The payments landscape is undergoing a dramatic shift. Mobile commerce is rapidly overtaking desktop and in-store transactions as consumers increasingly spend time and money on their smartphones and connected devices. Industry research projects that mobile payment spending in Europe will reach €231 billion by 2022. The same research anticipates that all point-of-sale terminals will enable mobile payments within a few years, and that by 2021 the average user will own nine connected devices.
Despite this shift, telecommunications companies currently capture only about 3% of mobile payments revenue. To secure a meaningful share of this market and avoid being sidelined, telcos must add tangible value to the payment experience. Analysis by ACI Worldwide suggests telcos could increase their mobile payments revenue at least fourfold by 2022 if they act decisively. At the same time, new market entrants—particularly over-the-top (OTT) providers—threaten traditional telco revenue streams. Mobile network operators (MNOs) and mobile virtual network operators (MVNOs) must therefore define profitable, sustainable strategies to compete in an increasingly connected economy.
The Internet of Things as a key driver for change
Over the next decade, the number of devices and payment-enabled applications will grow exponentially. Imagine paying for groceries on your phone, scheduling home delivery, then receiving a notification from your refrigerator two days later that milk is running low. Before you return home, a replacement bottle could already be on its way—possibly delivered by a drone—thanks to integrated, real-time services.
For this cross-functional ecosystem to work smoothly, the market must move from fragmentation to integration. In this landscape, telcos are well-positioned to act as integrators—bringing together devices, payment methods, applications and customer identity services to create a cohesive experience.
Greater innovation requires greater responsibility. If device manufacturers, software developers, merchants and payment providers fail to integrate, consumers may have more choices but a worse overall experience. Trust and convenience are essential for long-term growth in mobile payments. Strategic partnerships between telcos, merchants, manufacturers and payment facilitators—combined with a relentless focus on user convenience and security—will be crucial to deliver a reliable customer experience and capture more payment activity.
Mobile devices sit idle for roughly 96% of the day but can play a central role in both online and in-store payments. To cut through the complexity of multiple payment options, the market needs an aggregator. Telcos have the technical expertise, large subscriber bases and identity-management capabilities to fulfill this role. To succeed, however, they must build robust payment platforms capable of handling high transaction volumes, delivering seamless user journeys, and defending against growing fraud threats.
Technology solutions that enable these ideas
From PayPal embedded in checkout pages to NFC on smartphones, the industry trend focuses on improving convenience. The most successful solutions quickly connect customers to payments—examples include peer-to-peer transfers via chat platforms, e-SIM features like Telstra One Number that share voice and data across devices, and widespread QR-code payments such as those used by millions in China through WeChat and Alipay.
What lessons can telcos draw from these examples? e-SIMs simplify using phone numbers for quick cross-device authentication. Data derived from device-specific payments and usage patterns can be analyzed and monetized to better understand consumer interests. Telcos can also support the growing shift toward peer-to-peer payments by leveraging their existing infrastructure and trust relationships with customers.
In the emerging payments environment, telcos have a distinct opportunity to lead the transition to mobile-first commerce. To capitalize, they should pursue strategic alliances with merchants, consumers and technology platforms, and collaborate with disruptive players such as major ride-hailing, payment and device companies. Expanding direct carrier billing to include multiple payment options, enhancing data management capabilities, and ensuring seamless order fulfilment will help telcos move payments forward while creating new revenue streams.
Interested in hearing industry leaders discuss these topics and share real-world use cases? Attend industry events that bring together leaders in the Internet of Things, blockchain, artificial intelligence, big data, cybersecurity and cloud technologies to explore the future of enterprise technology.