Service revenue growth from m-payment offerings for customers in mature markets like Japan and South Korea, even under almost ideal market conditions has come only after many years of trials, investments and service upgrades. A study ‘From Digital Content to M-Wallets: M-Payment Strategies for Operators’, conducted by US based research agency, Pyramid Research, feels that there is a clear dichotomy between the potential of the m-payments services that involve mobile money transfers for ‘unbanked’ customers, characteristic of emerging markets, and the more advanced m-payment services offered to customers in mature markets, usually involving m-wallets and adjacent value-added services.
In Japan, at NTT Docomo, as per the study, revenue from m-payment services accounted for 9.3 per cent of total service revenue in 2012. NTT Docomo invested in Mitsui Sumitomo Bank in 2005, and the FeliCa service has been available since 2002, which means that it took around one decade after the initial investments in m-payments services for the service to yield relatively sizable revenue gains.
South Korea’s SK Telecom’s revenue from Hana SK Card service – SK Telecom’s credit service, which formed the basis for the operator’s T Smart Pay (m-wallet) launch in 2009 – accounted for only 1 per cent of the operator’s total service revenue in 2012.
The report feels that m-payments for the unbanked is based on a sound business model and offers a clear value proposition for the end user. Therefore, the revenue potential associated with service (mobile money transfer, most often) is large and immediate.
In addition to its contribution to operators’ service revenue, m-payments, according to the study offer indirect benefits to operators. The most emphasised one is the positive effect on customer loyalty. Again, as with revenue, providing m-payments services for the unbanked has a clear and immediate effect on the operator’s churn rate, while in the developed world this is still more of an expectation.
The report believes that an m-wallet service that offers value beyond payments will eventually have a powerful churn-curbing effect on the operator’s mobile subscriber pool. When SK Telecom in 2009 launched T-Smart Pay, it allowed customers to store up to eight credit cards in their mobile phones, in addition to 30 membership, points or mileage cards and 50 coupons. This type of value proposition is designed to be sticky, since the customer will be reluctant to switch operators due to the hassle of transferring data (where this is even possible) from one m-wallet to another.
What’s currently missing for this sticky effect of m-wallets to become more obvious is scale: indirect effects of m-payment, such as churn reduction, become evident only when a large enough portion of customers sign up for the service, and more importantly, actually use the service actively.