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Mobile Wallet Services

  • June 2013
  • -
  • Berg Insight AB
  • -
  • 170 pages

Executive summary

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.

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 instore 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. 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.

This report will allow you to:

Profit from 40 new executive interviews with market leading companies.
Understand the competitive dynamics of the nascent mobile wallet industry.
Learn from the strategies of the leading mobile wallet operators.
Identify new business opportunities in value-added services.
Evaluate how the deployment of infrastructure for NFC wallet services is proceeding.
Recognize the benefits and challenges of non-NFC wallet services.
Benefit from expert market analysis including detailed regional forecasts.

This report answers the following questions:

How are MNOs, banks and other companies addressing the mobile wallet opportunity?
Which are the leading technology vendors?
How do the choices of the secure element issuer affect the options available to service providers?
What are the benefits and challenges associated with non-NFC mobile wallet services?
How many TSM projects will be commercially live at the end of 2013?
When will the majority of all POS terminals incorporate NFC?
What value-added services can be successfully incorporated in mobile wallets?
What are the prerequisites for mobile wallets to become mass market services?

Who should buy this report?

Mobile Wallet Services is the foremost source of information about the status, future trends and technology developments on this market. Whether you are a bank, telecom vendor, mobile operator, retailer, investor, consultant or application developer, you will gain valuable insights from our in-depth research.

Table Of Contents

Mobile Wallet Services
Table of contents

Table of contents i
List of figures vi
Executive summary 1

1 Introduction to mobile wallets 3

1.1 Introduction 3
1.1.1 Mobile wallets and value-added services 3
1.1.2 Opportunities to engage with consumers in new ways 4
1.1.3 Threats to the structure of the payments value chain 5
1.2 Overview of the card payments industry 6
1.2.1 The transaction process in card payments 6
1.2.2 Costs of a card payment transaction 7
1.2.3 Revenue distribution in the card payments industry 9
1.3 Card payments and household consumption expenditures 10
1.3.1 Breakdown of household consumption expenditures 11
1.3.2 Card payment volumes 12
1.4 Mobile payment technologies 14
1.4.1 NFC 14
1.4.2 2D barcodes 15
1.4.3 Identification numbers and tags 16
1.4.4 Other technologies 17

2 Acceptance at the point of sale 19

2.1 Overview of the POS terminal market 19
2.1.1 Installed base of POS terminals 20
2.1.2 Form factors 21
2.2 Acceptance of mobile wallets at the POS 23
2.2.1 Rollout of NFC-ready terminals 23
2.2.2 Acceptance of Visa and MasterCard contactless payments 25
2.2.3 Acceptance of value-added services at the point of sale 29
2.3 POS terminal vendors 30
2.3.1 Equinox Payments 32
2.3.2 ID Tech 33
2.3.3 Ingenico 33
2.3.4 PAX Technology 35
2.3.5 Spire Payments 36
2.3.6 VeriFone 37

3 Mobile handsets 39

3.1 Overview of the mobile handset market 39
3.1.1 Mobile subscriptions and unique mobile users 40
3.1.2 Smartphone platform market shares 41
3.1.3 Smartphone ecosystem developments 43
3.2 NFC and secure elements in mobile handsets 45
3.2.1 NFC handset availability and sales accelerated in 2012 45
3.2.2 NFC solution architectures and chipsets for handsets 49

4 TSMs and mobile wallet platforms 53

4.1 Trusted service managers 53
4.1.1 Overview of SEI-TSM and SP-TSM solutions 53
4.1.2 Commercially live SEI-TSM projects 55
4.1.3 Commercially live SP-TSM projects 57
4.1.4 TSM projects live and under implementation 59
4.2 Mobile wallet platforms 60
4.2.1 Competitive landscape 60
4.2.2 Overview of a mobile wallet platform 62
4.2.3 Commercially live mobile wallet deployments 62
4.3 TSM and wallet platform vendor profiles 64
4.3.1 AIRTAG 66
4.3.2 C-SAM 67
4.3.3 Cardtek Group 68
4.3.4 Corfire 69
4.3.5 Gemalto 70
4.3.6 Giesecke and Devrient 72
4.3.7 Fiserv 73
4.3.8 MasterCard 75
4.3.9 Monitise 76
4.3.10 Oberthur Technologies 78
4.3.11 Morpho 80
4.3.12 Proxama 81
4.3.13 Sequent 82
4.3.14 SAP 83
4.3.15 Visa Europe 84

