Beruflich Dokumente
Kultur Dokumente
PostFinance
Danske Bank
American Express
EVRY
Hans S. Ildstad
EVRY
Ville Sointu
Ericsson
Sirpa Nordlund
Mobey Forum
Sarah Kocianski
Monitise
Nets
Andr Zlch
PostFinance
Keywords
Mobile wallet, prepaid, stored value, gift cards, financial institutions, merchants, payments, value added
services (VAS), mobile financial services.
Contents
1.
Executive summary......................................................................................................... 5
2.
Introduction ................................................................................................................... 5
3.
Prepaid and the mobile wallet: The crossing of two evolutionary paths ........................... 8
4.
The evidence: Innovative and disruptive prepaid wallet solutions available today ......... 18
5. Bad news for banks? How can they react to the prepaid phenomenon? .......................... 27
5.1 Deploy an invisible prepaid infrastructure in support of a new service ......................................... 27
Example: MobilePay from Danske Bank ............................................................................................. 27
5.1.1 How the prepaid solution works ................................................................................................ 27
5.1.2 Usage.......................................................................................................................................... 28
5.1.3 Conclusions ................................................................................................................................ 28
5.2 Establish a prepaid agent network and resell the products of high profile merchants ................... 28
Example: PostFinance Fast Service ..................................................................................................... 28
5.2.1: How the prepaid solution works............................................................................................... 28
5.2.2 Usage.......................................................................................................................................... 29
5.2.3 Conclusions ................................................................................................................................ 29
5.3 Use prepaid openly and actively................................................................................................. 29
5.4 Concede and play a supporting back-end role to new players in prepaid ...................................... 29
Example: CBW Banks backing for Moven and Simple ....................................................................... 29
5.4.1 How Movens prepaid solution works ....................................................................................... 30
5.4.3 Conclusions ................................................................................................................................ 30
6.
1. Executive summary
This paper analyses the intersection of prepaid commerce and the mobile wallet, in order to present
strategic options for banks seeking to respond to what Mobey Forum contends is an emerging threat to
their positions in the mobile wallet ecosystem.
It provides an overview of the various market developments and growth sectors in prepaid services,
together with a description of prepaids differentiating characteristics, before exploring how their
competitive attributes and advantages over traditional banking services are congruent with the key
drivers of mass market mobile wallet adoption. It contends that new, innovative prepaid service models
and second generation mobile wallet solutions are mutually supportive and, when combined, they will
each drive innovation in the other, pushing traditional banks further down the mobile value chain as a
result, and forcing them to yield both market share and visibility with their mobile customers.
The paper acknowledges that, for now, prepaid may be a better fit for the mobile wallet than
traditional banking alternatives. In order to explore the prevailing options for banks, the paper cites
examples of how innovative banks have responded to this emerging market for mobile prepaid. These
options include developing a proprietary prepaid infrastructure for active and open use with customers;
utilising a prepaid infrastructure behind the scenes in order to support new services such as peer to
peer money transfers; establishing an agent network enabling the bank to resell the prepaid digital
products of popular merchants; providing back-end infrastructure support to the new prepaid service
providers. The paper concludes that banks now need to recognise prepaid as a major driving force in the
future of mobile wallets and accept that influential stakeholders in the mobile wallet development
ecosystem are now utilising prepaid as a means of accelerating mobile wallet development and
deployment.
2. Introduction
2.1 Why is Mobey Forum focusing on prepaid?
Welcome to the sixth instalment of Mobey Forums series of papers exploring the mobile wallet
ecosystem.
Prepaid solutions, in various forms, have existed on the fringes of consumer financial services for some
years, but are now growing rapidly in popularity. The physical prepaid card market in the US, for
example, accounted for 4% of purchase volumes in 2012 and has grown at a compound annual rate of
25% for the past five years running, compared to a mere 10% for debit and just 3% for credit cards1. In
Europe, Visa expects prepaid to grow at a rate 12% per year from 2012 to 2020, compared to debit at
1
4% and credit at just 3%. Central and Eastern Europe is expected to grow even faster, at 27% year on
year.
Mobey Forum sees the continuing advance of mobile payment services creating new opportunities for
prepaid. But more than this, the proliferation of the prepaid model is also opening doors for mobile
payment services, enabling innovative deployments by merchants and other stakeholders and
encouraging wider spread user adoption as a result.
Figure 1: The mobile wallet and prepaid worlds are converging, each creating new opportunities for the other
An important driver of the convergence of mobile and prepaid is its potential to dramatically simplify
the mobile wallet ecosystem. Prepaid is a payment model that is already utilised by merchants, mobile
operators and a variety of other influential mobile wallet stakeholders. Indeed much of the pre-mobile
wallet utilisation of prepaid has focused on delivering value added services (VAS), such as coupons, gift
cards or loyalty schemes. The digital equivalents of these have already been widely acknowledged as key
drivers of mobile wallet end user adoption.
