Sustainable business models are needed to drive adoption of mobile payments in CEE

Details: James Barton; Category: Mobile Finance; 09 June 2011; 8168 views

The lack of consensus between telecoms and financial institutions, in terms of an equitable split of mobile payments revenues, decelerated the expansion of the mobile payments market in Central and Eastern Europe (CEE)...

Gradual market development has been driven mainly by applications providers for whom mobile payments are the core business. However, both financial institutions and telecoms, find mobile payments as a lucrative alternative to generate additional revenues.

New analysis from Frost & Sullivan finds that the value of mobile payment transactions in CEE reached almost €290 million in 2010, and this is expected to surge to €22,700 million by the end of 2017.

“Mobile phones in CEE are gradually becoming information and education centres, with the number of applications on them constantly expanding,” states Frost & Sullivan Industry Analyst Edyta Kosowska. “Using mobile phones as wallets is only a matter of time.”

The growth of the mobile payments market will be supported by the proactive engagement of key stakeholders – mobile network operators (MNOs) and banks. In the CEE countries, these stakeholders are increasingly interested in the mobile payments market as a good niche to fill. Many operators in the region already implemented mobile payments. The most advanced market is in Hungary. Apart from in-store transactions, users can pay via their mobiles for parking, motorways, movie tickets and many others.

“Mobile payments, in order to become popular in CEE, need to meet several criteria,” remarks Kosowska. “First of all, they need to be secure and convenient for end-users. They also need to demonstrate a positive business case for all market stakeholders.”

Convenience criteria meet payments in NFC technology, which gradually develops in the CEE region. The leader in this respect is Bulgaria, where service providers see the potential in the unbanked part of the society. NFC trials are also conducted in the Czech Republic, Hungary and Poland.

However, limited cooperation between mobile operators and financial institutions has resulted in lower growth rates for the mobile payments market. It has also not been conducive to enhancing the end-user experience.

“Both stakeholders have equally strong purchasing power, thus creating business models that satisfy all is difficult and time-consuming,” comments Kosowska. “The main issue of the dispute is the revenue split: both parties would prefer to receive a percentage of each transaction as opposed to a fixed fee.”

The creation of a successful business model is the most challenging task in the mobile payments environment. The situation is further complicated due to the very low margins on in-store payments. “In order to make sufficient profits on the low-margin mobile payments market, a high volume of transactions is essential,” explains Kosowska. “Therefore, service providers will have to attract large base of users. In that case, educational efforts gain additional importance.”

More info: