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Citi Mobile Landscape 2014
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Citi Mobile Landscape 2014






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Citi Mobile Landscape 2014 Presentation Transcript

  • 1. 22 January 2014 QED Regulating EU Mobile, Internet and Card Payments Conference Brussels, Belgium Greg Ohm EMEA Emerging Payments Head greg.ohm@citi.com Global Consumer Bank
  • 2. 2 North America, Europe and Asia are expected to see a surge in adoption on the back of increasing consumer acceptance and concerted efforts by market participants Africa Asia North America §  Initiatives predominantly targeting the unbanked; M-Pesa huge success story §  Opportunity in P2P transfers and Remote payments driven by demand for mobile recharge. §  Discussions related to social disbursements, payroll transfers via mobile could fuel opportunity §  Home to markets with advanced mobile cultures that have led proximity initiatives (e.g., Japan, South Korea) – NTT Docomo’s Felica is a major success §  Relatively less developed markets (e.g., India, China) will experience rapid uptake in P2P payments §  In most markets, the ecosystem needs to jointly realize the opportunity §  Significant market momentum (e.g., MCX – major retailers, IsIs – major MNOs); all likely to launch in 2013; Testing ground for major digital disruptors (e.g., Google); Dominant PayPal presence §  Remote will remain a major opportunity driven by increasing acceptance of m- commerce; Proximity will register largest growth (both NFC and non-NFC variants likely to materialize) Key Trends Market Size and Distribution (in USD billions, 2016) Regions Europe §  Dominant opportunity in remote payments §  Significant interest in contactless payments - France, UK, Poland taking lead in realizing the opportunity §  Market requires ecosystem to rally around the opportunity (similar to France). Consequently, focus on standards development (SEPA payments, EU e-money directive) LATAM §  Mobile payment solutions predominantly targeted at unbanked/ under banked population. SMS based payment service by Oi Paggo over 1mn customers as they addressed need for credit services for the low income segment §  Services sought would include money transfers, bill payments and retail purchases using a mobile phone 36% 33% 9% 34% Remote 58% $120 bn P2PProximity 38% $29 bn38% 28% $138 bn 45% 39% $11 bn 27% 29% 4% 18% $150 bn 62% Note: Discussion based on observations in the 27 countries analyzed Estimates exclude current and future projections of popular closed loop initiatives (M-Pesa, Felica) to ensure parity in comparing market sizes Surge in Adoption of Mobile Payments
  • 3. 3 The Evolution of Payments The new generation of payment methods… competitive look Card Networks Banks and Processors In the cards network category, we include Visa, MasterCard, American Express, Discover and China Unionpay. Looking at the big picture, here is what the card networks have achieved in the last six months: §  Unveiled incremental details about their proposed respective wallets (such as partnerships, timelines, etc.); §  Focused on targeted offers through either M&A or specific merchant arrangements or both; and §  Worked on expanding their funding reach beyond traditional bank relationships by investing in prepaid and cash-based funding options. Telecom Companies In this category, we include not just telecom companies but also a range of technology companies that focus on direct-carrier billing including Boku, Bango, PayOne, payVia and others. The telecom category has been busy as well, having: §  Continued the process of starting regional partnerships to introduce wallets – partners include card networks, technology companies and sometimes, banks; §  Introduced direct-carrier billing relationships in several geographies; and §  Made progress on SMS-based (text messaging) mobile payments in several emerging markets. Based on telecom company actions, support for NFC-based technology seemed very strong among the “developed economy” telecoms, relative to other categories of participants. Obviously in regions where feature phones are more prevalent than smart phone, non-NFC technology is making progress. On the bank side of this category, we looked at the actions of U.S. and non-U.S. banks while on the processor side, we include technology vendors such as Fiserv, Fidelity National Information Systems, Monetise and Total System. §  The processors have unveiled products that could extend mobile payments capability to smaller financial institutions; §  Larger U.S. banks have agreed to collaborate / exchange data to facilitate person-to-person (P2P) transactions; and §  The category as a whole has unveiled regional inter-bank or bank/ telecom collaboration on wallets. Technology and Internet Companies The obvious candidates in this category are Apple, Facebook, Google and PayPal. Although Amazon and Microsoft are mentioned less often, we believe they will have more to say in the future as Mobile Payments develops. Various point-of-sale (POS) providers constitute a key sub-category within the larger category. The POS providers themselves can be divided into two segments, although there are some companies such as VeriFone and Square that bridge these two segments. §  Mobile Payment Acceptance specialists – Essentially these companies sell card readers. This list includes VeriFone, Square, Revel, iZettele, mPowa, payleven, NCR and others. §  Loyalty and Targeted offers enablers – This is a long list of companies, which includes Levelup, Cardlytics and other such companies. This is clearly an interesting space and there are a significant number of participants in practically every single category from Banks to Card Networks to Technology Companies who believe they have a right to and an ownership of client data that seems to underpin success in this segment. Source: Capgemini Analysis 2012