As familiar users of the prepaid model, unlike banks and financial institutions, these stakeholders have
no intrinsic commercial allegiance to the traditional banking system and as a result do not naturally
gravitate toward it when developing mobile solutions. Familiarity with prepaid, however, is only part of
the story. Some stakeholders are actively using prepaid as their transactional model of choice in order to
sidestep the traditional banking system entirely, open up new engagement channels with their
customers and, displace banks from their traditional role as 'guardians of commerce' in the mobile
world.
Already, there is strong evidence in the ecosystem to support this suggestion. Some prepaid providers
are developing suites of financial services that seek to compete head to head with the current accounts
of traditional banks. Should these services be rolled into a mobile wallet environment they will be
exposed to customer demographic of predominantly affluent, technically curious, early adopter mobile
wallet end users. Business won here is likely to be at the direct expense of the traditional banking
industry.
These, together with a number of other observations explored in this paper, makes prepaid a strong fit
for todays generation of mobile wallet. As a result, prepaid has captured Mobey Forums attention, not
least because a mobile wallet future dominated by the prepaid model has the potential to have a
significant and negative impact on banks and financial institutions in the mobile ecosystem.
Mobey Forum defines a prepaid instrument as a container into which valuables can be stored and
retrieved using specific methods.
Acquirers often refer to prepaid products in terms of stored value accounts, cash accounts, gift cards,
closed loop, open loop, private label etc. For issuers, prepaid can refer to form factor - a physical card,
for example, a virtual card, or even a unique number inside an app. The term may also be used to refer
to the ways in which the container can be loaded and also to describe the type of good that is
purchased. These, together with a multitude of other terms used to describe prepaid have emerged as a
result of the increase in the number and variety of both prepaid providers and prepaid products.
Most prepaid solutions can be grouped under one of four headings: Open loop, restricted loop, private
label and closed loop. Open loop describes those solutions that can be used at any merchant accepting
the card brand. Typical examples here are Visa, MasterCard or American Express prepaid cards.
Restricted loop refers to solutions that serve specific merchant categories like grocery stores, for
example. These cards are typically branded with payment network marks. Their merchant acceptance
may also be restricted to the country in which the card was issued. Private label refers to solution that
serves a single network or retailer chain but is powered by a payment schemes infrastructure. Finally,
closed loop typically refers to proprietary solutions for retailers. A common example of a closed loop
solution is a merchant gift card.
Figure 3: Common categories of prepaid solutions, presented in descending order of merchant acceptance (left to right)
Nielsen Research: Pay As You Phone: How Global Customers Pay for Mobile, 2013.
3.3 Prepaid on steroids: The winning attributes of prepaid and the catalysing effect of
mobile
As prepaid has evolved its popularity has soared. This is due to the wide range of benefits that prepaid is
able to deliver to both consumers and service providers alike. Mobey Forum contends, however, that
prepaid's success to date is just the beginning and that its convergence with the mobile channel will be a
powerful catalyst that will propel both prepaid and the mobile wallet / mobile commerce industry
forward at pace.
10
Figure 4: Mobile prepaid offers a wide range of opportunities for new and
existing stakeholders
There are a variety of consumer and business benefits that a prepaid infrastructure can provide. In the
remains of this chapter Mobey Forum provides an overview of these winning attributes, together with
its observations on how these are being (or have the potential to be) magnified when combined with
the mobile channel.
For demographics that struggle to get access to the traditional financial system, due to factors such as
job security or financial hardship, prepaid cards, which require no credit checks to be issued, can offer
many of the benefits of a traditional bank account.
The introduction of a mobile prepaid solution here provides a level of convenience to this customer
demographic that has not previously been available to them, not least by reducing the amount of Know
Your Customer (KYC) requirements needed to enrol, thus raising the attractiveness of these solutions
and potentially broadening their appeal to other, higher value, customer demographics.
Confidence and security
Some consumers use prepaid solutions because they perceive them to be more secure than other
payment mechanisms such as cash, debit, credit or direct from account payments, especially when
buying online. The use of a prepaid solution limits the amount of money that can potentially be lost
11
through online fraud, or in the event of the loss of a mobile device. This is particularly pertinent when
discussing the use of prepaid in mobile wallets, as security is often cited by consumers as a reason not to
use mobile payments.3 Prepaid accounts in wallets help to mitigate these fears.