5 Mobile wallet operators 87

5.1 Mobile wallet ecosystems 87
5.1.1 Secure element issuers, service providers and wallet operators 87
5.1.2 Controlling the secure element 88
5.1.3 Universal wallets and merchant wallets 89
5.1.4 The effective addressable market for NFC wallet services is still small 91
5.1.5 The benefits and challenges faced by non-NFC wallet services 93
5.1.6 The value of a mobile wallet ecosystem 93
5.2 NFC mobile wallet service architectures 96
5.2.1 Centralized architecture 96
5.2.2 Decentralized architecture 97
5.2.3 Hybrid architecture 98
5.2.4 Open architecture 99
5.3 Business models 100
5.3.1 Interchange and other acceptance fees 100
5.3.2 Secure element access 101
5.3.3 Presence in the wallet 102
5.3.4 Value-added services 102
5.3.5 Services to issuers and acquirers 103
5.3.6 Improve position in an adjacent market 103
5.4 Case studies 103
5.4.1 Apple launches Passbook 104
5.4.2 Google moves to a staged model for mobile wallet services 105
5.4.3 ING plans rollout of mobile wallet services in Europe 108
5.4.4 LevelUp drives traffic to merchants with offers and mobile payments 109
5.4.5 Mobito is a mobile wallet available to everyone in the Czech Republic 111
5.4.6 Orange expands wallet services and plans new launches 113
5.4.7 Samsung announces wallet and embedded secure element in new devices 114
5.4.8 SEQR builds a new payment network and rolls out a mobile wallet service 115
5.4.9 Swedbank launches mobile payment services in Sweden 118
5.4.10 Swedish MNOs launch mobile wallet joint venture 120
5.4.11 Telefónica sees mobile wallet opportunity in value-added services 121
5.4.12 Turkcell pioneers mobile wallet services in Turkey 123
5.4.13 US carriers launch the Isis wallet service 125
5.4.14 US retailers form MCX consortium 128
5.4.15 Visa launches the V.me wallet with initial focus on eCommerce 129

6 Value-added services 131

6.1 The revenue potential of value-added services 131
6.1.1 Local advertising is big business 131
6.1.2 The use of location data allows more advertisers to reach their customers 132
6.1.3 Indoor location technologies enable new marketing possibilities 132
6.1.4 Mobile phones enable personalized interactions with consumers in real-time 132
6.1.5 High performance motivates premium rates 133
6.2 Types of value-added services 133
6.2.1 Coupons and offers 134
6.2.2 Loyalty solutions 134
6.2.3 Product information 135
6.2.4 Digital receipts and warranties 135
6.3 Case studies 136
6.3.1 Cardlytics enables card-linked offers based on purchase history 136
6.3.2 Foursquare generates more than 5 million check-ins per day 139
6.3.3 Groupon expands with new deal formats 140
6.3.4 Proximus Mobility delivers relevant ads to consumers' mobile devices 141
6.3.5 Scanbuy enables measureable 2D barcode campaigns 143
6.3.6 Shopkick drives foot traffic and enables in-store navigation at merchants 144
6.3.7 Starbucks creates mobile payment experiences linked to loyalty programme 145
6.3.8 STM launches new reward programme with real-time personalized offers 147
6.3.9 The Logic Group provides loyalty as a managed service 148
6.3.10 Vouchercloud locates the nearest discounts and provides directions 149
6.3.11 Warrantify enables digital management of warranties and receipts 150

7 Conclusions and forecasts 151

7.1 Market trends and analysis 151
7.1.1 Network effects will limit the number of universal wallets in each market 151
7.1.2 Mobile wallet operators need to build capabilities in value-added services 152
7.1.3 The effective addressable market for NFC wallets is small but can grow fast 153
7.1.4 Alternatives to mobile operator controlled secure elements emerge 155
7.1.5 The CP/CNP dichotomy will be revised 155
7.1.6 MasterCard introduces new rules that affect staged wallet operators 156
7.2 Forecasts on infrastructure for NFC mobile wallet services 157
7.2.1 NFC-ready POS terminals 157
7.2.2 NFC-enabled handsets 161
7.2.3 Rollout of TSM infrastructure 163
7.3 The mobile wallet market in EU27+2 164
7.3.1 Market analysis 165
7.3.2 Forecasts 167
7.4 The mobile wallet market in North America 168
7.4.1 Market analysis 169
7.4.2 Forecasts 171

