Ericsson has announced that it will be launching a mobile banking service that will allow users to make credit card like payments, and person-to-person money transfers. Ericsson, the world’s largest telecom vendor, expects the mobile financial services sector to become a $27.7 billion market in terms of revenues by 2015.
According to Ericsson more than 1 billion people around the globe have mobile phones, many of whom don’t have a bank account. Ericsson wants to enable these 1 billion users to carry out person-to-person transfers and other financial transactions via their mobile devices.
The system in the beginning will be a competitor to services offered by Western Union and MoneyGram, but the long term objective is to have it as a viable alternative to credit cards. Ericsson estimates that person-to-person mobile financial transactions would reach 600 billion euros, with revenues around 20 billion euros ($27.7 billion) by 2015.
According to Semir Mahjoub, Head of Ericsson’s Money Services:
Different estimates we have done … indicate that the value of revenues from financial services over mobile channel will be around 20 billion euros in 2015. We expect to have a reasonable share of this market.
Ericsson has currently been working with banks to provide such a service in Europe. But since banks are not as pervasive as mobiles, Ericsson was unable to build a truly global cross-border financial service. Ericsson will now partner with mobile operators that have been using Ericsson’s telecom infrastructure to roll out its service.
Ericsson aims to leverage its global reach to capture a large portion of the market. According to Mahjoub:
Given our global presence, which is our main asset in this case, we are working with mobile operators and delivering similiar systems to them already, we hope to be able to capture a reasonable share of this market. There are not many other companies that will be able to do this on a global scale. There will be others, but not many.
Ericsson is also likely to face competition from mobile vendors like Apple that are planning to offer similar services of their own. Apple will be including NFC (near field communication) technology in the upcoming release of iPad 2 and iPhone 5. NFC allows devices to communicate with each other when they are in certain proximity. The inclusion of NFC in iPhones will allow users to use them as electronic wallets or virtual credit cards.
Google’s Android, Samsung’s Nexus, and Nokia’s devices already support NFC technology and hence are fully capable of offering their own mobile financial service.
Given the size of this market, we expect to see a lot of activity in this space, so stay tuned.