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Global Insights

ADVANCING INSIGHTS ADVANCING COMMERCE MAY 2012

THE MOBILE PAYMENTS READINESS INDEX:

A GLOBAL MARKET ASSESSMENT

EXECUTIVE SUMMARY

MasterCard believes that a score o 60 on the MPRI will indicate that a market has reached the

inection pointthe stage at which mobile devices account or an appreciable share o the

payments mix. The most advanced market in the Index, Singapore, attained a score o 45.6.

To be ready or mobile payments, markets need to achieve a balance o high scores across

the six components that comprise the Index: Environment (economy and scale), Inrastructure

(telecommunications and technology), Regulation, Financial Services, Consumer Readiness, and

Mobile Commerce Clusters (the degree o integration and partnering among banks, telcos, and

the government).

Some global markets lead in certain components, while alling behind in others. A close reading

o the fndings reveals that most markets are still capable o being molded in the interests o

consumers looking or convenience, security, and fnancial inclusion.

THE GLOBAL AVERAGE OF READINESS FOR MOBILE PAYMENTS IS 33.2 ON A SCALEOF ZERO TO 100.33.2

While its early days or the adoption o mobile payments globally, some markets are making

progress toward attaining the right mix o market orces and consumer acceptance. Thats among

the top-level fndings o the MasterCard Mobile Payments Readiness Index (MPRI), a rigorous,

data-driven survey o the global mobile payments landscape. Using public and proprietary data,

as well as original market research, the survey gauges the preparedness and receptivity o 34

countries or mobile payments o three varietiesperson to person (P2P), mobile e-commerce

(m-commerce), and mobile payments at the point o sale (POS).

On a scale o zero to 100, the 34 countries achieved an average mobile readiness score o

33.2. No market reached a score o 50indicating there is still work to be done beore mobile

payments become mainstream. Other top-level fndings include:

No two global markets are identical; each is driven by local conditions of environment,

inrastructure, regulation, and fnancial services.

In the vast majority of markets, more consumers are currently using mobile payments

or m-commerce than or person-to-person or point-o-sale transactions.

Consumers are typically drawn to mobile payments either for access to electronic payments

(mainly in developing economies) or the convenience o mobile phone payments (in the

developed world).

Conditions on the ground, such as a stable telco network, established nancial services, andprogressive regulation, do not ensure consumer readinessthe one essential variablein any

given market.

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ADVANCING INSIGHTS ADVANCING COMMERCE2

INTRODUCTION

The MasterCard Mobile Payments Readiness Index provides a rigorous, data-drivensituation report on the status o the payments business in 34 global markets.

Specifcally, it measures these countries readiness to shit rom plastic to interactive

mobile devices. By investigating three mobile payment typesperson to person,

mobile commerce, and mobile payments at the point o salethe MPRI oers a

comprehensive view o the current state o mobile payments as well as the course

they will likely take in the near uture, both regionally and on a country level.

KEY FINDINGS

No market has progressed to the inection point o 60 on the moile

payments adoption curve. On the MPRIs scale o zero to 100, overall country

scores range rom 22.4 to 45.6, a narrow spectrum. No one country is a standout

with the possible exception o Kenyaand no one country has a monopoly on

success actors. There is opportunity in every market.

Consumer readiness is a critical success actor. The most advanced

inrastructures in the world, with responsive legal systems, mature economies, and

sophisticated technology networks, may be ertile ground, but until consumers

embrace mobile payments, that ground will remain allow. Consumer amiliarity,

willingness, and actual usage are necessary conditions or mobile payments to

take o.

Environment, inrastructure, regulation, and fnancial services are talestakes or readiness. The interplay among these market orces is as important as

the relationship between these orces and consumer readiness.

Partnerships can greatly accelerate progress. Partnerships among the

key players in the mobile payments ecosystemfnancial institutions, telcos,

governments, technology providers, and otherscan speed the commercialization

o mobile payments.

Segmentation is the key to early adoption. The path to success will likely

dier rom country to country, based on consumer segments varying degrees o

receptivity to mobile payments.

M-commerce has achieved the greatest success so ar. Signifcant consumer

experience with e-commerce is part o the reason why m-commerce is the leading

mobile payment type in most o the markets surveyed.

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The MPRI oers a

comprehensive view othe current state o moile

payments as well as the course

they will likely take in the near

uture, oth regionally and on a

country level.

