- Market Overview : PPT presentation (5 slides), 12 page writeup, Excel research sheet
- Price : GBP 79,00 (Single User License)
- Author : Florian Bertele (Bio)
Global consumers will spend roughly $30 trillion in 2012. In traditional retail, about half of all payments are being made in cash, the other half mostly with credit or debit cards. However, the way people pay for goods and services is expected to change radically over the next few years: Regular payments in retail stores (offline payments) will be replaced more and more by online payments, as people shop more frequently on the internet, a segment which is growing at about 20% per year globally. Over the past 3 years, a significant number of people have also started using their mobile phones to shop. This has created the mobile payments sector, which is growing by over 50% annually. Mobile payments not only represent online shoppers starting to use a mobile devices, but also increasingly represent online payment methods being used at the point of sale in retail stores. In other words, mobile payments have the potential to eliminate the wallet in peoples’ pockets and many companies are competing for this $15 trillion opportunity.
Card schemes such as Visa or Mastercard have a very strong market position with well-established global brands and high levels of user trust. They innovate to make card payments more user-friendly, e.g. with contactless technologies at the point of sale, or online/ mobile payment methods that don’t require the full entry of card numbers and details. Startups and technology companies such as Square are introducing mobile card readers, which shift cash payments with small merchants to card payments. Credit card companies can change their market position significantly by acquiring a direct relationship with buyers and sellers, and by facilitating value added services such as targeted offers, discounts and rewards.
Online gorillas and walled gardens are large technology companies building up a payment ecosystem. They leverage their closed ecosystem (e.g. eBay buyers and sellers with more than 100m PayPal accounts) or technology platform (e.g. Google’s Android with more than 60% market share in smartphone sales) to acquire a large number of users for their payments. They can disrupt the existing payment market by providing an electronic wallet and control online and offline transactions end-to-end. If successful, they have the potential to carve out major parts of the established financial services industry that currently manage payments. Also, technology companies providing alternative payments benefit from the shift of physical media businesses (e.g. books, movies, music) towards digital formats, such as eBooks, mp3-downloads and video streaming.
Mobile carriers are building joint ventures across the fragmented carrier market in order to integrate an electronic wallet into the mobile phone. They leverage their relationship with mobile phone users and make use of the SIM card inside of a phone, which bears security features that are similar to the chip on a Debit card. In the developing world, such as Africa, mobile carriers already facilitate major parts of peer-to-peer payments (e.g. M-PESA). In developed markets, mobile carriers have the opportunity to break into mobile and in-store payments and turn the phone number into a payment method. Also, carriers serve the digital goods market with direct carrier billing. Companies such as Zong and Boku offer the phone number as a very convenient and easy payment method for small transactions, known as micropayments (mostly $10 and below). Buyers are charged via their phone bill and don’t need any cards, which makes this payment method attractive to reach customers who don’t tend to carry credit or debit cards, e.g. teenagers.
Rising stars are fast growing companies with the potential to become game changers in the payments industry. They are innovating by lowering the cost per transaction (e.g. Dwolla), offering specialized solutions for virtual currencies (e.g. Playspan) or making the user and merchant experience generally more convenient (e.g. Stripe, Jumio). Their opportunity is to capture an increasing market share from established card and alternative payment methods in the online and mobile segment.