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2015 Mahindra Comviva. All rights reserved. Reproduction of this white paper by any means is strictly prohibited.
August 2015
T A B L E
O F
C O N T E N T S
EXECUTIVE
SUMMARY
....................................................................................................................................
3
INTRODUCTION
...............................................................................................................................................
4
METHODOLOGY
.........................................................................................................................................
4
THE
RISE
OF
MPOS
SERVICES
..........................................................................................................................
5
THE
APPEAL
OF
MPOS
...............................................................................................................................
7
MPOS
IS
A
CATALYST
FOR
MOBILE
PAYMENTS
GROWTH
.........................................................................
7
CREATING
NEW
CUSTOMER
ENGAGEMENT
OPPORTUNITIES
........................................................................
9
CHALLENGES
OF
IMPLEMENTATION
.......................................................................................................
10
CONCLUSIONS
AND
IMPLICATIONS
..............................................................................................................
12
ABOUT
MAHINDRA
COMVIVA
.......................................................................................................................
14
CONTACT
.................................................................................................................................................
14
ABOUT
AITE
GROUP
......................................................................................................................................
15
AUTHOR
INFORMATION
..........................................................................................................................
15
CONTACT
.................................................................................................................................................
15
L I S T
O F
F I G U R E S
FIGURE
1:
THE
EVOLUTION
OF
MPOS
EQUIPMENT
........................................................................................
6
FIGURE
2:
CARD
TRANSACTION
GROWTH
IN
LEADING
ECONOMIES
..............................................................
8
2015
Mahindra
Comviva.
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rights
reserved.
Reproduction
of
this
white
paper
by
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means
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August 2015
EXECUTIVE
SUMMARY
The
Evolution
of
mPOS:
The
Payments
Industry
in
Flux,
discusses
the
development
of
mobile
point-of-sale
(mPOS)
acceptance
methods
from
their
origins
as
electronic
payment
services
for
small
merchants
to
a
channel
used
by
larger
enterprises
to
extend
and
enhance
their
customer
service.
Key
takeaways
from
the
study
include
the
following:
mPOS
initially
allowed
businesses
to
roll
out
payment
and
other
services
using
tablets
or
smartphones,
accompanied
by
secure
card
reader
devices.
But
todays
mPOS
offering
delivers
more
than
just
an
easy
way
to
accept
payments.
Tablet-
based
services
allow
demonstrations
of
products,
provide
information
on
offers,
permit
deliveries
to
be
scheduled,
and
enable
application
forms
to
be
filled
in
as
well
as
accept
payments.
mPOS
juxtaposes
mobile
services
with
the
rise
of
digital
payment
instruments.
It
enables
new
sales
and
fulfillment
channels,
empowers
staff,
allows
retailers
to
develop
more
engaging
store
designs
to
interest
shoppers,
and
more.
mPOS
services
can
be
configured
in
many
ways,
and
the
growth
of
this
payment
acceptance
channel
is
just
starting.
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INTRODUCTION
mPOS
solutions
have
taken
the
payments
world
by
storm
in
the
last
few
years.
As
a
leading
embodiment
of
the
secular
trend
toward
mobile
device
ubiquity
throughout
social
and
commercial
life,
mPOS
services
have
been
standard-bearers
of
mobile
in
the
retail
ecosystem.
That
the
phenomenon
has
been
led
by
businesses
that
were
not
traditional
players
in
the
industry
is
even
more
remarkable.
Despite
their
recent
emergence,
however,
mPOS
services
have
already
evolved
into
a
number
of
distinct
offerings
targeting
different
commercial
opportunities.
Starting
from
serving
the
needs
of
small
merchants,
recent
developments
have
seen
mPOS
services
embraced
by
larger
enterprises,
including
not
only
major
retailers
but
also
a
variety
of
other
types
of
firms,
such
as
insurance
companies,
healthcare
companies,
distribution
and
courier
firms,
agent-based
sales
operations,
and
more.
mPOS
has
grown
from
its
initial
starting
point
remarkably
quickly,
and
an
increasing
range
of
organizations
recognize
it
as
offering
new
ways
to
interact
with
customers
and
better
opportunities
to
convert
leads
into
sales.
This
trend
will
accelerate
in
coming
years.
M E T H O D O L O G Y
In
preparing
this
paper,
Aite
Group
drew
upon
existing
internal
analysis
supplemented
with
interviews
of
a
number
of
leading
organizations
active
in
the
payments
industry.
Additional
information
was
gathered
through
desk
research.
2015
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rights
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means
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August 2015
2015
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Comviva.
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rights
reserved.
