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Operators Cash In on Mobile PaymentsOperators Cash In on Mobile Payments

Mobile payments let operators be the bank for the unbanked, but it won't be a simple job, Heavy Reading says

Sarah Thomas

July 15, 2010

3 Min Read
Operators Cash In on Mobile Payments

In mobile operators' quest for incremental data revenue, mobile money is emerging as a significant opportunity across the globe -- one that will only grow as 4G networks are deployed.

The opportunity is significant, but so are the challenges that threaten to slow the market’s growth, according to the latest Heavy Reading 4G/LTE Insider, "Mobile Payments: Opportunity in the Run-Up to 4G." (See Mobile Money Machines.)Mobile payment systems have been around since the early 2000s when they began taking shape in developing African and Southeast Asian economies, Heavy Reading research analyst Aileen Arcilla writes in the report, but it wasn’t until the Haiti earthquake that operators experienced the power of mobile payments in the form of millions donated via text messaging. (See Mobile Haiti Relief Surpasses $33M.)Now they are beginning to pursue the opportunity, as are handset makers, financial institutions, and third-party vendors.

The market has upside for handset makers that can sell more basic feature phones that only require SMS in emerging markets, and for mobile operators that will collect fees associated with managing transactions. In that respect, the operator becomes the bank for its customers, especially for those who don’t have access to widespread ATM or bank branch networks. (See CTIA 2010: Can Carriers Cash In On Mobile Payments?)

“For every new subscriber that the operator can acquire, the subscriber can also sign up for mobile payment services and conduct transactions,” Arcilla writes. “Because new subscribers in developing countries typically sign up for prepaid accounts, the purchased airtime becomes the currency.”

This becomes more important when subscribers want to send money, via airtime, to long-distance family members, Arcilla notes.

Along with the opportunity comes the challenge, stemming from the fact that it is attracting interest from so many different parties, Heavy Reading finds. The lack of standardization and number of disparate banking systems that use either the operator or the handset is fragmenting the market among proprietary vendors. Security, billing, and varying regulation in different countries also complicate things.

In the US, there’s another potential roadblock to the mobile operator's role in mobile payments, too, and that’s the financial institutions themselves. Many are eager to get into mobile, but they want to own the relationship with the customer in place of the mobile operator, according to the report. That means they also own the revenue stream. The key will be for them to partner in such a way that both parties benefit.

“The concept of conducting financial transactions via my mobile phone has yet to be embraced by all worldwide, so any further innovation that can occur in this space can only help to increase awareness, and subsequently adoption. Until then, the mobile payment systems space will become increasingly crowded, offering potential customers more options than imaginable.”

Included among those jumping into mobile payments is AT&T Inc. (NYSE: T), which inked a deal with mobile payments vendor Apriva last month to use its app that turns smartphones into point-of-sale devices that accept credit or debit cards to target the enterprise. In Kenya, Safaricom Ltd. uses Vodafone Group plc (NYSE: VOD)’s money transfer technology to let mobile phone users keep an interest-earning savings account on their handset. Salt SA is also targeting the African market with mobile payment services, and advances in near-field communications are bringing contactless payments closer to reality. (See AT&T Works With Apriva on Apps, Vodafone Adds to M-PESA, Orange Money Expands in Africa, and Near-Field Inches Nearer.)

— Sarah Reedy, Senior Reporter, Light Reading Mobile

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About the Author(s)

Sarah Thomas

Director, Women in Comms

Sarah Thomas's love affair with communications began in 2003 when she bought her first cellphone, a pink RAZR, which she duly "bedazzled" with the help of superglue and her dad.

She joined the editorial staff at Light Reading in 2010 and has been covering mobile technologies ever since. Sarah got her start covering telecom in 2007 at Telephony, later Connected Planet, may it rest in peace. Her non-telecom work experience includes a brief foray into public relations at Fleishman-Hillard (her cussin' upset the clients) and a hodge-podge of internships, including spells at Ingram's (Kansas City's business magazine), American Spa magazine (where she was Chief Hot-Tub Correspondent), and the tweens' quiz bible, QuizFest, in NYC.

As Editorial Operations Director, a role she took on in January 2015, Sarah is responsible for the day-to-day management of the non-news content elements on Light Reading.

Sarah received her Bachelor's in Journalism from the University of Missouri-Columbia. She lives in Chicago with her 3DTV, her iPad and a drawer full of smartphone cords.

Away from the world of telecom journalism, Sarah likes to dabble in monster truck racing, becoming part of Team Bigfoot in 2009.

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