MOBILE PAYMENTS

Now entering mass adoption phase
INVESTMENT CASE
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MOBILE PAYMENTS

 

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While the mobile payment infrastructure is now in place (NFC-enabled phones and POS terminals, various platforms such as Apple Pay), we are about to enter the second phase of growth for the theme, which is mass adoption of payment solutions by consumer.

Increasing marketing and improving ergonomics, security and value-added services (such as rewards, loyalty and couponing) should give a major boost to consumer engagement.

Mass adoption is not a question of if, but when:
 

  • the example of e-commerce says it all: despite initial concerns around security, now most consumers make online transactions,
  • new forms of mobile payments will expand the total addressable market: in-car payments and VR shopping.
     

Government incentives for a cashless society are another major catalyst: increasing number of limits on cash transactions all around the world.
 

The best way to capture this secular growth in the volume of digital payments is to get exposure to payment processors, which handle all these transactions.

 

FACTSHEET

PRESENTATION

TERMSHEET USD (Retail)

TERMSHEET EUR (Retail)

 

KIDs (MP USD Retail)   

KIDs (MP EUR Retail)   

KIDs (MP EUR Instit.)   

 
PRICE (USD)
367.34 July 29, 2021
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WHAT IS IT ABOUT?
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THE MOBILE
AT THE HEART OF DIGITAL INTERACTIONS

 

Mobile payments refer to all payment transactions made from or via a mobile device and debited either on a bank account or on a mobile operator bill.

      


TOP 5: SMARTPHONES PENETRATION

 

Source: geoba.se/usnews.com/emarketer

 

The rise of smartphones, tablets, and now wearables has driven new means of paying.

               

 

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SMARTPHONES ARE USED TO PAY,
BUT ALSO TO GET PAID
(MERCHANTS)

 

All smartphones now allow contactless payments in a simple and quick way via an electronic mobile wallet, and can also become POS terminals for merchants.

 

 

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THE FUTURE OF MOBILE PAYMENTS
IS ALREADY TAKING SHAPE

 

In-car payment solutions will allow drivers to pay for gas, toll fees or public parking without having to pull their credit card or smartphone from their pocket.

 

Payments in virtual stores are another exciting opportunity:
 

  • Consumers wearing a VR headset will soon have the ability to visit virtual stores and make purchases.
  • Alibaba recently unveiled a VR mall called Buy+ in which consumers gaze at products long enough to select them and nod their heads to buy them.
  • Amazon is said to be working on a similar initiative.

 

The seamless checkout experience (pioneered by Amazon Go) will deal a final blow to cash payments. In an Amazon Go store, you just walk in, pick the groceries you need and walk out without having to go through a checkout line. Your Amazon account is automatically debited when you exit the store. This revolutionary checkout experience is likely to be adopted by other major retailers in the future.



WHAT IS HAPPENING NOW?
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THE USER EXPERIENCE

IS THE KEY IN MOBILE PAYMENTS ADOPTION

 

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  • The biggest challenge remains the change in consumer habits. It has to be simple, intuitive and comprehensive.
  • Mobile payment requires better communication and education.
     
  • Mobile payments allow the merchant to increase the visibility on its brand, target consumers and increase loyalty services (e.g. coupons).
     
  • As illustrated by the recent success of Samsung Pay’s loyalty program, rewards/couponing are expected to be a major catalyst for mobile payments adoption.

 

 

 

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SECURITY CONCERNS
NEED TO BE IRONED OUT
 

With tokenization technologies and the emergence of biometrics, mobile payments become more secure than contactless card payments.

 

 

 

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GOVERNMENTS AROUND THE WORLD
PUSH TOWARDS A CASHLESS SOCIETY

 

To fight money laundering and tax evasion in 2014, Israel limits cash transaction between businesses to 5,000 shekels (USD 1,400) and private transactions done in cash or by check to 15,000 shekels.

In most EU countries cash payments are limited:
 

  • In 2015, France has limited the use of cash payments to EUR 1,000 from EUR 3,000.
  • In 2016, Italy has limited the use of cash payments to EUR 2,999.
  • Germany plans to impose a limit of EUR 5,000 on cash payments.
     

India demonetized some of its banknotes at the end of 2016.
 

The European Union plans to launch a service by the end of 2018 that allows mobile payments person-to-person using the mobile phone number as a proxy for the IBAN.

 

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WHICH PAYMENT WOULD YOU CHOOSE?

 

 

PERSPECTIVES
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STRONG GROWTH OUTLOOK

 

The annual transaction volume via mobile payments in 2015 was $450bn and is expected to exceed $1tn in 2019.

 

Asia Pacific and Africa are early and faster adopters of mobile payments with more than 100 million mobile payments users.

