2013 09-02 IMP-paper Fragmentation of mobile payment market in Sweden

1. Trends Towards Fragmentation of
the Mobile Payment Market in Sweden
The 29th
Annual IMP Conference, September 2, 2013, Atlanta
Jan I. Markendahl, Associate Professor
Tatjana Apanasevic, PhD Student
Wireless@KTH, KTH Royal Institute of Technology, Stockholm, Sweden

2. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 2
Introduction
General problem:
Many mobile payment solutions, but they do not take off
Mobile payment solutions can be applied in different areas
There are a number of actors interested in these solutions
(e.g. banks, mobile operators, transport companies, retail chains, etc.)
Intence competition in each sector
All actors try to offer a separate mobile payment solution
Credit cards are very popular
Multitude of solutions leads to a market fragmentation

3. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 3
Introduction
Contribution:
Overview of different cases
Analysis of business networks in B2B2C context, and
Discussion of a market fragmentation

4. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 3
Why Sweden?
Before January 2013:
A number of mobile payment service providers
Different mobile payment solutions
The main application areas:
Transport ticketing
Retail
Parking payments, and
Person-to-Person (P2P) money transfers

5. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 4
Why Sweden?
Before January 2013:
A number of mobile payment service providers
Different mobile payment solutions
The main application areas:
Transport ticketing
Retail
Parking payments, and
Person-to-Person (P2P) money transfers
Actors:
 Banks
 Mobile operators
 Payment service providers
 SMS payment companies
 New payment providers
 Local transport companies
 Retail chains

6. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 5
Why Sweden?
Before January 2013:
A number of mobile payment service providers
Different mobile payment solutions
The main application areas:
Transport ticketing
Retail
Parking payments, and
Person-to-Person (P2P) money transfers

7. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 6
Why Sweden?
Before January 2013:
A number of mobile payment service providers
Different mobile payment solutions
The main application areas:
Transport ticketing
Retail
Parking payments, and
Person-to-Person (P2P) money transfers
A number of pilots in a test phase
Stabile ecosystems of partners (mainly in transport ticketing, parking)

8. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 7
Why Sweden?
Before January 2013:

9. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 8
Why Sweden?
Before January 2013: SMS ticket

10. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 9
Why Sweden?
Before January 2013: SMS ticket
Ticket handling:
• Issueing the
SMS ticket
• Sending it to the
end-user
• Creation of a
“virtual” ticket in a
data base
• Validation of a
ticket

11. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 10
Why Sweden?
Before January 2013: SMS ticket
Ticket handling:
• Issueing the
SMS ticket
• Sending it to the
end-user
• Creation of a
“virtual” ticket in a
data base
• Validation of a
ticket
• Management of
customer data
• End-user billing

12. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 11
Why Sweden?
After January 2013:
The Payment Service Directive – a new regulation of mobile
payment services:
The mobile operators are no longer allowed to handle payments
and transactions for non-telecom services without being
a payment provider
The payment providers need to know the identity of persons
doing the transaction
Considerable changes in the mobile payment market
New market actors

13. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 12
Why Sweden?
Research Questions:
Why do not mobile payments take off on a large scale
although the technology is here?
What is the impact of the multitude of solutions on the adoption
of mobile payments?
How are the value networks organized and what actors will take a
leading position?

14. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 13
Agenda
Methodology
Analyzed Mobile Payment Cases
Public Transport Ticketing
PoS solutions in Retail
Analysis of Results
Summary

15. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 14
Methodology

16. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 15
Methodology
Qualitative research:
Data collection:
Interviews with industry representatives before and after
the change in the law
2010–2011 – the first round of interviews and workshops with
representatives from different sectors (banking, parking, retailing, public
transportation, mobile operators, and payment providers)
2012 – the second round of interviews (≈20) with the same actors
After February 2013 (after the launch of the “new” SMS tickets for public
transportation) – ≈10 interviews (five main public transportation companies and
some of the payment and ticketing solution providers)

17. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 16
Methodology
Analysis Approach:
ARA model Actors, resources and activities (Håkansson and Snehota, 1995)
Interaction between different actors
Type of relation between end-users and providers
Identification of actor(s) that organizes the network
ARA relationships are presented as the actor-activity maps
illustrating distribution of activities and resources between actors

18. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 17
Methodology
Analysis Approach:
ARA model
Actor-activity map

19. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 18
Analysis Approach:
Activity system approach (Zott and Amit, 2010)
To analyze:
The design elements of
the business model:
• Content
• Structure
• Governance of the activities
Methodology

20. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 19
Analysis Approach:
Activity system approach (Zott and Amit, 2010)
To analyze:
The design elements of
the business model:
• Content
• Structure
• Governance of the activities
Methodology
The activity design themes:
• Novelty
• Lock-in aspects
• Complementarities
• Efficiency

21. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 20
Analyzed Mobile
Payment Cases
Public Transport

22. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 21
Cases: Public transport ticketing
SMS tickets: before February 2013
Payment service provision:
Activity splited between
mobile operators and
the transport operator
Tickets handled by agregators
Billing:
By mobile operators

23. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 22
SMS tickets: after February 2013
Payment service provision:
New actor – 4T Sweden
WyWallet payment service
Main changes:
Due to public service
procurement new actors
entered the market
Cases: Public transport ticketing

24. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 23
Cases: Public transport ticketing
Regional transportation
company
Provider of tehnological
solution
Provider of
payment solution
UL, Östgötatrafiken, etc
Skånetrafiken
Västtrafik
SL/Stockholm (got the contract)
SL (temporary solution)
Mobill
Plusdial
IPX and Plusdial
Unwire
Mobill
PayEx and OKB
WyWallet
Seamless
Samtrafiken, DIBS
PayEx and OKB

25. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 24
Cases: Public transport ticketing
Change in the market structure: before February 2013

26. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 25
Cases: Public transport ticketing
Change in the market structure: after February 2013

27. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 26
Analyzed Mobile
Payment Cases
PoS Solutions in Retail

28. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 27
Mobile payment
solution
Payment service
provider
Payment type Other parties
involved
SEQR
Bart
Payair
ME
Axfood, McDonalds
Axfood
Webhallen, shops and res-
taurants as a part of a trail in
Uppsala
Beijing8
Collector (billing)
Shops equipped with
PoS terminals
Webhallen
Point
(VeryFone company)
Cases: PoS solutions
Monthly bills
Bank account
Bank account
Credit card
Bank account
Credit card

29. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 28
Mobile payment
solution
Payment service
provider
Payment type Other parties
involved
SEQR
Bart
Payair
ME
Axfood, McDonalds
Axfood
Webhallen, shops and res-
taurants as a part of a trail in
Uppsala
Beijing8
Collector (billing)
Shops equipped with
PoS terminals
Webhallen
Point
(VeryFone company)
Cases: PoS solutions
Monthly bills
Bank account
Bank account
Credit card
Bank account
Credit card

30. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 29
Solutions linked to service accounts: SEQR
Payment service providers:
IT company (Seamless)
Payment:
- SEQR app
- QR-code based
- Separate service account and billing
Trials:
- Retail chain Axfood (380 shops)
- Five McDonalds’ restaurants (2010)
Cases: PoS solutions

31. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 30
Solutions linked to service accounts: SEQR
Payment service providers:
IT company (Seamless)
Payment:
- SEQR app
- QR-code based
- Separate service account and billing
Trials:
- Retail chain Axfood (380 shops)
- Five McDonalds’ restaurants (2010)
Cases: PoS solutions

32. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 39
Analysis of Results

33. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 40
Analysis of Results
Transport Ticketing Using SMS Payments:
The activity system content is the same (the same activities)
The activity system structure and governance have changed since
the activities are linked in new ways and performed by new actors. The
mobile operators do not participate any longer, they are replaced by
payment providers
The novelty of the design scheme is about the structure, i.e. how the
activities are linked and how they are governed
The lock-in design theme seems to be an inverted one, many users
liked the old SMS system and did not want to change it
The efficiency as a design theme is not clear, no improved efficiency
can be identified

34. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 41
Analysis of Results
Mobile Payments for PoS and P2P Transactions:
The activity system content is new
The activity system structure is new. Activities are performed by actors
providing a service or making use of a service
The novelty is one of the design themes
The lock-in design theme:
• Banks and credit card companies want their customers to use existing
accounts for mobile payments to increase the value of existing accounts
• New payment solutions require user accounts
The efficiency and complementarities are not drivers for new
solutions

35. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 42
Summary

36. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 43
Summary
Mobile operators have lost leading positions
New actors from financial and IT areas enter the mobile payment
market, however, their offered services overlap
A multitude of offered mobile payment solutions leads to a high
market fragmentation and problem of reaching a critical mass of
consumers

37. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 44
Summary
Creation and management of multiple accounts for mobile pay-
ment are potential obstacles for a new service adoption by con-
sumers
The need to register new user accounts for buying SMS tickets
resulted in a substantial reduction of the number of sold tickets
and made transactions during February 2013
Limited infrastructure of mobile payments is another obstacle
Most of the existing solutions are offten coupled with bank
accounts/cards which have a wide infrastructure

38. Jan I. Markendahl and Tatjana Apanasevic, The 29th
Annual IMP Conference, 2013-09-02, Atlanta | 45
Summary
Entry Points for Mobile Payments: from a user perspective
Public transport:
Mobile payment and ticket solution may be accepted:
• It is used frequently for the service
• The phone is obvious as a ticket
PoS solutions:
Currently bank service would be the natural choice of many merchants
Solutions offered by retail chains may be one entry point but this would
not be the case for restaurants (less frequent visits)

39. Jan I. Markendahl janmar@kth.se
Tatjana Apanasevic tatjanaa@kth.se
Thank You