Ease of Use
Mobile prepaid solutions give consumers more control over their spending as the mobile element allows
them to keep an eye on their balance. This appeals to those who have previously had financial
difficulties or who are on a strict budget (see 'Low barriers to entry, above).
Restricted loop and gift card mobile prepaid solutions can be topped up quickly, easily and remotely at
any time. This enables them to be used to transfer funds securely to third parties and, in certain
circumstances, to define specifically how those funds may be spent.
Given that today's mobile consumers have their mobile devices on their person almost constantly, the
ability to use a mobile prepaid gift card facility is likely to increase the chances of them using the balance
of the card before it expires.
P2P
An invisible prepaid structure can be used to offer a mobile person-to-person (P2P) payments service
which has lower barriers to entry than some other P2P services which require full customer
authentication.
Anonymity
Prepaid solutions provide a simple and untraceable means of transferring cash from one place to
another. In digital world in which the customer's every move is tracked and analysed, the mobile
prepaid model offers a means for consumers to protect their identity from merchants when shopping.
A closed loop prepaid solution increases the issuers coverage of the value chain as it allows them to
have proprietary control of the payment system and method, as well as increasing the potential amount
of consumer data which can be captured. It also enables merchants to easily add payments to their
loyalty schemes.
Lower costs
A digital or mobile form factor saves prepaid issuers from having to pay for the production of a physical
form factor (a gift card or paper voucher, for instance) and therefore from having to pass that cost onto
an end consumer. Transactional costs are also reduced as consumers are likely to load their prepaid
solution with a larger amount fewer times. Each transaction the merchant processes from the prepaid
solution will be cheaper than each transaction they process using a debit/credit card payment solution.
3
Security concerns are the other top impediment; 53% of those uninterested in using a smartphone to process in-person transactions also say
they don't want to store sensitive information on their phone, while nearly half (47%, up from 40% in 2012) don't want to transmit sensitive
information to the merchant's device, Harris Interactive, November 2013
12
Earnings
Issuers claim the 'breakage' when prepaid deposits go unclaimed - after a certain amount of time the
prepaid solution can expire and the issuer can claim whats left.
In addition, issuers can earn interest on deposits stored on prepaid solutions while most of the time they
dont pay the users any interest on the prepaid balances at all.
Increased usage
A customer's use of any payment instrument is likely to increase if they are given more control over that
instrument. A prepaid solution as part of a mobile offering offers a customer more instant access
options to monitor and control their spending. Examples here include instant balance checks,
transaction confirmations and options to set up alerts and automatic top-ups. Furthermore, in relation
to closed loop prepaid solutions such as value loaded onto a coffee card, consumers often view this
value as money already spent and thus encourages greater usage.
New customer base
A mobile prepaid solution is likely to appeal to more users because it provides easier access and higher
control. As a result, a merchant providing a prepaid solution, for example, is likely to attract consumers
that previously would not have bought from them.
Closed loop solutions can also help increase an issuer's customer base through a viral effect people
sending money to non-users who are then encouraged to adopt the prepaid solution themselves.
Innovation and rapid implementation
A mobile prepaid solution offers the provider more opportunities for further innovation due to the
number of non traditional players that are also participating in the prepaid model. Each stakeholder has
more control over the development of the solution than can be afforded to them via the traditional
banking system. It is therefore easier for prepaid mobile solutions to be launched for specific customer
demographics. Compared to the production and rollout of physical form factor prepaid solutions,
additional functionality can be quickly added to a mobile solution in order to take advantage of the rapid
advances in mobile technology or the changing dynamics of the marketplace.
Data
The use of mobile prepaid solutions with loyalty features, or a mobile gift card solution, allow the issuer
to obtain additional profiling data about their customers spending habits which they would previously
not have had access to, as prepaid cards are frequently used less, and for shorter periods of time, than
traditional checking accounts. 4
The average lifespan of GPR is 189 days. Kansas City Fed, General Purpose Reloadable Prepaid Cards:
Penetration, Use, Fees and Fraud Risks, Feb 2014. The average lifespan of a checking account is five years. Federal
Home Loan Bank of New York.
13
Prepaid solutions without a scheme mark (e.g. Visa, MasterCard or American Express) will be accepted
by a much smaller pool of merchants. That said, the acceptance infrastructure even for scheme marked
mobile payment solutions is not yet ubiquitous, even in markets with high volumes of smart phone and
contactless card penetration.
Regulation
As the prepaid product market grows so does prepaid regulation and with it the risk that that some of
the benefits which currently make prepaid solutions so attractive will be made obsolete.
