BCG: Banks, Telcos Must Partner On Payments
Partnerships between banks and telcos are essential if both entities are to retain their place in the mobile payment value chain, according to the Boston Consulting Group. With payments giving telcos an opportunity to recoup investment in 3G networks, BCG warns that if telcos succeed in this area, banks will lose revenues at the expense of total margins. BCG sees competition of this type causing aggregate revenues to payment providers to fall from USD 310 billion, to USD 259 billion.Much depends on the evolution of mobile phones into value-added e-wallets, with BCG observing "telcos can offer e-purses for cash replacement, card-type payments for offline POS purchases and online payment options for the mobile Internet". If this scenario happened, banks would lose control of the payments value chain and end up providing low-value, commodity services, but, as BCG concedes, "banks are in a strong position to act as a brake on telco development".
Although dual-slot phones and EMV cards offer a short-term window for banks to gain share in the mobile payment market, European banks are now struggling for a 'business case' for EMV. Bankers see dual-slot phones as a way of entrenching their control of mobile payments, while telcos want to retain the single SIM model. Telcos could, for example, capture part of the payments value chain, such as origination, authentication and settlement. Yet by year-end, it is "possible that any direct challenge to the banks' control of the payments system will be postponed".
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