Mobile Your Life : A Mobile Payment Solution For SK By Wang Chen, School of Economics and Management Ma Linian, School of Economics and Management Li Gang, School of Economics and Management
Nov 16, 2014
Mobile Your Life :A Mobile Payment Solution For SK
By Wang Chen, School of Economics and Management
Ma Linian, School of Economics and Management Li Gang, School of Economics and Management
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Outline
New competition situation of China Telecom Industry
1.11.1
The change of telecom operators’ income structure
1.21.2
The trend of the service evolution
1.31.3
Mobile payment is a smart choice for China Unicom
1.41.4
SK has mature operation experience
in Mobile Payment
1.51.5
Transportation and micro-payment is
Feasible and Potential for China Unicom
2.12.1
Description of Transportation card
service
2.22.2
Description of Micro-payment service
2.32.3
Criteria of choosing a long-term profitable
strategy
3.13.1
Market plan of the strategy
3.23.2
Strategy for Phase 1, 2,3 in details
3.33.3
Establish commercial alliance
to provide total mobile financial
service for subscriber
Establish commercial alliance
to provide total mobile financial
service for subscriber
Goal
Why is Mobile payment? Why is Mobile payment? What is Mobile payment? What is Mobile payment? How to Mobile payment? How to Mobile payment?
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1.1 New competition situation of China Telecom Industry
Before the reform After the reform 3G Brand & Network license
TD-SCDMA
WCDMA
CDMA2000
Brand&
Tech
Brand&
Tech
Market Share
of income
Market Share
of income
Market Share
of mobile subscri
bers
Market Share
of mobile subscri
bers
Source : Information and Technology Industry Department of PR. China
After the reform of telecom industry, China Mobile still seize the dominant position, although TD-SCDMA has some disadvantage comparing with WCDMA and CDMA2000.
launching 3G service, all the operators release their 3G brands and try to create their advantage in the 3G service. Specially for China Unicom, it launch its 3G brand as “WO” as last one.
13.84% 11.68%
24.83%
49.64%
中国联通 中国网通 中国电信 中国移动
20.67%29.05%
50.27%
中国联通 中国电信 中国移动
29.70%
70.30%
中国联通 中国网通 中国电信 中国移动
22.00%7.70%
70.30%
中国联通 中国电信 中国移动
Fixed operator
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1.2 The change of telecom operators’ income structure
Source : Annual report of CMCC, Vodafone, Verizon, Ericsson business consulting technology.cgap.org
With 3G coming, Data service and Value-Add service seize more and more important place in operators’ service structure and contribute more and more in the income structure;
With the price of voice service falling, the operators will more and more depend on VAS to keep income increasing.
24.51%39.00%
50.58%59.78% 66.63%
2007 2008 2009 2010 2011
Global VAS Per forcast
16.70% 17.00%18.50%
2005 2006 2007
VAS Per of vodafone
21% 24% 26% 28%
2005 2006 2007 2008
VAS Per of CMCC
11.80%16.90%
21.70%
2006 2007 2008
VAS Per of Verizon
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1.3 The trend of the service evolution
• Basic mobile communication demands for all users
• Diversified and personalized communication demands
– voice->IVR->KARAOK
– Comprehensive communication demands,
– communication->terminal->individual communication solution
• Extension of life demands
– Demands are integrated horizontally, for instance, communication->entertainment->commerce
– Relevant extension, for instance, individual->family->friends
Customer’s diversified demands
• Voice services
• Short Messaging Service
• Standard services
• Value-added services
• Personalized services to segmented market+ standardized services
• Personalized comprehensive services
• Personalized services + relevant value-added services
Individual users have gradually showed their interests in comprehensive services.
The trend of differentiation demands on mobile communications is growing more and more intenseBasic
servicesValue-added
servicesComprehensive and converged services
Cu
sto
mer V
alu
e
Exte
nsio
n
China Mobile operators are evolving to offering comprehensive services
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1.4 Mobile payment is coming! Cooperating with SK is a smart choice for China Unicom
According to AC. Nielsen’s recent report, over 80% consumers in China wish the transportation IC card, credit card and other payment tools integrated in the mobile phone.
China Mobile has started the trial mobile payment service in Hunan province
Mar 2009,CMCC launched its ”Mobile transportation IC card” as a trial in Hunan province. The IC card is integrated in the mobile phone and could withdraw from subscriber’s mobile phone account and bank account;
CM announced, during the 2010 world expo, CM will supply mobile payment service and consumers could pay the ticket over the phone.
