Inside telecommunications Issue 12

Service Innovation

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New moves to combine mobile payments and marketing

Much has been made of the long-term growth potential of mobile payments and the role operators have been playing in bringing financial services to the unbanked or providing contactless payments at the retail point-of-sale (POS). Last year, Gartner predicted that the number of mobile payment users worldwide would reach 245.2 million by the end of 2013, up 22% year-on-year.

Nevertheless, the number of mobile payment users is equivalent to just 7% of global mobile phone users, underlining that device-based payments are still very much in their infancy. This is particularly true of developed markets, where a wide range of pre-existing payments instruments, high levels of cross-sector competition, fragmented technologies and regulatory complexity have tempered take-up rates.

In this light, mobile operators are taking the following actions:

  • Considering new ways of adding value
  • Collaborating on mobile payments platforms in developed markets
  • Forming national joint ventures with banks

While mobile operators are certainly showing themselves to be more agile as they strike new horizontal and vertical partnerships, a number of challenges continue to overshadow the mobile payments market.

  • Fragmentation: In the US, there are now a number of competing ecosystems, with merchants and mobile operators forming separate industry initiatives.
  • The mobile POS reader market: Increasingly congested as a raft of “me too” hardware products hit the market.
  • New technologies: As they widen the landscape for innovation in POS mobile payments, they could also disrupt existing business models by allowing a greater range of players to take control of service provisioning.

It is clear that migration to mobile solutions will take time — with service success dependent on a range of factors, from the costs of upgrading legacy POS infrastructure to appetite for value-added solutions that incorporate many use cases.

Mobile data pricing evolves in new directions

Strong growth in demand for mobile data is leading operators to provide new monthly packages to subscribers, targeting end users that want the flexibility to share connectivity across multiple devices or with other family members, as well as those seeking more flexible handset payment options. The benefits for operators are clear: revenue upside and churn reduction through new value propositions alongside lower customer acquisition and retention costs.

In order to embed new value propositions, operators have given users tools to help them gauge their mobile data usage while offering other incentives, such as tethering capability and Wi-Fi hotspot access.

Unlimited voice minutes and texts have also featured as part of such packages, signaling an inversion of historical pricing models where minutes and texts were capped alongside all-you-can-eat data plans.

Despite early successes with shared data and handset financing plans, operators must ensure their pricing strategies evolve dynamically in the long term. Greater segmentation of consumer needs is vital.

For mobile operators to increase the flexibility of their service bundles, billing solutions will need to be revitalized with real-time charging capability and integrated with policy control. Up-sell offers based on real-time intelligence and improved customer analytics can help operators become more responsive, while convergent charging solutions can speed launch processes at a time of unprecedented innovation in pricing models.

EY – Operator plans to offer different mobile charging models.