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The MPRI does not rank order the 34 markets surveyed in terms o valueactual

or potential. Rather, it operates objectively on three levels. On the global level, it

oers an assessment o where the industryis and how ar it has to go in terms omass adoption o the technology. On a market level, it presents a snapshot analysis

o each countrys current situation in terms o conditions on the groundmarket

orces and consumer readinesswhile prescribing activities and initiatives to bridge

these gaps. Finally, on a conceptual level, it isolates thesuccess factors that issuers,

acquirers, merchants, telcos, device manuacturers, networks, and operating system

vendors need to consider in building mobile strategies.

METHODOLOGY

The MPRI is undamentally a data-driven Index. It includes 50 variables comprising

six components. MasterCard weighted each o these components, combining theresults to create a unitary score on a 100-point scale or each o the 34 countries.

MasterCard drew the data that compose the variables rom public sources such as

the World Bank and International Telecommunications Union, and combined them

with proprietary MasterCard data, market research, and analysis.

The Six Components

The components are a mix o quantitative and qualitative data. Five o the

componentsEnvironment, Inrastructure, Regulation, Consumer Readiness, and

Financial Servicesare in large part quantitative. The remaining oneMobile

Commerce Clustersis a more qualitative assessment o readiness.

The Consumer Readiness component is a proprietary MasterCard asset that

dierentiates the Index rom other gauges o mobile payments readiness. Rather

than ocus exclusively on technology and capability, MasterCard surveyed an

average o 1,000 consumers in each o the 34 markets regarding their amiliarity

with, willingness to use, and current usage o each o the three types o

mobile payments.

The Environment component measures economic, technological, and

demographic elements such as a markets per capita income, consumer access to

the Internet, and how well businesses adapt to new technologies.

The Financial Services component measures the level o development o

consumer fnancial services, such as how well consumers are treated by the

industry, the accessibility and aordability o fnancial services, and the penetration

rate o payment cards.

The Inrastructure component measures the breadth and sophistication o the

mobile phone industry by calibrating variables such as mobile phone penetration,

network coverage, and levels o NFC terminalization.

The MPRI is undamentally a

data-driven Index. It includes50 variales comprising six

components. MasterCard

weighted each o these

components, comining the

results to create a unitary

score on a 100-point scale or

each o the 34 countries.

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ADVANCING INSIGHTS ADVANCING COMMERCE4

The Moile Commerce Clusters component analyzes partnerships or joint

ventures among fnancial service companies, telcos, governments, and other

members o the mobile payments ecosystem. As no one entity can develop andpromote mobile payments by itsel, partnerships generally ensure smoother and

more successul product introductions.

The Regulation component assesses the structure and efciency o a markets

legal and governmental bodies in terms o how they interact with business,

particularly the communication and technology businesses.

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Kenya Canada Singapore

United States Japan

Consumer Readiness Mobile Commerce Clusters

Survey-based indicators

Familiarity with using a

mobile device to send

money to amily and

riends

Frequency o using a

mobile device to pay

or merchandise ata store

Willingness to use

a mobile device to

browse the Internet to

shop or and purchase

merchandise

Percentage o individuals

using the Internet

Household consumption

expenditure

Impact o inormation

and communication

technology on access to

basic services

Percentage o

population residing in

urban areas

Technology absorption

by businesses

Aordability o

fnancial services

Financial cards in

circulation

Financial card

transactions

Customer satisactionwith companies

Foreign direct

investment and

technology transer

Eectiveness o anti-

monopoly policy

Mobile telephone

subscriptions

Mobile telephone

subscriptions as

a percent o the

population

Annual investment in

telecom services

Revenue rom mobile

services as a percent

o revenue rom all

telecomm services

NFC-enabled merchant

locations as a percent o

the population

Scale o telco-bank

partnerships to

promote mobile

commerce

Scale o involvement

by government

groups

Intellectual property

protection

Government

prioritization o

inormation and

communication

technology

Burden o governmentregulation

Government

procurement o

advanced technology

products

Inormation and

communication

technology use and

government efciency

Efciency o legal

ramework in settling

disputes

Efciency o legal

ramework in

challenging regulations

CONSUMERREADINESS

ENVIRONMENT FINANCIALSERVICES

INFRASTRUCTURE MObILE COMMERCECLUSTERS

REGULATION

THE INTERPLAY AMONG THE SIX COMPONENTS IS CRITICAL

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Component Interaction

Examining Consumer Readiness scores in the context o the other componentshighlights the extremes o the spectrum across which the markets are arrayed.