China Telecom developed micro-payment service for its 3G mobile phone
Dec 2008, China Telecom cooperated with a IC card company in Nanjing, to develop the micro-payment service for surfing , which is China Telecom’s 3G brand;
In 2008, China Telecom (fujian division) cooperated with banks launched transfer payment and pubic fee through fixed network.
Apr 2009, China Mobile announced it would cooperate with shanghai public transportation card company and fudan micro-electric to research NFC chip integrated with transportation card on mobile phone, and consumer could buy the mobile phone integrated the chip or paste the chip on the shell
SKT has comparative long time experience on running the mobile payment service, and a comprehensive service solution;
For China Unicom, 1.Last one to join in the mobile payment competition. 2.developing a new service will take quite a long time All above facts will make CU in a very bad position,
so cooperating with SK is a smart choice.
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1.5 SK’s comprehensive mobile payment solution and mature operation experience in Mobile Payment
Source : technology. cgap. org, www. catr. cn
2001.09,Moneta Card launchedMoneta cards were launched as a chip-embedded credit card and were initially co-branded by Visa and issued by five major domestic credit card companies and banks.
2001,A mobile cash product LaunchedNEMO (Network + Money), a mobile cash (m-cash) product which was launched alongside nine major Korean banks and was subsequently rebranded Moneta Cash
2002.11, Moneta Cash launchedMoneta was launched as a mobile wallet application that allowed customers to make proximity (in-store) payments through several mechanisms
2003.08,Moneta expanded to online payment SKT has expanded its Moneta payments services from the merchant proximity payment service (Moneta Card) to online payment services
2003.12, Moneta had a wide access baseSKT placed 400,000 merchants to be able to accept Moneta payments, which represents about 75% of all payment points in South Korea
2007.02, Moneta has a wide customer baseMoneta had 1.5 million registered users in Korea, and 80% of new 3G capable phones had the credit card functionality enabled
2001 2002 2003 2007
2003.03Transportation Pass Launch
2005. 01Membership Shopping Mall Launch
2005
9 : SKT’s Moneta has over 9 years operation experience in mobile payment field 15 : Moneta signed with 15 banks in Korea to provider a total financial service 300,000 :it will increase 300 thousand handset available for Mobile payment per month in Korea
For SKT, it has comprehensive mobile payment solution and mature operation experience. SK could make use of its advantage as complete as possible, through cooperating with China Unicom.
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Outline
New competition situation of China Telecom Industry
1.11.1
The change of telecom operators’ income
structure
1.21.2
The trend of the service evolution
1.31.3
Mobile payment is a smart choice for China
Unicom
1.41.4
SK has mature operation experience in
Mobile Payment
1.51.5
Transportation and micro-payment is
Feasible and Potential for China Unicom
2.12.1
Description of Transportation card
service
2.22.2
Description of Micro-payment service
2.32.3
Criteria of choosing a long-term profitable
strategy
3.13.1
Market plan of the strategy
3.23.2
Strategy for Phase 1, 2,3 in details
3.33.3
Why is Mobile payment? Why is Mobile payment? What is Mobile payment? What is Mobile payment? How to Mobile payment? How to Mobile payment?
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2.1 Transportation and micro-payment is Feasible and Potential for China Unicom
Source : chip.moneta.co.kr
The MONETA card is a service that enables you to conveniently and safely pay for items and services by means of a chip attached to your cell phone that contains all the functions of credit, transportation, membership and cash cards.
Stability
Convenient
Unity
Transportationcard
Micro-payment
Feasible and Potential Application for CU
1. High Consumption FrequencyConsumers involve the service repeatedly in daily life
2. Large Number of Access pointsThere are already large scale of access points spreading in the main cities
3. Easy to accept consumers has the severy deal is on a small amount of money
Criteria for CU to choose application at the beginning Criteria for CU to choose application at the beginning
Convenient
Do away with complicated payment processes by just touching the back of your mobile phone to a dongle in the same way you use a transportation card.
Stability
Unlike regular plastic cards, IC chips cannot be counterfeited, altered or copied.
Unity
One single chip handles all the functions of a credit card, e-cash, transportation card and membership card.