 

 

AFRICA AND CHINA ARE THE PIONEERS OF MOBILE PAYMENTS

 

Mobile Payments are a solution for providing financial services to unbanked people:

In Sub Saharan Africa, the mobile penetration in Africa is 70% but only 10% of the population have a bank account.

Payments via mobile are the faster and cheaper way to send money to family. The SMS and USSD technology is compatible with 99% of mobiles.

 

In China, under the impulse of e-commerce and due to the low use of bank cards online payment, and especially mobile-commerce, has become a reality.

 

Annual transaction volume in $Bn
Mobile Payments


Source: AtonRâ Partners, TrendForce, NFC

 

Mobile payment users by region
(in millions)

Source: AtonRâ Partners, Gartner Inc.

          

PLAYERS
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THE PAYMENT INDUSTRY:
A PRIVATE CLUB?

 

 

  • New players enter the payment industry, already benefiting from a large customer base and offering many online services: Internet and Tech giants such as Google, Apple, PayPal and Amazon are providing new mobile payments solutions.

     
  • The legacy players (telecoms, banks, card networks…) must assert themselves. The need for innovation is the opportunity to boost these institutions and offer them a new position in the payment industry.

 

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A LOOK AT THE PAYMENTS INDUSTRY
MAIN PLAYERS

 

 
 

CARD ISSUANCE
Wirecard
First Data
TSYS

   POS TERMINAL
Ingenico
VeriFone
NCR Corp		  
 
  SIM CARD, SECURITY
Gemalto
G&D
Oberthur		   ATM HARDWARE
NCR Corp
Wincor Nixodorf
Diebold Inc		  
 
 

SEMICONDUCTOR
Infineon
Samsung
STMicro

 
 
  Acquirers differ
depending on regions
(can be banks or
financial institutions)		   Some acquirers*
outsource the
processing to third
party processors 		 
 
  IN US:
First Data
Global Payments
BOA		   *TSYS
Planet Money
WorldPay
IPPay		  
 
 

TERMINAL SERVICES
Ingenico
Many regional
banks offer these
services to merchant

 

      
 
  PHONE LINE
AT&T
Sky
British Telcom		   CREDIT CARDS
Visa
Mastercard
Discover
American Express		  
 
 

INTERNET
AT&T
Sky
British Telecom

 

   DEBIT CARDS
Maestro
Visa Electron		  

 

HARDWARE AND CARD ISSUANCE
TECHNOLOGY PROVIDERS

 

  • Card issuance
    credit and debit card suppliers and
    software for banks.
     
  • Semiconductors
    at the heart of IT servers, network
    routers and smartphones.
     
  • NFC technology
    magnetic strip or EMV chips for
    bank cards.
     

Point of Sale terminals providers (PoS)

 

MERCHANT SERVICES
 

  • Acquiring services

    The acquirer : providing  the merchant  the services to accept a transaction. The acquirer will route the encrypted transaction details to the card association/network (Visa/MasterCard).

    Distribution and maintenance of PoS.

    Most large acquirers do the processing part.

  • Processors

    The technological side of payment processing: clearing and settlement.

    Acquirers, processors and POS terminal providers offer value added services to merchants:  reporting, fraud management, loyalties program, big data analysis.
     

CONNECTION
 

  • Networks
    Identify which financial institution issued the card and re-route the information to the cardholder’s issuing bank.

    Set the interchange fees.
     
  • Connectivity
    Mobile operators and internet:
    provide connectivity and data transfers.
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A LOOK BEHIND THE SCENES

 

I - BANKING DATA CAPTURE AND AUTHORIZATION

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II - CLEARING AND SETTLEMENT
 

The merchant pays to the acquirer a "merchant discount“ of  ~ 2.50%. How are these costs shared?

 

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DISCOVER THE OTHER THEMES

 

 

AtonRa Partners SA

INVESTMENT THEMES


Artificial Intelligence and Robotics
Bionics
Biotechnology
Fintech
Innovation
Mobile Payments
Security and Space
Sustainable Future

 

ABOUT US


Who We Are
Our Team
Our Identity
Our Research
Investment Approach
Solutions
Risks
Ethics

 

CONTACT US


7, rue de la Croix d'Or
1204 Geneva, Switzerland

+41 22 906 16 16
info@atonra.ch

About AtonRâ Partners: AtonRâ Partners is an asset management company, founded in 2004 with head office in Geneva, incorporated under Swiss law, duly approved by the Swiss Financial Market Supervisory Authority (FINMA) under the Swiss Collective Investment Schemes Act. AtonRâ Partners is a conviction-driven asset manager combining industrial and scientific research with financial analysis. AtonRâ Partners focuses on long-term trends powerful enough to be turned into thematic equity portfolios.

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