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DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionswww.
pwc.
com/fsiContentsSectionPage1.
Pointofview22.
Currentsituation83.
Competitiveintelligence294.
Aframeworkforresponse454.
Aframeworkforresponse455.
HowPwCcanhelp54Section1PointofviewPointofviewChangestothepaymentsecosystemfromtheadventofmobileservicesputmorethan$20billioninplayforfinancialservicesindustryparticipants—throughbothnewrevenueopportunitiesandpotentiallossmitigation.
Inactionisnolongeranoption.
DisintermediationoftraditionalprocessorsbyalternativeplayersErosionofbrandequityandcustomerloyaltytoalternativeplayersLossofinterchangerevenuefromsteeringtoACHthroughmobileOpportunitiesThreatsConversionofsmallticketcashtransactionstomobilepaymentsNewacquisitiontoolthroughincreasedaccesstotheemergingaffluent,newtocreditandun(der)-bankedNewmobileecosystemrolessuchasTrustedServiceManager(TSM)PwC3DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsMigrationofbalancesandbankfeesfromtraditionalaccountstostoredvaluemobilewalletsAttritionofcustomersduetolackofmobileofferingsNotexhaustive.
CirclesizedenotesrelativerevenuepotentialMobileadsmCommerceMobileanalyticsmCouponsVirtualcurrenciesNewinterchange/feerevenuefromnewmobilespendNewmobilevalue-addedservices,including:Potentialvalueatstake:Upto$20billioninannualrevenue11BasedonPwCanalysis.
PointofviewFinancialinstitutions(FIs)havebeencautiousentrantsintothisspace,leavingthedoorwideopenforaleadertoemergeandgainsignificantfirstmoveradvantages.
Announcementshavebeenmade…BigplayersincludingAmericanExpress,Visa,MasterCard,ISIS(partnershipformedbetweenAT&T,T-Mobile,Verizon,BarclaycardandDiscover),andGooglehavemadeannouncementsoftheir"open"mobilewallets"Me-too"InvestorsLeadersLevelofinvestmentHighGIMobileLandscapeMatrixOpportunityexistsforbothtraditionalandnon-traditionalindustryplayerscapableofofferingacompelling,bi-directionalvaluepropositionandameaningfulintegrationplatform.
PwC4DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionstobedeployedin2011However,thereis…Noend-to-endsolutionproposedbyFIsthatmaximizesthevalueextractionopportunitiesalongthevaluechainLackofaconciseplanthatresolveshurdlessuchasterminalization,merchantvaluepropositionandconsumervaluepropositionLackofclarityandunderstandingofhowthesolutionswillworkinthebroaderecosystemLowlevelofcollaborationacrossplayersleadingtostallingofstandardizationandopennessofplatformsActiveParticipantsSide-linersPaceofadapting,deployments,developmentLevelofinvestmentFrequent,FastInactive,SlowLowBNTRGLeadingGlobalPlayersNLeadingUSNetworksBLeadingUSBanksTLeadingUSTelcosILeadingTechInnovatorsRLeadingUSRetailerPointofviewTheemergingraceisresultinginnewbusinessmodelsforming.
Webelievethefutureisopenandfinancialinstitutionsshouldalignwithopenplatformstothrive—aclosedsystemcannotleveragethewidevarietyofpartiesrequiredtomovetheecosystemforward.
BusinessModelConsiderationsWhatbusinessmodelbestalignswithourgoalstoensuresuccessHowdowegainthisalignmentPwC5DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsBank-networkCollaborativeInnovatorRetailerMobileoperatorModelparticipantsBanks/issuersAssociation/networkMobileNetworkOperators(MNOs)Banks/issuersAssociation/networkAlternativesolutionprovidersRetailersStand-alonemerchantsMobileNetworkOperators(MNOs)DescriptionBuildsonexistingnetworkanddeploysmobilepaymentapplicationsordevicestocustomers,viabankpartnersCollaborationamongbanks,mobileoperators,existingpaymentnetworksandotherstake-holdersinthemobilevaluechainTechnology-basedsolutionthatleveragesexistingandcomplementarymobileassetstodevelopmobilepaymentcapabilitiesMerchantscreateindependent,closed-looppaymentapplicationsMobileoperatoractsindependentlytodeploymobilepaymentapplicationsandvalueaddedservicesThecollaborativemodelposesthemostcomplexitybutalsoholdsthemostpromisefordeliveringanend-to-endmobilepaymentssolutiontotheecosystem.
PointofviewForfinancialinstitutionstosucceed,thereareorganizationalDNAchangesthatwillberequiredtodelivertherightoperatingmodel.
Thiswillenablethemtoplaynewrolesanddelivernewservicesinanopen,collaborative,andfast-pacedecosystem.
OperatingModelConsiderationsHowdoweoperatewithinourchosenbusinessmodelWhatorganizationalchangesarerequiredtoplaydifferentiatingrolesMobile-readyenterpriseTrustedServiceManagerCustomer-centeredAdvancedMarketingIntelligencePwC6DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsEntrepreneurialScalable/flexibleTechnologyStreamlined,agileprocessesOpenplatform,collaborativesolutionsIntegratedcustomerviewUnifiedchannelsandchannelintegrationLoyaltyPlatformProviderDataServicesWalletProviderOpenInnovationPlatformPointofviewThequestionformostobserversremains,"Whowillbethewinnerintheemergingspace"Traditionalplayerscurrentlyhaveanearlylead;however,iftheydonotkeepupwiththefastpaceofchange,techinnovatorsandcollaboratorswillprevail.
Banks/FIsSocialmediaplatformConsumerSentiments1HighLikelihoodofsuccessCollaborative**Bank-networkRetailerEmergingModelsSuccess1PwC7DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutions"Willtrustmobilepaymentsolution""Willtrusttoinnovate"Techcompany/innovatorMobilenetworkoperatorLowDegreeofdisruption/complexityofdeploymentLikelihoodofsuccessLowHighRetailerInnovatorMobileOperator**US-centricthreatmatrix;emergingmarketswillhavemobileoperatorsrankedhigher|**Successwilllargelybebasedontactics/implementationdesignRatherthanadoptawait-and-seestance,financialinstitutionsneedtostartdefiningmodel-agnostic"defendandextend"mobilestrategiesinordertoprotecttheircurrentrevenuestreamandpositionthemselvestoinnovatethenextwaveofdigitaltransactions.
1BasedonPwCsurveyandanalysis.
Section2CurrentsituationCurrentsituationCurrentlandscape,developments,anddriversWhilemobileoperators,financialservicesfirms,andretailershavebeenevaluatingthefeasibilityofmobilepaymentssinceearly2000,recentdevelopmentsonboththesupplyanddemandsidearepromptingthekeyplayersinthevaluechaintogetseriousaboutitspotential.
Sittingonthesidelinesisnolongeranoption.
PwC9DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionssidelinesisnolongeranoption.
CurrentsituationThemobilepaymentsspacecanbebroadlycategorizedbytheintersectionofchannels,technologiesandtheunderlyingconsumerinteractionsthatdrivecommerce.
Goingforward,weexpecttheemergingC2B-Proximitymarkettoholdthemostpotential.
Consumer-to-Business(C2B)andPeer-to-Peer(P2P)channelsallowmobilepaymentuserstotransactinoneoftwoways:proximityorremotely.
ProximitypaymentsrequirethemobilepaymentusertobephysicallypresentforpaymentandusuallyrequiresNFCorasimilartechnology.
Conversely,remotepaymentsenableapersontosendfundstoeitherabusinessorindividualthroughhis/herphoneoveramobilenetwork.
Proximity(NFCStickers/microSD/DeviceRemote(WAP,SMS,Apps)FormDescriptionNearFieldCommunication(NFC)isaDefinitionMobilePaymentsMatrix1PwC10DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsFastest-growingareawithmanyexistingcompetitors*(US$3.
1trillion)Technologycurrentlyexistsandcustomeradoptionisaccelerating*(US$156billion)Limitedsuccessinpasttrials*MostrobustP2Pareawithmanyexistingcompetitors*integrated,QRcodes,etc.
)Apps)C2BP2PNFCNearFieldCommunication(NFC)isatechnologythatenablesdevicestoperformsafe,contactlesstransactions,accessdigitalcontent,and/orconnectelectronicdevicesQRCodeAQuickResponseBarcode(QRcode)isaspecificmatrixbarcodereadablebydedicatedQRbarcodereadersandcameraphones;theinformationencodedcanbetext,URLorotherformsofdataWAPWirelessApplicationProtocol(WAP)iscommonlyusedforwebbrowsingonsmallmobiledevicessuchascellphonesSMSMobilepaymentsinitiatedbyShortMessageService(SMS)allowfundstobetransferredfromaregisteredaccountoramobilewalletUS$279billionHeavymarketfocus*Examplesnotexhaustive1BasedonPwCanalysis.
CurrentsituationTheubiquityofmobilepaymentsisbecomingarealityandisthreateningfinancialinstitutions'controlofpayments.
Financialinstitutionsneedtorecognizeopportunitiesandthreatstocraftstrategiesthatwilldefendandgrowtheircurrentvaluestreams.
MobilefinallymakesabreakthroughAlthoughmobilepaymentshavelongbeenheraldedtobegrowingwithintheUS,thenecessaryorenablinginfrastructureandtechnologyhavenotexisteduntilrecently.
Significantinnovationhasfilledthevoid.
ForecastspredictsignificantvolumeincreasesMobilepaymentvolumeshavebeenforecastedtobeashighas$250billionin2015,withaCAGRofupto70%between2010-2015.
1Weexpectthatmobilepaymentvolumescouldcapture10%oftoday'ssmallvaluetransactions1(transaction<$25).
ConvergenceofgrowthfactorsOnthesupplyside,favorablefactorsincludemobilephonepenetrationrates,smartphonemarketshareandadvancedmobilecapabilitiessuchasreal-timeandimprovedpersonalizedinteractions.
Onthedemandside,similartrendsarebeingnoticed—PwC11DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutions$250BInmobilepaymentspurchasevolumeby20151$200B10%ofthe$2trillioninsmalltickettransactionscouldmovetomobile1capabilitiessuchasreal-timeandimprovedpersonalizedinteractions.
Onthedemandside,similartrendsarebeingnoticed—heightenedconsumeradoption,increasedcomfortwithtechnology(furtherfueledbythegrowingmobile-nativeGensXandY)andincreasedappetiteofmerchantsforcheaper,alternativepaymentsolutions.
IncreasedinvestmentbyprogressiveindustryleadersThesemovementshavenotgoneunnoticedbytheplayersinthemarketasinvestmentsinmobilepaymentsdevelopmentareestimatedtohaveexceeded$1billionoverthelastyearalone.
