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Mobile Wallet – Market Trends and Future Predictions

Mobile wallet is a system that allows consumers to pay by phone during travel, from any location, anytime. It is an application that manages the portfolio of mobile NFC services on the handset. It may also manage other services offered by mobile operators and their partners. The mobile wallet enables the user to prioritise one NFC service over another, for example selecting the active payment card. In general, this app is likely to be the responsibility of the mobile operator. However the definitions of mobile wallet to the end user still not clear. A recent mobile wallet consumer survey by Vibes found that consumers define mobile wallet in different ways. The following figure shows how consumers define the mobile wallet.

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Due to advancements in mobile technology, there is significant growth in terms of the number of mobile device users. By the use of these mobile devices, there is significant growth in M commerce, which is the mode of transactions conducted via mobile devices. Mobile devices are currently becoming a center of numerous technologies and various applications that are created for customers as well as businesses globally. M commerce is considered as an efficient way of delivering E Commerce to consumers regardless of the time and location. Due to the fundamental characteristics of mobiles such as customization, mobility, and prevalence, M commerce illustrates immense market potential, and high profitability. There are a number of stakeholders involved in M commerce.

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There are various M commerce applications available in the market with which one can obtain benefit in a number of ways. Applications such as mobile trading, location maps, news, mobile shopping, and ticketing are widely used by end-users. Presently, a majority of the online stores have their own mobile website or apps for mobile phones, which have demonstrated huge growth, not only in business and sales, but also in the customer base. This report is primarily focused on mobile transaction, which occurs between businesses and customers.

A few of the major key vendors that occupy the M commerce market are Google, Paypal (Ebay), Mastercard, Visa, and IBM. The M commerce research report discusses the strategy and insights of the key vendors in the industry. This research report provides an in-depth study of the driving forces and challenges for the M commerce market. The report also analyzes the global adoption trends and future growth potentials of M commerce applications across different regions. MarketsandMarkets has segmented the M commerce market on the basis of transaction types, payment modes, user types, and geographical regions. The report consists of MarketsandMarkets’ views of the key players and analyst insights on various developments that take place in the M commerce market.

The global mobile wallet market is expected to grow at a CAGR of 127.5% from 2012 to 2020. The key driver for the growth of the market is it to provide consumers with greater convenience for payment. It is estimated that more than 70% smartphone users are willing to adopt mobile payment modes and 15% have already completed the adoption.

However, the payment method can be used till the mobile has power and battery backup. Therefore, when the battery of the mobile is down, the mobile wallet cannot be used. This is one of the key restraints for the growth of the market. Smartphone users have multiple applications on their phones which consume power and the chances of battery outages are high. This limits the usability of the mobile wallet application. An important challenge for technology providers is to make the advances in the emerging NFC technology, as it is expected to have high demand among consumers.

Berg Insight believes that the emergence of mobile wallet services will be the most significant development in the payments industry during this decade. Mobile wallet services will change both offline and online commerce by enabling new shopping experiences for consumers and by creating an unprecedented opportunity for retailers and brands to interact with their customers while purchase decisions are being made. However, the mobile wallet market is still in its infancy and the wallet services need to develop substantially before this vision can become reality. Nevertheless, the market is now moving rapidly and commercial rollouts of numerous NFC and non-NFC wallet services are underway. The required infrastructure for mobile wallet services is being rolled out and key partnerships are being formed between mobile network operators, financial institutions, retailers and other companies. This will result in a proliferation of mobile wallet services during the next few years, which will be a very important time during which wallet operators have an opportunity to learn and improve their services. Berg Insight anticipates that only a limited number of wallet services will survive in the long term due to network effects. Mobile wallet operators that do not enter the market early risk falling behind and may find themselves struggling to gain critical mass.

The European market for mobile wallet services is developing quickly, with substantial momentum behind NFC wallet services and many launches of non-NFC wallet services are also in progress. Commercial mobile wallet services will have been launched by companies such as Telefónica, Orange, T-Mobile, Vodafone, ING Bank, BNP Paribas, Barclaycard, Swedbank, mBank, PKO Bank Polski, Seamless, Auchan and PayPal by the end of 2013. As a result, there will be mobile wallet services live in nearly half of the EU27+2 countries at the end of the year. Berg Insight expects that 2016–2017 will be the first years in which mobile wallets approach mass market penetration and more than ten million new wallet users will then be added on an annual basis. The number of active mobile wallet users is projected to increase from 0.5 million in 2012 to 42 million in 2017, whereas the in-store payments volume will grow from well below € 0.1 billion in 2012 to € 45 billion in 2017.

