LOOKING TO DRIVE REVENUE? PARTNER UP. The Mobile Payments Opportunity for Telcos

Transcription

1 LOOKING TO DRIVE REVENUE? PARTNER UP The Mobile Payments Opportunity for Telcos

2 TELCOS CAN IMPROVE THEIR SHARE OF MOBILE PAYMENTS SPEND WITH NEW PARTNERSHIPS. The European telco industry is struggling with a 27% decline in ARPU between 2009 and and a high yearly churn rate of 25% 2. Many telcos are missing out to competitors who are more agile at creating stickiness with their products and services. From private car hire to coffee, merchants are simplifying consumers buying experiences. Uber has eliminated the concept of paying cash and consumer anxiety about taxi fees. Starbucks can cut queue waiting times by offering a mobile order and multiple payment options. Here, we explore the mutual benefits of creating partnerships in the mobile payments industry and how telcos can use these partnerships to shift their consumers perceptions of them from operator to digital marketplace. AVERAGE HOUSEHOLD EXPENDITURE BY CONSUMPTION TYPE, EUROPE 2 Recreation and culture Restaurants and hotels Miscellaneous goods and services 12% 9% 9% 5% 5% Homeware Clothing and footwear 5% Education and health Transport 13% 3% Communications Food, drink, tobacco 16% 24% Housing, water, electricity, gas and other fuels TELCOS CAN EXTEND THEIR REACH BY PARTNERING WITH OTHER PLAYERS WHO HAVE ACCESS TO CONSUMERS, MERCHANTS AND PAYMENT ENABLERS. Of the average 3,055 monthly household spend in Europe, telco services represent just 3% 3. This relates to spend on traditional fixed and mobile voice/data services. Telcos already have profile data and a billing relationship with their customers. This can be leveraged to facilitate more payments and increase share of wallet by aggregating products and making the mobile payments process more attractive than that of their market counterparts. 2

3 TELCOS CAN CREATE TRANSACTION- ENHANCING AND VALUE-ENHANCING PARTNERSHIPS. To increase ARPU, telcos should focus on two drivers: number (or frequency) of transactions and amount spent per transaction. This leads to two types of initiative: transaction-enhancing and value-enhancing partnerships. Transaction-enhancing partnerships increase the total number of times a consumer makes a payment. An example of this is PayPal s partnership with Skype to gain access to Skype s userbase and increase their peer-to-peer transaction volumes. Value-enhancing partnerships increase the amount spent per transaction by the consumer. For example, O2 Priority offers O2 customers benefits which extend far beyond priority to services offered at the O2 Arena in London, giving O2 a share of merchant sales. PAYMENT PARTNERSHIPS: HOW TELCOS CAN INCREASE PAYMENTS VOLUME AND SPEND PAYMENT PARTNERSHIPS TRANSACTION-ENHANCING Make the payments process more efficient, Increase number of transactions VALUE-ENHANCING Make the offer more attractive, Increase spending per transaction TELCO AS PAYMENTS ENABLER TELCO AS DIGITAL MARKETPLACE Telcos can enable customers to pay with direct carrier billing on partner platforms (e.g., Google Play, Netflix) and offer more choice of payment methods (e.g., PayPal, Apple Pay) Telcos can supplement their communications offer with a marketplace for third-party digital goods (e.g., Netflix, Amazon Video, Spotify, Kindle, Audible, Google Play apps) 3

4 TRANSACTION-ENHANCING PARTNERSHIPS BOOST SERVICE STICKINESS AND SPEND FREQUENCY. Successful mobile payment players understand the need to work hand-in-hand with adjacent companies in the value chain. Transaction-enhancing partnerships maximize the simplicity, efficiency and conversion rate of a consumer mobile payment. This addresses the issue of shopping cart abandonment, since 21% of consumers abandon mobile payments because the payments process takes too long 4. By being directly involved in the payments process, telcos can positively impact their conversion and churn rates. Below, we discuss two cases, one where the partner is the payments enabler, one where the telco is the payments enabler. TRANSACTION-ENHANCING PAYMENT PARTNERSHIPS OFFER MORE PAYMENT METHODS AND CHANNELS CASE EXAMPLES Partners SKYPE + PAYPAL 5 The partnership allows Skype users to make transfers to each other via their PayPal accounts. Partners GOOGLE PLAY + O2 6 The partnership allows O2 customers to pay for Google Play apps via their O2 bill or credit. SKYPE PAYPAL GOOGLE PLAY 02 Business model Sells voice over IP top-ups and business conference call services via Skype for Business Takes a % share of consumer-tobusiness PayPal payments Business model Sells third-party mobile apps to consumers via own marketplace Sells telecommunication services (voice and data) to consumers and businesses Benefit Skype s primary service becomes more sticky and users top up more frequently PayPal reaches Skype users who would otherwise not make a P2P 7 transfer and gets a % share of transfer Benefit Google Play increases customer loyalty and spend frequency by offering more choice of payment methods O2 increases customer loyalty by offering more convenience and gets a % share of the sales Partnerships such as these give consumers more mobile payment choices, in terms of channel and method. This wins trust and stickiness with consumers due to savings in time, effort and potentially cost (for example, if a payment has a discount attached). 4