Markets such as Singapore have highly advanced inrastructure, fnancial systems,

and regulatory structures, but relatively weak consumer willingness. Conversely, in

markets such as Kenya, the inrastructure, fnancial services, and regulatory systems

score much lower, while consumer willingness is high. Both o these markets are

in the top quintile, but neither has widespread mobile payments adoption across

all three payment types. Markets cannot develop one component and neglect the

others:Allthe ingredients are needed.

While a consumer base that is amiliar with mobile payments and willing to use them

is not the only condition needed or adoption o mobile payments, it is a necessary

one. How technologically capable a market is o developing mobile payments doesntmatter i consumers arent inclined to use the technology.

One o the strategies that the consumer research points to is the need or analyzing

consumers based on what MasterCard calls the amiliarity-willingness gap. For any

o the three types o mobile payments, the most important metric is the dierence

between how amiliar consumers are with the orm o payment and how willing they

are to use it. This method clarifes the approach mobile payments industry players

should take. For example, in a country such as France, where amiliarity is higher

than willingness across all payment types, consumers are not yet sold on the value

of the offering; product enhancement and a sharpening of the value proposition are

needed. On the other hand, in a country such as the Philippines, where willingness

is equal to or higher than amiliarity across all payment types, the situation calls or

marketing and consumer education eorts that allow consumers who arent yet

aware o mobile payments oerings to understand and take advantage o them.

While a consumer ase that is

amiliar with moile payments

and willing to use them is notthe only condition needed or

adoption o moile payments,

it is a necessaryone. How

technologically capale a

market is o developing moile

payments doesnt matter i

consumers arent inclined to use

the technology.

CONSUMER READINESS: ROOM TO GROW

P2P POS m-comm P2P POS m-comm P2P POS m-comm

WILLING USING

16 11 20 19 17 21 8 5 9

FAMILIAR

Index Average on a Scale o Zero to 100.

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ADVANCING INSIGHTS ADVANCING COMMERCE8

REGIONAL HIGHLIGHTS

Each global region exhibits its own strengths and weaknesses, and individual marketswithin those regions likewise have country-specifc characteristics that determine how

ready they are or mobile payments.

North America

Canada and the United States came close to the top o the global list, largely as

a result o high scores in components related to quantifable market orces such

as Inrastructure and Environment. Nevertheless, Canada slightly edges out the

United States predominantly on the strength o its consumer results and its Mobile

Commerce Clusters score.

The United States also has some vulnerabilities, most notably in its Consumer

Readiness scores. The dilemma conronting the United States is the same one acing

a number o other developed markets such as Australia. Although consumer scores

were by no means negligible, they skewed male and young; and while interest in

mobile payments increases with income, it declines with age. The question is: Are

young males with (relatively) lots o money a broad enough segment to ignite a

change as undamental as a shit in payment orm actor?

CANADA UNiteD stAtes

MOBiLe PHONe sUBsCRiPtiONs PeR CAPitA

Canada

Und sa

Und Kngdom

Grmany

WiLLiNGNess tO MAKe MOBiLe PAYMeNts

Canada and the United States

came close to the top o the

gloal list, largely as a result o

high scores in components related

to quantifale market orces such

as Inrastructure and Environment.Nevertheless, Canada slightly

edges out the United States

predominantly on the strength o

its consumer results and its Moile

Commerce Clusters score.

NORTH AMERICA IS AbOVE AVERAGE IN TERMSOF CONSUMER READINESS

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Latin America

In Latin America, the highest consumer scores went to Brazil and Colombia. Thesurprise here is Colombia, by no means the biggest market in the region and one

that has just emerged from a period of considerable political and social turbulence.

Nevertheless, Colombia has a consumer base that is ready and willing, though so ar

not very able, to conduct mobile payments. Colombians as a whole are slightly more

likely to have a mobile device than they are to have a debit card, which suggests that

Colombia could well be ready or a double marketing strategy based on payment

type at both ends o the demographic spectrum.

Colomians as a whole are slightlymore likely to have a moile

device than they are to have a

deit card, which suggests that

Colomia could well e ready

or a doule marketing strategy

ased on payment type at

oth ends o the demographic

spectrum.

Familiar Familiar Willing WillingUsing Using

Country Score Index Average Leading Country Score

BRAZiL COLOMBiA

CONSUMER READINESS IN LATIN AMERICA IS HIGHEST INbRAzIL AND COLOMbIA

Scale : Zero to 100

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ADVANCING INSIGHTS ADVANCING COMMERCE10

Asia Pacifc, the Middle East, and Arica

Asia Pacifc, the Middle East, and Arica (APMEA) represent the most diverseglobal region. The entire world knows about the success o M-Pesa in developing

mobile payments in Kenya. Paradoxically, it was the great disparityin Kenyas

scoresbetween Consumer Readiness and Financial Services, or examplethat

drove the market to its leading position. It was precisely the defciencies in Kenyas

banking, legal, and regulatory systems that created the demand and acilitated the

development o P2P payments.

