strategy+business is published by PwC Strategy& LLC.
or, sign in with:
strategy and business
(originally published by Booz & Company)


Making Mobile Payment Work for Everyone

Consumers seem to be flocking to the new offerings. In the case of SK Telecom, which commands slightly more than half the market, the wireless operator worked closely with the Hyundai credit card company and Woori Bank to set up a network for its phones equipped with the Moneta chip. Since its launch in September 2003, SK Telecom’s offering alone has attracted 1.2 million subscribers, and that number should swell with the company’s alliance with MasterCard PayPass, which will expand Moneta’s usefulness worldwide.

The Challenge outside Asia
Telecoms are driving the m-payment revolution in Japan and Korea, but it will be a lot harder for them to follow the same path in the U.S. and parts of Europe where payment cards are already a deeply embedded fixture of consumer behavior, accounting for 70 percent of retail transactions. In these places, any telecom wishing to establish an m-payment system is up against a population that isn’t eager to move away from its familiar payment systems and might never have thought of cell phones as payment devices. (The road will be easier in Germany and other central European markets where cash accounts for 60 percent of retail transactions, mostly because merchants are eager to switch to cashless systems at the expense of handling currency.)

All this means that wireless operators that attempt to go it alone, as DoCoMo did, risk stumbling. To succeed, they will have to hew more to the Korea example and work closely with the incumbent financial players — banks and credit card issuers — along with handset manufacturers and retailers to establish a viable mobile payments infrastructure. Failure to work cooperatively will almost certainly lead to the kind of fate suffered by SIMPAY, a joint venture of several European telecoms, which just closed it doors, having reportedly been brought down by intractable differences among its members.

Signs for better partnership are already evident. Telecoms will find willing partners in the banks, which are facing greater competition than ever and decreasing margins in their traditional credit card businesses. They’re hungry for new ways to boost their card payment volume, and that’s an opportunity for wireless operators that seek to launch cooperative plays. Device-enabled payments leveraging the existing card products and payment infrastructure are the natural next step in that direction. Citibank’s recent move to distribute 2.5 million MasterCard PayPass-enabled devices gives evidence of banks’ willingness to play. The stage is set for the rise of mobile payments across the globe.

An Industry Consortium Approach
The single most important step in building a successful m-payment system is to set the incentives for all stakeholders. Without this, there will be no progress. Each of the participants, furthermore, must accept certain fundamentals and step up as needed for the good of the entire enterprise:

  • Banks and credit card companies (and incumbent stakeholders like acquirers, which bring new merchants into the network and process transactions, and network operators, which equip merchants with POS technology) must leverage existing value chains, rather than build new competitive solutions. They must also evaluate ways to let mobile telecoms participate in collaborative value generation.
  • Mobile operators must consider new mobile payment systems in the context of new ways to open up revenue streams, especially from monthly m-payment subscription charges or per transaction fees. Operators must also take full advantage of the positive side effect of embedding the mobile phone even deeper into the life of the subscribers — a significant motivator in the Japanese model.
  • Handset suppliers must embrace new approaches and start to consider active integration of mobile payment capabilities into product road maps and line-ups. Mobile payment capabilities are seen by some as the next big thing to drive handset replacement, making standardization and compatibility across operators and platforms critical to preserve user attractiveness and scale benefits.
  • Merchants must use their vast experience with cashless payments to drive further cost decreases that accrue from giving up cash, and to offset POS technology upgrade costs.
  • Finally, it needs to be demonstrated to mobile phone users that mobile payment is much more attractive than other more familiar payment schemes. The bundle of convenience aspects (safe, secure, available, fast, transparent, etc.) needs to be packaged and sold to target groups individually.
Follow Us 
Facebook Twitter LinkedIn Google Plus YouTube RSS strategy+business Digital and Mobile products App Store



  1. Raul L. Katz, “Irrational Exuberance: How the Telecom Industry Went Astray,” s+b, Summer 2003, Click here.
  2. Helmut Meier, Roman Friederich, and Hanno Blankenstein, “A Master Model for Mobile Multimedia,” s+b, Spring 2004, Click here.
  3. Helmut Meier, Roman Friedrich, Hanno Blankenstein, and Alexander Froment-Curtil, “How Wireless Carriers Will Make Mobile Data Pay,” s+b enews, 10/23/03, Click here.
Sign up to receive s+b newsletters and get a FREE Strategy eBook

You will initially receive up to two newsletters/week. You can unsubscribe from any newsletter by using the link found in each newsletter.