Business Daily (Nairobi)
Kui Kinyanjui
29 October 2007
There's no stopping us, no stopping, no one does it better..." goes the hit song by Ollie and Jerry, the hip breakdance ode that characterised the highly optimistic and euphoric heady days of the eighties.
Now, the tune would be an adequate theme song for the mobile phone.
In its ability to transform and become anything - is there any stopping the mobile phone?
"Not yet," said Tomi Paastila, a man who has designed mobile phones for a leading manufacturer during the most dynamic years in its history.
"This gadget has metamorphosed into almost anything we can want it to be. There truly is no stopping the mobile phone."
First, the mobile phone became your camera. Then, it was your music player and radio. It's currently considering posing a serious threat by becoming your television.
Now, it wants to pay your bills too.
The last year has seen the more aggressive entry of the mobile phone into the financial payments sector.
With the advent of mobile money transfers earlier in the year, more innovative products promise to place the device at the forefront of the payments industry. The sector widely recognised as the next financial hot spot for the mobile phone.
Just over a month ago, the British technology firm, Business Phone, launched a mobile payment terminal that enables debit and credit card holders to transfer money.
The Sh40,000 hybrid gadget, dubbed Biashara Phone, acts both as a point of sales terminal and as normal mobile phone giving merchants access to a more portable option for card payments.
A hand-held, wireless payment device, Biashara phone is targeted at merchants who do business on the move, such as household contractors, taxi drivers and mobile sales forces.
Its proponents say the phone could mark a shift in the Kenyan consumers aversion to credit cards, which has traditionally been marked by lower adoption rates than other countries around the world.
"Traditionally, Kenya has a cash culture. We're now following the global trend of moving away from cash towards a cards-based society.
After South Africa, Kenya is the fastest growing credit card market in Africa," said Mr Mohamed Jeneby, Managing Director of Swift Global Kenya Limited, the locally appointed distributors of the new phone. "The Biashara Phone presents a very exciting opportunity for Swift Global and we believe that it will take the Kenyan market by storm."
The device is expected to provide the security and functionality of a traditional point of sale (POS) terminal, merged with the convenience and flexibility of a mobile phone.
Credit card adoption has in the past been hampered by the lack of available outlets at which to use the cards.
According to the Credit and Debit Card Association, there are just over 4,000 across the country with the majority clustered in the capital.
Sixty per cent of the merchant network is located in Nairobi, while 30 per cent are in Mombasa and the remaining 10 per cent are scattered across the country.
New products, such as the Biashara Phone, are expected to resolve the shortage of merchants as it will allow more individuals and smaller merchants to own a POS System that is fully mobile.
But with available figures still placing the number of Kenyan credit cards at just under 1.5 million, a new solution that will drive more consumers to use credit facilities being offered by banks is needed. With the mobile phone, new solutions are raising hopes that card use will pick up.
In April, Mastercard launched trials of its Paypass service, equips mobile phones and other devices with technology that allows them to exchange information with POS systems, effectively letting them act like credit cards.
Consumers will be able to purchase goods and services and pay for them with a wave of their mobile phone.
"MasterCard is excited about the future of mobile phone payments, particularly as today's consumers rely increasingly on their mobile phones for activities other than calls," said Stuart McKinlay, New Zealand country manager, MasterCard Worldwide, said at the launch of trials for the new service in Taiwan.
"The Taiwan pilot follows a number of successes worldwide for PayPass which is proving a fast and efficient way for MasterCard card holders to make purchases."
By leveraging Near Field Communication (NFC) and Over-The-Air (OTA) technology, MasterCard has worked closely with industry players to add its PayPass capability to an NFC-capable phone in order for it to carry the same payment functionality and services that payment cards provide.
The technology enables mobile phones to securely transmit and receive information over a short range, maximum range of a few inches, when customers make payment.
Industry pundits are excited about the new technology, pegging it as a perfect solution for the Kenyan market, which has already demonstrated its openness to merging using a mobile phone with making financial transactions with mobile money transfer services such as Sokotele and M-Pesa.
Mastercard research reveals that consumers are more willing to spend more when given the option of contact-less payment systems such as PayPass. Participants involved in the PayPass trials made payments more often compared to using traditional contact-based cards, with many citing "mobility" and "real-time downloads" as two major advantages.
