New mobile payment and banking technology looks set to change the way customers interact and access services. Smartphones may one day become the only currency people will need
20 million: The number of handheld smart devices in the region today
32 million: The expected number of handheld smart devices in the region by the end of 2012
Source: Informa Telecoms & Media
The Middle East, with its high mobile penetration and the fastest internet growth rates in the world, is one of the more attractive markets for electronic-payment (e-payment) and mobile-payment (m-payment) technology.
There are various methods by which a mobile device can be used to transfer money or settle a sale. Mobile devices have, in some ways, turned into electronic wallets, increasingly becoming the platform on which financial transactions can be completed.
“E-payments and m-payments are one part of how we can better use technology and deliver better services to customers,” says Wissam Khoury, managing director of Sungard Middle East, a financial systems provider.
Convenient payments by mobile
Already many regional telecoms operators have developed applications and systems for m-payment to make it easier for customers to complete transactions by mobile phone. Whether for bill payments or buying goods and collecting loyalty points, the unique identification number that comes with each subscriber identity module (sim) card makes it a viable and quick solution in markets that aim to become more convenient.
|Types of m-payment|
|Mobile payment scheme||Description||Main providers|
|Payment to mobile phone bill||Run by operators and aimed at low-value payments, mainly for digital content||Most operators, Zong, Danal, Billto Mobile|
|Premium-rate SMS||Used to pay for digital content and interactive TV||Content providers such as Jamster, TV companies|
|Mobile web and WAP billing||Browser/user interface with WAP/mobile web billing by credit card||PayForIt, Takuten, Digby, Intuit|
|SMS/Java/SIM toolkit||Uses pre-registered accounts and/or mobile wallet. Includes text-based transactions at the physical storefront or vending machine||Paypal Mobile, Luup, MobiVending|
|P2P (person-to-person)||SMS-based transfer of funds between two mobile phones, redeemable against cash or goods||Obopay, Globe Telecom|
|Smartphone applications||Credit or debit card payment for downloadable apps and in-app billing||Apple iTunes|
|Contactless||“Wave and pay” scheme where phones can be passed across a reader to transfer funds using technologies such as NFC||MasterCard Paypass, Visa|
|In-store||NFC-enabled casings allowing phones to be used as mobile wallets||Mocapay, Mozido|
|NFC=Near-field communication. Source: Juniper Research|
The real driver for the growth in m-payment is the low credit card penetration in the region, which has also prevented the e-commerce sector from really taking off.
While Qatar’s e-commerce volume grew by about 60 per cent in 2011, reaching $600m, according to industry regulator ICTQatar, countries such as Egypt, Tunisia and Morocco are more likely to see greater growth in
According to a survey carried out in November 2011 by Onecard.net, an online shopping portal and payment service for the Middle East and North Africa (Mena) region, 43 per cent of participants had bought something online. The biggest preventer of online purchases was fear of credit card information theft and fraud. Mobile phones, however, are less frequently targeted for fraud and so are more secure when making transactions.
M-banking is more than … just checking your balance. It is better for the bank to connect more with customers
Wissam Khoury, Sungard Middle East
According to US-based strategic research firm Grail Research, the Middle East and Africa m-payment transaction market is expected to be worth $28.1bn by 2012, about 11.3 per cent of the global total. Mobile money transfer (MMT) in the region is expected to account for 84 per cent of m-payment transactions.
These transactions can include retail purchases, mobile phone credit top-ups and bill payments by mobile handset. Retail purchases by mobile phone are expected to rise to $405.7m in the Middle East and Africa region in 2012, from $26.3m in 2009.
The rise of group-buying and coupon websites, such as Cobone.com and Living Social, is helping to drive this trend. Most regional operators are looking to move away from physical vouchers to a complete mobile experience, where customers pay by credit card and need not print out their vouchers.
Banks are also keen to offer their services through new technologies. Already some have partnered with mobile operators and internet service providers to offer internet banking and m-banking services.
The next step for many is incorporating more social features into their services and building up a presence on networking websites, such as Twitter and Facebook.
“M-banking is more than going online making transfers and just checking your balance. It is better for the bank to connect more with the customers, so it is more about substantial information and social media linking to see what your peers are up to. The more time the customers spend on the application, the more time they are communicating with the banks,” says Khoury.
These services are being developed primarily for smart devices, including tablets and third-and fourth-generation mobile phones.
