Around half of the world’s mobile owners are ready to use their phone to make purchases and manage money – but mobile finance players must tailor their strategies to the conditions of each market to take full advantage.
Use of mobile banking and mobile wallet services is set to surge worldwide as consumers respond to the promise of convenience, and look past security concerns. The Mobile Life 2012 study reveals that 50% of the world’s phone owners are either interested in mobile banking services or using them already, whilst 45 percent show the same level of enthusiasm for making payments using their phone.
Whether in Asia, The Americas, Europe or Sub-Saharan Africa, consumers identify convenience as the key driver of their enthusiasm for mobile commerce. However, different markets provide very different contexts for the idea of doing things more easily: the sophistication of mobile technology, the perceived dangers of fraud and robbery and the familiarity of banks themselves all have a role to play. Mobile finance providers must be well aware of these nuances as they figure out which services they should offer – and which brands they should offer them through. Target the right markets with the right approach and they are likely to find in mobile commerce a major opportunity for increasing market share.
Mobile banking: identifying the opportunities Phone owners’ enthusiasm for mobile banking varies considerably by country, even within bands of development. Significant differences in consumer attitudes emerge between different developed markets and different emerging countries, and the level of opportunity for mobile banking is best understood by setting such broad distinctions aside. A more insightful analysis groups markets according to their adoption of and interest in the service – and the existing availability of traditional banking channels.
Within developed markets, with generally strong traditional banking services, the balance of smartphones and non-smartphones in the hands of consumers tends to define how enthusiastic they are about mobile banking – and the immediacy of the opportunity for financial, and other partner brands, such as those in retail, technology and even consumer packaged goods.
The developed markets with the greatest appetite for mobile banking are those which are very comfortable with mobile technology. 44 percent of mobile owners in these markets already use a smartphone, making them the most popular form of handset versus either advanced or basic feature phones.
For banking customers, the move from online PC to mobile banking is a small step that offers immediate and easily understood benefits in terms of convenience and ‘always-on’ availability.
With mobile banking services quickly flooding the market in these territories, the opportunity is immediate, even urgent. Already, 15 percent of mobile owners use mobile banking services with an additional 35 percent intending to do so. Consumers are already very attuned to the benefits that mobile banking offers and banks face a potential competitive disadvantage if they fail to develop such services.
Interestingly, consumers in these markets do not intend to reduce their use of any other banking channels significantly, once they take up mobile banking. Their intention is to fit mobile into their banking repertoires, using the most appropriate of their portfolio of services for different banking tasks. Intended use of branch banking, for example, drops only from 54 percent to 46 percent. Mobile banking will likely steal some of the usage occasions previously reserved for in-branch or online exchanges – mobile banking has the benefits of on-the-go access and immediacy, however for more advanced transactions, people will likely still rely on online or in-branch. Although privacy and security register as potential barriers amongst some phone owners, there is potential for rapid growth in mobile banking if these concerns are adequately addressed in product development and communication.
Amongst another group of developed countries – those with higher access to traditional banking but lower acceptance of mobile banking – limited mobile technology and a lack of familiarity with online banking are holding back enthusiasm for mobile banking services. Germany, France, The Netherlands, Argentina, Russia and Japan are amongst a group of 19 developed countries that show far less interest, despite high levels of access to traditional in-branch banking services.
Consumers in these markets are far more likely to own basic feature phones than more advanced smartphones, and they are significantly less likely to have tried online banking (only 38 percent of phone owners have banked this way, compared to 58 percent in the first group of developed countries).
The opportunity for mobile banking in these markets is longer term but still potentially significant. Although current usage of mobile banking stands at only seven percent on average, a further 22 percent of phone owners intend to try it. As smartphone penetration improves, mobile banking will increasingly resonate with consumers. However, those offering the services must work harder to establish the convenience benefits, and the value of alternatives to in-branch banking, especially given the lower previous take-up of online services.
‘Convenience’ has a very different connotation in emerging markets, where many mobile owners have no prior access to banking services of any kind – and the benefits offered by mobile banking can mean foregoing a day’s journey on foot to reach a bank branch rather than avoiding a 10-minute wait in a queue. The value of mobile banking services to emerging markets has been well established. However, Mobile Life reveals a strong and occasionally surprising divergence between one group of countries that are highly engaged with the concept, and another group that have very little interest in it.
Those markets that are highly engaged are made up predominantly (although not entirely) of rapid growth markets and includes South Africa, Kenya, Uganda and Nigeria as well as China, Vietnam and Mexico. Across these markets, 41 percent of mobile owners have no prior access to banking services – and in their enthusiasm for mobile banking, consumers appear to recognise an opportunity to fill this gap. To meet this demand, mobile banking providers must be ready to build from the ground up, addressing a lack of familiarity with banking in general and often providing basic financial services for the first time.
Mobile banking offers should focus on the simple things in financial life: receiving wages and making payments and transfers. Sending money to relatives abroad is a priority for many migrant workers in these countries, whilst Mobile Life shows strong demand for paying utility bills via mobile (the “most important point” for over 23 percent of phone owners) and receiving salaries (“most important” for 16 percent). The ability simply to access account details is itself highly valued – and the most important feature of mobile banking for 15 percent of phone owners. In taking advantage of strong demand, mobile banking providers must adapt their offer both to the mobile technology available in each market – and the need to educate consumers. Close to a third (29 percent) of mobile owners in these markets indicate that they do not know how to use mobile banking services.