Thislevelofinvestmentmadebyindustryleadersacrossindustries(payments,advertising,marketing,andtelecommunications)hasusheredinunprecedentedadoptionandfunctionality.
1BasedonPwCanalysis.
CurrentsituationFinancialinstitutionsneedtocreate"defendandextend"mobilestrategiesinordertoprotecttheircurrentrevenuestreamaswellascapturecustomervalue(increasedspendandrevenue,increasedbrandloyaltyandcustomersatisfaction,etc.
).
Estimatedvalueatstakeforfinancialinstitutionsisup$20billion,withnewvaluestreamsshowingthepotentialtobeevenmoreprofitablethancurrentvaluestreams.
1ConsumertransactionpathCaptureconsumerdataPickfundingsourceAuthenticateparties/networkrailsAuthorize,clear,settleSelectgood/purchasedecisionAd+loyaltyBrandequity/TransactionInterchangeConsumerPwC12DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsAds,promos,andloyaltyrevenuethroughrobustpersonalization(e.
g.
,LBS)andanalyticstoolsAd+loyaltyrevenueConsumeridentificationwithdigitalwalletratherthanpaymentinstrumentBrandequity/walletshareInadditiontonetworkfees,newtollsmaybeintroducedtotheecosystembynon-traditionalplayersTransactiontolls/feesInterchangerevenuewillbelowerbecauseof:ACHfundingCollaborator/innovatordisintermediationInterchangerevenueDatacapture"birthrights"ofbanksbecomeupforgrabsConsumerintelligenceCurrentvaluestream(tobeprotected)Newvaluestreams(yettobetapped)Valueatstake1BasedonPwCanalysis.
CurrentsituationMobilepresentsfinancialservicesplayersanopportunitytogrowvolumesbyconvertinghistoricallycashpaymentstomobile,deliveringmobilevalue-addedservices,andengaginginothervaluestreamspreviouslynon-existentandoutofreach.
Smalltickettransactions(<$25transactions)CashisstillpreferredovercardswhenmakingsmallpaymentsMobilepurchasesandvalueaddedservices*2$250billionUptoinestimatedmobilespendandvalueaddedservicesinin2015IncreasedwalletsharethroughabilitytosteerAcceleratesaccesstocustomertransactioninformationOthervaluestreamsONEDOLLARINGODWETRUSTONEPwC13DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutions$2trillionInsmall-tickettransactionsintheUnitedStatesin20101~10%Ofsmall-tickettransactionswillbecontactlessinthenext3years2whenmakingsmallpayments1S.
Ezell,"ContactlessMobilePayments,InformationTechnologyandInnovationFoundation,"2009.
2BasedonPwCanalysis.
MobileadsmCommerceMobileanalyticsmCouponsVirtualcurrencies*Notexhaustive,circlesizesdenoterelativerevenuein2015transactioninformationAnewpowerfulacquisitiontoolforbanks,especiallyinun(der)-bankedregionsAbilitytoactasTSMEnhancedbrandownershipCurrentsituationChangestothepaymentsecosystemfromtheadventofmobileservicescouldputmorethan$20billioninplayforfinancialservicesindustryparticipants—throughbothnewrevenueopportunitiesandpotentiallossmitigationinthenext5years.
32Mobilevalueaddedservices*mCommerceinterchange$13bninnewrevenueopportunitiesPwC14DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutions8Smallticketcashconversionopportunities34InterchangerevenuelossInterestincomerevenueloss$7bninlossmitigationpotentialPotentialvalueatstake:Upto$20billioninannualrevenue1*Mobilevalueaddedservicesthatcanbeprovidedbyfinancialinstitutions1BasedonPwCanalysis.
CurrentsituationThe"alwayson"and"alwayswithme"mobileconsumerbehaviorsenablefirmstomaintainconstantcustomerinteractioninwaysthattranscendallotherchannels.
Mobiledevicesallowforanenrichedcustomerexperiencethroughanenhancedlevelofinteractivity.
Threekeymobilecapabilitiesindependentlyandcollectivelybenefitcustomersandpaymentparticipants:CommunicationContentdeliveryLocationmonitoringMobilecommunicationisnolongersimplyvoice;it'svoiceandtext.
Withinformationavailableatkeydecisionpoints,mobiledeliverstheabilitytoThemobiledeviceprovidesaplatformforcontentdeliveryandstorage,enablingcustomerstoreceive,storeandretrieveinformationon-Themobiledevice'scontextandlocationawarenessapplicationscanprovidereal-timeinformationtoconsumerstoinfluencepurchase,spendingorPwC15DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsmobiledeliverstheabilitytoimpactbehaviors,forexample,theabilityto:―Communicateacustomer'screditlineincreaseatthepointofsale(POS)basedonpreviouspositivebehavior―Proactivelyprovidealertsandremindersinreal-timesuchasfraudalerts;securecustomerswillbemorelikelytomakemobilepaymentsretrieveinformationon-demandinsituationssuchas:―Aretailercansendapurchasereceipttoacustomerwhocanstoreitinhis/herphoneforfuturepurchasereturn―Aretailercansendadigitalloyaltydiscountcertificatetoacustomertousetowardsafuturepurchaseinfluencepurchase,spendingorfinancialbehaviorssuchas:―Retailersormerchantssendingdiscountofferstoconsumerswhennearlocationswherethoseproductsareavailable++TXTGPSRSSCurrentsituationCurrentforcesinthemarketplacearedrivingunprecedentedchangeinthepaymentsecosystem.
Asconsumerdemandrisesandpaymentbehaviorschange,inactionisnolongeranoption.
Whilemobileoperators,financialservicesfirms,andretailershavebeenevaluatingthefeasibilityofm-paymentssinceearly2000,developmentsonboththesupplyanddemandsidearepromptingthekeyplayersinthevaluechaintogetseriousaboutitspotential.
Rapidevolutionandexpansionofmobilehardware/softwareandMobileinnovationisdrivingcustomerpreferencesandNon-traditionalplayerssuchasGoogleandStarbucksareEvolvinginfrastructureConsumerandmarketsophisticationCompetitiveinnovationPwC16DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsofmobilehardware/softwareandNFC-enabled(nearfieldcommunication)POSsystemsMobilephonepenetrationSmartphonepenetrationTabletemergenceDeviceadvancementscustomerpreferencesanddemand—customersarebeginningtodemandandexpectadvancedmobilecapabilitiese.
g.
voicerecognitionandcontextualawarenessfromallserviceinteractionsThecomingofageofthemobilenativeandtechsavvyGenerationXandYwillredefinewhatcustomersatisfactionmeansGoogleandStarbucksareinvestingheavilyinmobilepaymentsTraditionalindustryplayerssuchasVisaandMasterCardareexpandingtheirofferingstomaintainmarketshareNewpartnershipssuchasISIS,apartnershipbetweentelcosandfinancialinstitutions,alsoincreasethepressureforinnovationCurrentsituationTheseforcesareintroducingnewstakeholdersintotheecosystemthathavetheireyessetondisplacingtraditionalplayers.
Financialinstitutionsneedtorethinkcurrentstrategiesinordertodefendtheirpositioninthepaymentsvaluechain.
Thetraditionalpaymentecosystem,bestcharacterizedbyitsdependenceonphysicalcards,bank,andpaymentnetworkdomination,isbeingpenetratedbynon-traditionalplayers.
TraditionalpaymentsecosystemNetworksWhotheyareDevicemanufacturerCompaniesthatresearch,developandmanufacturemobilephonesbasedonconsumerdemandandtechnicalinnovationMobilenetworkMobilephonecompaniesthatsellNFCorPwC17DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsIssuingBankAcquiringBankConsumerMerchantProcessorsMobilenetworkoperators(MNOs)MobilephonecompaniesthatsellNFCorotherpayment-enabledphonesValue-addedserviceprovidersCompaniesthatprovideadditionalmobileservicessuchascouponing,loyalty,advertising,etc.
Software/applicationdevelopersCompaniesthatcreatemobilepaymentapplicationsthatwillbepre-loadedordownloadedtotheconsumer'smobiledeviceAlternativesolutionsprovidersCompanieswithstrongbrandpresenceandknownfordevelopingconsumer-friendlymobileapplicationsTrustedservicemanagers(TSM)Independentthirdpartiesresponsibleforprovisioningtheconsumer'sfinancialinformation(credit,debit,etc.
)tothemobiledeviceCurrentsituationWhilevarioustechnologyformobilepaymentsexists,NearFieldCommunication(NFC)isbeingconsideredthesolutionofthefuture,withQRcodesbridgingthecurrentgap.
Organizationsshouldstartconsideringtheinvestmentsthatneedtobemadetoenableusageofthesetechnologiesacrosstheircoreconsumerbaseaswellastheimpactonsystems,processes,andmarketing.
NearFieldCommunication(NFC)QuickResponseBar-Codes(QRCodes)PwC18DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsAroundsince2003,NFCisasubsetoftheISORFIDstandard.
Itisashortrange,lowpower,wirelesstechnologyusedtoreadand/orwritedatabetweendevicesatdistancesnogreaterthan3-5inches(distancevariesbasedonthepowerofthereader)Advantages:Openstandard,simplepaymentexperience,moresecureDisadvantages:Highcostformassadoption(fewsmartphoneshaveNFCtodate,mostmerchantsdonothaveNFCinPOSmachines),moreplayersareinvolvedwithmobileNFCcontactlesspayments(e.
g.
TSMs,MNOs)(NFC)Alternativesolutionprovidersarelookingtousebarcodestoconductpayments—bypassingNFCtechnologyThetechnologyisalreadypopularinJapanandSouthKoreaAdvantages:Openstandard,lowbarriersforproduction,lowcost,fastproduction,allsmartphoneuserscanuseQRcodesDisadvantages:Requiresimagecapture,cumbersomepaymentexperience,lesssecure(QRCodes)CurrentsituationWiththeintroductionofNFCintothepaymentsvaluechain,theroleoftheTrustedServiceManager(TSM)iscriticaltoensuringmobilepaymentsarehandledinasecuremanner.
i.
Anyapplicationthatrequiresyourpersonalinformation,suchasacredit,debitorotherpaymentapplication,requiresspecialhandling;theapplicationandyourpersonalinformationmustbestoredinthehandset'ssecureelementandnotinthestandardhandsetmemoryWhyisaTSMrequiredMobileNetworkOperator(MNO)ManagementServiceProviderApplicationManagementMNOManagementContractualrelationshipSecureconnectionBusinessrulesandauthenticationBilling,reporting,andreconciliationUserregistrationServiceProviderAppManagementChipdatapreparationApplicationkeymanagementServiceProvider,application,andend-customerlifecyclemanagementFraud/securitymanagementEnd-customersupportTrustedservicemanagerroles1PwC19DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutions1FirstData,"TrustedServiceManager:TheKeytoAcceleratingMobileCommerce,"2009.
handsetmemoryii.