Restricted funds/ lack of credit
One of the benefits of prepaid can also be considered a limitation. Prepaid solutions rarely offer features
such as overdrafts. Nonetheless, customers still need access to credit, and are motivated to save by the
interest they can earn on their money. These services are rarely available to prepaid account holders,
principally because their provision would require the prepaid issuer to obtain a full banking license,
which would, in turn, require it to conform to the traditional banking regulatory environment, increasing
costs and impeding its agility.
Fees
Whilst many prepaid solutions offer lower fees than those offered by traditional financial institutions,
issuers may also need to introduce fees for loading money, administration or to withdraw cash from
ATMs. These fees may also be set and collected by stakeholders beyond the control of the prepaid
issuer.
Proactive account management
Prepaid solutions need to be loaded with funds and/or value. This additional step can be a potential
obstacle for some users. In order to reduce this limitation, the top up process needs to be as straight
forward and 'frictionless' as possible.
The cost of doing business
Building up and running a prepaid solution can require significant initial and ongoing investment. A
stakeholder that intends to do so will require a considerable base of recurring users before any return
on investment can be realised.
Consumer guarantees
Prepaid service providers do not participate in a deposit guarantee scheme in order to protect their
customers' funds from insolvency, nor do they operate neutral boards of appeal that can support
conflict resolution. Instead, customers have to rely on the providers customer service functions.
14
These conditions enable banks to provide a level of security and a depth of service that prepaid
providers are unable to match.
Mobey Forum has defined a series of control points to help facilitate understanding of the mobile wallet
ecosystem and to help stakeholders plot their position relative to other players. See earlier installments in this
series of papers, specifically Part 2: Control Points in Mobile Wallets and Part 3: Mobile Wallets - The Hidden
Controls.
6
Mobey Forum Launch of Mobile Wallet: Definitions & Vision White Paper
15
based secure element have inhibited banks from deploying their mobile wallet solutions at an optimal
rate.
3.5 Vertical focus: A strength for merchants but a handicap for banks
To date, mobile wallet development has closely followed the commercial interests and specialist market
focus of the stakeholders responsible for each solution. With some exceptions, most banks and
traditional financial institutions have, for example, sought to develop mobile wallet solutions that
enable customers to access their full portfolio of proprietary payment and personal banking services via
their mobile device. In other words, they have focused on their own vertical market sector and
assembled wallet solutions accordingly.
Equally, other stakeholders have done the same. High street retailers and online merchants, for
example, have sought to strengthen the brand loyalties of customers by utilising their own strengths,
extending their delivery of a uniquely pleasurable shopping experience by integrating their own legacy,
value oriented solutions into their own proprietary mobile apps.
With this in mind, if banks continue to focus their mobile wallet development on the provision of their
own financial services, they will limit their potential to capitalise on this new mobile environment. The
world of personal mobile banking and payments is only a small part of the users overall mobile activity.
As consumers switch their attentions from money to shopping, for example, the business of conducting
a transaction becomes little more than an inconvenience. Merchants understand this well and are
seeking to minimise this inconvenience, or remove it entirely from their customers shopping
experience. As a result prepaid models, which minimise payment disruption and can integrate quickly
and easily with merchants legacy loyalty and rewards programmes, are fast taking centre stage in their
mobile wallet development.
Indeed the heightened consumer experience delivered by merchant prepaid mobile wallets may prove
to be sufficiently persuasive for consumers to accept the current extent of mobile wallet fragmentation.
Their express focus on delivering an optimal customer experience is likely to cause many banks to
reassess their approach to market. Are prevailing consumer attitudes more attuned to the individual
merchant mobile shopping experiences, or to the comprehensive collection of all payment instruments
in a single aggregated mobile wallet environment?
16
many of which they are underpinned by pre-existing prepaid infrastructures. These systems operate
independently of the traditional banking infrastructures and, crucially, are not subject to many of the
operational, regulatory and technical integration challenges that banks have had to contend with when
developing their solutions.
Prepaid payments platforms are also considerably more flexible and agile than their equivalent systems
at traditional banks.
Through a combination of these factors, prepaid has enabled a variety of powerful mobile wallet
stakeholders to sidestep the embattled banks and employ their specialist knowledge to assemble their
own mobile wallet solutions.
17
abandoning their bank in favour of a new breed of prepaid service provider. The attraction of an
integrated, value added prepaid mobile wallet may well provide this incentive.
18
The Starbucks Card Mobile App is distributed free of charge via Google Play and Apples App Store.
Customer acquisition and enrolment
After downloading the app, users must register themselves and open a Starbucks account by entering
personal information. If already available, an existing Starbucks Card can be registered. If not, a new,
virtual Starbucks Card can be generated instantly.