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There were approximately 7.5 million mobile wallet users in North America at the end of 2012, which completed in-store payments for a total of US$ 0.5 billion (€ 0.4 billion) during the year. However, this relatively high number of users and transactions was almost exclusively due to the phenomenal success of Starbucks’ application for mobile payments that had around 7 million users at the end of 2012. Mobile wallets that can be used at multiple merchants only had a few hundred thousand users in the region at the end of 2012. However, many promising initiatives are underway in both the US and Canada. Companies and consortiums such as Google, Isis, MCX, PayPal, CIBC, LevelUp and Square are competing to become the consumer’s wallet of choice, each with a unique approach to the market. Berg Insight expects that several of these initiatives will have a significant impact on the market already in 2014. The number of active mobile wallet users will increase to 29 million in 2017, whereas the in-store payments volume will grow to US$ 44 billion (€ 33 billion) in the same year.

A prerequisite for commercial NFC mobile wallet services is that the necessary software and hardware infrastructure is in place. Deployments of this infrastructure have now gained substantial momentum. Global shipments of NFC-enabled handsets grew by 300 percent in 2012 to 140 million units and are forecasted to grow at a CAGR of 48 percent to reach 1.0 billion units by 2017. The market for NFC-ready POS terminals grew fiercely in 2012 and annual shipments doubled to an estimated 3.9 million units worldwide. If we segmented the market, we can find the following market segment for m-commerce.

Global Market, By Application

  • Mobile Commerce Market
    • Mobile Wallet Shopping Market
    • Mobile Wallet Bill Payments Market
    • Mobile Wallet Hotel Booking and Payments Market
    • Mobile Wallet Entertainment and Event Pay Market
    • Mobile Ticketing Market
    • Rail, Metro and Bus Tickets
    • Airline Tickets and Boarding Passes
    • Mobile Coupons Market
    • Mobile Transfers Market
    • Micropayments

Global Market, By Mode of Payment

  • Remote Payment
  • NFC Payment
  • NFC Product Market

Global Market, By Stakeholders

  • Mobile Network Operators (MNOs)
  • Handset and other Hardware Solution Manufacturers
  • OSS/BSS Solution Providers
  • Software Developers and Cloud Computing
  • Content and Applications Aggregators
  • Other Stakeholders

Global Market, By Geography

  • North America
  • Europe
  • Asia-Pacific
  • RoW

Global shipments of NFC-ready POS terminals are forecasted to grow at a CAGR of 29.1 percent to reach 14.0 million units by 2017. The implementation of TSM infrastructure for NFC wallet services is also progressing rapidly and there are high levels of activity in Europe, parts of Asia-Pacific, Turkey and North America. In fact, 2013 will be a record year for the rollout of TSM infrastructure, as an expected 140 mobile network operators, banks, transport companies and other companies will be using TSMs in commercially available services at the end of the year. The number of SEI-TSM and SP-TSM projects expected for the end of 2013 marks a substantial increase from just 57 live projects at the end of 2012 and 25 live projects at the end of 2011. The largest share of TSM projects has been implemented in Asia-Pacific, followed by EU27+2 and North America.

The global increase in Smartphone penetration compounded with the widespread use of NFC (Near Field Communication) technology in the form of embedded “tags” is driving the mobile wallet market. Smartphones and associated applications are the fundamental requirement for mobile wallet technology that enables payment without the intervention of traditional banking channels. The increasing demand for Smartphones, especially in the developing economies of the Asia Pacific region, is eventually resulting in the growing share of the mobile wallet industry globally. Transactions conducted using online payment require an active data connection, hence rise in mobile data usage is equally contributing to the growth of this market. There are a large number of consumers that are unbanked and do not have proper access to financial services provided by financial institutions, such as banks. Mobile wallets provide banking services and financial management at affordable prices and help consumers in managing their accounts. As a result, the mobile wallet industry is witnessing a boost in its revenue.

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However, the payment method can be used till the mobile has power and battery backup. Therefore, when the battery of the mobile is down, the mobile wallet cannot be used. This is one of the key restraints for the growth of the market. Smartphone users have multiple applications on their phones which consume power and the chances of battery outages are high. This limits the usability of the mobile wallet application. An important challenge for technology providers is to make the advances in the emerging NFC technology, as it is expected to have high demand among consumers.

Some of the key players profiled in this report are American Express, Apple Inc., AT&T Inc., Blackberry, First Data, Google, Sprint, Samsung, MasterCard and Visa.

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Initiatives from governments to encourage the use of mobile wallet is gaining momentum in emerging markets such as Philippines and Kenya due to the larger gap between bank and non-bank organizations. Financial inclusion is the crucial factor to reduce this gap which can be accomplished by agreements between governments, telecom companies and financial organizations.

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About Md. Moulude Hossain

FinTech | AVP, Business Development KONA Software Lab Limited

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