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2008 05 - booz allen hamilton - gsma congress - 2-pay-buy-mobile ecosystem – a macro-economic perspective


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2008 05 - booz allen hamilton - gsma congress - 2-pay-buy-mobile ecosystem – a macro-economic perspective

  1. 1. Booz Allen Hamilton White Paper Overview The Pay-Buy-Mobile Ecosystem A Macro-Economic Perspective Barcelona February 13th, 2008
  2. 2. Industry experts from Booz Allen’s Global Mobile NFC team devel- oped the GSMA Pay-Buy-Mobile white paper in summer/fall 2007 Booz Allen’s Global Mobile NFC Team Europe Roman Friedrich Global Team with >25 Partner, Telco Olaf Acker members representing Principal, Telco/Tech Booz Allen’s Telco, Christopher Schmitz Banking, IT, Transport and Principal, Financial Services Holger Brohm Technology functions North America Principal, Financial Services Asia/Pacific Willy Dommen Stefan Amling Ian Park, Working with MNOs, Principal, Transport Principal, Banking suppliers, credit card Princial, Transport Oliver Wyrsch Tae Yamaura Associate, Telco Senior Asc., Telco associations, transport and Michael Catalano Associate, Technology Peter Spieckermann Curtis Pierce, technology providers on Senior Consultant, Telco Associate, Transport Anthony Scott ... … making m-payment a reality Associate, Technology across continents … Roman Friedrich Olaf Acker Oliver Wyrsch Peter Spieckermann Partner, Europe, Dusseldorf Principal, Europe, Frankfurt Associate, Europe, Zurich Senior Consultant, Europe, Munich 1
  3. 3. The white paper discusses the business potential of the Pay-Buy- Mobile use case from a macro-economic perspective Pay-Buy-Mobile White Paper – Background Information The white paper investigates the feasibility, market acceptance and business outlook for the Pay-Buy-Mobile ecosystem based on a standardized business case It is complimentary to and differentiated from an MNO driven Pay-Buy-Mobile white paper, developed by a group of MNOs in 2007 White paper focus was on a stand-alone business case, to prove that even the most basic payment scenario with conservative assumptions can be profitable The analysis was done for 10 markets plus 3 regions and covers a floating 5 year window from a macro-economic perspective (top-down) The white paper is also meant as a marketing tool to promote Pay-Buy-Mobile and motivate sceptical stakeholders to join 2
  4. 4. As it focuses on Pay-Buy-Mobile only, it reflects only a sub-set of potential revenue streams expected from Mobile NFC Payment Ticketing Mobile payment at Mobile ticketing in – Retail stores – Public transport (POS) – Concerts – Restaurants – Sport events – Virtual credit & – Ski lifts debit cards Mobile NFC Marketing Access Control Loyalty Access control for programmes – Office buildings eVouchers – Computer NFC enabled Systems posters / billboards – Cars 3
  5. 5. In addition to the country-agnostic Pay-Buy Mobile analysis, the white paper covers 10 country markets as well as 3 regional cases Country and Region Overview Europe North America Asia / Pacific Developed Emerging Developed Emerging Developed Emerging Markets Markets Markets Markets Markets Markets Austria Algeria USA Australia Bangladesh Belgium Czech Canada Hong Kong China Denmark Egypt Japan India Finland Hungary New Zealand Indonesia France Iraq Singapore Malaysia Germany Israel Latin America South Korea Pakistan Greece Morocco Developed Emerging Philippines Markets Markets Ireland Nigeria Taiwan Argentina Italy Poland Thailand Brazil Netherlands Russia Chile Norway South Africa Colombia Portugal Turkey Mexico Customer Research Spain Ukraine by Serrula Peru Sweden Customer & Merchant Venezuela Research by Serrula Switzerland UK Country Trial-Country1) Note: Shaded countries are not in focus (1) In underlined countries Pay-Buy-Mobile is piloted by local MNOs Source: Booz Allen Analysis, Merrill Lynch Global Wireless Matrix 4
  6. 6. The business case analysis is based on 3 pillars Serrula Customer & Public Research Expert Interviews Merchant Research Data from banks, credit Interviews with >50 industry Market research by card associations, experts from Serrula research companies and – Banks – 2800 customers other public sources (online research) – MNOs – 200 merchants – Credit Card Associations (phone interviews) – Merchants – TSMs – Handset Suppliers 5
  7. 7. Objective of the analysis was a to prove that there is a profitable business case for all stakeholders involved Key Stakeholders Mobile Network Trusted Service Card Issuing Electronic Pay- Operator Manager Bank ments Networks Acts as platform provider Acts as middleman Is as debit or credit card Operates an electronic that rents out secure between operators and issuer and operates the payment network slots for mobile banks. Provides card value chain with for card transactions applications on UICC and infrastructure and services acquirer provides mobile network for virtual debit and credit card applications Merchant Subscriber Handset UICC Supplier Supplier NFC Operates Point of Sales Is mobile subscriber and Manufactures NFC- Manufactures UICCs with debit or credit card debit or credit card capable handsets that (Universal Integrated terminals that are NF- holder. Has an NFC- allow subscribers to use Circuit Card) for NFC- enabled enabled handset mobile NFC applications capable handsets 6
  8. 8. To get there we need to reflect the perspectives of each player in the business case logic Mobile NFC Ecosystem defend payment monopoly Financial Services Industry Service Contract Operate / Use Offer / Accept mPayment secure mobile schemes for the infrastructure for respective industry appl. mPayment appl. (eg. eTicketing) Trusted Service Manager (TSM) establish business model Service Service Contract Contract Mobile Network Operate / Use secure mobile Service Industries / Application Provider infrastructure for the respective Operator (MNO) (Transport, Consumer, Restaurants, …) industry appl. (eg. eTicketing) extend value chain leverage new technologies and business models 7
