Mobile contactless payments in Europe: reality beyond the NFC hype

[Posted by Thomas Husson]

You can also follow me on Twitter at Thomas_Husson

 Hardly a week goes by without a press article or conference reporting how ubiquitous mobile payment services and their adoption are in Japan. Forrester decided to put some figures on the so-called Japanese mass-market reality and to understand why Japan is the declared leader in mobile contactless payment services. What lessons can others learn from the Japanese market and to what extent do they apply to Europe?

There are several reasons why Japan is ahead of the curve among which the role of Felica Networks in the value chain and the scale merchants could benefit from (Sony and DoCoMo invested several dozens of million euros to make sure that retailers and points of sale had the technology to read the chipsets embedded in mobile devices), the loosening of Japan's financial regulations (making it possible for non-banks to become financial services players), operators' role in paving the way for mass market adoption of mobile Internet and higher usage of mobile services (fostering the natural expansion of mobile payments).

Despite this, reality is that the mobile contactless market in Japan is only reaching critical mass, not mass-market adoption. In Europe, conditions differ quite a lot and even if Near-Field Technology is likely to play a key role in the future, the technology is only entering the pre-commercial era.

There are some very positive signs such as banks rolling out NFC payment cards (Barclays in the UK), hypermarket chains like Carrefour adding NFC to their loyalty cards, transporters adding NFC to their transport cards (Navigo, Oyster Card), card networks (Visa, Mastercard) and technology vendors (handset/hardware and smart chip manufacturers) evangelizing the solution, governments offering pre-live conditions (many regions in Europe will help funding live tests such as the one starting next year in Nice). 

However, two key inhibitors will prevent mobile contactless from becoming mainstream anytime soon: conflicting interests and the classic chicken-and-egg situation (handset manufacturers won't start mass production of NFC-capable handsets until the supporting infrastructure is in place) and the huge marketing efforts needed to convince consumers of changing their habits since mobile contactless payments provide only marginal improvements over established systems like cash and credit/debit cards.

However, NFC is much more than a mobile payment technology. It will enable a range of applications and services from various industries, linking together mobile marketing, mobile CRM, and mobile commerce. That's the reason why we believe in its long-term potential.  

If you want for more information, see the full report "Mobile Contactless Payments in Europe: Reality Beyond the NFC Hype".

Amazon's Kindle Strategy & the Mobile/Wireless Market

By Ian Fogg (bio, recent research)

Updated Tuesday, February 10 - Apologies to readers for a draft post ending up live on the site. The version below is now the correct, finished, version. Because of the publishing problem that hit me yesterday here, I posted this entry on my personal blog first. You may wish to subscribe to that blog as well although it normally has a different focus.

Today, Amazon announced a new Kindle, as the company continues its transformation from a retailer of physical goods to one that is a major digital content (music, books, video) and Internet service (e.g. S3) company.

Few notes:

Amazon's strategy is extremely US-centric, unlike their traditional retail reach. By choosing to include a US-specific mobile phone radio under the bonnet -- the so-called Whispernet that is used to download books without a PC -- Amazon limit their global presence. If Amazon wished to create a foundation for a global strategy then Amazon, like Apple, should have used a GSM/UMTS mobile phone radio. Now, Amazon must release different hardware if they want to offer Kindle in Europe or most of Asia. For consumers, this decision decision hits the product's convenience: Kindle will only download books in the US, and in the future perhaps a few select countries that happen to use the same mobile technology, such as South Korea and parts of South America.

Kindle demonstrates how mobile strategy is not just a telco thing. Mobile is like the Internet, every company should have a vision for where they are going and how to embrace, partner, or compete, with the mobile market and players.

Amazon has become a device company, and is no longer purely a content play. Kindle is a combined content / hardware business models. What Amazon is selling is content: The latest books, supplied for the relatively low cost of $9.99 for bestsellers. But to sell that content they have become a device company.

Surprisingly, Amazon have not leveraged other ebook companies that they own. Mobipocket supplies both free ebook software and sells ebooks protected by DRM. But to date, Kindle ebooks are not compatible with Mobipocket software. If Amazon does offer ebooks on mobile phones, which was reported on Friday before the Kindle announcement, then Mobipocket will be a core part of Amazon's toolbox. Syncing reading position between multiple devices -- Whispersync, announced today -- will certainly help Amazon in offering a great complementary service, i.e. a consumer will be able to use both Kindle and a mobile phone in tandem. Additionally Amazon own Booksurge, which is a an electronic self-publishing company, and yet are not fully exploiting Booksurge via Kindle.