There are already more than 64 million handheld devices in the region, according to UK-based research firm Informa Telecoms & Media. Of these, almost 40 million are standard mobile phones, while more than 20 million are smartphones. By the end of 2012, smartphones are expected to number more than 32 million.
[It] will soon be a reality. Your mobile could buy you lunch, a cinema ticket, transport and much more
Essa al-Haddad, Etisalat
As demand for such devices grows, more will feature long-term evolution (LTE), a high-speed mobile broadband technology. Informa expects the number of LTE-capable devices in the Mena region to grow from 96,000 in 2011 to 407,700 in 2012, eventually surpassing half a million by 2015.
As more operators increase investment in their mobile networks and as governments encourage their citizens to take up mobile internet, the development of this sector will strengthen as more users go online and access these services.
“The entire objective of the experience is not advertising,” says Khoury. “It is linking several things together: looking at the financials on a website, conferring with peers, linking to websites such as Facebook, chatting with bank representatives to get more information about their products and services, and helping you analyse some of your habits and providing dedicated information. This alone will make it more beneficial, as the customer becomes more loyal to the bank, making it more difficult to switch to another; this is the entire objective.”
For many users, the case for m-payments will be made by the ease and speed with which transactions can be settled.
Advanced technology for mobile payment
In October 2011, the Emirates Telecommunications Corporation (Etisalat) used the Gitex technology exhibition in Dubai to launch near-field communication (NFC) technology, one of the most advanced technologies around for mobile commerce. NFC enables close-proximity radio communication between devices, allowing users with compatible smartphones to pay for goods by placing their mobile device on, or near, an electronic reader.
The operator has partnered with Mastercard Worldwide and Network International to enable customers using the Blackberry 9900 smartphone to make mobile payment transactions using electronic readers installed in more than 600 retail outlets across the UAE.
The service is still limited to transactions of $50 or less and customers have to type in a personal identification number to complete a transaction.
Some operators have successfully managed to incorporate credit card, mobile device and sim card technologies to provide customers with a more streamlined service.
Developing these partnerships can create more than just m-payment solutions.
“The NFC technology used in this application allows a tremendous shift in how we will start to make payments. Something that has been talked of for years will soon be a reality. Your mobile could buy you lunch, a cinema ticket, transport and much more,” says Essa al-Haddad, chief marketing officer at Etisalat.
Faced with declining average return per user levels, operators are keen to establish new revenue streams.
Many operators, particularly those based in the Gulf, are taking advantage of a market that has only recently emerged. Paying remittances using mobile devices is gaining ground. With most of the region’s large expatriate population sending money back to their home countries, the potential for growth is huge.
There are about 6 million Indian expatriates living in the Gulf. The low banking penetration among South Asian workers singles out the mobile device as one of the most secure platforms to transfer money.
Safaricom is a leader in mobile remittance, with its MMT services accounting for 30 per cent of total revenue.
Zain Jordan was one of the first telecom companies to launch an MMT service, called E-mal, in the region. Customers can easily transfer money to the bank account of another Zain account holder. Zain Jordan has successfully completed its mobile-banking trials in the country. In the first four months since its launch, E-mal attracted 30,000 subscribers who completed $140,000 of transactions a month. The service is now available in Bahrain and Sudan, and should be launched across all Zain subsidiaries in the region in the months ahead.
Bill payments are one of the first services operators look at when partnering with banks. Qatar Telecom (Qtel) customers can pay their mobile phone bills through Mashreq’s web and mobile banking services. Already more than 60,000 Qtel customers have switched from paper bills to electronic bills and, as Qtel extends the service to its other subsidiaries, demand for moving online is showing no signs of slowing.
According to a study conducted by credit card company Visa, Qatar will be the fastest-growing IT market in the region in 2011-15. Qatar is expected to invest the most in IT products and services as it prepares to host of the 2022 World Cup. Qtel alone is spending $55m to develop an LTE network.
Governments are keen to develop and liberalise the m-banking sector, which is seen as of huge benefit to small and medium-sized enterprises. The main issue holding back growth is the cost of connectivity, combined with a lack of trust of the technology and new services, but such fears are quickly allayed in the world of IT.
“M-banking is one of the top solutions in this market, especially in third-world countries where banking may not be important or technology is new,” says Khoury. “The way we see it, emerging markets are much [more] advanced in terms of requirements for m-banking.”
He adds that these new services and a more social m-banking service should be launched soon in some of the more technologically advanced markets, with about three banks in each of the Gulf countries keen to release services during 2012.