Channels to get value into the solution
During registration, users have to provide payment details that can be used to reload the account with
funds. The account can be reloaded manually or automatically according to the users preference. Credit
cards or PayPal are available as payment methods.
Channels to get value out of the solution
After starting the app, the main screen is displayed. The QR code needed to initiate a payment
transaction can be accessed through the top navigation, or by shaking the phone. Once the QR code is
displayed, it can be scanned by the cashier. Thanks to the new version of the app released in March
2014, it is also possible to add tips for each transaction.
4.1.2 Usage
At the beginning of 2014, ten million customers had downloaded the Starbucks Card Mobile App, which
is generating nearly five million mobile payment transactions per week (more than 11% of Starbucks
weekly transactional volume)7 8. In 2013 Starbucks processed more than $1bn in mobile payments9.
4.1.3 Conclusion
As the Starbucks prepaid card and loyalty program itself, the Starbucks Card Mobile App aims to
influence customer loyalty and behaviour but it also combines payments and loyalty within one
instrument, which aims to simplify the payment process for Starbucks customers. Questions remain as
to whether the app successfully speeds up the purchasing process at the point of sale, as Starbucks
claim.
http://www.mobilepaymentstoday.com/article/226745/Starbucks-reports-continued-growth-in-mobile-app-usage
http://www.mobilepaymentstoday.com/article/229331/Starbucks-upgrading-mobile-app-will-enable-in-app-tipping?rc_id=122
9
http://www.openmobilemedia.com/mobile-payments-europe/pdf/E4PMobilePaymentsPredictionsandTrendsinfographic.jpg
8
19
The prepaid account system is a reloadable, closed loop system for buying tickets only. It can be reached
and debited from a mobile wallet app as well as from an SMS message. More than one person can use
the same prepaid account.
The AtB solution is being distributed through the Google Play and the iTunes App Store and is free of
charge.
Customer acquisition and enrolment
When the consumer downloads the app and registers, a remote (net centric) prepaid account is opened.
At the same time the customer registers their mobile number together with their credit card credentials.
Channels to get value into the solution
The customer will immediately be asked to top up their prepaid account from their credit account. If this
does not occur, the customer's telephone bill or their credit card will be debited directly in order to fund
the purchase of a ticket. Using the prepaid account will trigger a 25% discount on every ticket
purchased.
When reloading the prepaid account, the customer must select a fixed amount (NOK 100, 200, 500). This
amount will be debited from the customers credit card and the whole amount credited the prepaid
account. The amount is immediately available for the customer to use.
Channels to get value out of the solution
The customer always has options when paying for a ticket. If the whole or a part of the ticket price is not
covered by the balance in the prepaid account, the rest will be debited from their credit account or
telephone bill.
The user can buy one or several tickets at the same time (for friends or family). Since the prepaid
account is net centric, several persons can share one prepaid account. This allows children to use their
parents account from another phone without having a credit card registered.
4.2.2 Usage
Due to its convenience, a considerable number of customers in the region have adopted the mobile
ticket solution. The number of users continues to grow as awareness of the product increases. In 2013
3.2milllion mobile tickets were issued via the solution, 40% of these were charged to the user's phone
bill and 57% were settled using the prepaid account.
4.2.3 Conclusions
Using a prepaid account provides the transport company with significant benefits. No interest is given to
the consumer on the available balance on their prepaid account which means interest revenue is
generated from the total capital of the accounts. The cost of executing a transaction on the prepaid
20
account system is lower than using a public card scheme, like Visa or MasterCard connected through a
Payment Service Provider (PSP). Using a local prepaid system allows shorter authorisation time than
connecting to the international card scheme networks.
All the mobile applications mentioned above are pre-installed on the iOS devices (iPads and iPhones).
Further mobile applications which extend the functionalities of Apple's retailer wallet are exclusively
distributed through iTunes App Store and are predominantly free of charge.
Customer acquisition and enrolment
There is a standard Apple ID account registration for the entire Apple ecosystem which provide access to
different mobile apps. In this way, this paper characterises these as a retailer mobile wallet. The user
can create an Apple ID on their computer, in iTunes or on an iOS device.
Channels to get value into the solution
Although the selection of a payment method is an essential part of the Apple ID creation, it is not
mandatory in order for completion of the Apple ID registration process. As an alternative to registering
credit, debit and open loop prepaid cards, Apple offers to Apple ID users the possibility to instead
redeem a gift card code. The gift cards can be purchased in the physical world (plastic gift cards) or in
certain markets as a virtualised digital code in an online shop (US), in a mobile banking app (Switzerland)
or via an ATM (Italy). Furthermore, digitised gift cards can be sent to anyone with the iTunes account as
a one-time transaction or as a monthly iTunes store credit.10
10
http://support.apple.com/kb/HT2105
21
A valid credit card must be registered to a user's Apple ID, or a the user's prepaid account must be
sufficiently funded, before a payment can be executed. iTunes Credit gift cards are accepted in the
iTunes Store and App Store. In this sense, iTunes Credit represents dedicated prepaid value for digital
goods. At this moment there is no information that Apple Store gift card is accepted within the wider
collection of Apple financial instruments that, in this white paper, are collectively referred to as Apples
retail wallet.
