The telco banks of the future: why mobile operators’ future is in money
The news today that MasterCard and Deutsche Telekom are working together on a mobile payments framework to enable consumers to use their mobile phones as a way to buy goods and services, is just another precursor to a gradual revolution that will see telcos become our future banks.
About a decade ago, I wrote a story for a business magazine about how mobile operators could transform their billing relationship with customers into a way to buy stuff. The idea was espoused by a telecoms provider at the time called David Ryan of Spirit Telecom and it made sense. But clearly it was a little ahead of its time.
Today, in 2012, the rise and rise of technologies like near field communication (NFC) are making it possible to make debit and credit card payments on your smartphone. Orange is trialing the technology in France, Telefónica is doing likewise in Spain and Samsung and Visa are using the 2012 Olympics in London to spearhead the use of phones as vessels for NFC payments.
In the US, Google is already pushing ahead with Google Wallet. Last week, Google revealed that more than 1m NFC Android devices are shipping every week since Android Beam was introduced in the Ice Cream Sandwich OS last year.
Recently unveiling Windows Phone 8, Microsoft emphasised how NFC will play a major roll in its mobile strategy.
But assuming NFC is the enabler for a mobile payments revolution long overdue is missing the point. Mobile operators already have the billing relationship with users to allow them to put payments for goods and services onto their bills.
As one source told me recently, we are on the cusp of a raft of new services from various operators that will allow users to buy things and charge them to their mobile bills whether they are using a smartphone or not. But operators are also being careful to ensure consumers avoid ‘bill shock’.
This is a time to innovate and avoid the 'dumb pipe' trap
But in its essence that billing relationship provides a broad tapestry upon which mobile operators can be creative. And innovative.
They need to do this because already the very companies they are helping into the market in the form of smart devices – Apple, Google, Microsoft and others – are eating their lunch in terms of buying digital products like apps, movies and music.
Mobile telecoms operators’ fears of becoming just a ‘dumb pipe’ are close to becoming a reality, but can be avoided if that billing relationship can be turned into currency – aided and abetted by the rise of NFC-based contactless payments.
According to Ovum analyst Angel Dobrdziev, the drive behind Deutsche Telekom’s mobile payments strategy is to create a comprehensive framework to address challenges in what is currently an incomplete ecosystem.
“Deutsche Telekom is working to ready the market and strengthen its brand association with financial services by becoming a credit-card issuer for MasterCard. Deutsche Telekom is looking to improve the retail infrastructure for mobile payments by acting as a sales partner for NFC-enabled point of sale (POS) terminals. It is providing NFC tags for consumers that do not have NFC-enabled devices. Deutsche Telekom is also taking a considered, phased approach to service rollout, which is no bad thing, starting in Poland this year and Germany in 2013,” Dobardziev said.
But Dobardziev’s colleague Eden Zollar warns that Deutsche Telekom’s strategy is broad and may be challenging to execute across the various geographies in which the company is active.
“Deutsche Telekom is also facing increased competition from a growing number of players with similar mobile payment propositions, including Google, that, like Deutsche Telekom, aims to differentiate with an integrated online and mobile payments service.
“We also see challenges with Deutsche Telekom’s business model, which is based on a share of transactions and rental fees – we expect this to be tested by alternative models based on advertising with free services to consumers and merchants,” Zoller concluded.
Mobile wallet image via Shutterstock