5 VALUE-ENHANCING PARTNERSHIPS INCREASE CONVENIENCE AND ARPU. The 10.4% decline 8 in telcos service revenues is impacted both by increased competitiveness among operators and the take-up of over-the-top (OTT) 9 calls and messages. While companies such as WhatsApp and Skype are regarded as telco competitors, we believe some OTT providers can be telco partners. Popular streaming services like Netflix and Spotify are being incorporated into a number of telco bundles. OTT players represent just one example. Where there is a matching customer segment, a strategic fit between services and a mutual benefit, there is a partnership opportunity for telcos. These value-enhancing partnerships enable a thirdparty merchant s goods to be sold to the telco s customers via a digital marketplace. THE RISE IN DIGITALIZED SERVICES IS A REAL OPPORTUNITY FOR TELCOS MOVISTAR APPS & DIGITAL SERVICES Spanish telco Movistar resells digital goods as a value-added service. This offer is separate from their telecom service. YAVOY Music streaming service TU WEB Website creating platform EMOCION Mobile games and apps download NUBICO ebook and emagazine subscription McAFEE Online multi-device security MOVISTAR CLOUD Cloud storage services Movistar is gradually driving Spanish telco operators to offer extended digital services. The partnerships they have formed with digital merchants increase ARPU, as consumers have more product choice and more convenience in a one-stop shop. Some telco innovators are taking this one step further to form a telco digital marketplace. TELCO DIGITAL MARKETPLACE EXAMPLE PARTNERSHIPS MUSIC & VIDEO Spotify Kindle BOOKS Netflix Audible EXISTING SERVICES COMMS 5GB 500M Imagine a business model where every merchant that relies on data connectivity to sell their goods pays a percentage of their sales to telcos. In some case, data is zero-rated which makes the data usage free to a consumer (for example Three UK provides content such as Netflix with no data charge). In the same way that Amazon started aggregating physical goods online 22 years ago, telcos can offer their customers a platform where they search for, compare and buy digital goods. The result? ARPU rises, driven by demand-driven services. Customer loyalty rises, due to convenience and variety. 5

6 AT ACI, WE UNDERSTAND TELCOS CHALLENGES IN INCREASING REVENUES ARPU Falling due to increased competition DATA In demand due to OTT services CHOICE Required in payment options AND WE HAVE THE SOLUTIONS TO ADDRESS THEM. ACI PAY.ON PAYMENTS GATEWAY INTEGRATION ROBUST INTEGRATION METHODS OPEN API, RAPID CHANNEL ACTIVATION eterminal GLOBAL COVERAGE MULTI-CURRENCY AUTHORIZATION AND SETTLEMENT CONNECTOR ON DEMAND SMART LOCAL TRANSACTION ROUTING MOBILE SOLUTIONS ios AND ANDROID IN-APP PAYMENTS MOBILE SDK DEVICE-OPTIMIZED SECURITY FEATURES 6

7 WE HAVE THE CONNECTIONS AND PARTNERSHIPS TO ENSURE A ROBUST SOLUTION FOR TELCOS Acquirers and alternative paying methods Countries Billions of consumer transactions each year Languages WE ARE A TRUSTED PARTNER TO RETAILERS, BANKS AND TELCOS AROUND THE WORLD YEARS INNOVATING PAYMENTS YEARS SUPPORTING TELCOS This paper is one in a series designed to help telcos understand and evaluate the mobile payments opportunity. Visit and sign up to receive your copy as each insight paper is published. 1 Average Revenue Per User, % change between 2009 and end of 2017 in EU28, Red Dawn Consulting, IDATE 2 Blended churn rate for post-paid and pre-paid, Tefficient; 3 Eurostat, Mobile Money Report, Mobile Ecosystem Forum, October PayPal and Skype partnership started in August O2 and Google Play partnership started in June Peer-to-Peer or Person-to-Person Payments 8 Red Dawn Consulting, ETNO Annual Economic Report 2017, IDATE 9 Over-The-Top providers (e.g. WhatsApp, Skype) offer digital services that require telcos networks to function 7

8 THROUGH PARTNERSHIPS WITH STRATEGIC DIGITAL PLAYERS, TELCOS CAN CAPTURE MORE CONSUMER SPEND. DON T BE LEFT OUT. Talk to us about how you can create payment partnerships that drive up ARPU and build customer loyalty. FOR MORE INFORMATION: Chris Curd, Head of Telco Sales - Europe chris.curd@aciworldwide.com +44 (0) Copyright ACI Worldwide, Inc ACI, ACI Worldwide, ACI Payment Systems, the ACI logo, ACI Universal Payments, UP, the UP logo, ReD, PAY.ON and all ACI product names are trademarks or registered trademarks of ACI Worldwide, Inc., or one of its subsidiaries, in the United States, other countries or both. Other parties trademarks referenced are the property of their respective owners. This report has been prepared in partnership with Red Dawn Consulting