4.3.2 Usage
By June 2013, 575 million Apple IDs had been established worldwide, a figure now estimated to exceed
650 million. There are now more than 315 million Apple mobile devices in consumer circulation11
and 2013 sales exceeding $10billion and $16billion from the App Store and the iTunes store respectively.
4.3.3 Conclusion
Apple cannot be considered to be anything other than a global powerhouse in mobile commerce and
mobile wallet technology. Apple is both a merchant and an operating system manufacturer with two
separate prepaid products: one for the digital goods sold through iTunes and the App Store and other
one for their physical Apple Store. Both prepaid products are closed loop products and do not combine
with any kind of loyalty program or additional functionality. The main driver behind Apple's inclusion of
prepaid solutions is to make content consumption from its own platform as easy as possible.
The prepaid aspect of its offering enables Apple to reach non Apple customers and/or those who
consume content but dont have payment cards (the youth market, for example).
11
http://en.wikipedia.org/wiki/ITunes_Store
22
4.5 Merchant / day-to-day money management hybrid example: Google Play/ Google
Wallet
The Google Wallet App was introduced in 2011 as a mobile application for proximity payments via NFC
but has evolved to the payment system for Google's own ecosystem. It is linked to the user's Google
account and offers remote and proximity payments as well as additional functionalities like P2P money
transfer, integration of loyalty and couponing functionalities. It is the official payment instrument for
Google Play, Googles digital media and software market place. In November 2013 Google introduced
Google Wallet Card, a prepaid plastic card as a physical extension of its mobile wallet.
Google Wallet is distributed as a part of Google Play Store and is directly linked to Google Account or it
can be downloaded as a mobile app in US in Google Play Store and in Apples App Store.
Customer acquisition and enrolment
There is a standard Google account registration for the entire Google ecosystem. Based on this there are
essentially two ways to register for Google Wallet. Every Google account holder in the world can expand
his Google account by adding their payment information to Google Wallet. US customers can, as an
alternative to the standard process, register from within the Google Wallet App.
Channels to get value into the solution
Different payment methods can be added to Google Wallet: credit, debit and open loop prepaid cards;
in some markets direct carrier billing; Google Play gift cards and the user's traditional bank account. It is
important to mention that some of these payment methods can only be used for specific purposes (see
'channels to get value out of the wallet', below). From the stored value account perspective, Google
Wallet manages two variants: the Google Play account and the Google Wallet account. The Google Play
account can be topped up only with Google Play gift cards. the Google Wallet account can be topped up
with a variety of different payment methods, including credit, debit and open loop prepaid cards as well
as directly from the user's bank account.
Channels to get value out of the solution
The Google Play account can be used only for purchases within Google Play Store. It is not redeemable
for cash and cannot be combined with other non-Google Play balances in the Google Wallet account.
The Google Wallet account, on the other hand, offers remote and proximity payments at the merchants
accepting MasterCard as well as additional functionalities like P2P money transfers and cash
withdrawals at ATMs through the Google Wallet prepaid plastic card.
4.5.2 Conclusion
Similarly to Apple, Google can in this example be considered as a merchant and an operating system
manufacturer. Googles interest in transactional data could be considered one of the main drivers
23
behind its provision of an open loop prepaid product. The structure of the wallet with two different
prepaid products is cumbersome and will require overhauling and simplifying if Google is to take full
advantage of its consumer mobile financial services potential.
The Mobile Money companion app for the prepaid Visa card is available in Google Play and Apple App
Store.
Customer acquisition and enrolment
T-Mobile uses its marketing channels to drive people to three enrolment destinations: Online, T-Mobile
stores and Safeway supermarkets.
The T-Mobile website offers online enrolment which allows users to order the Visa prepaid card for
delivery to their home address. Once the customer receives the physical card, online activation needs to
be completed separately via the T-Mobile website or by calling customer service. Walk-in customers can
enrol to the service at T-Mobile stores. Here customers can finalise their enrolment, initial (non-cash)
deposit and card activation all at the same time. According to T-Mobile communication, a co-operation
agreement with participating Safeway supermarkets also enables customer enrolment. Customers are
able to sign up to the service and obtain their prepaid T-Mobile Visa card at select Safeway locations in
the same way as in T-Mobile shops.
