Can Mobile Banking Hit 25% of U.S. Homes by 2017?

Is it plausible that there could be 109 million mobile banking users in 2017? Yes, using some optimistic assumptions.

Is it possible 25 percent of all households could be using mobile banking in 2017? Yes, using some perhaps optimistic assumptions.

If you assume there are about 135 million households in existence and that adoption mirrors the adoption of online banking, then 25 percent household adoption is possible.

If adopted as fast as online bill paying was, though it is likely mobile banking adoption will be lower than 25 percent in 2017.

Mobile banking adoption is highly driven by the number of younger consumers, the number of bank accounts they might use and the percentage that will choose to use at least one mobile banking feature, such as checking a balance or transferring funds.


If you assume 90 percent of consumers have bank accounts, and that 80 percent of Millennials, 60 percent of Gen X consumers, 40 percent of Baby Boomers and 20 percent of all others use mobile banking, then some 109 million consumers could be using some form of mobile banking.  According to netbanker, 25 percent of U.S. households will use mobile bank access by about 2018, based on the adoption curve for online banking from 1995 to 2005.


source: netbanker

                      Mobile adoption
         Est. pop       2012 2017   Banked  Total Mobile Bankers
Gen Y    75,000,000      39%  80%     90%    54,000,000
Gen X    40,000,000      28%  60%     90%    21,600,000
Boomer   75,000,000      15%  40%     90%    27,000,000
Senior   35,000,000      8%   20%     90%     6,300,000
        225,000,000                         108,900,000

source: http://snarketing2dot0.com

13% of Mobile Payments Users in India, Kenya, Indonesia, Ghana, Nigeria Received Money Using Phone

Post PC Era: Mobile Banking and Payments in Emerging Markets from On Device Research

Legacy Networks are a Problem; Sometimes You Have to Fire Your Customers

Telecom service providers are used to technology transitions, but that doesn't mean it always is easy, especially when existing customers need to be weaned off current legacy technology as an older network is shut down.

The public switched telephone network, for example, will be shut down, and replaced by IP network services, at some point. The issue is when. At that point, all end user gear and carrier switches and gear based on PSTN standards will be rendered useless.

The analog mobile network was shut down and replaced by second generation networks using several air interfaces, including time division multiplexing, code division multiple access, PDC and iDEN. Personal Digital Cellular (PDC) and iDEN. 

Now the 2G network faces its own sunset, by about 2017, in AT&T's case. 

That means users have to be encouraged to migrate off legacy protocols and onto the newer networks. 

"If you look at technology change, we have been in the IP world for a number of years, but we still have customers that are on IP/VPN, frame and ATM, but they have to go away," said Shammo. "We can't continue to invest in those networks and we can't continue to dedicate resources to that platform."

Smart Phone Owners Spend $38 Billion a year on International Calls?

Extraplating from the results of a survey conducted by Harris Interactive on its behalf, Rebtel estimates that U.S. mobile users could be spending $38 billion a year on international calls on their smart phones, annually.

Rebtel estimates that 21 percent of U.S. adult smart phone owners make international calls and spend an average of $156 every month doing so, Rebtel says.

If, according to the 2010 U.S. Census, there are 234.6 million adults age 18 or older in the United States, with 41 percent of the population owning a smart phone, and 21 percent of these people making international calls on their smartphones, then roughly 20 million Americans are spending nearly $38 billion a year on international calls on their smart phones annually.

Some might find that estimate fanciful. Visiongain calculates that in 2012 the global mobile VoIP market will see revenues of $2.5 billion.

Also, if U.S. mobile voice overall is about $120 billion, the Rebtel estimate would have international long distance comprising about 32 percent of all U.S. mobile voice revenues overall, a figure that seems unlikely.

According to the Federal Communications Commission, retained international revenues, revenues billed by U.S. carriers, less settlement amounts owed to foreign carriers for U.S.-billed traffic, plus settlement amounts due to U.S. carriers for foreign-billed traffic, amounted to $4 billion in 2009.

It is hard to reconcile total retained international calling revenues, on all networks, of $4 billiion, as reported by the FCC in 2011, with an estimate of U.S. smart phone calling of $38 billion.

Granted, it is harder these days to tally actual revenue, as more activity shifts to over the top IP mechanisms.

At some point, the estimates might be even harder to make, as mobile service providers switch from 3G networks for voice services, over to voice over LTE (voLTE), which will operate fundamentally in the same way as over the top mobile voice, the difference being the ownership of the services.

