Two new reports suggest that the time is ripe for mobile telephone operators to expand their operations into financial transactions, but that they shouldn't delay too long.
The first report, from Datamonitor, suggests that companies in the financial sector will soon not only have to prevent their customers from defecting to rivals within the sector, but will have to contend with an assortment of new entrants into the sector.
In Europe, companies from the retailing, utilities and automotive sector are already providing financial services. Some of the entrants include Tesco, Marks & Spencer and Centrica in the UK, Carrefour and Auchan in France, Tchibo and Axa in Germany and Albert Heijn and Aegon in the Netherlands. Car manufacturers include BMW, Ford, General Motors and Volkswagen.
But the greatest threat to the financial sector companies could come from the mobile telephone operators. Most have very large customer bases and a payment systems already in place. They also have strong brands and IT infrastructure. In the UK, payment systems have already been developed that allow customers to buy goods using their mobile phones, then pay for them on their mobile phone accounts. Vodafone has just launched a micro-payments system and it is running trials of a wallet payment system for larger payments in the UK, Germany and Italy. These may be rolled out globally. Orange is to launch a system in the UK soon.
According to Datamonitor's Alex Boorman, "It needs to be stressed that the mobile operators have spent heavily on 3G licenses. It therefore remains to be seen whether their finances remain sufficient to fund entry into financial services and how dependent entry would be on the success of 3G."
The second report, the Mobinet study, reveals that 44% of the 5,600 mobile phone users on four continents surveyed say that they would like to use their mobile phones for small cash transactions (m-cash) such as bus, taxi and train fares or items from vending machines. So far, only 2% have actually done so. Intent to use m-cash was highest in Japan at 50%, followed by 46% in Europe, 43% in the rest of Asia and 38% in the US.
But A.T. Kearney's Paul Collins, leader of the study, warns that consumer tastes in the mobile arena are fragile, so the industry must move promptly before consumer interest wanes. "The Mobinet Index recorded high numbers for intent to use mobile phones to access the Internet 18 months ago. Those numbers have fallen drastically, primarily because the mobile community hasn't provided consumers with enough reasons to access the Internet with their phones. Mobile cash could suffer the same fate if consumers aren't soon given compelling opportunities to use it."
The Mobinet study looks at global mobile phone use twice a year. It is conducted by global management consulting firm A.T. Kearney and Judge Institute, Cambridge University's Business School,