Drifting eastwards

[Dave Birch] I’m spending a lot of my time at the moment, because of a variety of projects, building up roadmaps linking business, social and technology change to try and help our customers to make better decisions about their next round of investment into the retail electronic payments space. If we assume that the key technologies for the medium term already exist, so we can try and assess the relationship between those technologies and business and social change without drifting into science fiction, then we still have to make some informed decisions about which of these technologies will shape the roadmap. Moreover, if we are trying to look at the payments roadmap over the medium term, another factor that we must take into account is the global shift in focus away from the current developed markets. Thus, we need to look at the dynamics of the payment sector and how different technologies are affecting the dynamics in different markets. One of the easier predictions to make is that China will have much bigger role shaping the future roadmap than it has done over the previous 3-5 years.

China is fast catching up with the US and Europe as a growth market for non-cash transactions, according to the latest edition of the annual World Payments Report from The Royal Bank of Scotland, Capgemini and Efma.

[From Finextra: China emerges as a growth market for non-cash payments]

China accounts for about 9% of global non-cash transactions, and is growing fast, but it’s important not just because of the size of the market but because of the nature of that market. It is interesting to speculate whether China will see a market maturing towards a “Western” model of card-based retail payments or whether “Asian” models informed by new technology will dominate. I mean, as you might expect, mobile. In-Stat says that the mobile payments in China will approach $18 billion in 2013, split between $14 billion in remote payments and $4 billion in local payments.

Recent research by In-Stat [in China] found the following:

• SIM cards with RF SIM solutions customized by China Mobile are expected to launch in mid-2010, and the company is currently working to develop retail partners and deploy POS devices.
• Over half of respondents to In-Stat’s survey express interest in using their mobile phones as a payment tool.
• The largest proportion of current mobile payment services users (36.7%) responded that they prefer to use payment platforms funded by banks, indicating that the banking sector is the most trusted by Chinese consumers.

[From In-Stat – Press Releases]

To see these figures in context, bear in mind the most recent Juniper Research forecast for the total world NFC payments market:

the application of NFC as a mobile retail marketing tool via coupons and smart posters will support the growth of NFC mobile payment transaction values from $8bn in 2009 to $30bn within three years.

[From NFC Mobile Payments to Exceed $30bn by 2012]

So the Chinese local and remote mobile payments market roughly equates to about half of the total world local mobile payments market, just to give an indication of comparative scale. The point is that from Western Europe, then, we may find ourselves looking east for inspiration. Look at the great work already being done on mobile platforms in Eastern Europe (where mobile banking has been growing rapidly), on the internet in Russia (look at the growth of Forum friends WebMoney) and in the mobile proximity worlds of Korea and Japan. The CEE and Russia mobile markets are huge, which is why they are fertile ground for mobile payment initiatives.

On a proportionate basis, MTS Group, which runs networks in six Eastern European markets including Russia and Ukraine, is now the second-largest operator group in Europe, trailing only Vodafone. MTS Group’s main regional competitors – VimpelCom and MegaFon – are also now among the top ten largest groups, in both cases due mainly to their operations in Russia.

[From Developing Telecoms – Russian mobile firms are now among the largest in Europe – Wireless Intelligence]

In these markets, mobile payments occupy a more central position in the payments roadmaps than in some Western markets, although the fact of the matter is that any medium term roadmap of retail payments now has mobile as a key path.

Mobile isn’t “just” another credential to be utilized for payments. In fact, mobile payments are likely to emerge as the primary payment channel substituting the incumbent’s cash and plastic in less than five years.

[From Bank Systems & Technology: The Blog: Creating New Revenue Streams With the Mobile Channel]

For most people, in most of the world, for most of the time, electronic payments means mobile payments.

I’ll be talking about the role of new technology, and how mobile phones are having an impact on digital money in different developed and developing markets, at the E-Money in Russia and CIS conference in Moscow on 12th-13th November 2009. I’m really looking forward to seeing how digital money is developing in Russia.

Incidentally, the lovely people at Worldwide Experts have given me a delegate pass for this event — worth 850 euros — to award on this blog as a competition prize. So if you are going to be in Moscow on those dates and you’d like to come along to hear some of the key players in the Russian market as well as speakers from the CIS and European Union, then all you have to do is reply to this thread with the name of the first country in the world to introduce a decimal currency system (which they did in 1704, although The Secret Service do not appear to know this) in which the major currency unit was divided into 100 minor currency units.

In the traditional fashion, this competition is open to all except for employees of Consult Hyperion and members of my immediate family, is void where prohibited and is raising awareness of climate change. The prize must be claimed within three months. Oh, and no-one can win more than one of the Digital Money Blog prizes per calendar year.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]