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Mobile Money and the battle for consumer engagement (Monitise)


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Mobile Money and the battle for consumer engagement (Monitise)

  1. 1. Mobile Money and the battle for consumer engagement Working for everyone mbanking | mpayment | mcommerce MONITISE WHITE PAPER // nov’12
  2. 2. 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?
  3. 3. Monitise white paper | Mobile Money and the Battle for Consumer Engagement © Monitise 2012 | page 3 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 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.
  4. 4. Monitise white paper | Mobile Money and the Battle for Consumer Engagement © Monitise 2012 | page 4 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
  5. 5. Monitise white paper | Mobile Money and the Battle for Consumer Engagement © Monitise 2012 | page 5 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?
  6. 6. Monitise white paper | Mobile Money and the Battle for Consumer Engagement © Monitise 2012 | page 6 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”
  7. 7. Monitise white paper | Mobile Money and the Battle for Consumer Engagement © Monitise 2012 | page 7 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.
  8. 8. Monitise white paper | Mobile Money and the Battle for Consumer Engagement © Monitise 2012 | page 8 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.
  9. 9. Monitise white paper | Mobile Money and the Battle for Consumer Engagement © Monitise 2012 | page 9 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.
  10. 10. Monitise white paper | Mobile Money and the Battle for Consumer Engagement © Monitise 2012 | page 10 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.