TheTSMplaysakeyroleinsecurelyinterfacingwithafinancialinstitution'ssecuredataenvironmentandensuringthatallrequiredsecuredata-handlingprocessesareinplaceiii.
TheTSMplaysakeyroleinvalidatingthatthemobilesubscriberissecurelyidentified,isavalidcustomerofagivenserviceprovider,andhaspermissiontoreceiveagivenpaymentapplicationTSMaddressesoneofthebiggestchallengestorealizingsimple,transparentmobilepaymentswithinthemobilecommerceecosystem:bringingmulti-accountservicestodifferentmobileNFCdevicesaccessedthroughavarietyofproprietarynetworks.
ManagementServiceProviderManagementOTAProvisioning/HandsetWalletManagementServiceProviderManagementContractualrelationshipSecureconnectionDatapreparation/datastagingBusinessrulesandauthenticationBilling,reporting,andreconciliationUserregistrationOver-the-Air(OTA)Provisioning/HandsetWalletManagementOTAprovisioningOTApost-issuance/contentdeliveryChipmanagementWalletmanagementHandsetmanagementSecurityelementkeymanagementMNO,handset,andend-customerlifecyclemanagementFraud/securitymanagementEnd-customersupportCurrentsituationImplicationsforfinancialinstitutionsMobileisbringingchangestocommercethatwillinevitablyimpactthetransactionpathasweknowittoday–creatingbothopportunitiesandthreats.
Financialinstitutionsneedtocreate"defendandextend"mobilestrategiesinordertoprotecttheircurrentrevenuestreamaswellascapturenewvalue.
PwC20DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsCurrentsituationWithmobilepaymentsdeliveringinnovationthatwillchangetheretailpointofsaleexperience,financialinstitutions(FIs)maybedisintermediatedunlesstheyactnow.
SecureVaultPaymentsallowsconsumerstopaybyloggingintotheirpassword-protectedonlinebankaccountPossibilityofmerchantssteeringcustomersawaytoapreferredandcheaperpaymentformTechnologicalsolutionscannowbypasscreditcardnetworksandleverageACHforpaymentsImplicationsforFIsInnovationsintheretailspacePwC21DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsAisleBuyerallowsconsumerstoreceiveinformationonproductsandperformcomparisonshoppinginthestoreandcheck-outthroughtheirmobileappSquareallowsmerchantstoacceptcreditcardpaymentsandmanagetransactionswithamobilephoneortabletChargeAnywhereturnsNFC-enabledphonesintoPOSmachinesImpactonacquirerbusinessesasmerchantsdemandsimplepricingandnewvalue-addedservicesLeveragingconsumers'mobiledevicesasmini-POSdevicesthroughappsmeansconsumersandmerchantshavemultiplepaymentchoicesMerchant-fundedandpersonalizedrewardsofferingswillbecomeanintegralpartofin-storepurchases.
ThiscanreducetheconsumerincentivestouseloyaltyprogramsofferedbyfinancialinstitutionsCurrentsituationTheadventofmobilealsointroducesnewprivacy,fraudandcompliancerisksthatfurthercomplicatethesecurityneedsofcurrentplayers.
Multipleprovidersmayhavedifferentorimmatureinformationsecuritycontrolsthatareregulateddifferently.
Differentprovidersmayuseconflictingprivacypoliciestohandlesensitivecustomerinformation.
Anonymityoftransactionsisaseriousrisk,yettheabilitytoincreaselayeringoftransactionsandreaptherewardsisgreatlyenhanced.
PrivacyProtectingcustomer'sFraudPreventmoneylaunderingComplianceAnti-MoneyLaunderingActInformationriskimperativesPwC22DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsProtectingcustomer'ssensitiveinformationfromexposuretounintendedthirdpartyPreventingidentityimpersonationfromlostorstolenmobiledevicesordevicecredentialsPreventingaccounttakeoveroridentityimpersonationfromcredentialsharvestedviakeyloggersorothermalwarePreventmoneylaunderingandterrorismfinancingfromuseofcompromisedaccountsPreventinvestmentfraudfromcompromisedbankaccountsPreventsmurfing(splittingoflargefinancialtransactionsintosmallertransactions)Preventdisguisingmobiletransactiontotals,origins,anddestinationsAnti-MoneyLaunderingActKnowYourCustomer(e.
g.
USAPatriotAct)CombatingterrorismfinanceSEC,FTC,andFFIECscrutinyMaybeincorporatedintotheproposedConsumerProtectionActCurrentsituationSeveralplayersaredeployingmobilewalletsolutions.
Mobilewalletsprovideasinglemediumthatcapturesthevaluestreamsofinteresttoparticipantsandalsoprotectsthemfromemergingthreats.
Amobilewalletisthetechnology-drivenevolutionofthetraditionalphysicalwalletwecarrytoday.
Itholdsvalue(accesstocashandotherpaymentsources)andprovidesadigitalformofidentificationforourphysicalselves.
Amobilewalletisaprogressionofthephysicalwalletwecarrytoday,butinadigitalform.
Credit/PrepaidcardPwC23DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsItcombinesthefunctionalitiesof"e"(online)and"m"(mobile)wallets.
Fourkeycapabilitieshelpdefineamobilewallet:–Linkingtootherpaymentsources(bankaccounts,cards,loyaltyprograms,coupons)–Holdingvalueorcurrency–Fundingcommerceinboththephysical(offline)andvirtual(online)environments–Enablingmanagementbymultipledigitaldevices(e.
g.
PC,mobile,tablets,PDAs)PrepaidcardLoyaltycardsIDcardsCouponsPFMCurrentsituationWhiletheopportunities,threats,andconsumerexperienceimpactsarethecurrentfocus,financialinstitutionsshouldstartpreparingforotherpossiblesystemicimplications.
Emergenceofalternativepaymentnetworks:Theintegrationoftechnologicaladvancementssuchascloud-basednetworksthatcanenablecloud-basedprocessing.
Regulatoryconcerns:Becauseoftherecenteconomicdownturn,regulatoryconcernswillcontinuetobeattheforefrontofthefinancialservicesindustryfortheforeseeablefuture.
Whilemobileregulationhasnotyetbeendetermined,oncemPaymentsbecomemainstream,regulatorswillweighin.
Consumerownership:Asindustryplayersbegintoexpandservices,consumerswillhavemultipleloyaltyrelationships.
Forexample,Visawillbegintoowncustomerrelationshipsandbankswilloperatemobilemoneyplatforms.
PwC24DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsexample,Visawillbegintoowncustomerrelationshipsandbankswilloperatemobilemoneyplatforms.
Intensifiedcompetition:Enhancedcross-borderviability/competitivenessoninternationalpaymentnetworks(particularlythoseemergingoutoftheEUsincetheyarealreadytacklingjurisdictionalissuesandcanmoreeasilyentertheUSasanadd-oninthefuture).
Newbusinessmodels:Perhapsthemostglaringimplicationofmobilepaymentswillbetheemergenceofnewbusinessmodelsthatarecreatedtoadapttobothmarkettypes(developedandemerging)andorganizationalstructure(collaborative,banknetworkmodel,etc.
).
CurrentsituationHurdlestomobilepaymentsadoptionWhiletherearehurdlestomobilepaymentsadoption,currentadvancementsinthemarketandlearningsfromglobalplayersdemonstratescriticallessonsonhowtheycanbeovercome.
Innovativeplayerswilladapt,test,learn,andadopt.
PwC25DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsCurrentsituationThreekeyhurdlesstandinthewayofwidespreadmobilepaymentsadoption,madeevenmorecomplexbythetwo-sidednatureofpayments.
Unidirectionalproductdesignsandsolutionsthatfinancialinstitutionshavegrownusedtowillnotworkinthisnewworld.
Thetwo-sidednatureofthepaymentslandscapecomplicatesthehurdlestoadoption,becauseoftheunavoidablechicken-and-eggconundrum–merchantswillnotadoptbecausethereisnoconsumeradoption,consumerswillnotadoptbecauseoflackofmerchantacceptance.
ValuepropositionNoconsensusonacompellingconsumervaluepropositionformobilepaymentsaswellasthelackofamerchantvaluepropositiontomaketheinvestmentorswitchInaddition,otherhurdlesexistthatwillneedtobeaddressed:PaymentprocessingefficienciesPwC26DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutions1K.
Foster,E.
Meijer,S.
Schuh,andM.
A.
Zabek,"The2008SurveyofConsumerPaymentChoice.
FederalReserveBankofBostonPublicPolicyDiscussionPaperNo.
09-10,"2009.
2BasedonPwCmobilepaymentsanalysis.
theinvestmentorswitchHandsetenablement2WhileNFChasbeentoutedasthewinningsolutionformobilepayments,NFC-capablephonesremainlessthan1%ofthemarketThemajorityofthepopulationstillusefeaturephones,limitingthepossibilitiesofmobilepaymentsdeliveryTerminalpenetration2MerchantsneedtoupgradetheirPOSterminalsinordertoacceptmobilepayments.
Today,only2%-3%1ofmerchantlocationsacceptcontactlesspayments.
PaymentprocessingefficienciesSecurityRegulatorycomplianceAccesstofunds/creditProvisioningComplexityofdeploymentCurrentsituationisthefirstmPaymentandloyalty-basedapplicationintheUS(6,800company-operatedstoresandover1,000Targetlocations)Whilethemarketisnotclosetoattainingubiquity,significantstepsarebeingtakenbytheforerunnersintheindustrytoovercomeknownhurdles.
CustomervaluepropositionTerminalpenetrationHandsetenablement4toincludeNFCinallPOSterminals.
2AlsoloweringcostofaddingNFCtoPOSterminalfrom$100to$30-$353million20122013201475%63%40%60%30%VerifoneStarbucksPwC27DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsfrom$100to$30-$35"Android2.
3willsupportNFC"–EricSchmidt,GoogleChairmanNewmobilepaymentsoftwarethatcantransformGoogle'sNexusSsmartphoneintoanNFCterminal33millioncustomershaveloadedmoneyinStarbucksapplication1year-over-yearincreaseinprepaidfundssincetheintroductionofthemobileapplicationin200921%1StarbucksAnnualMeetingofShareholders,2011.
2NearFieldCommunicationsWorld,"VerifonetoincludeNFCinallnewPOSterminals,"2011.
3ReadWriteWeb,"CHARGEAnywhereMakesNexusSanNFCTerminal,"2011.
