fstc’s 2008 annual conference on the innovative edge: successful strategies for financial services...
TRANSCRIPT
FSTC’s2008 Annual Conference
On the Innovative Edge:Successful Strategies for
Financial Services
Industry Navigators
The Financial Services Technology
Consortium
Empowering the Industry Through Innovative Ideas
FSTC’s2008 Annual Conference
On the Innovative Edge:Successful Strategies for
Financial Services
Industry Navigators
Mobility in Payments: Getting to a Secure,
Resilient, and Customer Friendly Solution
FSTC Mobile Technology Project
Janey Place, CEO DigitalThinking
June 18, 2008
Mobile Financial Services: Predictions
Great Statistics Global subscribers – ½ world population Mobile service revenue greater than fixed domestic and
international line revenue Mobile commerce revenue soars; predictions top $50 billion
Celent February 2006 2006 will be the year FIs and carriers “work together to create a
much larger market opportunity Mobile adoption Technology standards Industry dynamics Business interests
What Happened? Or Didn’t Happen?
What Hasn't Happened
Celent expected potential of vast opportunity – a much bigger pie – to drive stake holders to cooperate on a bank/carrier model for mobile payments
But… instead, mobile banking has dominated initial implementation.
NFC is stalled – why?
Proximity Payments (POS) is where the money is – will this model change or will the card model be grafted on to the mobile channel?
The Problem
Conflicting Expectations FI’s want a mobile Internet – “dumb pipes” Carriers want new revenue from content Both want control of their customers
Many Global Models Carrier-led are most common: Philippines, Kenya Hybrid – carriers partner with FI - DoCoMo Bank-led is rare
Can’t We Just Get Along?
Mobile Realities
Wireless Carriers Own The Networks Not the Internet or old telephone network No regulatory presumption of “universal access” or “public good” Carriers’ huge investments make them determined not to be “dumb
pipes” for content providers to earn revenues and customer loyalty Digital content purchases– 25-50% revenue share to carrier Mobile applications can be carrier controlled Interoperability isn’t a given among carriers
Globally, Wireless Carriers are in Driver’s Seat US: Brand in the consumers hand is the carrier brand User choice is driven by carrier selection or handset Banks are frequently in the background in global payments
More Mobile Realties
US: Carriers Subsidize Handsets/Control User Choice
This may change or erode, but it is the situation today New spectrum – some open requirements Verizon has announced it will be open – what does that mean?
Mobile Platform Contentions Who controls secure elements, user credentials? Most agree that FIs and other application providers will pay carriers
“rents” to reside on mobile platform Mobile payments will not take off until a revenue sharing, “rental” and/or
licensing business model is worked out
Carriers are in Charge Payments are content to mobile carriers This is different from current models of accessing value, whether stored
in DDA accounts or prepaid cards or in credit vehicles The differences are presenting FIs with challenges
Lessons from the Past
Remember the Internet Regulation helped bring order Walled Garden versus Open Access ISP “owned” customer for a while
Technology a major driver to today’s open Internet Browser is inherently open WWW is inherently open Look at the trouble “closed” countries have controlling
access
Land line evolution Technology innovation Regulation
Mobile Models: Celent Report 2006Bank Centric Bank Carrier JV Carrier Centric
Bank owns the user accounts.
Mobile payment system
resides within a Bank’s
firewall. To facilitate SMS
payment, bank will strike
relationship with one or more
carriers to provide SMS
access.
Bank owns the user accounts
(credit card or stored value) and
infrastructure resides within a
Bank’s firewall. The carrier is
utilized purely as a connectivity
vehicle. The Carrier provides
connectivity and customer base.
Carrier becomes licensed
financial services provider;
banks used for settlement
(under normal settlement
agreement that Banks
provide).
Useability issues
associated with multiple
carriers if carriers cannot
provide a single message
access number
A split of transaction
economics between carriers
and banks is difficult to work
through. Carriers and Bank
must form close partnership
that has not traditionally
taken place.
Carrier must be willing to
commit to regulatory
oversight as a full or partial
financial services provider.
Carriers purely connectivity
and messaging providers;
banks take on onus of
digital and terrestrial mobile
commerce system.
Carriers make money off of
data charges and there is a
transaction fee split with a
bank. Banks make money
off transactions and have
ability to market to telco
consumer base.
Carrier derives revenue from
becoming a data/transport
provider and receiving a
transaction fee. Banks are
incented to participate to
receive float, settlement
fees and chance to lure the
unbanked.
Technology’s Role
Technology is an enabler – what will it enable? Open mobile web, bypassing carrier control? Great security and fraud prevention, requiring carrier involvement? Great User Interface, requiring carrier involvement?
A clear description is needed To identify where value is To identify which entity can best provide each value To ensure rapid user adoption
Can we have a Mobile Infrastructure that is Cost effective Capable of leveraging existing platforms Flexible enough to build compelling user-friendly applications Secure
Project Goals: Describe and Document
The current US wireless networks transmission technologies and interoperability (or lack thereof)
Handset capabilities in current and near-term future models
Modes of accessing content using mobile phones
Barriers to open access
Methods through which to provide mobile content
Open access standards and principles
The Mobile Channel
The mobile channel can be a powerful enabler of services to customers and driver of revenue if it is
Very secure – let’s build this in up front this time, rather than dealing with deficiencies years later as we’re doing with the Internet. Consumers, businesses and application providers must trust this channel. This will require close collaboration among carriers, banks and handset manufacturers.
User friendly and easy to use: Nothing accelerates adoption like a great User Interface. This will also require close collaboration among the various players.
Integrated with FI infrastructure: Customers expect integration across channels; robust security demands it.
FSTC’s2008 Annual Conference
On the Innovative Edge:Successful Strategies for
Financial Services
Industry Navigators
Mobility in Payments: Getting to a Secure,
Resilient, and Customer Friendly Solution
FSTC’s2008 Annual Conference
On the Innovative Edge:Successful Strategies for
Financial Services
Industry Navigators
Luncheon Program:Emerging Strategic
Business Competencies – Sustainability &
Security