Consumers in the final group of markets identified by Mobile Life also lack familiarity with both banking and mobile technology. However, there is a big difference: 50 percent of phone owners across these markets have no interest in engaging with banking services in general, let alone with mobile banking. The value of even simple financial services is poorly established.
This group features some surprising inclusions: India, a BRIC market and one of the most dynamic economies worldwide, and Turkey, with its rapidly growing economy and movement towards EU membership. Significant divisions between rural and urban development and lack of mobile infrastructure appear to be contributory factors: 78 percent of mobiles are basic feature phones and 43 percent of phone owners do not know what mobile banking is.
Developments in mobile infrastructure are a precondition for mobile banking to take off in these countries. As phone capabilities increase, interest in advanced features such as mobile banking will grow. Until then, however, these markets should remain the lowest priority for those developing mobile banking services.
Mobile wallet: the adaptive technology
Like mobile banking, the adoption of mobile wallet technology is growing rapidly on a global basis. Mobile wallet is a broad term that signifies the use of phones to make purchases utilising NFC (near field communication) technology whereby consumers touch their phone to a sensor in order to pay. Unlike with mobile banking however, adoption is spread evenly across different types of markets, with the mobile wallet concept adapting to the level of technology available in different countries. There is some correlation between enthusiasm for mobile banking and adoption of mobile wallet. Uganda, Hong Kong and Korea, the three leading countries for mobile wallet usage, all show high levels of enthusiasm for mobile banking; meanwhile India, Pakistan, The Philippines and Egypt fall in the bottom ten for both.
Mobile wallet providers must vary their approach to the level of technology available in each market – and also to reflect different triggers for adopting the services. Convenience and speed are the key drivers for developed and tier 1 emerging markets, but avoiding the need to carry cash far outstrips these considerations for tier 2 emerging countries. As with mobile banking, the stakes are raised when it comes to the consumer needs that mobile commerce addresses: lack of security and fear of being robbed, trump lack of time and fear of being inconvenienced.
The uptake of mobile wallet does not simply rely on consumers however, and a large part of adoption is reliant on retailers. Developed Asian markets are very much early adopters of mobile wallet capabilities, however in many cases, particularly Japan and South Korea, this adoption is quickly explained by the ease of payment in-store and infrastructural efforts retailers have made.
Mobile Life spotlights the efforts of different mobile players battling to take control of the mobile commerce ecosystem, with interesting variations in the question of whom consumers trust to handle their payments.
Typically these bases of trust relate to the systems already dominant within the market. Mobile networks score significantly higher on customer preference in Sub-Saharan Africa, where existing money transfer services from the likes of Kenya’s Safaricom have already established credibility. Credit card companies score particularly highly in developing Asian countries, where they are preferred by 30 percent of consumers, as well as in the heavily credit-based USA. In all territories, however, banks emerge as the most trusted brands to handle money, the preferred choice for 53 percent of mobile owners worldwide. Partnership with a banking brand is likely to strengthen the appeal of a mobile wallet service in the vast majority of markets.
Moving forward together: mobile banking and mobile wallet in step
Demand for mobile banking and mobile wallet services feed and influence one another – and this produces important variations in the nature of the mobile commerce ecosystem in each market. It seems likely that the simple mobile wallet services already established in countries such as Uganda and Tanzania are helping to fuel interest in mobile banking, despite the lack of familiarity with banks overall. The accessible nature of mobile wallet services in these markets should influence the form of mobile banking services and may well mean that mobile networks, already established in the mobile wallet space, are trusted to help provide them.
In developed markets where mobile banking acceptance is already high, the expectations for mobile wallet services will also be higher. More complex solutions, such as near-field communications or touching phones to sensors, are likely to be demanded that are tailored to smartphones and designed to allay consumer concerns over digital security. And partnership with banks is likely to be a major competitive advantage in the mobile wallet space, lending a familiar brand presence to help with education and awareness. Partnership between mobile banking and mobile wallet providers will also provide a distinct role for mobile in consumers’ existing repertoire of banking services.
The opportunity: mobile commerce as differentiator
The rapid growth in demand for both mobile banking and mobile wallet services makes them a vital differentiator in competitive markets. For banks, provision of mobile services is a spearhead for gaining share quickly in rapid growth countries, and encouraging switching between providers in more mature banking markets. Meanwhile, the availability of mobile wallet services will soon begin to influence consumers’ choice of which retailer to visit, particularly in countries where mobile payments, and avoiding the need to carry cash, are recognised as enhancing personal safety.
In each market, mobile commerce providers must tailor their offers to the level of technology available, the enthusiasm for and understanding of mobile banking, the providers that consumers best trust to deliver payment services, and the nature of the freedom that mobile commerce provides. Freedom from fear and financial exclusion potentially demands very different consumer messaging to freedom from queuing and call centres.
Ryan Versfeld is based in Cape Town and is the AME Connect Development Manager at TNS. Fiona Buchanan is based in Melbourne and is the Global Connect Development Manager at TNS. In Focus is part of a regular series of articles that takes an in-depth look at a particular subject, region or demographic in more detail. All articles are written by TNS consultants and based on their expertise gathered through working on client assignments in over 80 markets globally.