4PwCTeamAnalysis–basedonpubliclyavailabledevicereleaseannouncements.
201220132014SmartphonePenetrationNFCPhonePenetrationRapidadoptionandavailabilityofQRcodesas"bridge"technologyChargeAnywhereGoogleCurrentsituationInaddition,criticallessonsondrivingadoptioncanbelearnedfromglobalpredecessorsinthemobilepaymentsspacethathavebeensuccessfulinovercomingknownhurdles.
Customerchoicehelpedadoption;inJapan,threepaymentoptionswereprovidedtocustomers–Prepaid,CreditandDirect-to-bill2TerminalizationconcernswerelargelyresolvedthroughsubsidizedNFCterminals.
NTTDOCOMOsetaside$22milliontosubsidizesmallmerchants.
InNTTDocomodeployedaseriesofstrategiestotacklehandsetenablement,forexample:KeycarriersconvincedthedevicemanufacturerstoembedCustomervaluepropositionTerminalpenetrationHandsetenablementPwC28DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutions1S.
Ezell,"ContactlessMobilePayments,InformationTechnologyandInnovationFoundation,"2009.
2M.
Crowe,M.
Rysman,J.
Stavins,"MobilePaymentsintheUnitedStatesatRetailPOS:CurrentMarketandFutureProspects,FederalReserveBankofBoston,"2010.
andDirect-to-billPartneringwithwidelyadoptedplayerchannels(masstransit,dominantretailchains)iscriticalforfastpacedadoption1Loyaltycoupons,offers,andincentivesdriveuptaketosubsidizesmallmerchants.
Inexchange,merchantspaidasmallfeeforeachNFC-relatedtransaction2AcriticalfactorinthedevelopmentofmobilepaymentsecosysteminJapanwasDOCOMO'sdecisionnottoseekexclusiverightsforFeliCa2devicemanufacturerstoembedFeliCachipstoensureinteroperability1QRCodeswerewidelyusedasmeansofcoupondeliverytomobilephones—drivingadoptionOvertheairaccountactivationbydialinga3-digitshortcodeprovidedbythenetworkoperatortoenrolltheuserintheentryleveldirect-to-billaccount2Section3CompetitiveintelligenceCompetitiveintelligenceBank-networkCollaborativeInnovatorRetailerMobileoperatorIntheUS,theemergingmobilepaymentswarhasresultedinatleastfivedistinctbusinessmodelsthatarebeingformedinordertoassessthefinancial,operational,andexperienceimpactstoparticipantsandconsumers.
PwC30DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsModelparticipantsBanks/issuersAssociation/networkMobileNetworkOperators(MNOs)Banks/issuersAssociation/networkAlternativesolutionproviderRetailersStand-alonemerchantsMobileNetworkOperators(MNOs)DescriptionPaymentnetworkbuildsuponexistingnetworkanddeploysmobilepaymentapplicationsordevicestocustomers,viabankpartners,andensuresmerchantshavetherequiredpoint-of-sale(POS)acceptancecapabilityCollaboratorsfostercoordinationamongbanks,mobileoperators,existingpaymentnetworksandotherstakeholdersinthemobilevaluechain,includingapotentialtrustedthirdpartytomanageanddeploymobileapplicationsTechnology-basedsolutionsleverageexistingandcomplementarymobileassetstodevelopadigitalwalletandrelatedmobilepaymentcapabilitiesMerchantscreateindependent,closed-looppaymentapplicationsthatareinteroperablewithexistingPOStechnologyMobileoperatoractsindependentlytodeploymobilepaymentapplicationsandvalueaddedservicesthroughthemobiledeviceasa"billtomobile"ordigitalwalletpaymentsolutionCompetitiveintelligenceBank-networkmodelModeloverviewPaymentnetworkdistributesmobilewalletthroughbank/issuerpartnersWalletwillbeopentoallnetworksandfinancialinstitutionsandallowforcross-channelpayments(e-commerce,P2P,social)ValueaddedservicessuchasmerchantofferswillbeincludedStrengths/opportunitiesModeliscloselyalignedtoexistingbusinessrulesfortraditionalpaymentswiththeaddedbenefitofadditionalrevenuestreamsforthenetworkoperatorAbilitytoscalequicklythroughexistingbank/issuerrelationshipsOpportunitytoincreasebrandawarenesstoend-consumersPwC31DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsWeaknesses/threatsPaymentnetworkwillneedtobeabletoquicklyrespondtoconsumerdemandswhilealsomanagingotherstakeholderrelationships(merchants,banks,issuers)Limitedexperienceindevelopingandmanagingconsumer-facingapplicationsLackofMNOrelationshipmaylimitabilitytodistributewalletOverallassessmentPaymentnetworkbuildsuponexistingnetwork,reputation,andrelationships.
Thehurdleistodeploymobilepaymentapplicationsandnearfieldcommunication(NFC)mobilephones—acapabilitywithlimitedexperienceCompetitiveintelligenceU.
S.
casestudy:Bank-networkmodel–Visa*CaseoverviewInMay2011,VisaannounceditsplanstolaunchamobilewalletwhichwouldbeopentoallfinancialinstitutionsandpaymentnetworksThewalletwillbedistributedthroughitsbankpartners;14weresignedupatthetimeoftheannouncementThemulti-platformdigitalwalletcanbeusedfore-commerce,m-commerceandmobilecontactlesstransactionsandincludesmobilepayment,NFCandcouponcapabilities.
1Strengths/opportunitiesLargestpaymentbrandReadymerchantavailability:Existing150,000+merchantswhoacceptPayWave,itscontactlessplatform,willnotneedanewreaderProtectsexistingrevenuestreamswhilecreatingopportunitiesfornewones(suchasadvertising)Currentglobalinitiativesandacquisitions–forexample,theacquisitionofFundamoinSouthPwC32DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutions1NFCWorld,"Visaunveilsmobilewalletplans,"2011.
Currentglobalinitiativesandacquisitions–forexample,theacquisitionofFundamoinSouthAfrica–willprovidecriticalexperiencethatcanbeleveragedintheUSWeaknesses/threatsVisawillneedtoproveitcanquicklyrespondtoconsumerdemandsforpaymentfeatureswhilebalancingdemandsfromitsmerchantandbankcommunityLackofanMNOrelationship(allfourleadingMNOshavealreadyestablishedotherpartnerships)mayslowdowneffortsOverallassessmentBecauseofitsbrandstrength,merchantnetwork,andcustomerbase,VisahasalikelihoodofsuccessintheecosystemThewalletmodelintheUSwillprogressivelybecomemorecollaborativeasVisaopensupitsplatformsandbuildsrelationshipswithotherplayersinthevaluechain*InformationbasedonpubliclyavailabledataasofSeptember2011CompetitiveintelligenceCollaborativemodelModeloverviewMNOpartnerswithpaymentnetwork,bank/issueroralternativesolutiondeveloperWalletpre-loadedontohandsetviamobileoperatingsystemdeveloperorthroughMNOStrengths/opportunitiesPotentiallylargecustomerbasefromonsetbecauseofcustomerbaseeachpartnerbringstothepartnershipStrongbrandidentitybywalletproviderscanstimulateconsumerdemandEachpartnerallowedtofocusontheirownstrengthstobenefitecosystemasawholeManyplayerswithinonecollaborationwillmaketechnicalintegrationdifficultPwC33DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsWeaknesses/threatsManyplayerswithinonecollaborationwillmaketechnicalintegrationdifficultInabilitytoquicklyresolvecustomerissuesbecauseofcomplexenvironmentcanleadtopoorcustomerexperience,decreasedusageanddecreasedrevenuesOverallassessmentWhileallkeyplayersexist,givingthismodelahighlikelihoodofsuccess,thetechnicalandoperationalintegrationbetweenallplayerswillbechallengingCompetitiveintelligenceU.
S.
casestudy:Collaborativemodel–GoogleWallet*(w/Citi,MasterCard,SprintandFirstData)CaseoverviewGoogleannounceditisteamingupwithMasterCard,Citigroup,SprintandVeriFone.
HoldersofCiticardscanpaythroughanmPaymentsapplicationdevelopedfortheAndroidphoneGooglecommittedtoreleaseanewAndroidOSwithNFCin2011OthermajorplayersinthefinancialservicesspaceareexpectedtoalsobecomepartoftheprogramStrengths/opportunitiesAlreadyownspaymentprocessingmodelforonlinepayments(GoogleCheckout)AndroidphoneshaveovertakeniPhonesinnumbersold(in2010)Strongmobileadpresenceandcustomerdataminingcapabilities;GooglehasthecapitaltosubsidizeNFC-enabledPOSdevicesFirstData'sindustryleadingprocessingandmerchantdistributioncapabilitiesisasignificantaddPwC34DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsWeaknesses/threatsPaymentsexperiencenotasmatureasotherplayersCustomerprivacyconcernssurroundingthereleaseofGoogleBuzzmaytaintotherGoogleproductsOverallassessmentGooglecouldleverageitsexistingpaymentscapabilitiesthroughGoogleCheckouttoenterthemPaymentssceneasadigitalwalletproviderGooglewillleverageitsNFC-enabledphonesandtrackingabilitiestoimprovecustomeranalyticsandadvertisingwhichtheycanselltobusinesses*InformationbasedonpubliclyavailabledataasofSeptember2011CompetitiveintelligenceInnovatormodelModeloverviewNon-financialfirmleveragesexistingtechnologyandexistinginternalassetstodevelopmobilepaymentsolutionsStrengths/opportunitiesPotentialtoquicklyscalebecauseoflargeexistingcustomerbase(e.
g.
AppleiTuneshas160millionuserslinkedwithpaymentinformation,Facebookhas250millionmobileusers—Facebook-mobiledeviceusersaretwiceasactiveasnon-Facebookmobileusers)Strongconsumeradoptionandconsumercomfortwithexistingpaymentassets(Facebookcredits,accountlinksoniTunes)MerchantspaylowerfeescomparedtotraditionalpaymentmethodsPwC35DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsWeaknesses/threatsLackofexperiencewithinthepaymentsindustryrelativetotraditionalplayersCustomertrustwithfinancialinstrumentshasbeenlowerfornewentrantsintothepaymentsspaceOverallassessmentUnliketraditionalplayerswhohave"card-emulation"requirements,innovatorscanignorethestatusquo.
However,innovatorswithoutcollaborationlacksignificantmerchantorconsumeradoptionCompetitiveintelligenceU.
S.
casestudy:Innovatormodel–SecureVaultPayments(SVP)*CaseoverviewSponsoredbyNACHA,SVPallowsconsumerstopayatamerchantwebsitebylogginginwiththeirbankcredentials(bankloginIDandbankpassword).