Still, the Rebtel estimate seems inflated. One has to assume that the sample was not representative of the typical base of smart phone users, or that respondents somehow misunderstood or inaccurately recalled their international long distance spending. 

Maybe I am misreading the FCC data. Or perhaps the FCC data isn't capturing mobile calling data. But the numbers do not add up.

What's Value of Mobile Payments for Retailers?

For mobile payments and wallets to get wide retailer support, the value proposition has to be quite clear, since it is merchants, almost alone among ecosystem participants, for whom mobile payments means spending money (upgrading point of sale systems and software), not getting it (consumers might get rewards, processing networks and issuing banks protect transaction fee revenue).

Access to consumers' shopping habits is probably the biggest long term value, though some might expect lower transaction costs that will offset the costs of upgrading point of sale systems to accept mobile payments, in some cases.

"Who's buying, what the market segments are, where they are, what kind of things they're buying and how the information that's captured at the point of sale can be leveraged for things like offers, loyalty, rewards, and that kind of thing" is the value, according to Bill Maurer, who runs the Institute for Money, Technology and Financial Inclusion at U.C. Irvine, according to.Money Morning.

That would allow creating the sort of recommendation engines that Amazon and Netflix use to create context and shopping suggestions.

How the Internet Has Changed 2002 to 2012

Which is the Bigger Cloud Opportunity, Business Process or Software "As a Service?"

It isn't clear whether software as a service or "business process as a service" is the biggest cloud computing opportunity. Gartner has in the past argued that SaaS is the biggest opportunity. But Gartner now seems to believe BPaaS is the single biggest opportunity.

"Major trends in client computing have shifted the market away from a focus on personal computers to a broader device perspective that includes smart phones, tablets and other consumer devices," says Steve Kleynhans, Gartner VP. "Emerging cloud services will become the glue that connects the web of devices that users choose to access during the different aspects of their daily life."

To be sure, there also are ramifications for enterprise users as well as consumers. And that explains the huge interest in cloud computing, on the part of service and application providers.

Still, most of the revenue upside appears likely to accrue to hardware and software suppliers, according to a Morgan Stanley analysis. In the telecom space, the analysts expect key winners to include Rackspace, Equinix and competitive local exchange carriers and metro bandwidth suppliers.

Also, pubic cloud computing is likely to reduce traditional telco enterprise service revenues. Morgan Stanley further suggests that among IT decision makers, the large telcos remain behind Amazon and others in terms of “cloud mindshare.”

How much overlap there is between hosting and cloud computing services is an important issue for service providers. At one level, hosting is about server real estate and amenities. But cloud computing is about some other things, namely rental of computing cycles and storage, rental of operating systems and platforms, and rental of actual business apps.

Though service providers have embraced the hosting business and content delivery networks as “valued added parts of the transport and business,” it remains unclear how far they might ultimately go in the core cloud computing business.

The increasing number of devices used by any single consumer to access and use cloud computing resources means more access revenue, to be sure.

Gartner predicts that, by 2014, the personal cloud will replace the personal computer at the center of users' digital lives. That implies heavy and growing need for broadband access.

What also is clear is that service providers now see content delivery networks and cloud computing as new business opportunities, with ramifications for enterprise users as well as consumers. And that explains the huge interest in cloud computing, on the part of service and application providers.

Still, most of the revenue upside appears likely to accrue to hardware and software suppliers, according to a Morgan Stanley analysis, even as enterprises start to shift workloads to cloud approaches.

According to the Morgan Stanley survey, 79 percent of information technology workloads are running at on-premise data centers today, but over the next few  years, respondents expect that only 64 percent of workloads will run at in-house data centers.

What’s more, 51 percent of respondents are running their entire infrastructure on premises today, but in three years some 70 percent of companies will have moved at least some workloads to managed hosting or public cloud environments, including infrastructure as a service, (IaaS), platform as a service, (Paas) or software as a service (SaaS).

That does not mean each of those ways of “doing cloud computing” represents the same amount of potential revenue for suppliers of the services. In the relatively near term, software as a service probably will represent most of the actual revenue for suppliers of cloud computing apps and services.

In fact, one might ask whether, on a global basis, cloud computing will be a significant revenue driver for anything but software as a service. According to Forrester Research, for example, by 2020 SaaS might represent $133 billion in annual revenue, while the other forms of cloud computing will register only in single-digit billions or low double digits.

In a similar way, some will argue that hosting and CDN services are more of a  “value add” for connectivity services, rather than big new revenue drivers for service providers, in their own right.