A very dierent market rom Kenya is China, not simply in scale, but in character. In

Kenya, the development o mobile payments was almost exclusively a bottom-up

phenomenon, ueled by a pressing consumer need or a secure, convenient payment

mechanism that obviated cash. In China, the consumer base is ready or at least

two types o mobile paymentsP2P and m-commerceand the telcos are readyto oblige them. The question o fnancial services role in the ecosystem suggests a

partner strategy.

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The entire world knows aout the

success o M-Pesa in developing

moile payments in Kenya.

Paradoxically, it was the great

disparity in Kenyas scores

etween Consumer Readiness and

Financial Services, or example

that drove the market to its

leading position.

component leaders

are located in theMiddle East, Asia,or Africa

APMEA LEADS THE INDEX IN CONSUMER READINESS

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Europe

The prosperous and developed countries in the heartland o EuropeGermany,France, and Italydid not rank as highly on the Index as did other integrated

economies, both close by (the United Kingdom) and on the other side o the world

(Australia). This has nothing to do with the economic and political uncertainty currently

roiling the Eurozone. Rather, it is a result o the unique characteristics o each o these

markets payment systems and the unique profles o their consumer populations.

In Germany and Italy, consumer attachment to cash is largely reected not only in

lower-than-average Consumer Readiness scores, but in some o the market orces that

drive this lack o consumer interestor example, the high cost o banking services

in Italy.

Far more positive is the situation in the United Kingdom, where consumers show the

highest levels o amiliarity and willingness to use mobile payments in the region. For all

three payment types, the results skew male, while income levels vary among the three

payment types. Although its still early days in Europe, consumer education to reinorce

the benefts o mobile payments is necessary i they are to thrive in the region.

In Germany and Italy, consumer

attachment to cash is largely

reected not only in lower-than-

average Consumer Readiness

scores, ut in some o the market

orces that drive this lack o

consumer interestor example,

the high cost o anking services

in Italy.

MObILE PAYMENTS READINESS FACTORS IN THE UNITED KINGDOMAND ITALY DIFFER STARKLY

85%

72%

80%

54%

UnitedKingdom

Italy

Mobl phonpnraon

Counry scor indx Avrag

inrnpnraon

Paymn cardpnraon

38%

18%

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ADVANCING INSIGHTS ADVANCING COMMERCE

CONCLUSION

At the global level, some meta-themes emerge rom the MPRI that can help allplayers orientate themselves as the new world o mobile payments takes shape.

Segmentation:While each market operates according to its own dynamic, a two-

pronged segmentation strategy is beginning to take shape: The auent and mass

segments are seeking convenience while the underserved are looking or access to

electronic payments.

Partnerships:Again and again in the Index, the lack o partnerships among players

depressed scores and, more importantly, revealed correlations between the lack o

such partnerships and weak or struggling consumer demand.

Emerging and Developed Markets:The dynamics o mobile payments adoption

vary signifcantly between the developed and the emerging world. In Kenya, it was

the lack o inrastructure, environment, regulatory, and fnancial services that enabled

the success o M-Pesa. At the other end o the spectrum, developed economies such

as Italy and Germany, with everything else going or them, need to build consumer

readiness based on an understanding o the market characteristics driving their

negative consumer scores.

To beneft ully rom the MPRI, users ought to look not so much at the individual

components, but at how they ft together. Especially revealing in this regard are stark

disparities among components, which highlight opportunities to advance the cause

o mobile payments globally.

SOURCES

United Nations (2011)

US Census Bureau (2011)

World Bank World Development Indicators (2010)

International Monetary Fund International Financial Statistics (2010)

International Telecommunications Union (2010)

World Economic Forum Global Information Technology Report (2011)

World Economic Form Global Competitiveness Report (2011)

Euromonitor International (2010)

The World Bank Information and Communications for DevelopmentOnline Database (2011)

CIA World Factbook (2012)

Proprietary Consumer Research for MasterCard Worldwide (2011)

For additional insights, visit http://insights.mastercard.com and www.mastercardadvisors.com

2012 MasterCard. Proprietary and Confdential. All rights reserved.

Insights and recommendations are based on proprietary and third-party research, as well as MasterCards

analysis and opinions, and are presented or your inormation only.

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