ThisprocessisfacilitatedthroughACHandeliminatestheneedforpaymentnetworks(e.
g.
Visa/MasterCard)SVPhasannouncedamobileapplicationthatwillrelyonQRcodestointeractwithusers'handsets.
Onceauserscansthequickresponse(QR)codeforSVPdisplayedonabillorscreen,thehandsetwilltaketheusertoanauthenticationpageStrengths/opportunitiesMerchantspayalowerfeecomparedtotraditionalpaymentmethodsNoadditionalsign-upprocessforconsumers,bankonlineloginIDandpasswordwillsufficeMerchants/billersreceiveimmediateauthorizationofguaranteedACHpayments,fundstypicallysettlethenextdayNotsubjecttoPCIcompliance–merchantsdonotneedtostore/protectinfoPwC36DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsNotsubjecttoPCIcompliance–merchantsdonotneedtostore/protectinfoWeaknesses/threatsWorksonlywithonlinebankingcustomersegmentsInterchangerevenuecannibalizationforissuersmaydeteruptakeCurrentlylowmerchant/bankadoptionrate(USBankbiggestadoptertodate)OverallassessmentSVPcanposeathreattopaymentnetworksandissuerinterchangerevenueonceitsnetworkeffectsstrengthen*InformationbasedonpubliclyavailabledataasofSeptember2011CompetitiveintelligenceU.
S.
casestudy:Retailermodel–Starbucks*CaseoverviewStarbucksusesasmartphoneapplicationtogenerateabarcodetoreloadbalances,payforpurchases,trackspend,andawardloyaltystarsStrengths/opportunitiesHighmerchantadoption:Closed-loopmodelallowsStarbuckstorolloutacceptancehardwareto6,800+storesLowcustomerrisk:PrepaidnaturelowersconsumerriskincasesoftheftorfraudFamiliarity:Processpiggy-backsonexistingprepaidfunctionthatcustomersarefamiliarwithLoyalty:TheStarbucksappallowsforhigherpenetrationofitsloyaltyprogramPwC37DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsWeaknesses/threatsEligiblepurchasesarelimitedtoStarbucksproductsandlocationsOverallassessmentIntegrationofprepaidcardswithsmartphoneapplicationswillprovideconsumerswithhighervalueandconvenienceOthermerchantsadoptthe"Starbucksmodel"—leadingtomultipleindependentsystemsandthepossibilityofamerchantaggregatorwithnon-competebigboxretailers(e.
g.
imagineStarbucks,Target,McDonaldsandAMCaggregatorasaprivatelabelapp),whichcouldsteercustomerstowardsalternatefundingsources*InformationbasedonpubliclyavailabledataasofSeptember2011CompetitiveintelligenceMobileoperatormodelModeloverviewActingindependently,themobileoperatordevelopsanddeploysamobilewalletsolutionthatcanbeusedforretailPOSpurchasesand/ordirectmobilebillingStrengths/opportunitiesMobilepaymentsplatformcanbeusedtoreducecustomerchurnExistingcustomerbaseprovideslargepotentialtargetformobilewalletuptakeWeaknesses/threatsConsumersmaynotwantanotherfinancialaccountLackofexperienceinfinancialservicesandpayments,particularlyfinancialriskmanagementMobileoperatorswouldneedtodevelopmerchantrelationshipsthatcurrentlydonotexisttodayPwC38DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsOverallassessmentWhileasoloventurefromanMNOmakessenseinthecontextofanunbankedmarket,thelong-termviabilityofanMNOinadevelopedmarketishardertojustifyWhilethebank-networkandcollaborativemodelshavethehighestlikelihoodofsuccess,playersshouldbuildmodel-agnosticstrategiesthatpositionthemforsuccessinanymodelratherthanwaitforthewinningmodeltoemergeandrisklosingoutonpotentialbenefits.
CompetitiveintelligenceModelnameOverallassessmentBank-networkPaymentnetworkbuildsuponexistingnetwork,reputation,andrelationships.
ThehurdleistodeploymobilepaymentapplicationsandNFCmobilephonesCollaborativeWhileallkeyplayersexist,givingthismodelahighlikelihoodofsuccess,thetechnicalintegrationbetweenallplayerswillbechallengingPossiblemodelsHighLikelihoodofsuccessCollaborative**Bank-networkRetailerEmergingthreatmatrixPwC39DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsRetailerIntheshort-term,onlywell-capitalizedmerchantscancreateindependentclosed-looppaymentapplicationsInnovatorUnliketraditionalplayerswhohave"card-emulation"requirements,innovatorscanignorethestatusquo.
However,innovatorswithoutcollaborationlacksignificantmerchantorconsumeradoptionMobileoperatorLowcostofentryandhighconsumeradoptionpotential;however,willrequireintegrationwithpaymentprocessorsforacceptance*US-centricthreatmatrix,emergingmarketswillhavemobileoperatorsrankedhigher**Successwilllargelybebasedontactics/implementationdesignThebank-networkmodelmaycurrentlybepredominant,butattheendofthedayifbanksaretooslowtokeepupwiththefastpaceofchange,collaboratorsmaytakethelead.
Tosucceed,bankswillneedtobecollaborativewithpartnerswhobothunderstandthemobilespaceandareabletokeepupwiththepaceofchange.
LowDegreeofdisruption/complexityofdeploymentLikelihoodofsuccessLowHighInnovatorMobileOperator*CompetitiveintelligenceGlobalCasestudy:NTTDoCoMo*NTTDoCoMo,theforerunnerofmobilepaymentsinJapan,isasignificantplayerinthemobilespacebecauseofitsearlyinvestments,strategicpartnerships,andcurrentpenetrationintheJapanesemarket.
InitiativeoverviewIn2003,Sony,JREast,andDoCoMoestablishedajointventurecalledFeliCaNetworkswhichactsasaTSMandcollectslicensefeesfromothermobileoperatorswhouseFeliCaIn2004,NTTDoCoMointroducedthetechnology,sellingmobilephonesenabledwithFeliCaandincludingan"e-wallet"applicationpreloadedoneachphoneIn2006,NTTDoCoMolaunchedtheiD/DCMXplatformformobilecreditcardtransactionsDoCoMoholdsa50%+marketshareinmobileservicesPartnershipwithJREast,Japan'slargestrailway,ledtoquickuptakewithmass-transitusersOpenedupplatformfor3rdpartyapplicationsPrimaryMarketPwC40DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsStrength/opportunityOpenedupplatformfor3rdpartyapplicationsDoCoMosetaside20billion($22million)tosubsidizesmallmerchants'installationofNFC-enabledreaders/writersLoyaltycoupons,offersandincentivesdriveuptakeCustomerchoicehelpedadoption—3paymentoptionswereprovidedtocustomers—Prepaid,CreditandDirect-to-bill,witheasyovertheairaccountactivationbydialingathree-digitcodeWeakness/threatBecauseFeliCaisaproprietaryclosed-standard,differentelectronicmoney(digitalcash)systemsarenotinteroperable,requiringmerchantstodeployproprietaryPOSreaderterminalstoacceptdifferentelectronicmoneysystems.
GoingforwardasDoCoMotriestoexpanditstechnologyinternationally,itwillhavedifficultyworkingwithotheralreadyestablishedstandardsOverallassessmentWhilethesuccessofDoCoMoislargelyduetoitsenvironment,USfinancialinstitutionscanadoptmanylessonsfromthecompany.
PlayersseekingtopenetrateglobalmarketsalsowillneedtoestablishaninteroperableandopensystemtocompeteagainstfirmslikeNTT*InformationbasedonpubliclyavailabledataasofSeptember2011CompetitiveintelligenceGlobalCasestudy:M-PESA*M-PESA,popularinAfricabecauseofitsabilitytoreachouttotheun-bankedandunder-banked,offersbothP2Pandsmallpurchasesviatext.
InitiativeoverviewM-PESAallowsconsumersinKenyatosendmoneytooneanotherthroughtext–P2PM-PESAalsoincludesmerchantsintheprocessas"agents,"allowingconsumerstowithdrawcashatagentlocations;nochargefordepositing,butaslidingtariffisleviedone-cashsentandwithdrawnStrength/opportunityWorkswithlow-techmobiledevices.
OnlySMSfunctionalityrequiredTargetsareaswithpoorbankinginfrastructurewherecashistheonlypaymentalternativeSignedanagreementwithWesternUniontofacilitatecross-bordermoneytransferRapidlygrowingagentnetworkandconsumeradoptionPrimaryMarketPwC41DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsRapidlygrowingagentnetworkandconsumeradoptionParentcompany,Safaricom,controlled~80%oftheKenyamobilephonemarketWeakness/threatM-PESAwillhavedifficultyinareaswithwell-establishedbankingstructureswithoutcollaboratingwithexistingplayersinthemarketOverallassessmentWhileM-PESAisalreadyexperiencingresoundingsuccessinAfrica,thefutureofM-PESAisintimatelyinterconnectedwithitsabilitytoexpandtoothercountriesthroughstrategicpartnerships(suchasWesternUnion).
Thisexpansionwillallowforgrowthinitsexistingconsumerbaseandallowadditionalopportunitiesfornewrevenuestreams*InformationbasedonpubliclyavailabledataasofSeptember2011CompetitiveintelligenceGlobalCasestudy:MTN,StandardBank*WhereasM-PESAhassucceededwithunbankedmarkets,MTNisgainingmarketshareinareaswherebankingpenetrationishigh.
InitiativeoverviewSimilartoM-PESA,MTNMobileMoneyisamobile-operatorledmodel.
ThedifferencelieswithMTN'sadditionaloffering—MTNhasapartnershipwithStandardBanktooffercomprehensivebankingservicesStrength/opportunityMTNMobileMoneyservicesareavailableforbothbankaccountholdersandnon-bankaccountholders—wideningtheircustomerstobothhigh-andlow-endsegmentsWeakness/threatBecauseoftheirjointventure,MTNdoesnothavefullcontroloverthebankingservicesofferedPrimaryMarketPwC42DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsOverallassessmentFormarketswherebankingpenetrationishigh,MTNhasshownthatajointventurebetweenMNOsandbanksdemonstratesahighvaluepropositiontoconsumers.
ThetrendinmoredevelopedmarketsisaconvergencebetweenMNOsandfinancialinstitutions*InformationbasedonpubliclyavailabledataasofSeptember2011CompetitiveintelligencePrimaryMarketGlobalCasestudy:MobilepaymentsinNice,France*France'smobilenetworkoperatorsandbanks,alongwithVisaandMasterCard,thelocaltransportoperator,thecitycouncil,andotherstookpartinEurope'sfirstpre-commercialNFCpilotundertheCityzibrand.