More than 25 per cent of the participants who used their physical credit card two to three times a month prior to the trial programme increased their frequency of usage to more than three times a month after experiencing MasterCard Mobile with PayPass.
The company says as of the end of the first quarter of 2007 when the service was launched, there were more than 14 million MasterCard PayPass cards and devices in the market, all of which were accepted at over 51,000 merchant locations globally, including popular spots such as fast-food outlet McDonald's and coffee house Starbucks.
Interest in PayPass has not been limited to retail establishments. The technology has proved popular in sports facilities and MasterCard PayPass is now accepted in many Major League Baseball and National Football League stadiums, as well as at numerous golf events.
Not to be left behind, Mastercard's rival Visa has also rolled out extensive plans to grow the new business segment. The new technology promises to be a hit with consumers and merchants around the world. According to industry analysts ABI Research, mobile phones equipped with the NFC technology are gaining popularity with consumers, with shipments poised to surpass 200 million in the next two years.
Thirty per cent of mobile users would be comfortable with the new arrangement, says new data, with people from emerging markets such as Kenya being more comfortable with even higher rates.
The losers in the new equation could be banks, who would lose out on revenues earned through commissions gleaned from credit card transactions as consumers will have direct relationships with the card vendors.
According to the Kenya Credit and Debit Association, Kenyan banks make "good business" from the credit card commissions business, making about Sh500 million in gross income from the cards business.
The banking industry is also revelling in the rebirth of the credit card business, which has seen more consumers open to the concept of obtaining one and banks being more willing to part with them as they learn more about the credit histories of their customers.
Barclays Bank plans to drive its current credit card subscriptions up from around 70,000 to 150,000 and has since embarked on several initiatives aimed at increasing the number of credit card holders in the country.
"The growth in credit card usage in the last few years has not been phenomenal but it is now picking up. Last year, we issued 7,000 cards in twelve months. Now, we issue that amount in a single month," said James Kinyany, Head of Barclaycard at Barclays Bank.
The bank largely attributes the growth to a relaxation in requirements by banks as they have more access to information on customers and can be surer of fewer default levels.
With analysts pegging the growth of the industry on younger users, who say they would be happy to use mobile phone credit card hybrid products to purchase anything from clothing to fast food, the technology appears to be a sure fire hit for card vendors.
For the mobile phone of the future, there's no stopping the payment possibilities.
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Over Fifty Million Consumers to Pay for Every-day Goods and Services via Mobile Phone by 2011, According to Juniper Research
HAMPSHIRE , UK - 30th October 2007: New forecasts from Juniper Research show that around 52 million consumers will adopt new mobile technologies such as NFC (Near Field Communication) and other physical mobile payment methods to pay for everyday goods and services by 2011. This will help drive the physical mobile payments market to $11.5bn by the same year. NFC and other physical mobile payments methods will begin to offer consumers a viable alternative both to cash, credit and debit cards supporting their increasingly mobile lifestyles.
The new Juniper Research study found that by 2011, around 12% of the total mobile phones in circulation will offer support for contactless payment, specifically NFC - equating to nearly 470 million NFC-enabled handsets worldwide, thereby providing a significant marketplace for retailers to offer goods via mPayment applications.
Other findings from the report include: • Mobile payment applications and services are already available in most regions in a variety of formats where they are being adopted in either a trial or commercial mode with favourable user feedback.
• Industry players (including retailers, handset vendors and the financial community) in the Far East and the US are seen as particularly receptive to the idea of using RFID or NFC to facilitate mobile payments for physical goods and services.
• Members of the mobile payments value chain must develop a mutually satisfactory, robust business model, guaranteeing revenue to all parties.
Juniper Research assesses the current and future status of the mobile payments market based on interviews, case studies and analysis from representatives of some of the leading organisations in the growing mobile payments industry.
White papers and further details of the study 'Mobile Payments: Strategies & Markets 2007-2011’ can be freely downloaded from http://www.juniperresearch.com. Alternatively please contact John Levett at john.levett@juniperresearch.com, telephone +44(0)1256 830002. Juniper Research provides research and analytical services to the global hi-tech communications sector, providing consultancy, analyst reports and industry commentary.