The value of telecom operators micro payment

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[MobileMonday Switzerland #2 : Mobile payments and banking.]
Antonio Brignoli, Software marketing manager Europe at HP. Antonio is responsible for HP’s telecom infrastructure business. Previously he worked for VeriFone, developing new solutions in the area of card payments.

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The value of telecom operators micro payment

  1. 1. The value of telecom operators micro payment Antonio Brignoli 6th October 2008 © 2008 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice
  2. 2. m-payment: why it is important for SPs? Revenues Walled garden Partnerships Long tail Service providers need on-line • Voice, SMS, MMS bundle • Portal content (films, sport, soap, music) • Group-user- generated content payments as a way to: • Personal and group calls • Hosted-user-generated content (blogs, messages) • Friends and 70% (clubs, enterprises) family content • Generate new revenue streams due • Advertising (photos, videos) to increased competition 20% • Participate in the revenues from on- line transactions made by their 10% customers 1-10 11-100 101-1000 Services • Leverage their billing relationship with their customers 6 0 0 2 ,tr a h C cr A : e cr u o S • IMS, SDP, Web 2.0 enable new ecosystem of partners offering innovative services (long tail) − Music, video, SW downloads, transportation, parking, vendings, ticketing, etc. − All demanding micro-payment 2 10/7/2008 HP Confidential
  3. 3. Why SP in m-payment? Telecom service providers added-value • Ubiquitous service access : ~2.5 B mobile users − Voice interaction with low literacy consumers − SMS, WAP, … • Micro-billing and credit : > 500 B€ / year − Users < 18 years old, with low credit, P2P and C2B − 3rd party billing for value-added services (premium SMS and voice) − Mobile commerce revenue 2006 > 25 B€ − Split billing to mobile 2.0 communities (games, sharing) • Strong user authentication − SIM / USIM authentication − Recording / logging of voice transaction − Possible voice authentication • Trusted by consumers and merchants 3 10/7/2008 HP Confidential
  4. 4. M-payment market opportunity For both Banks & Telecom Operators • New revenue stream − Commission opportunity for all payment segments, expecially new one like micro-payment & P2P money transfer • New disruptive technologies (NFC) & new biz models (MVNO) • Untapped segments − Transportation, micro-payment, unbanked P2P money transfer • Web 2.0 requires new payment mechanisms • Differentiator factor − PayPal for eBay − Vodafone UK with Facebook Community messaging using UK’s PayForIt − MyMoneyManager announcement by Sprint powered by mFoundry − Visa’s announcement of mPayment initiative on Google’s Android • Role of Enabler to add additional VAS services − E.g.: in a P2P transfer, possibility to offer credit if person does not have cash 4 10/7/2008 HP Confidential
  5. 5. Example: NTT DoCoMo Osafu-Keitai™ • Osafu-Keitai™payment system: launched in 2005, 20M users as of June 2007, doubled in 14 months − NTT DoCoMo issued their credit card DCMX™, 2.25 M issued so far − Charges on phone bill − Osafu-Keitai™ accepted both in stores and taxis in Tokio − Suica ® : rechargable contactless rail services card on same chip − Both systems incorporate FeliCa® NFC smart card • Loyalty: DoCoMo’s ToruCa™ information capture service, allows users to download flyers and discount coupons for a growing number of restaurants and stores. − Supermarket chains are using Osaifu-Keitai to introduce discount and point systems • Security: 24x7 call centre for lost/stolen Osafu-Keitai™ phones Source: NTT DoCoMo June 2007 5 10/7/2008 HP Confidential
  6. 6. Bridge RCS & Social Networks on multiple client types for rich & personalized experience For enterprise or residential to mashup their own service Residential Business users Social networks Mashup Tool with preloaded Services (REST, RSS) Network (Enabling) Service Platform HP SDP Enterprise •Widget library Communication Hub = Gwy portal Communication •Policy, charging Widgets : •APIs • IM, Presence •Mashup tool • SMS FACEBOOK • Voice Calls Services : • Conferencing Other services: Social -VOIP -Content networks • Content Sharing -Location • etc -Video streaming -SMS, MMS -IPTV etc -etc 6 10/7/2008 HP Confidential