  • 4. 4 Waves of Innovation in Payments Innovation continues to drive a fast moving environment and new market entrants
  • 5. 5 Several players are vying for their ‘piece of the pie’ Early stage exploration, selective launches All active, consortiums formed, emerging mkt success Several partnerships, some live Broadly reactive, partnerships forming Exploring Forming Early stage exploration with trials and pilots Move from trials / pilots to live deployments Norming Performing Multiple live initiatives, but limited traction/ commercial success Commercial deployments with significant traction enjoying profitable operations Traditional FI Digital MNOs Networks Agenda Barriers What they Need Maturity and Timeline Merchants Add to VAS portfolio to unlock incremental revenue, reduce churn, and ensure relevance Migrate to mobile; Migrate to the physical world Protect existing revenue streams; tap into new revenue streams; reduce costs Retain their role in the payment processing value chain and pursue new, direct-to-consumer value propositions Consumer trust, financial infrastructure, compliant operations; Mobile banking relationships in place Limited distribution and reach, cumbersome and slow processes, lack of ‘innovation culture’ Culture of innovation, access to capital and technology IP, rapid and agile product development, massive reach and distribution, consumer product familiarity Distribution and reach – both digitally and physically, customer access and control, leverageable infrastructure – particularly billing and recharge Significant reach across markets through network members; oligopolistic tendency with control of network infrastructure; sets rules across banks and merchants Limited financial infrastructure, brand equity, and regulatory experience Limited financial infrastructure, brand equity, and the ability to leverage compelling existing digital products Lack direct consumer access, need to balance ambition with existing interests, lack of ‘innovation culture’ Increase volume and revenue through digital payments; drive differentiation with online retailers Significant distribution and customer engagement; control offers/ rewards; push to online, with an advantage in connecting online-2-offline; SKU-level data; payment capabilities Lack a compelling, integrated digital user experience; closed-loop will require significant investment & alignment Exploring Forming Norming Performing 24 months out Exploring Forming Norming Performing 12-18 months out Exploring Forming Norming Performing 12 months out Exploring Forming Norming Performing 18 months out Early movers gaining traction Exploring Forming Norming Performing 18-24 months out Crowd Leaders Leaders (PayPal, Amazon) Crowd Crowd Crowd Crowd Leaders (Walmart, Starbucks) Progress What they Have
  • 6. 6 What business model best aligns with our goals to ensure success? Business Model Considerations Bank – Network Collaborative Innovator Retailer Mobile Operator •  Banks/issuers •  Payment Networks Builds on existing network and deploys mobile payment application or devices to customers via bank partners •  Mobile Network Operators (MNOs) •  Banks/Issuers •  Payment Networks Collaboration among the banks, mobile operators, existing payment networks and other stake-holders in the mobile value chain •  Alternative solution providers Technology-based solution that leverages existing and complementary mobile assets to develop mobile payment capabilities •  Retailers •  Stand-alone merchants Merchants create independent, closed-loop payment applications •  Mobile Network Operators (MNOs) Mobile operator acts independently to deploy mobile payment applications and value added services Model Participants Descriptions The collaborative model poses the most complexity but also holds the most promise for delivery of an end-to-end mobile payments solution to the ecosystem Source: PWC
  • 7. 7 The Changing Payments Ecosystem - Ensuring a Level Playing Field Non-traditional players continue to disrupt and transform the payments landscape •  Several non-traditional players like Square, PayPal, and others have introduced many new, innovative ecommerce solutions •  Many of these solutions are being readily adopted by consumers – but without some of same protections and rights they expect from their financial institutions •  These new competitors have also disrupted the status quo around traditional roles, relationships, regulation, liability and consumer protection •  This requires all stakeholders to align on a common strategic framework and ensure a level playing field for all participants Customer •  Data protection •  Fraud / Security •  Refunds •  Disputes •  T&Cs •  Explicit consent Payment Parties •  Transparency •  Define contractual relationships •  Allocation of rights & responsibilities •  Fair allocation of liability •  Business case Regulators •  Open, efficient, innovative, transparent payment systems •  Clear legal framework •  Fraud •  Balanced liability reparation •  Geographic scope (outside EU)
  • 8. 8 Thank  you.  
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