Glossary 173

List of figures

Figure 1.1: Typical payment transaction flow 7
Figure 1.2: Visa interchange fees in the UK and the US 8
Figure 1.3: Revenue distribution in card payments 9
Figure 1.4: Card payments as a share of HCE and GDP (World 2011) 10
Figure 1.5: Household consumption expenditures by service and product (EU27 2011) 11
Figure 1.6: Card payments in Europe and North America (2011) 12
Figure 1.7: Card payment volumes (EU27 and NA 2007-2011) 13
Figure 1.8: Different forms of 2D barcode payments 16
Figure 2.1: Installed base of POS terminals (World Q4-2011) 19
Figure 2.2: POS terminal density by country (World 2011) 20
Figure 2.3: Stationary and mobile POS terminals 21
Figure 2.4: mPOS devices 22
Figure 2.5: NFC-ready POS terminals by region (World 2012) 24
Figure 2.6: Visa payWave POS terminals (Europe 2012) 26
Figure 2.7: PayPass and payWave POS terminals (World 2012) 28
Figure 2.8: Acceptance of mobile wallets at the point of sale 30
Figure 2.9: POS terminal shipments by manufacturer (World 2012) 31
Figure 2.10: Equinox Payments POS terminals 32
Figure 2.11: PAX Technology POS terminals 35
Figure 3.1: Handset shipments by segment (World 2008-2012) 39
Figure 3.2: Mobile subscriptions by region (World 2011-2012) 40
Figure 3.3: Unique mobile users and mobile phones in use (World 2010-2012) 41
Figure 3.4: Smartphone shipments by vendor and OS (World 2012) 42
Figure 3.5: Number of NFC handsets available on the market (2010-2013) 46
Figure 3.6: NFC handset vendor market shares (2010-2012) 47
Figure 3.7: Examples of commercially available NFC-enabled handsets (Q2-2013) 48
Figure 3.8: NFC solution architectures in handsets 49
Figure 3.9: Examples of NFC controllers and combo chipsets by vendor 50
Figure 4.1: SEI-TSMs and SP-TSMs in the NFC ecosystem 54
Figure 4.2: Commercially live SEI-TSM projects (World Q1-2013) 56
Figure 4.3: Commercially live SP-TSM projects for banks (World Q1-2013) 58
Figure 4.4: TSM projects live and under implementation (Q1-2013) 59
Figure 4.5: Competitive landscape for wallet platform vendors 61
Figure 4.6: Mobile wallet platform deployments by vendor (Q1-2013) 64
Figure 4.7: Overview of TSM and wallet platform vendors (World 2013) 65
Figure 5.1: Examples of universal wallets 90
Figure 5.2: Examples of merchant wallets 91
Figure 5.3: Effective addressable market for NFC mobile wallet services 92
Figure 5.4: The value components of a mobile wallet ecosystem 94
Figure 5.5: Centralized architecture for NFC services 97
Figure 5.6: Decentralized architecture for NFC services 98
Figure 5.7: Hybrid architecture for NFC services 99
Figure 5.8: Open architecture 100
Figure 5.9: LevelUp offering and FTUB white-label payment solution 110
Figure 6.1: Cardlytics' offers in online and mobile banking 138
Figure 6.2: Starbucks payments and rewards 146
Figure 7.1: Effective addressable market for NFC wallets by region (World Q1-2013) 154
Figure 7.2: NFC POS terminal shipments by region (World 2011-2017) 159
Figure 7.3: NFC POS terminal installed base by region (World 2011-2017) 160
Figure 7.4: Forecasts on NFC handset shipments (World 2011-2017) 161
Figure 7.5: Smartphone shipments (EU27+2 and NA 2011-2017) 162
Figure 7.6: Installed base and penetration of NFC handsets (World 2011-2017) 163
Figure 7.7: Rollout of TSM infrastructure (World 2011-2013) 164
Figure 7.8: Mobile wallet users and transactions (EU27+2 2012-2017) 168
Figure 7.9: Mobile wallet users and transactions (NA 2012-2017) 172

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