Ovum says operators face uncertainty in the expanding mobile payments value chain

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Operators must rethink their traditional role in the mobile payments value chain in order to remain relevant, according to Ovum. Despite operators’ belief that mobile wallet services will keep them centre stage in the value chain, growing competition and the threat of rival services from powerful over-the-top (OTT) players and other parties means this will not be the case for most.
A new report* from the leading telecoms analysts reveals that one of the most difficult challenges for operators will be from those OTT players offering mobile wallet services free to end users and merchants, shifting the business model to mobile advertising where operators have little or no experience.

“This is exactly what Google is aiming to do with its mobile wallet service and if it gains critical mass then it will have a disruptive impact on operators,” says Eden Zoller, principal analyst and report author. “It will also make the SIM rental model being explored by operators more difficult to sustain.”

Ovum’s research indicates that the majority of operators are exploring collaborative mobile payment ventures that can leverage collective resources and customers, helping to create the kind of scale that is critical to success. But, while there is logic to this, the track record on operator collaborative ventures is not always impressive. “The danger is that operator mobile payment ventures will not move quickly enough, hampered by lack of consensus and slow decision making,” notes Zoller.

There are also fundamental questions about how substantial revenues from such large scale collaborative ventures can be when revenues have to be shared between an increasing number of parties. Another issue faced by large scale operator collaborations is regulatory scrutiny on anti-trust grounds.

The report also observes that many operators would benefit by focusing more on the B2B mobile payments enabling opportunity rather than just competing head on with OTT and other players via their own brand D2C mobile wallet services.
“One way of adding value is to act as a facilitator for card issuers that could see operators provisioning cards virtually or via stores, helping with authorization by distributing cards to verified users on their own networks, leveraging customer data from user accounts and credit checks,” explains Zoller. “This will be invaluable to credit card issuers struggling to obtain reliable user data/ identification on potential owners of cards and the service described could save card issuers time and money.”