Channels to get value into the solution
The current solution supports a variety of value top-up channels including direct deposit (including social
benefit and salary payments); remote check capture with the companion mobile app; the Blackhawk
agent network (Reloadit) for purchasing reload packs with cash; Visa ReadyLink at participating
merchants for cash-in and Moneygram for receiving funds only. Direct cash-in at T-Mobile stores is not
allowed under the constraints of the current partner setup and related regulation in the United States.
24
The Visa prepaid card can be used at any merchant location in the United States that accepts Visa debit
cards and for online purchases anywhere. In addition to basic Visa acceptance, the user can also use
their stored value to Pay T-Mobile bills and top-up their airtime; withdraw cash from ATMs (no fees for
40,000 on-net ATMs in US, standard fees for others) and make bill payments for registered payee
companies in US$.
4.6.2 Conclusion
In a highly competitive MNO market like the US, the T-Mobile Mobile Money solution is an attempt to
create a value added service that increases customer stickiness to the T-Mobile core business of selling
network services. By building on the churn reduction business case, the financial products offered can
be offered at a relatively low price point, making the prepaid card proposition particularly attractive to
the underbanked immigrant worker segment, which commonly deals with cash only and use prepaid
subscriptions for mobile services.
Competition within the US telecom segment is a stronger driver than trying to encroach on the financial
institutions territory - MNOs are mostly seeking to reduce churn. Any additional revenue streams from
financial services are an added bonus but not critical to the business case.
As a secondary motive MNOs are seeking new revenue sources and in so doing are moving into what has
traditionally been banks territory. Significance of this new revenue might grow in the future as it
gathers more data about is users and further develop the partnership.
Some of the digital features of BlueBird include sub-accounts for family members or other additional
individuals, and a feature that enables funds to be ring-fenced and put towards the achievement of a
financial goal defined by the user, such as saving for a vacation. The advantage of BlueBird over a
traditional bank account is that there are no minimum transfer or balance requirements and almost no
fees.
Channel to get value into solution
Bluebird accounts can be funded via payroll/government direct deposit, mobile check deposit, ACH
transfers from existing US bank accounts, or via cash loading at Wal-Mart store locations.
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The BlueBird online solution and mobile app can be used to check balances, pay bills and transfer money
to friends and family. The Bluebird account comes with both a companion card and paper checks, to
make physical payments. In addition, the physical card can access funds via ATMs.
BlueBird funds are FDIC insured so the solution offers equivalent security to those of US bank accounts.
In addition, the solution also offers additional security features such as purchase protection and fraud
protection which are not often provided as standard with a traditional current account from a bank.
4.7.2 Conclusion
BlueBird is a product that has strategic value in its ability to compete with traditional banking
institutions by offering a bank account replacement solution, together with additional features often
enjoyed by credit card holders or digital wallet-using consumers.
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5. Bad news for banks? How can they react to the prepaid
phenomenon?
The news that the mobile wallet ecosystem is adopting prepaid as a model of choice will not be
welcomed by banks and financial institutions, least of all because it narrows their strategic options
considerably and will make it harder than ever for them to establish a firm footing anywhere other than
at the low end of the mobile wallet value chain. Nonetheless Mobey Forum contends that banks must
accept that, at least for now, the prepaid model, despite its limitations may be a 'better fit' for mobile
wallet solutions than the current account alternatives supported by the traditional banking system.
In order to address the growing threat from prepaid mobile solutions, some banks have already
accepted this premise, and have taken steps to engage with, and capitalise upon, the prepaid model.
Four different strategic options for banks and financial institutions are offered below. Where possible
these options have been discussed in the context of a real world implementation.
MobilePay is distributed via the official app stores of Apple, Google and Microsoft.
Customer acquisition and enrolment
In the MobilePay app, users must register a payment card, a bank account and a mobile phone number.
No further KYC is needed as the service operates under the e-money directive of the EU.
Channels to get value into the solution
The payment card that is registered during enrolment is automatically debited whenever a transaction is
initiated. Thereafter the wallet account is credited and the funds are sent to the receivers bank
account.
Channels to get value out of the solution
For both peer to peer and consumer to business payments, any funds received are automatically sent to
the bank account of the user, using the existing infrastructure. The prepaid account operates in the
background and is not exposed to the end user. Whenever the account is credited it is automatically
debited, ensuring a zero balance is constantly maintained.
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5.1.2 Usage
MobilePay has been downloaded over 1.3m times and boasts 1.1m registered users.