InitiativeoverviewOfficiallylaunchedinMay2010,thisprojectwascoordinatedbytheAssociationFrancaisepourleSansContactMobile(AFSCM)andbroughttogethermobilenetworkoperatorsOrange,BouygesTelecomeandSFRplustheNiceregion'spublictransportoperatorVeoliaandFrenchbanksCreditMutuel,SocieteGenerale,andBNPParibasStrength/opportunityThepilot'sstrengthsareduetothecollaborationofanationalmobileassociation,mobilenetworkoperatorsandbanks.
Bypartneringwiththeregionalpublictransportoperator,thepilotprovidesacompellingvaluepropositionbyprovidingaplatformandlocationformobilepaymentsusePwC43DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionspaymentsuseWeakness/threatSuccessfultrialshaveoccurredwheremasstransitispopular.
ThetransitionfrommasstransittowidespreadmerchantadoptionremainstobeseeninmostcountriesOverallassessmentAlthoughrolledoutinaverysmallarea,thepilotwascriticalinshowingthatlocalizedrolloutswereimportanttogainconsumertrustandestablishastrongvaluepropositionwithintheconsumerconsciousness*InformationbasedonpubliclyavailabledataasofSeptember2011Successfulmobilepaymentsdeploymentsrequireacompellingdrivingforce.
Competitiveintelligence"Castingvote"and/or"Collectivegood"developments:Safaricom'sM-PESAownsmorethan80%ofthemarket.
NTT,whichownsmorethan50%ofthemarket,subsidizedPOSmachines.
Inlessconsolidatedmarkets,marketleader(s)mayneedtomakesignificantinvestmentstoattaincriticalmass.
Bi-directionalvalueoffering:Mostinnovationsanddevelopmentsdelivervaluetoonlyonesideoftheequation—withpaymentsbeingatwo-sidedindustry,valuemustbedeliveredtobothsidesoftheequation,simultaneously,tomitigatethechicken-and-eggconundrum.
Regulatoryintervention:Wherethereisregulatorypressuretodeploytheinnovationorservice,whichinessenceforcesPwC44DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsRegulatoryintervention:Wherethereisregulatorypressuretodeploytheinnovationorservice,whichinessenceforces"castingvote"or"collectivegood"developments.
Alessprescriptivevariantofregulatoryinterventioncouldbeattainedwhenanassociationorunionofkeypartiesputforwardproposalsandguidelineslikelytobeadopted.
Forexample,theEuropeanPaymentsCouncil(EPC),whichrepresentstheEuropeanbankingindustry,hasreleasedadraftversionofguidelinesithopeswillgivetheuseofNFC(NearFieldCommunications)forpaymentsaboost.
"Glass-empty"innovation:Inthisscenario,theserviceofferingisnotmerelya"nice-to-have"butanactualvacuumisbeingfilled–servicesorproductsareextendedtounreachedmarketsegmentssuchasSquarewithsmallmerchantsandM-PESAwithunbankedmarketsinKenya.
Section4AframeworkforresponseAframeworkforresponsePreparingforsuccessSuccessintheecosystemwillrequireorganizationalDNAchangesthatwillenabletraditionalparticipantstoplaynewrolesanddelivernewservicesinanopen,collaborative,andfast-pacedecosystem.
PwC46DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsAframeworkforresponseBank-networkCollaborativeInnovatorRetailerMobileoperatorTheemerging"mobilepaymentsrace"willresultinnewbusinessandoperatingmodelsleadingtoafreshsetofbusinessquestionsbeingaskedinthespace–makingawrongcallwillbecostly.
BusinessModelWhatbusinessmodelbestalignswithourgoalstoensuresuccessHowdowegainthisalignmentPwC47DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsModelparticipantsBanks/issuersAssociation/networkMobileNetworkOperators(MNOs)Banks/issuersAssociation/networkAlternativesolutionprovidersRetailersStand-alonemerchantsMNOsOperatingModelHowdoweoperatewithinourchosenbusinessmodelWhatorganizationalchangesarerequiredtoplaydifferentiatingrolesMobileReadyEnterprise:Customer-centered,Entrepreneurial,Scalable/FlexibleTechnology,StreamlinedAgileProcesses,OpenCollaborative,IntegratedCustomerView,UnifiedchannelsTrustedServiceManagerLoyaltyPlatformProviderDataServicesAdvancedMarketingIntelligenceMerchantAggregatorWalletProviderOpenInnovationPlatformAframeworkforresponsePlayersneedtorecognizethatformobilepaymentstosucceed,thefuturewillneedtobeopenandassuchshouldalignwithsolutionsthatareopenandcollaborative.
Aclosedsystemcannotleverageawidevarietyoffirmstomoveforward.
Themostsuccessfulmobilepaymentsofferingwillmeet5foundationaltenetsofopennessandhavetherealestatetodelivervalueaddedservicestotheconsumer.
5foundationalprinciplesmPaymentofferingsshouldbeopentoall…SamplevalueaddedcomponentsWalletshouldbeenabledtohandlesomeofthefollowing…PwC48DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsNetworks/brandse.
g.
Visa,MasterCard,ChinaUnionPay,AmericanExpressIssuerse.
g.
BankofAmerica,Chase,CapitalOneOperatingsystemse.
g.
Droid,iOS,BlackberryFundingsourcee.
g.
ACH,Debit,Credit,PrepaidDevicese.
g.
HTC,Nokia,Motorola12345following…Loyalty/rewardsmanagementLocationawareofferingsMerchantadvertisingMoneyMovemente.
g.
P2P,BillPay,TransfersIdentityverificationTransitcardsSocialmediaintegrationPurchaseconfirmation/receiptingStoreofvalueAframeworkforresponseInadditiontobeingopen,severalkeysuccessfactorsneedtobeconsideredasmobilepaymentofferingsarebeingrolledout.
Theextentofadoptingthesefactorswillbehighlycorrelatedwiththeextentofsuccessandadoption.
SuccessfactorDescriptionBreadthandconvenienceinend-useutilityMustretainthefunctionalityandusefulnessofphysicalwalletsfromidentitytopaymentstocashin/outAlsoprovidenewfunctionalitywhichtakesadvantageoftheinternet(instantbalancechecks,pricecomparisons,etc.
)VirtualandphysicalavailabilityandacceptanceTranscendsallcomponentsofpaymentsfromP2P,retailpointofsale(POS)toe/m-commerceContributestodisplacementintheeverydayuseofcashandcheckswiththesamepaymentsourceavailabilityasphysicalwalletsprovidetodayPwC49DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsacceptancesourceavailabilityasphysicalwalletsprovidetodayCostadvantageMaintainslowertransactioncostadvantageofalternativepaymentnetworkswhenpossibleforconsumersandmerchantsCompetitivetransactionprocessingpriceswhenexistingnetworkrailsareused(debitorcredit)SecurityMaintainssecurityofpersonalbankinginformationandprivacyprotectionTransactionsencryptedwithapplicationlevelauthenticationCompliancewithindustrystandardforsecuretransactions(PCI,DSS)Interoperability/standardizationStandardizationacrossmobilepaymenttechnologieswillbecriticaltoenablingthephysicalacceptanceofdigitalwalletsInteroperabilityacrossprovidersolutions(mobile,financialinstitutions,networks)willbenecessarytodrivemassmarketadoptionComplianceMustcomplywithabroadsetofinternationalandlocalregulationstomaximizeglobalacceptanceAframeworkforresponseApproachshouldconsiderexternalandinternaldriversinbusinessandtechnologytoarriveatthestrategicroadmapMarketviewCustomerviewStrategicgoalsandobjectivesInternalcapabilitiesInputsMobilecompetitivelandscapeandmarkettrendsExternalresearchonusers'expectationsandneedsScenarioviewofmarketmovementsandimpactonMappingofcurrentonlineandofflineproductstocurrentcustomerbaseInstitutionsmobilecustomerneedsassessmentExistingtechnologyOrganizationalandfinancialconsiderationsPwC50DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsmovementsandimpactonbusinessleversDesiredmobilecapabilitiesTechnologyrequirementsandgapassessmentStrategicroadmapOutputsClearlydefinedandprioritizedfuturestatemobilebankingcapabilitiesRecommendedmobileinfrastructureTechnologygapassessmentPotentialvendorsandpartnersCost-benefitanalysisPrioritizedinitiatives1-3yeardeliveryplanandroadmapAframeworkforresponseacAsegmentationofthepopulationwithregardstopropensitytoadoptmobileservicesandvaluetobankshouldbeperformedtoestimatethemarketdemandformobilepaymentsValuetoBankLOBBankingSegmentation1(Likely2015mobileusers:57MM)Willchurnifmobileneedsarenotmetbutwillgrowinvaluewithmobileengagement;perfectforup-sell/cross-sellHighValuea3Donotforceit,veryunlikelytoseevalueinanymobileofferingLowPotentialcHighWealthyAccumulatorsPowerProfessionalsYoungProfessionalsacPwC51DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsbd2Canbecoachedintofinancialadulthoodwithplentyofcross-sell,engageearlyandkeeployalusingmobileHighPotentialbTargetProfilesAdoptabilityValuetoBankLOBDownscaleRetirees3UnlikelytobenefitfrommobileLowValuedUSpopulationsizeLikely2015mobileusersKeyHighWealthyRetireesPaydayBluesWorking-classTraditionalistsFiscalRookiesabDebtStriverscd1BasedonPwCanalysis.
AframeworkforresponseAclearviewofthetechnologylandscape(currentstateandfuturestate)iscriticaltounderstandingwhathasalreadybeencreated,whatplatformsarealignedtothebusinesscapabilities,andwhichplatformsmayrequireadditionalinvestment.
SMSIPBasedMobileDeviceOrganizingcapabilitiesbyinvestmenttypeenablessimpleprioritizationofresourcesbasedontheneedandthecosttoimplement.
PwC52DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsAframeworkforresponseMobilePlatformsInfrastructureCoreInfrastructureMobileApplicationsEnterpriseInterfaceSecureGatewaysMessageBrokersHostsSecurityAppComponentsIntegrationAppAuthenticationDataEncryptionEnterpriseBusinessServicesDevelopmentframeworksandinfrastructuremustbetailoredtoaddressthechallengespresentedbymobile.
DefineanddevelopreusableapplicationcomponentsthatenablerapidmobiledevelopmentacrosssupporteddevicesandoperatingsystemsAdoptmobilesoftwarethatofferssolutionstosecurelymanagefirmcontent,media,andcommunicationsTakeadvantageofsecureinterfacesthatPwC53DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsAppDistributionMobileHardwareSharedServicesConfigurationManagementAuthenticationStorageContentManagementLocalObjectStorageFrameworks/APIs*PatternsIntegrationInterfaceGUIFrameworkSecureProtocolsAuthenticationServicesDataServicesEnterpriseToolsContentPlaybackCommunicationCommunicationManagementSupportSupportTakeadvantageofsecureinterfacesthatprovideaccesstoexistingenterprisebusinessservices,securityresources,andassetsImprovecoreinfrastructurecomponentstobetterserve,secure,andsupportmobileapplicationsDeploysharedinfrastructureservicesthatwillfacilitatemobileplatformandapplicationmanagementandsupport*ApplicationProgrammingInterfacesSection5HowPwCcanhelpHowPwCcanhelpPwChashelpedanumberofindustryplayersaddresscriticalquestionsanddevelopcompetitiveresponsesthatwillhelpthemsucceedinthemobileecosystem.
TechnicalExecutionandprogrammanagementWeoperationalizeyourstrategythroughabusiness-drivenframeworkthatToenablesupportofbusinessrequirementswiththerightinfrastructure,weapplyframeworksthatthoroughlyassesscriticaldimensionsofyourtechnologyarchitecturePwC55DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsStrategydefinitionandopportunityprioritizationSolutionarchitecturedesignTechnicalinfrastructureassessmentmanagementOurStrategicBusinessArchitectureframeworkhelpsyouarticulatebusinessstrategyinastructuredmanner,ensuringalignmentoflongtermvisionandshorttermprioritiesabusiness-drivenframeworkthatidentifiesbusinessandtechnologygaps,helpingtodefinetheoptimalsolutionWeutilizeathoroughapproachtomanageandmeasureprogress,consistentlydeliveringbusinessandtechnologyprogramsthatproduceeconomicresultsHowPwCcanhelpClientneedsandissuesClientneedsIssueswehelpclientsaddressStrategydefinitionandopportunityprioritizationDevelopingamissionstatementaddressingthemajorfunctionsandoperationsthatthemobileprogramwilladdressArticulatinganinspirational,forward-thinkingvisionofwhattheprogramwantstoachieveDefiningthetoppriorities/objectivesthatwouldachievethevision,trackedbyperformanceindicatorsthatcollectivelysupportgoalattainmentDevelopingtheroadmapthatdescribeshowthebusinessplanstoachievetheobjectivesandwhatactionswillbeenabledSolutionarchitecturedesignIdentifyinggapsinmobilebusinesscapabilitiesbyassessingthecurrentbusinessarchitectureagainstmarkettrendsandleadingpracticesintheindustryIdentifyinggapsinmobiletechnologycapabilitiesbyassessingservicing,information,infrastructure,andintegrationneedsPwC56DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsneedsPerforminganalysisofbuildvs.
buyvs.
partnermodelsAnalyzingexpectedreturnoninvestmentanddevelopingthebusinesscaseDevelopingthetargetoperatingmodel,including:futurestatebusinessprocesses,dataflows,anddependencies;futureorganizationstructureandgovernanceimpacts;andregulatoryframeworkIdentifyingquickwinsandlong-termimplementationroadmapTechnicalinfrastructureassessmentDefininginfrastructurechangesneededtosupportreal-timemobiletransactionsAssessingtheabilityoftechnicalarchitecturetosupportmobiletransactionsacrossmultipledimensions,includingtheapplication,data,andoperatingsystemlevelsMeasuringtheadaptability,scalability,portability,andreliabilityofthesystemarchitecture,amongothercharacteristicsExecutionandprogrammanagementEstablishingaProgramManagementOffice(PMO)tooverseeprojectplanning,execution,andmonitoringDevelopingprojectgovernancestructuresandproceduresImplementingpilotprogram,capturingfeedback,andrefiningmobileproductfeatures/strategytoaddressfeedbackMeasuringandreportingonmobileprogramcostandbenefitsIdentifyingpotentialprogramrisksanddevelopingresponsestrategiesHowPwCcanhelpAmongthekeydistinguishingcharacteristicsofPwCisthedepthandbreadthofourexperienceandaclient-basedapproachthathelpsdeliversustainablechanges.
ExtensiveexperienceWehavedesignedandassistedwiththeimplementationofnewbusinessandoperatingmodelsforseveralleadingfinancialservicesfirms.
Wehaveextensiveexperienceaddressingthedevelopmentandchallengesofmobilepaymentswithleadingfinancialservicesinstitutionsintheindustry.
IndustryfocusOurseasonedteamofprofessionalsbringsdeepindustryexperienceandcanuncoverkeyoperationalrisksandmarketopportunitiesintheassetmanagementsector.
Deepoperations,Ourteamincludescustomerimpact,strategy,operations,finance,regulatory,andtechnologyspecialists.
TheseChangeimpactandreadinessTalentmanagementOrgdesignProjectandprogrammanagementAdoptionPwC57DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsoperations,finance,andITexperiencefinance,regulatory,andtechnologyspecialists.
Thesespecialistsprovideinsightonproductdesignandchannelstrategytrends,aswellashowcompaniesareintegratingthemintotheirback-officebusinessprocessesandinfrastructure.
Tailored,integratedapproachWetailorourapproachanddeliverablestoyourneedsbasedonyourstrategicgoals,yourcurrentoperatingmodel,andthedetailsofthebusinesscaseforchange.
AsinglepointofcontactOurdedicatedfinancialservicesteamprovidesasinglepointofcontactthatcanquicklymobilizetheappropriateresourcestoassistyouwithyourneeds.
GlobalpresenceWehaveafinancialservicespresenceinover25countries,allowingustoaddsignificantvaluetocompaniesconsideringcross-bordermarketsolutions.
Solution-basedapproachOrganizationshavemanychoiceswithrespecttoaddressingtherisk,accounting,andoperationsissuesrelatedtomobilepayments.
Weprovideatailoredapproachtoaddresstheseissuesinasustainablefashionforyourorganization.
StakeholderengagementLeadershipengagementCulturalchangesCommunicationsTrainingHRmanagementTransformationVisionAdoptionSustainabilityHowPwCcanhelpWhatmakesPwC'sFinancialServicespracticedistinctiveIntegratedglobalnetworkPwC'sFinancialServicespracticeconsistsofmorethan34,000industry-dedicatedprofessionalsworldwide,includingmorethan4,500intheUnitedStates.
Theyservelargeandmultinationalbanks,insurancecompanies,investmentmanagers,broker-dealers,hedgefunds,andpaymentsorganizations.
TheUSFinancialServicespracticeispartofthePwCglobalnetwork,whichhasclientsinmorethan150countries.
ExtensiveindustryexperienceandresourcesPwCservesmoreofthebiggestandmostcomplexfinancialservicescompaniesthananyotherfirm.
Weunderstandfrompersonalexperiencethewidevarietyofbusinessissuesthataffecttheindustry,andweapplyourknowledgetoourclients'individualcircumstances.
Moreover,ourlarge,integratedglobalnetworkofindustry-dedicatedresourcesenablesustoapplythisknowledgeonourclients'behalfwheneverandwherevertheyneedit.
PwC58DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsMultidisciplinaryproblemsolvingThecriticalissuesfinancialservicescompaniesfacetodayaffecttheirentirebusiness.
Addressingthesecomplexitiesrequiresbothbreadthanddepth,andPwCserviceteamsincludespecialistsinriskmanagement,compliance,technology,businessoperations,finance,changeandprogrammanagement,dataandbusinessanalytics,economicsandanalysis,internalaudit,tax,forensics,andinvestigations.
PracticalinsightintocriticalissuesInadditiontoworkingdirectlywithclients,ourpracticeprofessionalsandFinancialServicesInstitute(FSI)regularlyproduceclientsurveys,whitepapers,andpointsofviewonthecriticalissuesthatfacetheindustry.
Thesepublications—aswellastheeventswestage—provideclientsnewintelligence,perspective,andanalysisonthetrendsthataffectthem.
FocusonrelationshipsPwC'ssize,financialstability,and150-yearhistoryallcontributetoourlong-termviewofclientrelationships.
Wehelpclientstranslatestrategyintoactionbyhelpingthemaddresstheirchallengesinfinance,tax,humanresources,operations,technology,andriskandcompliance.
HowPwCcanhelpForfurtherinformation,pleasecontact:JohnGarveyjohn.
garvey@us.
pwc.
com+16464712422MichaelHeindlmichael.
j.
heindl@us.
pwc.
com+13122986887PatrickGiacominipatrick.
a.
giacomini@us.
pwc.
com+16464714399JamesRusselljames.
s.
russell@us.
pwc.
com+16464712597AmericasPwC59DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsFemiOdunugafemi.
odunuga@us.
pwc.
com+16464713020AppendixSelectqualificationsSelectqualificationsMobilepaymentsstrategy—LeadingUSfinancialservicescompanyIssuesTheclientviewedmobilepaymentsasbothanopportunityandthreattotheircorecardbusiness.
Theydesiredanunderstandingoftheexistingspacetonotonlydefendcurrentmarketshare,butalsocarveoutaspecificnicheandcreatenewvalue.
TheclientwasalsoconcernedwithitsabilitytoquicklyandeffectivelydeploymPaymentproducts.
PwCwasengagedtoproviderecommendationsonwhichthreatstomitigate,whichopportunitiestopursue,whichpopulationsegmentsoffergreatestvalue,andhowtomakecurrentinfrastructuremoreagileandrelevanttotheevolvingmPaymentspace.
ApproachPwCevaluatedkeybestpracticesintheindustrytoisolatetrendsandidentifypotentialfuture-statescenarios(openplatform,MNO-based,etc.
).
PwCprovidedcounselonthreats/opportunitiesandwhichmobilepaymentvalueaddedservicestheyshouldpursue.
PwC61DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionspursue.
BenefitsPwCidentifiedUSpopulationsegmentsthatwouldbeofgreatestvalueandrelevancefortheclient'smPaymentgoals,andprovidedanumberofinfrastructureimprovementstoachievecompetitiveagility.
Bytheendoftheengagement,theclientbeganimplementingseveraloftherecommendations,engagingpartnersandmobilizinginternalresources.
SelectqualificationsMobilepaymentsstrategy—LeadingUSfinancialservicesfirmIssuesClient'scurrentmBankingofferingswerelaggingbehindcompetition.
Theclientwasseekingtotransformitselfintoa"thinbranch"bankingmodel,andwasconcernedwithcurrentinfrastructure,vendorrelationships,anddeliverycapabilities.
Tocatchupwiththemarketandbeginprogressiontowardsthe"thinbranch"model,theclientdesiredanunderstandingofwhichmBankingfeaturestheyshouldbuildandwhy.