  7. 7. Example: Voda plugs into Web 2.0 with Facebook app 11 Sep 2008 UK-based mobile operator Vodafone began trialling an interesting service this week, one which enables any UK mobile user to send text messages from Facebook. Vodafone Connect to Friends is a Facebook plugin which allows users to send text and picture messages from their PC or laptop to anyone, even non-Facebook users. The smart thing is, it's also accessible to any user, even those not on the Vodafone network. As Disruptive Analysis's Dean Bubley notes: "It's really pretty clever, as it allows you to use the UK operators' PayForIt system to charge to your own non-Vodafone mobile account. So as I use O2 for my personal device, but Voda provides my Facebook interface, charges me money for SMS credits, but gets the cash by using O2 as a billing channel. Given the pricing points, both operators make money, O2 retains my billing relationship, but Voda "owns" my Facebook Mobile user experience." The cost of sending text and picture messages via the app is £0.10 per text and £0.30 per picture message. It also works overseas and inserts a user's phone number as the 'Reply to' contact. Source: Telecom.Com, Sep 12th, 2008 7 10/7/2008 HP Confidential
  8. 8. Thank You Antonio Brignoli HP OpenCall EMEA Marketing Manager antonio.brignoli@hp.com GSM: +39-348-8514109
  9. 9. Back Up
  10. 10. Card payment landscape 15 years ago • POS scenario: physical payment, debit/credit, loyalty • No internet • No Micropayment 01 8002/7/01 laitnedifnoC PH
  11. 11. Card payment landscape in Y2K • POS scenario: physical payment, debit/credit, loyalty • Internet: − Failure of SET − Investigation in other directions − Fighting for customer • Banks & Telcos • Result: market did not start • No Micropayment − Failure of all wallet schemes launched ww, issued by Credit Card companies and individual banks 11 8002/7/01 laitnedifnoC PH
  12. 12. Card payment landscape in 2008 • POS scenario: physical payment, debit/credit, loyalty • Internet: hosted wallet, Paypal • Mobile Remittance • Micropayment? − Interesting experience from Far East (Japan, Korea) with NFC for transportation, attempting to address other verticals • Industry standards (Semops, Pay-Buy-Mobile) to enable to share the pie between banks and other players • MVNO: − From Telco world: PosteMobile, Italy − From Bank side: Rabo Mobile, NL 21 8002/7/01 laitnedifnoC PH
  13. 13. The market opportunity in m-payment [$M] Market size estimates 0 0 41 0 0 41 0 0 41 0 0 41 0 0 21 -o r c M -or ciiM -or ciiM -o r c M 0 0 01 tnem yap 008 008 008 008 tnemyap -m tnemyap -m tnemyap -m tnemyap -m 006 006 006 006 004 004 004 004 e cna t timeR ,8002 repinuJ :ecruoS ,8002 eeknaY 002 002 002 002 ,8002 tneleC etamitse PH 0 0 0 0 31 0 2 2 1 02 11 0 2 0 1 02 9 00 2 31 0 2 2 1 02 11 0 2 0 1 02 9 00 2 31 0 2 2 1 02 11 0 2 0 1 02 9 00 2 31 0 2 2 1 02 11 0 2 0 1 02 9 00 2 What has changed in the market between 2000 & 2008 2000 – the internet bubble 2008 – the path to maturity in m-payment • Big hype, based on internet growth • Recognition of need for banks-MNOs cooperation − Confusion between m- and e-commerce − Different industry initiatives, driven by both sides − Example: a consulting firm, Renaissance, estimated for HP the e-payment potential for e- − All take into account needs of profitability & cooperation between all ecosystem players commerce alone to grow from $1.2B(!) in 2000 to $31B in 2003, based only on expected WAP • Many pilot projects launched phones growth − m-payment in advanced counties • No agreements between banking industry & − Remittance in developing countries telco operators => competition instead of • Successful introduction of NFC technology in cooperation mobile phones (equal to simplicity & speed of − Who owns the customer? transaction) − 25% of NTT DoCoMo revenue associated with m- • No industry trials payment in 2008 − 30% of new mobile phones expected to be NFC ready by 2012 31 8002/7/01 laitnedifnoC PH