5.1.3 Conclusions
The approach Danske Bank has adopted reflects the banks belief that the traditional current account is
held in higher consumer regard than an equivalent prepaid account; a belief that appears to be shared
by its customers. Utilising an invisible prepaid infrastructure has also allowed the bank to deliver the
service at a lower cost and under the terms of the EU e-money directive, enabling it to lower its barriers
to enrolment, which would otherwise have required full Know Your Customer verification.
5.2 Establish a prepaid agent network and resell the products of high profile
merchants
Example: PostFinance Fast Service
In 2007, PostFinance introduced an SMS based mobile payment solution called PostFinance Fast Service.
Since then, users have been able to link their mobile phone number with their PostFinance bank account
in order to debit their account each time they make a payment via their mobile phone. Some of the first
participating merchants were MNOs, who enabled their airtime prepaid accounts to be reloaded via
SMS. Today, the service enables users to buy digital goods, like a prepaid Paysafecard voucher, in realtime. In 2010, PostFinance introduced an iOS and Android App from which users can now top up their
prepaid balances from many different prepaid solution providers, including Apples iTunes store,
Paysafecard, MNOs, Nintendo, Microsoft or Sony.
The PostFinance app is distributed through the Google Play and the iTunes App Store and is free of
charge. The SMS alternative can be used with any SMS capable mobile phone with a Swiss SIM card.
Customer acquisition and enrolment
As a pre-requisite, all users must have a PostFinance bank account, including the associated debit card
as well as a Swiss mobile phone number. Users must download the PostFinance app and register once
for the Fast Service. Users that would like to use the SMS based option need also to register once via
SMS.
Channels to get value into the solution
A sufficiently funded PostFinance account is needed for each purchase. As with any other bank account,
users can fund their account in a variety of different ways (depositing wages, pay in a the counter or via
bank wire transfer).
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When a purchase is being made, the amount is debited from the users PostFinance bank account and
credited to the PostFinance account of the prepaid solution provider. As a purchase can only be made
when the users account has sufficient funds, the payment is guaranteed to the prepaid solution
provider. Therefore the users prepaid account can be topped up in real-time.
5.2.2 Usage
In 2013, more than half a million purchases of third party prepaid credits were made using PostFinances
Fast Service.
5.2.3 Conclusions
Through its agent network, PostFinance provides merchants with access to its 2.9m customers. In this
role, PostFinance is providing an invisible payment method and infrastructure, whilst visibly adding
value to its customers. By establishing an independent agent network, PostFinance has elevated itself in
the value chain and therefore generates higher revenues than it would be able to when performing the
role of a payment infrastructure provider only. As PostFinance is using digital channels only, the costs
associated with physical point of sale, together with the secure storage of physical merchant cards are
eliminated, thus making this approach very cost-effective.
5.4 Concede and play a supporting back-end role to new players in prepaid
Example: CBW Banks backing for Moven and Simple
Kansas based CBW Bank provides the back end processing infrastructure for prepaid mobile banking
services Moven and Simple.
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The Moven mobile app is distributed through the Google Play and Apple App Store.
Customer acquisition and enrolment
Moven users must download the mobile app and apply via the app to open a Moven prepaid account.
Channels to getting value into the solution
Moven users can transfer money from associated debit and credit accounts, once these accounts have
been linked to their Moven account. The Moven account can also receive credits from other users via
mobile peer to peer money transfers, and via payments sent from social networks, such as Facebook.
Channels to getting value out of the solution
Movens prepaid account is supported by MasterCard and MasterCards PayPass so payments via the
solutions NFC sticker are possible everywhere that this schemes mark is accepted. Cash withdrawals
are also supported at MasterCard supported ATMs. Moven is also capable of initiating peer to peer
money transfers via email, Facebook and mobile numbers.
5.4.2 Usage
Moven has grown to 5,000 registered users and over 100,000 individuals have signed up for invites to
the service.
5.4.3 Conclusions
Both Moven and Simple focus on customers mobile banking experience. Within their mobile app, users
can access to real-time updates and spending alerts, analyse their spending habits across all of their
bank and credit cards, and send money to friends from within the app via Facebook, email or their
mobile number.
By providing back end transaction processing and providing an anchor infrastructure for a disruptive
new prepaid provider, CBW Bank has accepted a role at the lowest end of the value chain and is
seemingly content to only generate revenues from each transaction that it manages. It is true that by
assuming this role CBW Bank has sidestepped the conventional costs associated with recruiting new
customers, but nonetheless, for most banks this position is far from favourable; it surrenders the banks
interface with its customers entirely, and along with it, all chance of generating additional revenues
through the provision of additional financial services and of gathering valuable customer profiling data.
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Contact us:
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