The issue is which cloud computing suppliers or even data centers will benefit, particularly since cloud computing services today are more logically provided by Amazon and other suppliers, not “data center” suppliers.

On the other hand, AT&T hopes to capitalize on its position as a “one-stop shop” for IT and connectivity needs. The company has said that it is already number two in hosting globally, with more than 2.5 million square feet of data center space (38 data centers, with 15 outside the US, primarily in Europe and Asia).

Verizon’s  purchase of Terremark likewise is expected to boost Verizon’s connectivity sales, not simply “hosting” revenue, especially with small and mid-sized businesses. Verizon operates 220 data centers in 23 countries, as well.

Metro fiber providers and independent hosting firms also will benefit, it is reasonable to conclude. What isn’t so clear at the moment is how much share telcos might gain in the IaaS, PaaS and SaaS business segments, which are less “real estate” plays and more “computing services” offers.

Cloud computing gets lots of attention these days in the service provider business. But it might be helpful to keep in mind that the actual amount of new revenue data center hosting or cloud computing actually will generate is likely to be modest, from a service provider perspective.

The more important angle is the “value add” for the other core connectivity solutions. Essentially, data center hosting services and content delivery networks "make the bits more valuable." And value is the antidote to commodity pricing.

The point is that although there are good reasons for service providers to see cloud computing as a viable and interesting new revenue stream, it is important to be careful and rational about the huge numbers one tends to see thrown around, related to cloud computing.

Gartner, for example, now expects enterprise spending on public cloud services to grow from $91 billion worldwide in 2011 to $109 billion in 2012, while by 2016, enterprise public cloud services spending will reach $207 billion.

That’s a substantial market, but a market with distinct segments, not all of which are easily adaptable to telco provisioning. So among the issues is the question of which of these markets are most congruent with what telcos already do.

Looking only at the segment names, it might seem as though infrastructure as a service is most congruent, and there is logic to that thought.

The largest segment, though, is “business process as a service.” Gartner says that BPaaS will grow from $84.1 billion in 2012 to $144.7 billion in 2016, generating a global compound annual growth rate of 15 percent.

BPaaS includes cloud-based enterprise processes such as cloud payments, cloud advertising  and “industry operations” such as e-commerce enablement.

In terms of revenue generated, cloud advertising is projected to grow from  $43.1 billion in 2011 to $95 billion in 2016, generating 17.1 percent CAGR in revenue growth through 2016.

Cloud payments are forecast to grow from $4.7 billion in 2011  to $10.6 billion in 2016, generating a CAGR of 17.8 percent worldwide.

E-commerce enablement using BPaaS-based platforms is expected to grow from $4.7 billion in 2011 to $9 billion in 2016, generating a 13.6 percent CAGR in revenue globally.

One might argue that payments, advertising and e-commerce are not necessarily areas where telcos have natural present advantages.

Software as a service will be a $26.5 billion market in 2016. SaaS-based applications include such functions as customer relationship management, enterprise resource planning, web conferencing, teaming platforms and social software suites, for example. SaaS-based CRM will grow from $3.9 billion in 2011 to $7.9 billiion in 2016.

Web conferencing, teaming platforms and social software suites will grow from $2 billion in 2011 to $3.4 billion in 2016. SaaS-based ERP will grow from $1.9 billion  in 2011 to $4.3 billion in 2016.
Supply chain management will grow from  $1.2 billion in 2011 growing to $3.3  billion in 2016.

Platform as a service might be just a $2.9 billion business in 2016. PaaS generally includes development environments, and also generally is the smallest of the opportunities. PaaS includes application development, database management systems, business intelligence platforms and application infrastructure and middleware.

Infrastructure as a service is forecast to grow to $24.4 billion in 2016. Gartner argues, and has the most obvious fit with competencies service providers already possess.

(IaaS) is a highly automated offering where compute resources, complemented by storage and networking capabilities, are offered to the customer on-demand, Gartner says.

With a projected CAGR of 41.7 percent, IaaS is the fastest growing of the public cloud segments. From $4.2 billion in revenue generated in 2011, IaaS is forecast to hit $24.4 billion in 2016. That includes computing services, storage and print server functions.

The computing subsegment is expected to see the greatest revenue growth globally, growing from $3.3 billion in 2011 to $20.2 billion in 2016.

The point is simply that the cloud computing opportunity is large, but also consists of segments that might be harder or easier for service providers to compete within. Very few of the cloud segments, even when using bandwidth, access and data centers, rely at the retail level on expertise in those areas.