositions aimed
at the needs of specific consumer groups.
Mpayments will continue to flourish as trust and confidence grows – firstly for traditional transactions, such as bill
payment, and then eventually facilitating mobile unique applications such as transfers using mobile phone numbers
or NFC proximity payments. As Mobile Money matures, mcommerce services will rapidly transform the consumer
experience through seamless ecosystems delivering new levels of service, convenience and satisfaction. The
consumer revolution and increasing competition will fuel the growth of Mobile Money from complementary channel
to strategic keystone, delivering connected, contextual services that were once unimaginable but now highly in
demand.
Delivering such a bold and broad Mobile Money vision is a
challenge for even the most technologically adept business.
For banks where a large proportion of technology investment is in regulatory compliance, generic servicing or
other critical infrastructure projects, Mobile Money presents a significant challenge. This resource constraint is
exacerbated by the rapidly changing nature of mobile and most banks will need to seek out a partner in order to
address the concurrent needs of technology, strategy and access to supporting networks.
Mobile as a strategic imperative is not just about having the best iPhone app, or benchmarking features and
device support. It is about investment in the right people, partners and platforms required to support connected
experiences for your mobile consumers.
• Platforms to provide the robust foundation to support today’s mobile needs and the sophisticated ecosystems,
deep systems integration, and open-web required for the consumer centric connected experiences of tomorrow
• Partners and networks to create the ecosystems required to support the connected experience for mbanking,
mpayments and mcommerce
• The people and global experience to provide the expertise to develop your mobile vision, drive innovation,
maximise adoption and deliver your mobile roadmap
But above all it’s about keeping consumer needs in-mind. Many organisations will attempt to enter the mobile
space. Many will shine brightly. But many more will burn out and fade away as they fail to address end-user
demands.
The world wants a Mobile Money service that is simple, reliable, absolutely trusted and everywhere.

Conclusion: The Evolution of Money
Survival of the simplest
07
That’s why together we’re well placed to take advantage of this phenomena – and fast. Mobile Money begins with
mbanking. Your mcommerce strategy should start with seeking out a global partner and technology platform that
can capably defend against disintermediation and drive your organisation onwards and upwards the mobile value
chain. Just like we did for RBS Group and a whole host of finance institutions across the UK, Europe, North America,
Asia Pacific, India and Africa.
Your technology of choice must cover the complete mobile
spectrum from mbanking and mpayments through to
mcommerce.
You should be assured of its future-proofed performance and confident in its capabilities to securely power your
mobile portfolio – whether its hosted on-premise or in a cloud environment. Consider too the configuration of the
interface. Usability is perhaps the most important factor for successful end-user engagement and this is where
specialist third party support can add the most value.
Your partner of choice not only needs vast experience of your sector but the tools and insights to support wide scale
user adoption and maximisation of your assets.
From identifying additional revenue streams to harnessing customer insights that enhance your business model, it
takes more than implementation to realise the full potential of the Mobile Money market. So even if you have existing
platforms in place, is there the support system behind it to ensure you’re exploiting its features and functionality to
the best of your ability?
In essence you’re looking for four key capabilities:
1. The technology to provide a secure, extensible, manageable Mobile Money service
2. The vision to integrate the ‘big three’ areas: payments, banking and commerce
3. The experience to engender high user adoption
4. The insights to intelligently maximise ways to move money and create new business leverage
Just like we’ve done for the top third of banks in North America, Visa, FIS and HSBC to name but a few of the
financial institutions we’ve worked with across the UK, Europe, North America, Asia Pacific, India and Africa.

KEY TAKEAWAYS08
The evolution of money from
promissory notes, to currency, to
cards and electronic funds will
continue as the digital and physical
worlds are bridged by Mobile Money.
Mobile is changing the overall
competitive landscape. It’s opening
the door to powerful technology-
centric disruptors that seek to stand
between financial institutions and
their customers by offering new
direct-to-consumer mobile payment
and commerce capabilities.
While disintermediation presents a
huge threat, there-in lays opportunity
too. There’s enormous potential for
innovation as banks seek to create
more interesting and valuable user
experiences to enhance engagement
and add value to existing products
and services.
Financial institutions need a strong
partner and technology platform to
defend and extend their role in the
mobile channel, while cementing
existing customer relationships.
Banks with existing mbanking
capabilities shouldn’t shy away from
exploring alternate and additional
platforms. Building on systems
already in place may not be as
expensive or disruptive as you first
think - making do with the mediocre
could actually be more costly in the
long run.

Mobile Money and the battle for consumer engagement (Monitise)

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