EY Director Tim Wulgaerts: mobile payments

1. Mobile payments
Mobile Business
27 March 2012

2. Introduction

3. Mobile Money
Mobile
banking
Mobile
ticketing
Mobile
Mobile payment
remittance
Mobile
shopping
Mobile
Mobile advertising
presence
Mobile Commerce

4. Different flavors and combinations
Front end technology Back-end settlement
Proximity payment Electronic wallet
(e.g. via NFC)
Mobile phone as POS Bank account
SMS / USSD Credit card
Mobile internet / apps Telecom bill

5. mPayment: just one additional mobile step
Marketing Ordering Distribution Payment
Go / e-mail / fax /
Traditional Go to shop Traditional
phone to shop
“Normal” web “Normal” web
Mobile = POS
Traditional + QR Physical delivery
QR scan
or NFC
NFC
Mobile presence NFC
Digital to PC
SMS / USSD
mAdvertising SMS / USSD
mCoupons Mobile web / app Digital to phone Mobile web / app

6. Do we need it? Some of the potential gains:
Consumers Merchants
► Phone always at hand ► Lower transaction cost
(even more than wallet) ► Reduced transaction
► Convenience processing time
► Usability ► Reduced labor costs
► Facilitates micro ► Ubiquitous channel to
payments accept customer
► More secure payments
► Lower transaction cost ► Avoid churn, attract new
customers
► Increase of electronic
payments

7. Who’s involved?
A whole eco system
Regulator
Card Technology
association/ innovators
network
Clearing Application
house / vendor
Hub
Customer
NFC chip
Integrator
Mobile manufacturer
operator
Payment Handset
network manufacturer
Government

8. Banks, credit card companies and operators
very active
Regulator
Card Technology
association/ innovators
network
Clearing Application
house / vendor
Hub
Customer
NFC chip
Integrator
Mobile manufacturer
operator
Payment Handset
network manufacturer
Government

9. But also many newcomers
Regulator
Card Technology
association/ innovators
network
Clearing Application
house / vendor
Hub
Customer
NFC chip
Integrator
Mobile manufacturer
operator
Payment Handset
network manufacturer
Government

10. A sample …

11. Is the technology there
yet?

12. What do we need for mobile payments to
happen?
Enabled
handsets
User expansion
Stable eco- Convenience promotes usage
scene expansion
system & usability
Positive Usage
scene
User
expansion
feedback expansion
Cycle
Scalability of Trust and
solutions awareness Usage scene
expansion
promotes user
Standard Cost expansion

13. NFC = important enabler
But still issues with:
► Standardization
► Interoperability
► Control (over secure element)
► Business model
► Customer awareness
► Handset availability
► Regulation

14. NFC-enabled handsets not yet omnipresent
Mobile handset shipments (million)
1.600 25%
1.420
1.400 1.335
20%
21%
1.200 1.133 1.152
1.092
1.000
15%
800
9% 10%
600
400
301
5%
3%
200 116
1%
0% 3 14 34
0 0%
2008 2009 2010 2011 2012
All mobile handsets NFC-enabled mobile handsets Share of NFC-enabled mobile handsets

15. NFC might be overhyped
NFC Payment
Media tablet
Location-Aware Applications
Mobile application stores
QR / Color code
Source: Gartner, Hype Cycle for Emerging Technologies 2011

16. Not all future scenarios include mPayment
Four scenarios based on scenario analysis – how will we communicate in 2020
Integration of internet and consumer life
A Fully integrated & seamless B
‘Full Speed
‘Roller coaster’
Ahead’
Security and privacy
Not in control
In control
‘Speed Limit
‘Gear Down’
control’
Fragmented & separated
C D
http://www.ey.com/NL/nl/Industries/Telecommunications/telecoms2020

17. Should you wait?
It may happen sooner than
you think

18. Internet Mobile
13%
30%
87%
70%
No Internet Internet No Mobile Mobile
Source: broadbandtrends, Feb. 2012 and ITU, Nov. 2011

19. Smartphones on the rise
52
100 million
activated Android devices (Google IO 2011)
% 400.000 new Android devices
activated per day (Google IO 2011)
Of phones shipped in Europe
in Q1 2011 are smartphones
(IDC, 2011)
468 million smartphones
shipped in 2011 (expected, Gartner)
4 million iPhone 4S’ sold in
first weekend (Apple)

20. 97
Of youth (age 12-18) in Europe
has a mobile phone
%
(Source: EY, compiled from several national studies)
How many have a
credit card?