  14. 14. Mac, iPod, iPhone, iTunes Apple fuels cross business Apple’s key competitive advantage is not iPod or touch screens. Its advantage is cloud based services such as iTunes, which enable Apple to provide new experiences that are unmatched by anyone else and create cross- product linkages • Sync music, video, and more with iPhone 3G • Applications from the iTunes Store exclusively designed for iPhone and iPod touch • Remote application for iPhone or iPod touch to • “Our objective with the iTunes store is to run it control iTunes playback from anywhere in the just a little above break even and we think that home -- a free download from the App Store it helps us to sell iPods and Macs and that is really our strategy.” Peter Oppenheimer, Apple CFO iTunes Sales Year by Year This $5B sales generated by iTunes store are 6.000 managed today with credit cards, but they are 5.000 $5bn typical µpayment (<$10). Banks are forced to accept them. US$bn 4.000 $3bn 3.000 2.000 $1bn 1.000 $500m 10/7/2008 10/7/2008 $100m 14 14 0 2004 2005 2006 2007 2008E Source: Always Connected, Strategy & Architectural Proposal, Jul 08
  15. 15. 23 Sep 2008 Smart Card Alliance Council Now Includes Mobile Payments The Council’s Mobile Payments Work Group published Proximity Mobile Payments Business Scenarios: Research Report on Stakeholder Perspectives. This research found that 86 percent of industry stakeholders believe NFC-based proximity mobile payments will be adopted, and it will happen with a “Collaboration Model,” bringing together banks, mobile operators, merchants, handset manufacturers and other service providers. The report is a comprehensive follow-up to the white paper also published last year, Proximity Mobile Payments: Leveraging NFC and the Contactless Financial Payments Infrastructure 15 10/7/2008 HP Confidential
  16. 16. Sample revenue sharing – digital goods User purchases a music clip for 20 cents User gateway Financial Federative Merchant Online merchant network fees payment gateway network fees 1.36 ¢ .6 ¢ .68 ¢ 1.36 ¢ 16 ¢* 6.8% 3% 3.4% 6.8% 80% * Can be further split between record label, Total fees 4 ¢ artist, distributor etc. Everyone in the value chain participates in the revenue from the online transaction Micro-payment transactions (esp. non-subscription sales of “digital goods”: music, content) become economically viable for merchants NOTE: All numbers are for illustration purposes only 16 10/7/2008 HP Confidential
  17. 17. Example: Bango commission structure UK credit and debit card payout rates Transaction Payout Operator / Country Currency Min Max Rate All UK operators GBP 1,49 20,00 75.0% UK PayPal payout rates Bango delivers PayPal payments across all mobile operators. Transaction Payout Operator / Country Currency Min Max Rate All UK operators USD 1,50 20,00 87% UK on-bill payout rates Transaction Payout Operator Currency Min Max Rate 1,50 6,00 63.1% 1,00 1,00 57.0% O2 0,50 1,00 51.7% Orange 1,50 20,00 68.0% 3 GBP 1,50 20,00 66.0% T-Mobile 1,50 20,00 63.1% Virgin 1,50 20,00 35.0% Vodafone 1,50 20,00 76.0% 17 10/7/2008 HP Confidential
  18. 18. 18 10/7/2008 HP Confidential
  19. 19. 19 10/7/2008 HP Confidential
  20. 20. Bank-centric payment architecture SWITCHING, PAYMENT PAYMENT PROCESSING DATA MINING AUTHORIZATION OPTIONS ACCESS AUTHORIZING OTHER BUSINESS AND SETTLEMENT POINTS APPLICATIONS APPLICATIONS APPLICATION LOADER ACQUIRING SOFTPAY-OMNI 2000 MULTILANE BANK RETAIL SoftPOS SIGNATURE CAPTURE RETAIL MAG SoftPay Financial Network CREDIT STRIPE Interfaces /DEBIT CARD CHIP SPECIALIZED Payment NETWORK Gateway DEVICES (VISA, MC, CARDS DISCOVER AMEX, DEBIT PRIVATE NETWORK CHECK NETWORK) PORTABLE TELCO SYSTEM CONTACTLESS MOBILE/ GSM ISSUING NFC BANK PETRO/C INTERNET DATA WAREHOUSE PAYMENT INTERNET DATA MINING 02 8002/7/01 laitnedifnoC PH
  21. 21. Telco-centric payment architecture Operator’s Storefronts/ Service Services Network Location Input Service Operator’s Aggregation Mobile Content Portal Access G Network M--Commerce M Commerce A Server T Internet E Server W A Y Operator Billing Storefront System Payment Network Internet VISA MasterCard Payment Services 12 8002/7/01 laitnedifnoC PH

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