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white
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means
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August 2015
Scale of opportunity
Large
corporations
Rugged
devices
for
enterprise
applications
Small
and
midsize
businesses
Micro
merchants
Tablet-based
POS
Audio
jack
donglechip
and
sign
Audio
jack
dongleswipe
and
sign
Embryonic
EMV
chip-and-
PIN
Bluetooth
card
reader
Segmentation
emerges
Next-generation POS
Market
maturity
Source:
Aite
Group
A
key
question
that
any
mPOS
service
provider
must
consider
is
the
profitability
of
the
service
it
offers.
The
majority
of
industry
participants
initially
adopted
a
price
of
2.75%
per
transaction,
but
as
mPOS
has
evolved
to
attract
larger
enterprises
and
nonretail
organizations,
a
broader
range
of
pricing
options
has
emerged,
driven
by
commercial
logic.
Hardware
costs
and
the
relatively
low
transaction
volume
generated
by
the
initial
target
market,
small
and
midsize
businesses,
makes
it
challenging
for
mPOS
providers
to
achieve
profitability
if
they
stay
within
this
narrow
target
market.
Instead,
mPOS
providers
have
adopted
products,
pricing,
and
targeting
strategies
to
attract
larger
merchants
that
can
drive
more
payment
volume,
and
therefore
revenue,
and
cover
the
upfront
hardware
cost.
Strategies
include
targeting
larger
merchants
and
providing
additional
revenue-generating
software
services
around
the
core
hardware.
Merchants
value
mPOS
additional
capabilities,
particularly
the
range
of
analytical
and
management
tools
that
assist
them
in
running
their
businesses.
At
the
enterprise
level,
however,
pricing,
and
therefore
margins,
are
much
lower.
Off-the-shelf
applications
might
not
be
required
by
larger
businesses
capable
of
developing
or
configuring
software
to
their
precise
requirements,
but
the
ability
to
provide
application
programming
interfaces
(APIs)
is
of
significant
value
to
larger
clients.
It
offers
the
flexibility
that
more
traditional
payment
service
providers
lack
and
represents
another
aspect
of
mPOS
that
merchants
value.
These
services
play
to
the
strengths
and
flexibility
of
the
mobile
device.
In
doing
so,
the
merchants
proposition
is
enhanced,
and
its
operating
model
is
altered.
Mobile
devices
allow
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retail
outlets
to
be
reconfigured
by
reducing
the
number
of
fixed
sales
points,
allowing
staff
to
engage
with
customers
around
the
store.
POS
services
can
be
dovetailed
with
other
innovations,
such
as
information
kiosks,
bringing
the
concept
of
the
endless
aisle
to
the
store.
This
approach
allows
shoppers
to
search
for
and
order
items
that
may
not
be
currently
displayed,
effectively
extending
a
retailers
product
range
while
simultaneously
reducing
the
physical
high
street
or
mall
footprint.
mPOS
services
lie
at
the
heart
of
these
initiatives,
integrating
the
payment
facility
with
an
improved
shopping
experience
for
the
customer.
They
form
one
key
component
among
a
range
of
technologies
that,
in
combination,
can
radically
transform
the
retail
outlet
and
shopping
experience.
T H E
A P P E A L
O F
M P O S
The
ability
to
simply
accept
card
payments
regardless
of
location
has
captured
the
interest
of
businesses
both
large
and
small
in
every
market.
What
started
as
a
service
for
those
small
businesses
that
were
unable
to
accept
cards
has
blossomed
into
a
channel
for
extending
the
reach
of
much
larger
enterprises.
mPOS
now
extends
far
beyond
retailing,
enabling
any
business
to
accept
noncash
payment
wherever
it
chooses
to
interact
with
customers.
This
includes
courier
and
distribution
companies;
organizations
that
provide
services
at
a
customers
home
or
place
of
business;
firms
that
deploy
pop-up
stores
either
in
the
high
street
or
at
public
gatherings,
festivals,
and
events;
and
many
more
besides.
Payment
services
have
extended
the
POS
from
limited
fixed
points
to
almost
any
location
or
venue.
mPOS-based
service
providers
are
revolutionizing
the
way
business
of
all
sizes
and
types
accept
payment.
They
are
transforming
the
way
customers
interact
with
businesses
and
are
enriching
the
customer
experience.
M P O S
I S
A
C A T A L Y S T
F O R
M O B I L E
P A Y M E N T S
G R O W T H
Payment
cards,
which
are
regarded
by
some
as
outdated
and
on
the
point
of
becoming
obsolete
by
phenomenal
smartphone
growth,
are
central
to
the
emergence
of
mPOS,
and
their
importance
is
in
turn
reinforced
by
it.
But
as
mPOS
grows
it
will
enable
new
forms
of
payment
to
flourish,
including
via
NFC-enabled
mobile
devices.
Much
analysis
focuses
on
the
mobile
phones
potential
to
transform
payments
and
replace
the
plastic
card,
but
within
an
mPOS
environment,
both
forms
of
payment
can
be
accommodated,
bringing
greater
flexibility
to
the
act
of
payment
acceptance.
Mobile
commerce
developers
gain
meaningful
traction
with
mobile
wallet
services
or
in-app
payments
while
merchants
benefit
from
the
ability
to
capture
a
variety
of
payment
instruments
without
limiting
the
options
available
to
their
customers.
Cards
are
a
familiar
starting
point
as
new
smartphone-based
payment
methods
become
established.
In
the
short-term,
however,
the
irony
of
mPOS
solutions
is
that
they
use
mobile
devices
to
dramatically
extend
the
reach
of
the
card-present
environment
far
beyond
what
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could
be
envisaged
just
a
few
years
ago.
Instead
of
killing
the
plastic
card,
these
devices
and
services
are
breathing
new
life
into
it
while
they
allow
other
forms
of
payment
to
emerge.
Card
transaction
volume
in
leading
economies
has
continued
to
show
strong
growth
from
2009
onward.
Forecasts
indicate
that,
in
the
22
countries
reported
by
the
Bank
for
International
Settlements,
cards
will
account
for
273
billion
transactions
at
a
combined
value
of
some
US$30
trillion
by
2018.
Cards
will
remain
the
most
important
payment
instrument
for
many
years
to
come,
their
role
supported
and
enhanced
by
mPOS.
Throughout
the
business
world,
however,
much
attention
is
being
focused
on
developing
the
next
generation
of
mobile-phone-based
payment
services,
and
these
applications
too
can
benefit
from
mPOS.
Newer
devices
have
NFC
capability,
allowing
contactless
tap-and-go
transactions
from
card
or
phone.
Their
flexibility
allows
them
to
be
reconfigured
over
time
to
adapt
to
changing
circumstances,
and
this
is
another
powerful
aspect
of
the
new
generation
of
mobile
payment
acceptance
devices.
The
flexibility
of
mPOS
terminals
in
an
increasingly
digital,
omnichannel
payment
environment
is
a
key
strength.
Figure
2:
Card
Transaction
Growth
in
Leading
Economies
Card Transactions in Leading Economies, 2009 to e2018
(In billions)
273
253
CAGR 9%
158
127
2009
174
186
201
217
234
139
2010
2011
2012
2013
e2014
e2015
e2016
e2017
e2018
It
will
take
time
for
mobile
transactions
to
rival
card
transactions
in
volume.
For
that
to
happen
there
needs
to
be
greater
standardization
in
approach
and
message
handling,
and
international
payment
networks
need
to
fully
embrace
the
channel.
This
is
happening,
but
true
mobile-
phone-initiated
payments
are
still
at
the
early
stages
of
development.
Aite
Group
research
indicates
that
from
2015
to
2018,
contactless
mobile
transactions
have
the
potential
to
reach
4%
to
5%
of
retail
payments,
with
growth
in
transaction
volume
accelerating
after
2020.
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2015
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Comviva.
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rights
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paper
by
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means
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strictly
prohibited.
August 2015
taking
a
holistic
view
across
their
entire
businesses,
and
mPOS
can
be
a
central
plank
in
this
strategy.
The
use
of
mobile
devices
in
store
means
that
staff
can
roam
the
aisles
and
engage
proactively
with
shoppers.
They
can
better
respond
to
queries,
look
up
product
details
on
their
devices,
exploit
the
immediacy
of
the
payment
function
if
the
customers
decide
to
buy,
and
potentially
provide
instant
offers,
discounts,
or
loyalty-based
promotions.
Retail
formats
can
be
refreshed,
and
shoppers
can
order
goods
that
are
not
currently
on
display
either
via
stand-alone
kiosks
or
with
the
help
of
a
sales
assistant
equipped
with
a
mobile
terminal.
Importantly,
staff
empowered
by
mobile
terminals
can
complete
the
sale
in-aisle,
saving
the
customers
time
and
lessening
the
risk
of
them
turning
elsewhere.
Beyond
retailing,
mPOS
is
being
enthusiastically
adopted
by
a
range
of
companies,
including
many
large
businesses
that
had
little
need
for
payment
terminals
in
the
past.
This
is
new
territory
for
many
payment
service
providers.