21. Digital natives are coming

22. 90 71 %
mobile subscribers in US and
Western Europe have a phone
that can access the mobile Web
US consumers likely to use
mobile payments if it were
instant
%
(half of which already HTML
browser)
Source: ComScore, 2011
Source: Toluna Survey and Poll Services, and Obopay 2011

23. Products researched or purchased using a
mobile device?
70%
62%
60% 55% 54%
50% 47%
42% 40%
40% 36%
32%
28% 29%
30% 24% 22%
20% 17%
14% 13%
8%
10%
0%
Researched Purchased
Source: JiWire research with WiFi hotspot users, Q1 2011

24. Also … NFC is more than mobile payments
► Identification
► Physical access
► Time registration
► Mobile ticketing
► Car rental
► Information provider
► Advertising
► Medical solutions
► Games
► Connecting devices

25. Again … Should you wait?
It is already
happening

26. De Lijn Mobile For
3 Million 3,5 Million
SMS tickets in 2011 mobile parking tickets
(25% YoY increase)

27. Korea Japan
100%
9,8 million users
80% (10% mobile subscription base)
Where are they paying?
60%
40%
20%
0%
Source: ComScore, 2011

30. 28%
Total revenue growth 2011
24%
Total payment volume (TPV)
growth in 2011
$ 5 billion
eBay revenue originating from
mobile commerce in 2011
$ 4 billion
Mobile payments volume 2011

31. What’s ahead?

32. What’s ahead?
20
$ 245 billion mobile
payment value by 2014 (Gartner, 2011)
40 % of all phones will be NFC
enabled by 2015 (Ovum, 2011)
Countries are expected to launch
NFC services in the coming 18
months 32,8 % of global m-payments
transactions will be NFC driven by
2014 (IE Market Research, 2010)
$ 74 billion in NFC
facilitated payments by 2015 (Juniper
Research, 2012)

34. Some final thoughts

35. Biggest challenge:
Getting the positive feedback cycle going
Positive feedback cycle Negative feedback cycle
User expansion Limited user induces
promotes usage merchants’
scene expansion reluctance adoption
Usage Usage
scene scene
User User decrease
expansion
expansion decrease
User does not
Usage scene increase
expansion because of
promotes user limited place of
expansion usage

36. Mobility is not in the
future, it is already
happening
NFC is promising

37. Towards “smart” commerce?
► Mobile is just one channel
► We are moving to a multi-channel environment
► Mobile wallet
► Online wallet
► Credit card
Moving from mobile
payments to a new
holistic way of payment
offerings?

38. Some recent thought leadership
Available via our EY Insights app or online
http://www.ey.com/NL/nl/Industries/Teleco
mmunications/telecoms2020

39. Ernst & Young
Assurance | Tax | Transactions | Advisory
Contact details
Ernst & Young
Assurance | Tax | Transactions | Advisory
About Ernst & Young
Ernst & Young is a global leader in assurance, tax, transaction
and advisory services. Worldwide, our 152,000 people are
united by our shared values and an unwavering commitment
to quality. We make a difference by helping our people, our
clients and our wider communities achieve their potential.
For more information, please visit www.ey.com.
www.ey.com
© 2012 EYGM Limited.
All Rights Reserved.
Ernst & Young refers to the global organization of member
firms of Ernst & Young Global Limited, each of which is a
separate legal entity. Ernst & Young Global Limited, a UK
company limited by guarantee, does not provide services to
clients.
This publication contains information in summary form and is
therefore intended for general guidance only. It is not
intended to be a substitute for detailed research or the
exercise of professional judgment. Neither EYGM Limited nor
any other member of the global Ernst & Young organization
can accept any responsibility for loss occasioned to any
person acting or refraining from action as a result of any
material in this publication. On any specific matter, reference
should be made to the appropriate advisor.