TURN THE CUSTOMER JOURNEY INTO A JOYRIDEThe Mobile Payments Opportunity for Telcos

Customer lifetime value (CLV) — the revenue that an average telco consumer will

generate over the course of their relationship with the operator — is at significant risk, due

to decreasing ARPU and high churn. In this paper, we explore — and seek to quantify —

how optimizing the consumer’s mobile payments experience can increase CLV.

Convenience and time-saving are cited as the primary drivers by consumers who have

paid on mobile1, which challenges telcos to make the checkout page as frictionless as

possible.

Equally, telcos must address the reasons for shopping cart abandonment. Concerns

about security and time consumption have been cited by consumers who abandon their

shopping before paying.

OPTIMIZING THE MOBILE PAYMENTS EXPERIENCE INCREASES CUSTOMER LIFETIME VALUE.

UNSUCCESSFUL MOBILE PAYMENTSUCCESSFUL MOBILE PAYMENT

Between filling a shopping basket and clicking the “Pay” button, 58% of consumers change their minds2.

The main causes include the time it takes to enter personal and payment details, being redirected to pay on

another page or concerns about data security raised by the design of the payments page. In summary, this

means lack of convenience and lack of trust. By implementing solutions to ensure payments convenience and

trust, both ARPU and churn rates can be improved.

2

25% via app1

26% believe their personal data is not protected in online payments3

19% via carrier bill1

21% are disengaged by the long checkout process2

58% of consumers abandon shopping carts2. Of these...

18% via mobile wallet1

40% via credit

card1

42% identify trust as a barrier to

purchasing2

MANAGING PAYMENTS CONVENIENCE AND TRUST

To become an efficient digital marketplace, telcos

must optimize customer convenience and trust —

by implementing a personalized interface, seamless

checkout, advanced security and loyalty schemes.

When these four initiatives work together, the

revenue-generating potential from customers

improves and greater stickiness is created, which in

turn reduces churn.

Focusing on data insight and personalization has

strategic benefits for the telco, for example enabling

the company to match merchants and customer

segments via social media integration and purchase

pattern analysis, to offer a personalized experience

that can have a direct influence on customer lifetime

value.

3

A SUCCESSFUL MOBILE PAYMENTS EXPERIENCE

PAYMENTS CONVENIENCE

MAXIMIZE DATA INSIGHT

MINIMIZE TIME SPENT

PAYMENTS TRUST

MAXIMIZE PERCEIVED

SECURITY RISK

MAXIMIZE LOYALTY

Adapts to the consumer’s

interests

removes consumer doubts about

payments safety

• Register with one click with social media account (e.g., Google, Facebook)

• Opt in to data analytics

• Receive purchase suggestions based on data insights

• Authenticate payment with biometrics (e.g., Apple’s Face ID4)

• Tokenization

• Security reminder at checkout

• Merchant brand commitment

supports consumer to

finalize payment

rewards consumer trust in payments

process

• Consistent omni-channel checkout

• Connect all devices through mobile phone (e.g., pay with wearable)

• Save personal details

• Receive benefits via rewards system (e.g., accrued points, volume of payments, tenure)

• Use merchant-specific vouchers in the marketplace

PERSONALIZED INTERFACE

ADVANCED SECURITY

SEAMLESS CHECKOUT

LOYALTY SCHEME

Be

ne

fits

Init

iati

ve

sE

xam

ple

fe

atu

res

Consumers are now more risk- and fraud-savvy than ever before. This, alongside the

upcoming GDPR5 regulation, means it is important to signpost all data analytics opt-ins

and security measures to gain consumer trust and stimulate mobile payments.

COMMISSIONS INCREASE AS TELCOS ADD MORE VALUE TO THE MARKETPLACE

INCREASED CLV

INCREASED ARPU

through payments convenience

SHARE OF WALLET

By expanding the product offer via the digital marketplace, telcos can capture an additional 10% of an average household’s

monthly spend, equivalent to ¤305/month6.

MARKETPLACE MARGIN

Of the “telco facilitated” spend, we assume telcos will capture a basic level of 1.5% merchant commission, i.e., an extra ¤4.6/month. Below we illustrate how this

commission can be increased.

PERSONALIZATION

By offering digital products tailored to consumers’ interests, as well as payment options that integrate third-party data, the stickiness of the service grows and

churn decreases.

LOYALTY

Once the marketplace has matured, telcos can differentiate through data-driven,

personalized loyalty schemes. We assume this will decrease churn by 20%.

DECREASED CHURN

through payments trust

4

CONVENIENCE AND TRUST HAVE A COMPOUND EFFECT ON CLV.

Consumers want a fast, seamless and

convenient mobile payments experience.

The digital marketplace facilitates this by

enabling them to make one payment for multiple

merchants’ products.