Nevertheless,
their
solutions
are
proving
increasingly
popular.
mPOS
tools
are
being
adopted
by
businesses
in
the
healthcare
business,
by
larger
home-servicing
companies
(e.g.,
heating
engineers,
air
conditioning
service
companies,
and
many
more).
Insurance
companies
are
adopting
them
as
important
tools
for
home
sales
personnel.
Doorstep
and
party-selling
operations
(promoting
anything
from
jewelry
to
kitchenware
or
clothing)
find
these
services
useful,
eliminating
the
need
for
agents
to
carry
large
amounts
of
cash
or
checks
and
bringing
the
benefit
of
immediate
electronic
payment.
Rugged
devices
are
attractive
to
larger
businesses
in
sectors
such
as
transportation,
allowing
at-
seat
sales
by
airlines,
trains,
and
long-distance
bus
operators.
Courier
and
delivery
firms
use
such
terminals
to
receive
payment
upon
deliverystill
an
important
service
in
many
countries.
mPOS
devices
can
even
be
found
in
use
for
payment
of
on-the-spot
speeding
fines
by
police
forces.
In
all
examples
and
more,
security
of
payment
is
improved,
with
cash
removed
from
the
equation,
and
some
transactions
(such
as
many
of
the
transportation
examples)
are
made
with
online
rather
than
offline
authorization.
This
encourages
efficiency,
opens
up
new
channels,
and
removes
or
reduces
certain
categories
of
risk.
The
companies
using
mPOS
are
extremely
varied,
but
the
attribute
they
share
is
the
ability
to
use
mobile
payment
devices
to
transform
their
relationships
with
their
end
users
or
customers.
It
is
this
rapidly
emerging
segment
of
larger
businesses
that
holds
the
most
promise
for
mPOS
service
providers
in
the
future.
Larger
businesses
are
demanding
clients
and
will
insist
on
very
fine
pricing,
but
they
also
value
the
range
of
software
services
that
can
be
built
around
the
core
payment
service,
and
this
brings
the
service
provider
many
opportunities
to
develop
deeper
relationships
over
time.
C H A L L E N G E S
O F
I M P L E M E N T A T I O N
Many
larger
companies
have
no
interest
in
adopting
stand-alone
mPOS
solutions
but
still
value
the
flexibility
of
the
mobile
payments
model.
Integrating
mPOS
solutions
alongside
existing
systems
and
infrastructure
can
pose
a
headache,
however.
The
solution
comes
in
the
form
of
a
software
development
kit
(SDK)
that
allows
firms
with
their
own
customer-facing
applications
to
integrate
payments
functionality
seamlessly,
feeding
data
via
APIs
into
other
systems,
such
as
inventory
management
or
data
analysis
services.
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Innovative
mPOS
players
are
now
providing
SDKs
and
APIs
to
the
enterprise
marketsome
via
proprietary
toolkits,
others
through
third-party
white-label
solutions.
This
kind
of
flexibility
brings
large
businesses
a
greater
degree
of
control
over
their
IT
infrastructure
evolution.
It
is
a
move
away
from
the
packaged
solution
that
appeals
to
the
small
merchant,
but
equally
it
shifts
away
from
the
inflexible
stand-alone
payments
solution
offered
by
many
more
traditional
acquirers.
It
is
stimulating
interest
from
a
number
of
third-party
software
developers,
which
previously
might
have
had
little
involvement
in
the
payments
industry
but
which
are
now
working
in
partnership
with
payment
service
providers
and
acquirers.
The
SDK
environment
allows
new
customer-facing
applications
with
embedded
payments
functionality
to
be
more
easily
launched
and
integrated
within
a
firms
wider
IT
architecture.
The
use
of
APIs
allows
information
to
be
fed
into
other
specialist
systems
to
meet
the
firms
own
specific
needs.
This
also
opens
doors
to
the
use
of
other
flexible
technologies,
such
as
cloud-
based
delivery
models.
Payment
capability
is
thus
positioned
to
operate
seamlessly
at
the
heart
of
a
flexible
delivery
infrastructure.
Stand-alone
payment
services
are,
as
a
result,
losing
their
appeal.
The
rise
of
omnichannel
retailing
means
that
merchants
expect
their
payment
service
provider
to
meet
their
needs
across
all
customer
outreach
channels,
including
in-store,
in-app,
and
mobile
payments.
More
traditionally
positioned
acquirers
have
had
to
adapt
their
business
models
to
maintain
their
position.
Alliances
with
software
specialists
are
increasingly
important
in
helping
them
maintain
this
role.
The
nature
of
the
payments
processing
industry
is
changing
fast
as
a
result
and
will
continue
to
evolve
rapidly.