Toimproveinfrastructureanddelivery,theclientdesiredaclearassessmentofthecurrentstateandrecommendationsforachievingfuturestategoals.
ApproachPwCwasengagedbytheclient'sdigitalteamtocreateamobilebankingstrategythatincludedinfrastructureandcustomersegmentationrecommendations.
PwCdevelopedanmBankinglandscapeoverviewwhichdefinedbaselinefunctionalities,keyplayersandconsumeradoptiontrends.
Theyconductedacomprehensivegapanalysisofcurrentofferings;providedcompetitive"parity"anddifferentiatedrecommendations.
PwC62DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsanalysisofcurrentofferings;providedcompetitive"parity"anddifferentiatedrecommendations.
Also,PwCidentifiedUSpopulationsegmentsthatwouldbeofgreatestvalueandrelevancefortheclient'smBankingpursuits.
BenefitsPwCdefinedcriticalmilestonestowardsenablingasuccessful"thinbranch"model,includingacomprehensivelistofrequiredfeaturesandpotentialfutureusecases.
Theteamalsohelpedtodevelopacurrentstateassessmentthatidentifiedopportunitiesacrosssystems,processes,security,vendors,anddelivery.
SelectqualificationsMobileapplicationsecurityassessment—FinancialservicesorganizationIssuesTheclienthaddevelopedamobilebankingapplicationthatcustomerscouldusetoexecutebankingtransactionsfromtheirsmartphone.
Theclientrecognizedtheadditionalrisksposedbythenewmobileapplicationplatformversusthestandardbankingwebapplication,specificallytheriskofsensitiveorpersonallyidentifiableinformationbeing"leftbehind"bytheapplicationwithinthesmartphone.
ApproachPwCworkedcloselywiththeclient'steamtodevelopamobileapplicationtestingmethodologythatincludedafullscopeofpenetrationtestingactivities.
Thismethodologytookintoaccountthevariousattackvectorsfacingthemobileapplicationandincludedtestingtheapplication'ssecurityfromtheperspectiveofusingtheapplicationwithastandardbrowserandfromtheperspectiveofusingtheapplicationfromthemobiledeviceitself.
Additionally,PwCdevelopedamobileapplicationsecurityquestionnaireandsolicitedfeedbackfromleadingPwC63DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsAdditionally,PwCdevelopedamobileapplicationsecurityquestionnaireandsolicitedfeedbackfromleadingorganizationswithintheclient'sindustry.
Usingtheseresults,PwCwasabletobenchmarktheclient'smobilesecuritypracticesagainsttheirindustrypeersandidentifythemobilesecuritypracticesofleadingorganizations.
BenefitsOurengagementidentifiedseveralwaysinwhichtheclientcouldimprovetheirmobileapplicationsecuritypracticestoaddresstheadditionalrisksposedbythenewmobileapplicationplatform.
Theresultsofthebenchmarkingassessmentallowedtheclienttoidentifystrengthsandweaknesseswithintheirmobilesecuritypracticesandinitiateprocessimprovements.
SelectqualificationsMulti-channelintegrationstrategy—MajorChinaretailbankIssuesClient'ssiloedoperatingmodelandlackofintegrationacrossphysicalanddigitalchannelshavesub-optimizedserviceandsalesopportunities,creatingadisjointedcustomerbankingexperience.
Withaheavyrelianceontraditionalchannels(i.
e.
,thebranch)forgrowth,thebankwasalsolaggingindigitalchannelcapabilities,investment,andcustomeruptake.
Theclientwasseekinganintegratedmulti-channelstrategytoestablisha360-degreeviewofthecustomer,andenablethebanktoservecustomersseamlesslyandpersonally,anytime,anywhere.
Thebankwaslookingtoshiftitsstrategicemphasisfromphysicaltodigitalchannels,andbuildamulti-dimensionalcustomeracquisitionandservicingmodelforfuturegrowth.
ApproachPwCwasengagedbythebanktodeveloptheintegratedmulti-channelstrategythatincluded1)channelcapabilityandoptimizationrecommendations,2)dataintegrationrequirements,and3)customersegmentationPwC64DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionscapabilityandoptimizationrecommendations,2)dataintegrationrequirements,and3)customersegmentationandmigrationopportunitiestodrivefuturee-channeladoption.
PwCconductedarapidcurrentstateassessmenttoidentifykeycapabilitygapsandintegrationneeds(acrosstheorganization,technology,andprocesses)tosupportafuture-stateandcross-channelsalesandservicingmodel.
Theteamalsoconductedhigh-levelprioritizationofthesegapsandformedastrategicroadmaptoguideimplementationandexecutionofthestrategy.
BenefitsPwCplayedakeyroleinaligningthebroaderorganizationontheneedforanintegratedmulti-channelstrategy,andtheneedtodeliveronthefuturevisionofbeingnumberoneincustomerservice.
PwCdefinedcriticalmilestonesforthestrategy,includingacomprehensivesetofintegrationrequirementsbothmulti-channelandchannelspecific,todeliverasuperiorandseamlesscustomerbankingexperience.
SelectqualificationsDigitalwalletstrategyandexecution—Globalpaymentnetwork/associationIssuesThedigitalandmobilepaymentsopportunitycontinuestorapidlyevolveandgrow.
Inanefforttocapitalizeonthisopportunityanddefendagainstarisingnumberofthreats,theclientispursuingthedevelopmentofadigitalwalletproductthatcantranscendweb,mobile,andphysicalpaymentcapabilities.
Thedecisiontobuild,deploy,andmaintainamajorbusiness-to-consumer(B2C)productisafirstfortheclient.
Further,theclientisenteringadigitalcompetitivearenawheretime-to-deploymentandabilitytoquicklyadaptarecriticalfactorsforsuccess.
TheclientisseekingtoimplementthenecessaryinfrastructureandoperationsthatcannotonlysuccessfullydeployB2Cproductsbutalsoadapttotheconstantlychangingneedsofthemarket.
ApproachPwCwasengagedbytheclienttoprovidethoughtleadershipandcriticalthinkingontheproductstrategyaswellasstructuringthesupportinginfrastructure.
ThisincludeddesigningandimplementingthenecessaryPwC65DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionswellasstructuringthesupportinginfrastructure.
Thisincludeddesigningandimplementingthenecessarygovernance,communication,andtoolsthatwouldcompriseabest-in-classprogramoffice.
Italsoinvolveddevelopingareleasemanagementinfrastructurebuiltonagiledevelopmentmethodologyprinciples.
PwCwasalsoengagedbytheclienttodefineandoptimizeexistingprocessesthatwillallowtheprogramandbroaderorganizationtobecomemoreefficientandquicklyadapttothemarket.
Thisinvolvedatraditionalcurrentstate/futurestategapanalysisexerciseacrossthoseexistingprocessesthatposedthebiggestrisktotheprogram'ssuccess.
BenefitsPwCdesignedandimplementedbest-in-classprocessesandtoolsthatallowedtheprogramtomaintainvisibilityandcontrolonitsproductreleasesaswellasunderstandbroaderimpactstotheorganization.
Thisinvolvedestablishingeffectivecommunicationchannelswithseniorleadership,activelyidentifying/resolvingcriticalissuesandrisks,andclearlydescribingandmaintainingoversightonmilestones,deliverables,anddependenciesacrosskeystakeholdersandworktracks.
Theprocessoptimizationeffortallowedtheorganizationtominimizeoverallprogramriskandbetteradapttomarketchangesbyimprovingtheclient'seffectivenessinthreekeyareas:on-boardingofnewresources,sourcingandmanagingfinances,andestablishing/operatingagiledevelopmentenvironments.
SelectqualificationsMobilepaymentsacceptancemarketassessmentandgo-to-marketstrategy—LeadingUSpaymentsprocessorIssuesThemobilepaymentsopportunitycontinuestorapidlyevolveandgrow.
Inanefforttocapitalizeonthisopportunity,theclientwaspresentedwithanopportunitybyaleadingtelecomcompanytotakearevolutionarymobilePointofSale(POS)devicetomarket.
Theclientwasseekingtounderstandthetotalofferingopportunity(marketsize)forthisgreenfieldproductanddevelopago-to-marketstrategythatwouldallowthemtocapturetheopportunitypotentialbyexaminingsalesanddistributionchannelsandoperationalmodels.
Thedecisiontobuild,deploy,andmaintainamobilePOSproductwasafirstfortheclient.
Further,theclientisenteringadigitalcompetitivearenawheretime-to-deploymentandabilitytoquicklyadaptarecriticalfactorsforsuccess.
Additionally,theclientwasseekingguidancearoundtheoperatingmodeldesignandlaunchofthepilotinselectedindustries.
ApproachPwCwasengagedbytheclienttoprovidethoughtleadershipandcriticalthinkingonproductreadiness,marketPwC66DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutionsApproachPwCwasengagedbytheclienttoprovidethoughtleadershipandcriticalthinkingonproductreadiness,marketsizing,go-to-marketstrategyandoperatingmodeldesign.
Productreadinessincludedunderstandingthevaluepropositionoftheproductandoutliningdifferentiatingfactorsfromcompetitorsthatgivetheclientaprimeopportunitytotakeimmediateandlastingmarketshare.
MarketsizingincludedanestimationofthepotentialnumberofmerchantswillingtoacceptamobilePOSproductthatinvolvedtwobroadfilters:firstly,thedifferentindustries'propensitytoadoptandsecondly,thepercentageofmerchantswhowillnotconsiderbuyingthetabletduetoitslowutilitytothem.
Go-to-marketstrategyincludedoutliningthesales/distributionchannelsthatneededtobescaledinspecificgeographies.
BenefitsPwCconductedaproductreadinessassessmentthatallowedmanagementtounderstandthespecificgapsinapplicationstorefront,productvariantsbymerchantsegment,andpricingandmonetizationstrategy.
MarketsizinghelpedtheclientunderstandthetotaladdressablemarketforthemobilePOSproduct.
Additionally,PwCoutlinedvariousmechanismsthatwillenableanincreaseoftheclient'spenetrationlevelsfrom10%to30%.
Go-to-marketstrategyoutlinedasegment-specificstrategy(small,medium,andnational)forhowtheclient'ssaleschannelsinspecificgeographiesacross18+industrieswillneedtobescaled(organicallyandinorganically)toincreasespeedtomarket.
Operatingdesignrecommendedtheagiletestandlearnoperatingstructurethatincludedagovernancemodel,rolesdescription,guidingprinciplesandanappropriatelevelofoperationalscalabilitybasedonmarketdemand.
www.
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com"DialingupaStorm:HowMobilePaymentsWillCreatetheMostSignificantRevenueOpportunitiesoftheDecadeforFinancialInstitutions,"PwCFSViewpoint,October2011.
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