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2.2 With public transportation investment increasing, transportation Card is booming in the main cities of China
•Beijing
Regions Start Time Application Scope
2000.10.23 •Bus, metro, rent, park tickets, car parks, public telephones, supermarkets
•Shanghai 1999.05.25 •Bus, road charging, parking, gas stations, public utilities pay
•Guangzhou 2001.12.01 •Bus, ferry, metro, telecommunications, small business payment
136 cities nationwide have set up the transportation IC card system, issuing more than 100 million cards. Non-uniform standards lead to difficulties in interoperability.
Situation in China
The transportation cards’ number will continue increasing fast in the future, and will enter non-transportation scope, such as utilities and micro payment, etc.
25
11
20
Unit: Million
Accumulated number of card in Beijing
transportationtransportation Micro-payment
8.0
17.0
25.0
Unit: Million
2006 2007 2008
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2.3 Rapid growth of retail sales and chain stores make a wonderful preparation for mobile micro-payment service.
Rapid growth in Retail Sales
–Total retail sales of consumer goods was 10,848.8 billion Yuan, up 21.6 percent on 2007
–The growth rate was more faster than GDP growth rate.
Chain Sales of More Rapid
Growth
–2007 "China Chain hundred" sales exceeded one trillion Yuan to 1002.2 billion Yuan, an increase of 21%, higher than the total retail sales of consumer goods increase by 16.8%.
–Total stores number of 105,191, an increase of 58%, excluding extraordinary development of individual enterprises factors, the adjusted 17 percent increase in stores number.
Rapid growth of total retail sales especially the rapid development of Top 100 chain sales have made a wonderful preparation for the promotion of mobile micro-payment service.
transportation Micro-paymentMicro-payment
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2.4 Convenience store is the best choice for micro-payment as target group to cooperate with at the beginning
2211 Potential Divers for Market Adoption
Department Stores
Exclusive Retailers
Super Markets
Convenience Stores C1 C2
C3 C4
Total 3.26 4.66 3.02 4.0
Consumption Frequency 40% 4 5 3 4
Branch Number 30% 4 5 3 3
Consumer Number 30% 3 4 4 5
Business willingness 40% 2 4 2 4
Consumer attitude 60% 3 5 3 4
Key Factors for Evaluation Weight C1 C2 C3 C4
Capability 60% 3.7 4.7 3.3 4.0
Acceptability 40% 2.6 4.6 2.6 4.0
5
4.5
4
3.5
3
2.5
2.5 3 3.5 4 4.5 5
Cap
ab
ilit
y
Acceptability
C1
C2
C3
C4
High Consumption Frequency– Improving settlement efficiency
Large Number of Branch– Highlight the convenience of mobile
payment Numerous Consumers
– Conducive to large-scale promotion
The Analysis Matrix Of Options
33 Convenience Store is the Best ChoiceConvenience Store is the Best Choice
transportation Micro-paymentMicro-payment
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2.5 Cooperating with 7 companies covers 3 main economics developed areas in China
Company NameCompany Name SummarySummaryScaleScale
5000Under the Division of China Petroleum & Chemical Corporation , who have long-term relationship with SK
More than 2000
Belong to Don guan Sugar & Liquor Group Holding
More than 1200
Subsidiary of Agribusiness Super mart Group Co,. Ltd
590 Shanghai, Beijing and Guangdong stores managed by the three companies
More than 300
Co-management by Rosen Co., Ltd. from Japan and Hualian (Group) Co.,Ltd
More than 200
Belong to Hong Kong's best holding
313 Run by Wu-Mart Group
transportation Micro-paymentMicro-payment
The companies below are selected as target group to cooperate
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Outline
New competition situation of China Telecom Industry
1.11.1
The change of telecom operators’ income
structure
1.21.2
The trend of the service evolution
1.31.3
Mobile payment is a smart choice for China
Unicom
1.41.4
SK has mature operation experience in
Mobile Payment
1.51.5
Transportation and micro-payment is
Feasible and Potential for China Unicom
2.12.1
Description of Transportation card
service
2.22.2
Description of Micro-payment service
2.32.3
Criteria of choosing a long-term profitable feedback strategy
3.13.1
Market plan of the strategy
3.23.2
Strategy for Phase 1, 2,3 in details
3.33.3
Why is Mobile payment? Why is Mobile payment? What is Mobile payment? What is Mobile payment? How to Mobile payment? How to Mobile payment?