Here we offer an approach to calculating the

impact on CLV from initiatives to increase consumer

mobile spend and reduce churn. Based on prudent

assumptions, the addition of 10% to the telco’s share

of wallet and a 20% improvement in churn, the

impact is almost a 50% increase in CLV.

CLV

calc

ula

tio

n a

ssu

mp

tio

ns

Incre

asi

ng

valu

e a

dd

s b

y

mark

etp

lace p

rovid

ers

MARKETPLACE TAKES HIGHER-VALUE COMMISSIONS

for higher-value products (e.g., eBay, Amazon)

MARKETPLACE MANAGES THE PLATFORM for

merchants to promote and sell products (e.g.,

DaWanda, Yatego)

MARKETPLACE PROVIDES URLs to merchants’

marketplace and may promote special offers

(e.g., TopCashback)

NO DIGITAL MARKETPLACE, aggregator pays low

commissions as cashback to consumers

(e.g., Santander)

Commission level7

15%+

6-15%

1-5%

.5%

CLV IS CALCULATED ASARPU Chum

5

CLV increases with the reduction in subscriber churn and increase in ARPU. We have

assumed three impacts: a 10% increase in share of wallet, a commission share of 1.5% and

a 20% reduction in churn. This leads to an increase in CLV of 49% as shown below.

DELIVERING A 49% INCREASE IN CLV

3%13%

1.6 24 1,20028.6

1,7862Additional

10%

20% reduction

Before initiatives After initiatives

+19%

+49%

TELCO SHARE OF WALLET (%)

ARPU, PER MONTH (EUR)8

METHODOLOGY

MOBILE CHURN, PER MONTH (%)8

CLV (EUR)

THE ARPU AFTER INITIATIVES9 IS CALCULATED ASARPU before initiatives + (Commission % x share of wallet increase x average household spend)

This paper is one in a series designed to help telcos understand and evaluate the mobile payments opportunity. Visit www.aciworldwide.com/mobilepaymentsopportunity and sign up to receive your copy as each insight paper is published.

WE ARE A TRUSTED PARTNER TO RETAILERS, BANKS AND TELCOS

AROUND THE WORLD.

40+ YEARS INNOVATING PAYMENTS

17 YEARS SUPPORTING TELCOS

© Copyright ACI Worldwide, Inc. 2017 ACI, ACI Worldwide, ACI Payment Systems, the ACI logo, ACI Universal Payments, UP, the UP logo, ReD, PAY.ON and all ACI product names are trademarks or registered trademarks of ACI Worldwide, Inc., or one of its subsidiaries, in the United States, other countries or both. Other parties’ trademarks referenced are the property of their respective owners.

TALK TO US ABOUT HOW YOU CAN INCREASE CONVENIENCE AND TRUST WITH YOUR CUSTOMERS.

...AND WE HAVE THE

SOLUTIONS TO ADDRESS THEM.

58% OF CONSUMERS ABANDON THEIR SHOPPING CARTS. WE UNDERSTAND TELCOS’ CHALLENGES IN SECURING CUSTOMER LOYALTY.

COMPETITION drives need for service innovation

CHURN increased by low switching costs

SECURITY concerns after high-profile breaches

PAYMENT PROCESSING

• Out-of-the-box checkout solution

• Managed recurring billing

• One-click omni-channel payment

INTEGRAL RISK CHECKS

• Blacklisting and whitelisting

• Plausibility checks

• 3D secure

MOBILE SOLUTIONS

• iOS and Android in-app payments

• Mobile software development kit

• Device optimized security features

ACI® PAY.ON® PAYMENTS GATEWAY™

Chris Curd, Head of Telco Sales - Europe

chris.curd@aciworldwide.com

+44 (0) 7884 262751

www.aciworldwide.com/telecommunications

FOR MORE INFORMATION:

This report has been prepared in partnership with Red Dawn Consulting.

1 Mobile users in Europe, “A Global Perspective on Mobile Commerce”, IAB and On Device Research, September 2016. Users can use

multiple methods to make a payment. Percentages do not add up to 75%. 2 “Mobile Money Report”, MEF, January 2017 3 Mobile users in Europe, “Global Consumer Survey: Consumer Trust and Security Perceptions”, February 2017, Aite Group, ACI Worldwide4 Face ID available on Apple X mobile phone, announced on September 12, 2017.5 General Data Protection Regulation (GDPR) will enforce more secure and authorized use of customer data in the EU starting May 2018.6 Eurostat, 20177 Commissions based on eBay, Amazon, Dawanda, Yatego, TopCashback and Santander data.8 Typical churn and ARPU based on post-paid subscribers in the U.K.9 Assume that ARPU from telco services and household spend remains constant 2017 to 2020; 10% increase in share of spend = EUR305;

1.5% commission received by telco from selling products in the digital marketplace; 1.5%*EUR305 = EUR4.58, which is the additional

ARPU received by a telco.

6