Mobile Commerce Insider Featured Article

November 21, 2013

Isis Mobile Wallet Will Need to be Patient

Though it might be self evident why a mobile payments service in a developed country such as the United States makes eminent sense for firms that supply retailer terminals and processing services, it might not be so clear why mobile service providers should be in the business.

Such questions are not new, and will continue to be asked about services such as Isis, the mobile wallet venture owned by AT&T, Verizon and T-Mobile US. Isis finally has made its national launch, has not yet reached a stage where “revenue” actually is material.

But Isis and its owners have reason to believe a reasonably large business eventually can be built.

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At NTT Docomo, for example, revenue from mobile payment services reached 9.3 percent of total service revenue in 2012, according to Pyramid Research. That is a significant revenue generator, by any estimation, especially for a “new” revenue source beyond voice, messaging and Internet access.

Assume AT&T revenue of about $130 billion annually, with ownership of Isis at about 40 percent. If AT&T did as well as NTT Docomo, AT&T might generate up to $4.7 billion annually from Isis services.

Still, that provides some illustration of the revenue magnitude issues U.S. carriers will face with most new services. Up to this point, no single new service has proven it has the revenue magnitude of voice, messaging or Internet access.

The other issue is that it might well take a decade before Isis reaches maturity. NTT Docomo invested in Mitsui Sumitomo Bank in 2005, and the FeliCa service has been available since 2002, which means that it took around one decade before the mobile payments revenue stream reached the 9 percent of total revenues level.

SK Telecom’s revenue from its Hana SK Card service represented about 1 percent of total service revenue in 2012, after launching in 2009.

The revenue case for mobile banking in developing nations, where the banking infrastructure is not well developed, is vastly more immediate. Safaricom’s M-Pesa reached 10 percent of total revenue in about two years, and 19 percent in about five years.

It might take a while, though. “Some high-profile services, such as Google Wallet and Isis, are struggling to gain traction,” say analysts at Gartner. Both services use NFC.

Gartner forecasts that NFC-based services will account for only about two percent of total transaction value in 2013 and five percent of the total transaction value in 2017.

Based on precedents in Japan and South Korea, it will take as much as a decade before Isis can generate significant revenue.




Edited by Alisen Downey




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