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3.1 Cooperating with China Unicom ensure a long-term profitable feedback from mobile payment
Profitability Short term: Investment
recovery, Mid-term: Sustainable
and stable cash flow Long term: Maintain
business innovation
Global Strategy MVNO: Ensure MVNO
success in china Service carrier:
Transformation from telecom carrier to data value-add carrier globally.
Market Potential First-mover advantage
establish leader role. Test data service in China
and prepare patting more application in china
Brand Position SK as a
comprehensive operator , mobile payment total solution provider and expert in china.
Goals
Strategy 2: Equipment SupplierStrategy 2: Equipment Supplier
Supplier: Integration Solution, terminal. Maintenance: System and terminal update.
Strategy 1: Cooperate with China Unicom Strategy 1: Cooperate with China Unicom
Become one participator and operator in order to ensure the position in china.
Focus on development and introduce more and profitable value-add service.
3.Goals Analysis
Details 1 2 3 4 5
Score
Profitability
Short term
Mid-term
Long term
GlobalStrategy
MVNO
Transformation
FMAMarket
Prepare
Brand
Criteria
1.Goals
2.Strategy option
Conclusion:Statery1 : Cooperate with China Unicom is one absolute advantage option, which will ensure SK a long-term profitable feedback and SK should take it.
Influence on customer
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3.2 Through 30 months market plan, establish a commercial alliance to provider total mobile financial service
Phase 1Phase 1 Phase 2 Phase 3Phase 3
We introduce a 30-month market plan to implement Strategy 1; The market plan consists of 3 phases and includes hard system and soft system.
Hard system
Soft system
Phase Description
Phase target
Start 6th month 18th month 30th month
As the first phase of whole market plan, main task in this phase is to establish a good consumer base.
Layout the terminal and mobile phone design
Produce customized terminal and mobile phone
Establish the MIS for payment
Establish the long-term cooperation relationship with China Unicom
Sign the transportation card company in Beijing for trial
Launch promotion campaign
Cooperate with China Unicom and launch a trial operation in Beijing with transportation card
During this phase, Moneta should spread its brand influence and extend from transportation area to Micro-payment area Release more new mobile phones
Develop the terminal for Chain store
Improve the MIS compatibility
Sign the convenience store as the micro-payment service partner in Beijing and Shanghai
Establish brand influence in the trial city ,Beijing and Shang
Establish Micro-payment service network covering the trial city, Beijing and Shanghai, and achieve the consumer’s trust
At the base of consumers’ trust, Moneta could try to provider comprehensive personal mobile financial service for consumers Combine the MIS with
commercial banks for trial
Build credit evaluation system for financial service
Negotiation with commercial banks and sign with profitable one
Extend from the trial city to the economics developed area of China
Establish the commercial alliance with the SME and commercial banks
Establish commercial alliance to provide total mobile financial service for subscriber
Cooperate with transportation card company
Cooperate with commercial banks
Cooperate with convenience stores
Hard system: the hardware for mobile payment Soft system: the relationship to support mobile payment
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3.3 Proposed strategy of Phase 1: cooperate with transportation card company
22 Strategy partner: Beijing Public Transport, Ltd.(BPT)
General Description
As of the end of 2006, BPT has a fleet of 25,409 operating vehicles of various kinds, plying 800 bus routes with an annual mileage and passenger trips topping 1.57 billion km and 389 billion respectively.
About transportation card
From 2007, started to operate transportation card
Accumulated 2 million cards sold
89 recharge stations for card around Beijing
11 At very best, SK should establish a the long-term cooperation relationship with China Unicom.We suggest SK establish an joint venture company with CU to operate mobile payment business.
Cooperate with BPTCooperate with BPT
SWOT analysis for cooperating with BPT
Strength & Weakness Directly gain BPT’s huge consumer base and terminal
Technical comparatively simple to develop
As enlarge investment in public transportation, BPT has a further developing ability
Since BPT is a state-owned company, policy risk is relative high
Since BPT is monopolized in Beijing, it has very strong negotiation ability
33
Opportunity & Threat
Through establishing good relationship with BPT, SK could extend to Beijing Subway, even the whole transportation network covering Beijing.
CMCC and China Telecom also want to access the transportation card market, and they already move ahead in the field of mobile payment.