From
its
beginning
as
a
single
stand-alone
service
for
small
businesses,
mPOS
has
quickly
evolved
into
a
transformative
set
of
technologies
that
will
drive
change
across
the
entire
payments
value
chain.
In
the
process,
it
is
bringing
new
players
into
the
market
and
forcing
incumbents
to
re-evaluate
their
methods
of
operation.
The
world
of
payments
is
at
the
start
of
a
process
of
change
more
fundamental
than
it
has
experienced
before.
New
business
models
and
partnerships,
and
more
flexible
solutions
with
payment
acceptance
at
their
heart
are
the
order
of
the
day,
but
the
key
ingredient
that
weaves
through
the
rapidly
evolving
landscape
is
mobility;
the
ability
to
accept
payments
at
the
customers
convenience
and
at
greater
variety
of
locations
than
ever
before.
mPOS
is
moving
from
a
niche
service
into
the
mainstream
of
modern
commerce.
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Cards
matter:
With
much
attention
paid
to
the
growth
of
mobile
payment
services
and
their
potentially
disruptive
ability,
the
application
of
mobile
payment
acceptance
via
mPOS
has
reinvigorated
the
role
of
payment
cards.
But
mPOS
nevertheless
provides
a
platform
for
new
mobile
payment
methods
to
emerge.
The
growing
demands
of
end
users,
rather
than
the
payment
service
providers,
are
likely
to
be
the
key
drivers
in
the
future
evolution
of
mPOS:
Increasingly
sophisticated
services
are
being
developed
around
the
POS
that
deliver
significant
value
for
users.
Merchants
are
increasingly
able
to
deploy
services
and
capabilities
that
are
tailored
to
their
own
situations,
differentiating
them
from
their
peers.
The
payment
service
at
the
heart
of
these
new
POS
ecosystems
allows
those
organizations
operating
in
the
payments
market
to
develop
new
revenue
streams
but
in
turn
requires
them
to
amend
their
businesses
to
meet
the
needs
of
an
increasingly
demanding
clientele.
mPOS
is
the
key
to
unlocking
value
in
payment
services
once
again.
Partnerships
are
a
vital
element
in
the
new
model:
These
may
come
in
several
flavors.
Payment
service
providers
exploring
mPOS
solutions
may
choose
to
work
with
banks
(which
can
provide
marketing
referrals,
distribution,
merchant
on-boarding,
access
to
local
payment
networks,
etc.),
acquirers
and
processors
(which
can
deliver
authorization,
clearing,
and
settlement,
and
provide
merchant
accounting
services
and
support),
distributors
(which
may
provide
new
ways
to
get
the
product
out
into
the
marketplace
and
allow
new
verticals
to
be
targeted),
and,
perhaps
most
importantly,
independent
software
developers
(which
play
a
vital
role
in
delivering
a
rich
ecosystem
of
tailored
apps
that
add
significant
value
to
the
core
mPOS
proposition).
Showrooming
has
become
a
risk
for
the
high
street
retailer:
But
mPOS
helps
combat
the
threat
by
empowering
sales
staff
to
complete
on-the-spot
transactions
in
the
store
and
reduce
the
chance
of
customers
walking
away.
If
staff
can
offer
discounts
on
the
spot,
this
is
an
even
more
powerful
tool.
This
is
one
example
of
how
mPOS
is
changing
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12
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the
nature
of
high
street
retailing.
The
flexibility
mPOS
brings
means
that
it
can
be
integrated
with
other
new
retailing
technologies,
such
as
endless
aisle
kiosks
and
augmented
reality
display
systems.
mPOS
has
a
role
in
rejuvenating
the
high
street
and
slowing
the
drift
to
online
and
digital
retailing:
By
helping
refresh
retail
concepts,
it
allows
town
center
stores
to
become
destinations
again,
giving
consumers
reason
to
go
shopping
once
more.
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means
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August 2015
C O N T A C T
For
more
information
on
Mahindra
Comvivas
payPLUS
solution,
please
contact:
info.payplus@mahindracomviva.com
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rights
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of
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white
paper
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means
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14
August 2015
A U T H O R
I N F O R M A T I O N
Andrew
Copeman
+44
7736
645695
acopeman@aitegroup.com
C O N T A C T
For
more
information
on
research
and
consulting
services,
please
contact:
Aite
Group
Sales
+1.617.338.6050
sales@aitegroup.com
For
all
press
and
conference
inquiries,
please
contact:
Aite
Group
PR
+44.(0)207.092.8137
pr@aitegroup.com
For
all
other
inquiries,
please
contact:
info@aitegroup.com
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15