Mobile and money have come together in different ways, such as mobile banking and remittance services in developing countries. Soon we will see a bigger revolution: the impact of mobile internet on finance services.
To be sure, neither internet nor mobile has had much of an impact in the finance services value chain to date, compared to other industries such as retail, online booking, travel booking and the media market. In the finance sector, people are more conservative. Moreover, regulation makes it time-consuming to introduce new services.
Now some solutions like Google Wallet, or the simple but effective Starbucks App, have kicked off mobile payments, and things have started to happen in that space. At the same time P2P lending and crowdfunding - from startups like LendingClub, Kickstarter, Kapipal and Crowdbaron - have created new models for finance services, and are even bypassing some old players. And mobile money transfer services like M-Pesa work especially well in places where traditional banking services are non-existent.
Things will really get interesting when we start to see combinations of previous services and new retail models for payments, loans and investing, and as they start to gain a significant number of users.
On a pure technical level, any company could develop these services - not just banks or other traditional finance firms. But once you factor in finance regulation and licenses, these services require heavy investment.
Many parties are waiting for NFC-based solutions. But really simple solutions, like Starbucks' 2D barcode, are now winners. Success stories indicate that the services that attract users are the ones that rely on simple technology, avoid POS investments, utilize debit and credit cards, and keep transaction fees no higher than credit card transaction fees.
One year is a short time in finance services. What we're most likely to see in 2014 is:
- More retailers offering payment solutions in mobile apps that are linked to a debit or credit card
- Mobile apps for P2P and crowd-funding services, starting with personal finance
- More mobile based cost-effective solutions to transfer money.
Carriers have time to act if they want to get to this business. For those that do, there are three things they need to do in 2014.
First: find ecosystem partners like banks, credit card companies and also new players like P2P finance and crowd-funding services rather than technology partners. Second, work with retailers to get more places where people can pay with mobile. And finally, don't take on actual finance services responsibilities, like handling transactions or taking responsibility for bad credit.
One final tip: telcos can have a role to play in these services to leverage their brand and offer finance solutions and easy-to-use applications, but they must accept a smaller revenue share that can generate high volumes.
Jouko Ahvenainen is co-founder of Grow VC Group. Full disclosure: He has interests in Kapipal and Crowdbaron
Seven key strategies for thriving in 2014:
- Time to change your mindset
- New adventures in apps
- Finance services finally go mobile
- Monetization gets personal
- Mobile data traffic goes mega
- Copper crucial to FTTH plans
- Time for TDD
This article first published in Telecom Asia Vision 2014 Supplement