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3.4 Proposed strategy of Phase 2: cooperate with convenience store
11 Selected convenience store:
Wu Mart Convenience Store
Advantage Since it is built with the sino-pec gas station, Yijie convenie
nce stores have a wide covering scope; SK already has long-term relationship with sino-pec, which
is parent company of Yijie.disadvantage Since built with gas station, the location of Yijie is not conc
entrated in resident area or CBD; The consumer of Yijie is too focused on the drivers, but less
divers than regular convenience store.
Advantage
Wu mart is focused in Beijing retailing market, and has
great brand influence in Beijing;
Since Wu mart not only has convenience store, but
also has super market, this help SK extend to bigger
retailers easily.
disadvantage
Since there is no dominant retailer in Beijing, so Wu
Mart as a competitor only could cover most area of
Beijing.Proposed strategy of Phase 222
Location: from Beijing spread to the North China and from shanghai to South China;
Promotion: implement cross subsidizing policy The Yijie could make it gas card users move to Moneta subscribers Wu Mart could promotion with coupons
Yijie Convenience Store
--1919- -
3.5 Criteria and Factors impact on option analysisIn
tern
al cap
ab
ilit
yExte
rnal
Ten
den
cy
Criteria Description Comments
PolicyPolicy
Informa-tionization
Informa-tionization
ServiceCapability
ServiceCapability
CustomerScale
CustomerScale
Interest onMobile
Payment
Interest onMobile
Payment
Mobile PaymentStatus
Mobile PaymentStatus
Government policy on mobile payment Government policy on share bank stock
Digital bring more convenient and customer perception.
Data communicate with partners.
Whether launch Mobile payment Mobile payment biz category Mobile operation status
Due to its security and impact on currency. Comes from many departments. Depends on bank’s type.
Short term biz development-trend Mobile operation strategy: cooperation or self
development
Biz-Branches, ATM, cover area Operational capacity
Total customer size Customer concentration in big cities.
Digital solution capability ensure business implementation and drive application innovation .
Service window conducive to business achievement and innovative.
Efficient operation capacity upgrade consume desire.
Display potential scale and decide the original city reference customer concentration.
Consider cooperation willing and possibility.
Check mobile payment will, possibility and mode to decide the partner.
--2020- -
3.5 In phase 3, China Merchants Bank is the very best partner to choose
China Merchants Bank is the very best partner for this business.
EXTERNAL INTERNAL TENDENCYEXTERNAL INTERNAL TENDENCYAlternative
PolicyInforma-
tionizationService
CapabilityCustomer
ScaleInterest On
Mobile PaymentMobile Payment
Status
SummaryStated-owned banks hard to cooperate due to government strict policy.Citi Bank and SK set up Mobile Money Ventures Co. in US, and it’s a candidate in future.
Beijing Bank
matching
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3.6 Establish commercial alliance to provide total mobile financial service for subscriber
IT industry
Financial industry
Retail industry
•Mobile phone banks
•Mobile phone securities
•Mobile phone payment
•……
•Mobile order•Mobile phone
Payment•……
•Mobile phone TV
•Mobile phone broadcast
•……
Media industry
Entertainment industry
Mobile Carrier
•KAKAOK•Ring and
image download
•……
•Group customers
•solutions•……
Security: Transaction security and keep customer information security order to prevent fraud and information leakage.
Convenience: Provide customers easy and comfortable life environment.
Integration: Businesses, functions even price integration in one solution.
Economy: To create an Scale effect through the price advantage.
Security: Transaction security and keep customer information security order to prevent fraud and information leakage.
Convenience: Provide customers easy and comfortable life environment.
Integration: Businesses, functions even price integration in one solution.
Economy: To create an Scale effect through the price advantage.
Teamwork: Business Ecosystem need all the related members involving and close co-operation.
Terminal: Perfect support businesses, and promote new application innovation.
Focus on customer: To increase the customer value as the business core and Purpose.
Teamwork: Business Ecosystem need all the related members involving and close co-operation.
Terminal: Perfect support businesses, and promote new application innovation.
Focus on customer: To increase the customer value as the business core and Purpose.
Financial Business character Financial Business character Financial Business Key-pointFinancial Business Key-point
To foster a carrier
dominated and
cooperated with banks
mobile communication
eco-system together
with non-
communication
industries to occupy
customer value at
maximum.
Thank You!
Contact: [email protected]@[email protected]