  9. 9. We created a standard business case model and applied it to all 10 country markets Monetary Flow for Pay-Buy-Mobile & Investments NFC-enabled Mobile subscription fee and handset potentially Pay-Buy-Mobile fee Customer Card Holder & Mobile Subscriber MNO Rental fee for USIM slot for Pay-Buy- Mobile application per card Annual credit card fee and (business model scenario) potentially Pay-Buy-Mobile fee Rental fee for USIM Payment slot for Pay-Buy-Mobile transaction application (alternative at POS scenario) Trusted Service (simplified) Manager (TSM) Fee per customer for updating card data e.g. card issuance, expiration and NFC-enabled maintenance (business model scenario) terminals Interchange fee (approx. 50% for CIB, 50% for acquirer) Merchant CIB Existing monetary flows New for Pay-Buy-Mobile 8
  10. 10. The modelling of the business case is based on four separate cases for each stakeholder – each needs to be profitable Cost Revenue P/L 1 MNO Business Case Revenue MNO P/L MNO - Cost MNO 2 CIB Business Case Revenue Bank P/L Bank - Cost Bank 3 TSM Business Case Revenue TSM P/L TSM - Cost TSM 4 Merchant Business Case Revenue Merchant P/L Merchant - Cost Merchant Market: Pay-Buy-Mobile Subscribers Customer and Handset Supplier Perspective Pay-Buy-Mobile are not described in individual cases Subscribers 9
  11. 11. Business Case Key issue #1: Who pays the MNO for Pay Buy Mobile services? Alternatives: – Customer pays MNO (per service, per card or general fee) – Banks pay MNO (per service, per card or general fee) Booz Allen Hypothesis: Banks are in a better position to pay MNOs for slot use – they have the option to subsidize Pay-Buy Mobile fees (important in markets where customers are not used to pay fees for credit cards) – fees multiply with each card put on the UICC (higher revenue potential for MNOs) – rental fee agreements can be combined with other joint marketing activities 10
  12. 12. Business Case Key issues #2 & #3: Can MNOs get a share of the transaction fees? Will it be cheaper for merchants? Sample Money Flows in Card Transactions NUM ILLU BERS STR ATIV E Card Charges for Associations Charges for Clearing/Authorisation 0.15 € Clearing/Authorisation 0.07€ 0.08€ Interchange (1.24 €) Processing Processing Issuer Acquirer Fees Fees 1.09€ 1.16€ Annual Fees Disagio 2.40 € Acquiring Issuing Prozessor Prozessor Terminal lease and transaction X.XX€ = money flows Merchant fees Network Operator Cardholder 97.60€ 100.00€ Transactions 11
  13. 13. To be successful, the Pay-Buy-Mobile ecosystem needs to be open to reach significant market share and offer benefits to all players Key Features of Proposed Business Model All CIBs and MNOs in a market can interact with each other securely and Open Business conveniently (e.g. through a TSM), limiting the amount of necessary interfaces Model and allowing easy integration of new market participants Merchants, CIBs, and MNOs cover all potential (sub-)markets, and customers Full Market have access to any merchant POS Coverage Cooperative The business model allows profitable business cases for all stakeholders — Approach stakeholders do not conduct business to the detriment of any other player Shared Customer The customer will have a relationship with MNO for the mobile subscription Relationships and with the CIB for the debit or credit card Standardization & Standards will drive contactless card technology, security requirements from Interoperability banks and credit card companies, as well as handset certification. All players need a guarantee to invest in the “right” technology Adjacent M-marketing and value-added services based on a consistent infrastructure Revenue Streams will give Pay-Buy-Mobile an additional push 12
  14. 14. Key driver of the case is an expected sales uplift at the POS due to speed & convenience that will impact customer purchase behaviour Key Drivers of Pay-Buy-Mobile Business Case Speed & Convenience MNO Key Enabler Speed & convenience are crucial for The MNO is the key enabler (and most merchants to defend and grow beneficiary) of the business model, as sales he invest in core infrastructure (POS upgrade primarily driven by banks Direct impact on revenue of the CIB initially) (interchange fees) and indirectly drive revenue for MNOs and TSM Cash Replacement Pay-Buy-Mobile Subscriber Fees Often mentioned as a key driver, but Country-specific – strongly influenced very limited potential to reduce cash by annual card fees customers are handling costs from our analysis (in used ot pay (or not) some countries large merchants are even paid by bank for cash handling) Range of €3-€6 per year in countries where customers are used to pay for cards 13
  15. 15. Thank you! Your questions? Olaf Acker Principal / Mitglied der Geschäftsleitung Booz Allen Hamilton GmbH Grüneburgweg 102 60323 Frankfurt Germany Mobile: +49 170 2238 453 / 14
  16. 16. What Booz Allen Brings Booz Allen Hamilton has been at the forefront of management consulting for businesses and governments for more than 90 years. Providing consulting services in strategy, operations, organization and change, and information technology, Booz Allen is the one firm that helps clients solve their toughest problems, working by their side to help them achieve their missions. Booz Allen is committed to delivering results that endure. With 19,000 employees on six continents, the firm generates annual sales of $4 billion. Booz Allen has been recognized as a consultant and an employer of choice. In 2007, for the third consecutive year, Fortune magazine named Booz Allen one of “The 100 Best Companies to Work For,” and for the past eight years, Working Mother has ranked the firm among its “100 Best Companies for Working Mothers.” To learn more about the firm, visit the Booz Allen website at To learn more about the best ideas in business, visit, the website for strategy+business, a quarterly journal sponsored by Booz Allen. 15