Amazon's exclusive on a new Stephen King story will test the robustness of Kindle's DRM content protection. As the content is only available on Kindle, if it suddenly appears online on one of the piracy websites then that DRM has been broken. It will only take one person to break the DRM for numerous people to download a pirated version.

2009 Mobile Trends

[Posted by Thomas Husson]

Since this is my first post here, let me begin with an introduction: I’ve worked at JupiterResearch – now a division of Forrester – for four years in the Paris office - after having spent 6 years in the marketing division of a mobile operator. During that time my research has focused primarily on mobile consumer services: mobile Internet, mobile content, mobile media and marketing, mobile messaging. I joined Forrester via their acquisition of Jupiter in July 08, and I’m excited to join the Forrester Consumer Product and Strategy team.

Since this is prediction time, I'd like to highlight some of the key trends likely to happen in the mobile space in 2009:

1) Tough economic conditions will dominate the European consumer mobile landscape in 2009

- Longer handset renewal cycles. Several handset manufacturers expect a decrease in sales (-5/6% in volume globally according to CEOs of Nokia* and Sony Ericsson). In a recent Forrester consumer survey, 63% of US consumers said they would be less likely to buy a smartphone in today's economy.

- Majority of consumers will focus on voice and SMS. Mobile entertainement (TV, games, music) considered as non-essential will be more difficult to promote by consumer product strategists. Few consumers were anyway ready to pay for those services. This will foster the transition towards ad-funded business models and towards the integration in voice/data packages.

- Minority of consumers will continue to be interested in new mobile services. The net result will be a greater polarization of the market between early adopters / innovators and the mass-market. Mobile services will continue to grow and to generate revenues but may take longer than expected to reach critical mass beyond geeks, business users and the younger generation.

- Starting from a low base, mobile advertising will continue to grow but will not generate significant $. There are several barriers to be removed for mobile advertising to really take off: regular and sticky audience of mobile services, education of advertisers and agencies, independent and certified measurement tools...and lack of budgets. In a recession, ad budgets will be tight and it will be tougher to allocate significant budgets for mobile in the overall media mix.

- Operators will have to reduce costs and could postpone network investments. That happened in the previous crisis (early 2000s) and may delay the launch of LTE and of Fiber (in the fixed space).

2) Regulation issues will be all the more important that new entrants will gain ground. Disruptive forces and innovation will open new opportunites particularly around web/mobile convergence

- the growing importance of regulation for operators is linked to the launch of new technologies and to the arrival of new entrants in the mobile space:

The mobile sector is increasingly dependent on political and regulation issues: pressure from the EU on roaming tariffs, decrease in termination rates, FTTH regulatory environement, pressure on environmental issues, new taxes on smartphones, convergence with media players...

This is not new and was highlighted in 2008 by 3 major facts: Apple's disruptive potential in the smartphone market, Android's launch from the largest online ad player coupled with the FCC auctions. In numerous countries, there are lots of open questions as how to best allocate spectrum and the digital dividend, to grant 3G licenses or to simply provide a legal framework for media companies and telecom players to work together.

- the good news is that innovation will create the building blocks for a mobile 2.0 ecosytem:

Online/web developers are only really starting to be interested in the mobile space and this will change the pace of innovation and the quality of execution.

A flow of innovation is taking place with integration of location into services, with widgets, mash-ups and mobile applications, greater avaibility of full-web browsers, more relevant mobile search, expansion of online social networking into the mobile space, mobile transactions...

Of course, such an innovation will not happen in one year but despite the economic downturn, this revolution will happen. The question is not if but when? And the current answer is probably a bit later than initially hoped or expected by some vendors.

If you want to know more about Forrester predictions, see the "Top European Consumer Mobile Predictions" report from my colleague Pete Nuthall.

For a more detailled and personal take, have a look at my own blog here.

For consumer product strategy professionals, I think it implies the following:

1) look at historical data and facts of the previous recession (2001-2003) but bear in mind, this crisis is likely to be different for the tech industry.

2) listen to your customers TODAY. More than ever, consumer survey will be of great help to better understand consumer behaviour and fine tune product launches. In this regard, worth having a look at Paul Jackson's report: "Consumer Spending in An Economic Recession".

3) work more closely than ever with the financial team when promoting big product strategy decisions. Business plans will be challenged.

* Updated January 25th: Nokia is now forecasting handset sales will fall by 10 per cent in 2009, double what the company was estimating just a month ago