Around the world, telecommunication companies known as mobile network operators (MNOs) are launching a range of traditional and alternative payment services as they seek to enter the lucrative payments industry. On March 3, at Mobile World Congress 2015, Australian telecommunication network Optus announced it is launching a new service for payments via wearable devices, including smartwatches and wristbands, which will allow customers to make contactless payments with a flick of the wrist. The firm also unveiled a model of the “Cash by Optus Smartwatch.”
The move follows the November 2014 announcement of the launch of Cash by Optus, a prepaid contactless payment application that uses Near Field Communication (NFC) and Visa payWave technology to pay for cash purchases below $100. That service was limited to people using one of 20 compatible Android handset models with an NFC-enabled subscriber identity module (SIM) card, but the new service has far broader reach to consumers since it syncs with any Bluetooth enabled smartphone, including Apple iPhone.
The announcement by Optus is just one of many in recent years by MNOs that have focused on launching competitive payment services. The most famous of these ventures is arguably M-Pesa in Kenya (Vodafone), which has grown exponentially over the years and today processes over 6 million transactions each day in the Kenyan market. The service has been replicated around the world from India to Romania.
Until now, the payments services provided by telecommunication network operators have largely been basic payment services. But recent announcements made by MNOs around the world reveal that these organizations are seeking to provide not just more robust traditional payment services but also new alternative payment services like crowdfunding and peer-to-peer lending.
Most of these services will require the assistance of traditional players like financial institutions. The payments industry at large would do well to monitor mobile network operators’ future announcements on mobile payments since the MNOs have an engaged customer base of mobile phone users. Their base includes consumer segments like the unbanked and underbanked which are difficult for banks to reach, and the success of their payment services can lead to further disruption of the electronic payments value chain.
Among the traditional payment solutions offered by MNOs are in-store payments that consumers initiate either through using a mobile handset equipped with NFC or a similar payment technology or through an accompanying issued payment card. Another traditional payment solution is the mobile online-initiated payment, in which a consumer makes a payment via a mobile handset to purchase a good or service online. Yet another is the person-to-person, or P2P, payment, designed to enable an individual to pay another individual without sharing account details (a mobile registry allows financial institutions to transfer the requested funds on the back end).
Additional common payment services offered by MNOs include carrier billing payment, in which a customer can pay for goods and services by charging them to his or her mobile account, and air-time payments, which serves as a form of prepaid in which the customer can either pay for goods or services or pay for “minutes” for talking internationally on the mobile phone. This latter type of payment provided by MNOs is particularly popular in many developing markets around the world and is the backbone for the popular mobile payment service M-Pesa in Kenya for example.
The complex and evolving regulatory environment may force MNOs to take a different approach to payments as their solutions gain popularity. The most likely result is that MNOs will work more closely with traditional industry players like financial institutions to provide consumers the most innovative and customer-friendly payment and banking services available. In some markets around the world this is already taking place. For example in Brazil, many of the leading MNOs have partnered with financial institutions to launch NFC-based mobile wallet services.
Of course, the Canadian market is familiar with MNOs entering the payment space. Rogers has introduced its “suretap” mobile wallet, which enables customers to store payment cards and complete everyday point-of-sale transactions using a mobile device. Rogers’ solution falls directly within the parameters of the traditional payment services, and while it’s worth following the developments of Rogers’ mobile payment services, it’s important to monitor international solutions that can set the standard for future innovation globally, including within the Canadian market.
